Smith & Ors v Collier & Ors [2001] NSWSC 194

Smith & Ors v Collier & Ors [2001] NSWSC 194

Clause 3 of the release, read with the surrounding circumstances known to the plaintiffs, created an express trust under which the plaintiffs held the settlement monies to satisfy amounts owing to National Australia Bank Ltd and Esanda Finance Corporation Ltd in priority to payments to or on behalf of the first defendant. The payments made out of the trust account before satisfying those financiers were breaches of trust. The plaintiffs were personally liable for those breaches, and the first defendant, having knowingly participated in and benefited from them, was equally liable to the second and third defendants and liable to indemnify the plaintiffs.

Jurisdiction
Australia
Judgment Date
16 March 2001
Procedural Posture
Summons in the Nature of an Interpleader Summons / Ex Tempore Judgment After Hearing
Outcome
Monies paid out of the solicitors' trust account were paid in breach of trust.
Legal Topics
['express Trust' "solicitors' Trust Account" 'breach of Trust' 'legal Profession Act 1987 S 61' 'knowing Participation in Breach of Trust' 'equitable Compensation' 'interest']
['equity' 'trusts' 'legal Profession'] ['express Trust' "solicitors' Trust Account" 'breach of Trust' 'legal Profession Act 1987 S 61' 'knowing Participation in Breach of Trust' 'equitable Compensation' 'interest']

Case Brief

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Procedural Posture

Summons in the Nature of an Interpleader Summons / Ex Tempore Judgment After Hearing

Legal Issues

  1. 1 ["Whether the payment of $168,340.00 into the plaintiffs' solicitors' trust account pursuant to the release created an express trust requiring payment of amounts owed to the second and third defendants in priority to any payment to or on behalf of the first defendant." 'Whether payments made from the trust account to the first defendant and to creditors of the first defendant were made in breach of trust.' 'Whether the plaintiffs and the first defendant were liable to the second and third defendants for the amounts owing to them.' 'How the balance remaining in the trust account should be dealt with as between the second and third defendants.' 'Whether interest should be awarded at the contract rates.' 'Whether it was necessary to determine alleged duty of care or unconscionability issues.']

Ratio Decidendi

Clause 3 of the release, read with the surrounding circumstances known to the plaintiffs, created an express trust under which the plaintiffs held the settlement monies to satisfy amounts owing to National Australia Bank Ltd and Esanda Finance Corporation Ltd in priority to payments to or on behalf of the first defendant. The payments made out of the trust account before satisfying those financiers were breaches of trust. The plaintiffs were personally liable for those breaches, and the first defendant, having knowingly participated in and benefited from them, was equally liable to the second and third defendants and liable to indemnify the plaintiffs.

Court Disposition

Monies paid out of the solicitors' trust account were paid in breach of trust.

Orders

  • ['The plaintiffs and the first defendant were to pay to the second and third defendants the relevant amounts due to them as at 14 May 1999, on the basis that the second and third defendants could not be paid twice.' 'The first defendant was to indemnify the plaintiffs in respect of the relevant amounts paid in...