Equity: unconscionable conduct

Kimberley Developments Pty Ltd v Bale [2023] NSWCA 25

The Court of Appeal has dismissed an appeal brought by Kimberley Developments Pty Ltd against a decision of the Supreme Court ordering that a transfer of land from Michael Schein to Kimberley Developments be set aside and further ordering that Kimberley Developments re-transfer the land to Ms Francoise Bale, Mr Schein’s only daughter. The initial transfer was for a stated consideration of $590,000 which comprised the discharge of a mortgage, settlement of monies owed to one of the directors of Kimberley Developments, a number of shares in Kimberley Developments (which were never issued) and $302,000 in banknotes for which no receipt or banking records could be produced.  The Court found that in equity, a party to a deed cannot set up an estoppel in reliance on a deed in relation to which there is an equitable right to rescission. The Court further found that it was open to the primary judge to find that Mr Darwiche and Mr Trigas had not paid the $302,000 and to find that Mr Schein was labouring under a special disadvantage which was unconscionably exploited by Mr Darwiche.

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Land Law: Torrens title; indefeasibility

Huang v 18 Woodville Holding Pty Ltd; Tao v 18 Woodville Holding Pty Ltd [2023] NSWCA 15

The Court of Appeal has dismissed two appeals each brought by purchasers of two apartments in a strata plan development against a decision of the Supreme Court finding that the development’s registered mortgagee was entitled to take possession of those apartments in exercise of its power of sale. That decision was reached because the mortgagee’s registered interest was indefeasible, whereas that of the purchasers-in-possession was not. The primary judge further held that the appellants in both proceedings could not rely upon any exception to indefeasibility, because they were tenants at will at the time. The Court distinguished a tenancy for a term from a tenancy at will and found that s 42(1)(d) of the Real Property Act 1900 (NSW) does not apply to a tenancy at will. This position was distinguished from that of Victoria and the Real Property Act 1958 (Vic). The Court further found that the appellants held their interests in the apartments under a tenancy at will such that the exception to indefeasibility set out in s 42(1)(d) of the NSW legislation did not apply. Consequently, the first respondent’s interest remained indefeasible.

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Insurance: meaning of “insured risk”

BCC Trade Credit Pty Ltd v Thera Agri Capital No 2 Pty Ltd [2023] NSWCA 20

The Court of Appeal has dismissed an appeal brought by BCC Trade Credit Pty Ltd (“BCC”) against a decision of the Supreme Court finding that a trade credit insurance policy issued by BCC to Thera Agri Capital No 2 Pty Ltd (“Thera”), in the course of Thera providing trade finance to two companies within the Phoenix Group, did cover the losses incurred by Thera when the Phoenix Group collapsed. The policy identified the subject of the indemnity as advances made by the respondent under the Murabaha agreements with the traders. Thera contended that because the advances had not been made in accordance with the Murabaha agreements the policy did not respond. The Court found that the Insuring Clause, when taken with the definitions of “Debt Obligation(s)” and “Advanced Payment”, covered the contractual loss that the Insured suffered. The use of the word “Advanced” was not significant because at times the Policy lapses into the language of a conventional trade credit financing arrangement. In dissent, Basten JA found that construing the policy as a whole, the loss was not an obligation which arose “in accordance with” the Master Agreement and that elements of incoherence in the definitional provisions provided an inadequate basis for suggesting that payments could be advanced otherwise than in accordance with the terms and conditions provided in the Finance Documents.

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Corporations: s 423(1) of the Corporations Act 2001 (Cth)

Sahab Holdings Pty Ltd v Tonks [2023] NSWCA 12

The Court of Appeal has dismissed an appeal brought by Sahab Holdings Pty Ltd, a trustee of two trusts, against a decision of the Supreme Court declining to inquire into the conduct of receivers appointed by the Court in an attempt to resolve a deadlock in proceedings. The Court found that, for an order under s 423(1)(b) of the Corporations Act 2001 (Cth) to be granted, there must be something sufficient in the complaint seeking the inquiry. There was nothing sufficient in the complaint in this case. The Court found that the receivers were obliged to defend the proceedings for which they were appointed unless they sought leave to compromise the proceedings. Finally, the Court found that since the receivers were appointed to manage all property Sahab held on trust, the receivers were not acting beyond the role allocated for them in seeking to use the litigation as a means to get out of what they regarded as a poor deal.

