Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2011] NSWSC 1306

Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2011] NSWSC 1306

On the proper construction of the Sale of Business Agreement, specifically clause 17.5, moneys received by Tekitu after completion of the sale of business, being referable to the acquired business, were impressed with a trust in favour of Australian Receivables, entitling it to trace those funds into the controlled moneys account, less sums already paid out. As to cross-claims, only certain adjustments are to be made in favour of Tekitu, notably for December acquired debt portfolio revenue, with no entitlement to balance of software rental, disputed business expenses, or claims for consulting fees or indemnities. No order for compensation or personal liability against the Smiths is...

Parties
Plaintiff/first Cross Defendant: Australian Receivables Ltd; Second Cross Defendant: NCO Australia Pty Ltd; First Defendant/first Cross Claimant: Tekitu Pty Ltd; Second Defendant/second Cross Claimant: Ross Edward Smith; Third Defendant/third Cross Claimant: Lynette Mary Smith
Jurisdiction
Australia
Judgment Date
31 October 2011
Procedural Posture
Principal Judgment / Final Judgment, Orders to Be Made
Outcome
Plaintiff entitled to tracing and part payment; cross-claim allowed only in part; set-off applies; no personal liability order required against Smiths; parties to bring short minutes for final orders.
Legal Topics
Trusts, Constructive Trusts, Express and Resulting Trusts, Contract Interpretation, Sale of Business, Set Off, Fiduciary Obligations, Breach of Warranty
Equity Contract Trusts Constructive Trusts Express and Resulting Trusts Contract Interpretation Sale of Business Set Off +2 more

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Parties

Australian Receivables Ltd

Plaintiff/first Cross Defendant

NCO Australia Pty Ltd

Second Cross Defendant

Tekitu Pty Ltd

First Defendant/first Cross Claimant

Ross Edward Smith

Second Defendant/second Cross Claimant

Lynette Mary Smith

Third Defendant/third Cross Claimant

Procedural Posture

Principal Judgment / Final Judgment, Orders to Be Made

Legal Issues

  1. 1 Whether moneys retained in a defendant's trading account after the sale of a business are held on trust for the purchaser under the Sale of Business Agreement
  2. 2 Whether plaintiff is entitled to trace into the controlled moneys account for such retained moneys
  3. 3 Whether directors of the vendor company are personally liable under Barnes v Addy principles for knowing assistance in a dishonest breach of trust

Ratio Decidendi

On the proper construction of the Sale of Business Agreement, specifically clause 17.5, moneys received by Tekitu after completion of the sale of business, being referable to the acquired business, were impressed with a trust in favour of Australian Receivables, entitling it to trace those funds into the controlled moneys account, less sums already paid out. As to cross-claims, only certain adjustments are to be made in favour of Tekitu, notably for December acquired debt portfolio revenue, with no entitlement to balance of software rental, disputed business expenses, or claims for consulting fees or indemnities. No order for compensation or personal liability against the Smiths is...

Court Disposition

Plaintiff entitled to tracing and part payment; cross-claim allowed only in part; set-off applies; no personal liability order required against Smiths; parties to bring short minutes for final orders.

Orders

  • Plaintiff may trace and recover $169,831.72 from the controlled moneys account as trust property, on top of prior recoveries.
  • Plaintiff entitled to retain previously received payments out of the controlled moneys account ($177,874 total).