Organic Paradise Pty Ltd v Brett Smith; Just Organics (Aust) Pty Ltd v Peter Melov [2015] NSWSC 1788

Organic Paradise Pty Ltd v Brett Smith; Just Organics (Aust) Pty Ltd v Peter Melov [2015] NSWSC 1788

Neither Coppolaro nor Jury held their shares in Just Organics (Aust) Pty Ltd on trust for Melov; as directors, Melov and Jury had no power to transfer Just Organics’ business to Organic Paradise without proper resolution and for no consideration. The transfer, and related dealings with assets/funds, were in breach of fiduciary duties and authority. Organic Paradise must account for profits derived from wrongful use of Just Organics’ assets, and sums transferred without basis must be repaid.

Parties
First Plaintiff (2012/333740), Second Defendant (2013/90782): Organic Paradise Pty Ltd; First Defendant (2012/333740): Brett Smith; Second Defendant (2012/333740), Second Plaintiff (2013/90782): Eric Abraham Jury; Third Defendant (2012/333740), Third Plaintiff (2013/90782): Pasquale Coppolaro; First Plaintiff (2013/90782): Just Organics (Aust) Pty Ltd; First Defendant (2013/90782): Peter Melov; Third Defendant (2013/90782): BU Organics Pty Ltd; Fourth Defendant (2013/90782): Organik Paradise Pty Ltd
Jurisdiction
Australia
Judgment Date
21 October 2015
Procedural Posture
Equity Proceedings (consolidated) / Final Judgment at Trial
Outcome
Judgment for Just Organics (Aust) Pty Ltd against Melov, Organic Paradise Pty Ltd, and Organik Paradise Pty Ltd in specified sums subject to offset; claims by Organic Paradise and by Coppolaro and Jury individually otherwise dismissed. Costs and final accounting reserved.
Legal Topics
Directors' Fiduciary Duties, Breach of Trust, Constructive Trust, Company Management, Trespass, Conversion
Equity Corporations Law Directors' Fiduciary Duties Breach of Trust Constructive Trust Company Management Trespass Conversion

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Parties

Organic Paradise Pty Ltd

First Plaintiff (2012/333740), Second Defendant (2013/90782)

Brett Smith

First Defendant (2012/333740)

Eric Abraham Jury

Second Defendant (2012/333740), Second Plaintiff (2013/90782)

Pasquale Coppolaro

Third Defendant (2012/333740), Third Plaintiff (2013/90782)

Just Organics (Aust) Pty Ltd

First Plaintiff (2013/90782)

Peter Melov

First Defendant (2013/90782)

BU Organics Pty Ltd

Third Defendant (2013/90782)

Organik Paradise Pty Ltd

Fourth Defendant (2013/90782)

Procedural Posture

Equity Proceedings (consolidated) / Final Judgment at Trial

Legal Issues

  1. 1 Whether shares in Just Organics (Aust) Pty Ltd were held on trust for Melov
  2. 2 Whether Melov and Jury breached fiduciary duties as directors in transferring business/assets
  3. 3 Entitlement to recovery of funds/profits wrongfully used or transferred

Ratio Decidendi

Neither Coppolaro nor Jury held their shares in Just Organics (Aust) Pty Ltd on trust for Melov; as directors, Melov and Jury had no power to transfer Just Organics’ business to Organic Paradise without proper resolution and for no consideration. The transfer, and related dealings with assets/funds, were in breach of fiduciary duties and authority. Organic Paradise must account for profits derived from wrongful use of Just Organics’ assets, and sums transferred without basis must be repaid.

Court Disposition

Judgment for Just Organics (Aust) Pty Ltd against Melov, Organic Paradise Pty Ltd, and Organik Paradise Pty Ltd in specified sums subject to offset; claims by Organic Paradise and by Coppolaro and Jury individually otherwise dismissed. Costs and final accounting reserved.

Orders

  • Melov and Organic Paradise Pty Ltd are liable to Just Organics (Aust) Pty Ltd for $98,000 with interest, as profit from wrongful use of business/assets.
  • Melov and Organik Paradise Pty Ltd are liable to Just Organics (Aust) Pty Ltd for $131,400 with interest, as funds transferred without authority, subject to offset for proven pre-December 2010 debts satisfied for Just Organics.