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Permanent Stays; Claims for Damages for Child Sexual Assault

RC v The Salvation Army (Western Australia) Property Trust [2023] WASCA 29

The Court of Appeal of Western Australia has refused leave to appeal against a decision of the Western Australia District Court ordering a permanent stay in RC’s claim for damages for the Salvation Army’s breach of common law and statutory duties, and their vicarious intentional tort liability in relation to alleged child sexual abuse that occurred 60 years ago. The stay was granted on the basis that the respondent was unable to meaningfully defend the action due to the passage of time and the loss of documents and the ability to call witnesses. The Court further found that where a defendant is put on notice of a plaintiff’s claim the existence and extent of any investigations undertaken prior to the commencement of proceedings may well be relevant to the operation of s 6A of the Limitation Act 2005 (WA) and in an application for a stay. However, the Court found that the primary judge did err in finding that an employment relationship between the alleged abuser and the Salvation Army would be necessary to establish vicarious liability. More relevant considerations were questions of authority, power, trust, control and the ability to achieve intimacy with the victim.

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Taxation: goods and services tax

Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust [2023] FCAFC 19

The Full Court of the Federal Court of Australia has allowed an appeal brought by the Commissioner or Taxation and allowed a cross-appeal brought by Complete Success Solutions Pty Ltd ATF Complete Success Solutions Trust (“CSS”) against a decision of the Administrative Appeals Tribunal finding that CSS was entitled to input tax credits on the acquisitions of scrap gold and not liable for GST on its export supplies of scrap gold. La Gajjr Pty Ltd (“La Gajjr”) provided consultancy and operational services to CSS in relation to purchasing scrap gold, paying a contract refiner to refine the gold and selling the resultant bullion to ABC Refinery (Australia) Pty Ltd (“ABCRA”) or La Gajjar without CSS ever having possession of the scrap gold or bullion. The Court found that the Tribunal erred in finding that CSS had not discharged its burden of proving that each of ABCRA and La Gajjar was a dealer in precious metal within the meaning of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“the GST Act”) in circumstances where the Commissioner did not produce relevant documents in his possession. The Court further found that the statutory task in s 165-5(1)(c) of the GST Act requires that each entity’s purpose be separately examined, whether focusing on its participation in the scheme as a whole or in relation to particular parts of the scheme; or that the principal effect of the various parts of the scheme be examined. Finally, the Court found that the Tribunal failed to property address s 165-5(1)(c)(ii), which required attention to the principal effects of part of the scheme.

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Māori Freehold Land; Equity: constructive trusts

Nicholas v Te Amo [2023] NZCA 22

The Court of Appeal of New Zealand has allowed an appeal brought by Mrs Nicholas against a decision of the Māori Appellate Court upholding a decision of the Māori Land Court finding that Mrs Nicholas had no right to possession or occupation of a house she had built and maintained on Māori freehold land. The house was on land owned by the trustees of the Te-Whaiti-Nui-A-Toi Trust and the courts below found the trust had not created an expectation that Mrs Nicholas was entitled to occupy the house, even though she had an equitable interest in it. The Court found that the trustees had created a reasonable expectation that Mrs Nicholas was entitled to occupy the house until 2066 because Mrs Nicholas’ licence was stated to be for the unexpired portion of a lease over the land at which point the future of the building would be dependent on the owners of the land at 31 May 2066.  The Court further held that the Māori Appellate Court erred in holding that Mrs Nicholas’ right of ownership did not carry with it a right of occupation because she had not contributed to the land on which the house stood.

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Bankruptcy; Statutory Interpretation

Bartenwerfer v. Buckley (No 21-908, 22 February 2023), slip op 4

The Supreme Court of the United States of America has dismissed an appeal brought by Kate Bartenwerfer against a decision of the Court of Appeals for the Ninth Circuit finding that Kate, being liable for her husband’s fraud in failing to disclose certain defects when selling a house he had renovated, could not discharge a debt in bankruptcy arising from this fraud, regardless of her own culpability. The Court found that in construing §523(a)(2)(A) of the Bankruptcy Code 11 U.S.C with regard to its use of the passive voice, the context of surrounding provisions and other rules of statutory construction, the Ninth Circuit did not err in concluding that Kate was unable to discharge the debt in bankruptcy. The Court further found that this conclusion was supported by Congress’ evident approval of the decision in Strang v Bradner, 114 U. S. 555. Finally, the Court found that §523(a)(2)(A) takes the debt as it finds it and does not define the scope of a person’s liability for another’s fraud.

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