Fodare Pty Ltd v Shearn [2011] NSWSC 479

Fodare Pty Ltd v Shearn [2011] NSWSC 479

Ms Shearn, as director, breached her statutory and fiduciary duties by failing to account for and improperly dispersing the proceeds of Fodare's sole asset sale, including amounts of $383,468.94, $251,488.85, and $120,000, in ways conferring no benefit to Fodare. Ms Hirtzell, with sufficient knowledge of the source and character of funds received, is liable under the first limb of Barnes v Addy for knowing receipt in respect of $251,488.85 used to discharge her mortgage. Compensation and equitable remedies are warranted against both, with joint and several liability for the relevant amount; Ms Hirtzell's property is charged with the sum.

Parties
Plaintiff: Fodare Pty Limited; First Defendant: Doris Emily Elizabeth Shearn; Second Defendant: Kathleen Anne Hirtzell
Jurisdiction
Australia
Judgment Date
25 May 2011
Procedural Posture
Corporations – Equitable Proceedings (breach of Director's Duties, Knowing Receipt) / Principal Judgment – Determination of Liability, Orders to Be Finalised by Short Minutes
Outcome
Liability found against Ms Shearn for breach of statutory and fiduciary duties, and against Ms Hirtzell for knowing receipt; compensation and equitable relief awarded, with orders to be finalised by short minutes to be brought in. Costs to be paid by both defendants.
Legal Topics
Directors' Duties, Breach of Fiduciary Duty, Knowing Receipt, Knowing Assistance, Compensation Orders, Trustee Liability
Corporations Law Equity Trusts and Trustees Directors' Duties Breach of Fiduciary Duty Knowing Receipt Knowing Assistance Compensation Orders +1 more

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Parties

Fodare Pty Limited

Plaintiff

Doris Emily Elizabeth Shearn

First Defendant

Kathleen Anne Hirtzell

Second Defendant

Procedural Posture

Corporations – Equitable Proceedings (breach of Director's Duties, Knowing Receipt) / Principal Judgment – Determination of Liability, Orders to Be Finalised by Short Minutes

Legal Issues

  1. 1 Whether Ms Shearn committed breaches of statutory and fiduciary duties as director by misapplying proceeds of sale belonging to Fodare Pty Ltd.
  2. 2 Whether Ms Hirtzell incurred liability for knowing receipt relating to funds misdirected by Ms Shearn to pay off her Citibank mortgage.
  3. 3 Whether compensation and equitable relief should be ordered against the defendants.

Ratio Decidendi

Ms Shearn, as director, breached her statutory and fiduciary duties by failing to account for and improperly dispersing the proceeds of Fodare's sole asset sale, including amounts of $383,468.94, $251,488.85, and $120,000, in ways conferring no benefit to Fodare. Ms Hirtzell, with sufficient knowledge of the source and character of funds received, is liable under the first limb of Barnes v Addy for knowing receipt in respect of $251,488.85 used to discharge her mortgage. Compensation and equitable remedies are warranted against both, with joint and several liability for the relevant amount; Ms Hirtzell's property is charged with the sum.

Court Disposition

Liability found against Ms Shearn for breach of statutory and fiduciary duties, and against Ms Hirtzell for knowing receipt; compensation and equitable relief awarded, with orders to be finalised by short minutes to be brought in. Costs to be paid by both defendants.

Orders

  • Ms Shearn to render equitable and statutory compensation to Fodare for $383,468.94, $251,488.85, and $120,000 plus interest from 1 December 2003.
  • Ms Hirtzell liable to render equitable compensation to Fodare for $251,488.85 plus interest, jointly and severally with Ms Shearn.