KATION PTY LTD v LAMRU PTY LTD; LEWIS v NORTEX PTY LTD (In liq) [2009] NSWCA 145

KATION PTY LTD v LAMRU PTY LTD; LEWIS v NORTEX PTY LTD (In liq) [2009] NSWCA 145

The Court dismissed the appeal and allowed the cross-appeal in part, holding that Lamru was entitled to direct relief for its share of misapplied bonuses and for misappropriated stock (without unclean hands barring statutory relief or equitable compensation against Kation and Lewis). Bonus payments to Mark Lewis were unauthorised and in breach of trust; accounting conventions applied; interest was to be awarded as directed. Costs were apportioned according to the benefit conferred; the liquidator’s costs for active resistance were not to diminish Lamru’s entitlement, with Kation/Lewis to indemnify Lamru for any such diminution.

Parties
Appellant and First Cross Respondent: Kation Pty Ltd; Second Appellant and Second Cross Respondent: Peter Lawrence Lewis; First Respondent and First Cross Appellant: Lamru Pty Ltd; Second Respondent and Second Cross Appellant: Russell William Lamb; Third Respondent and Third Cross Respondent: Nortex Pty Ltd (In liquidation); Fourth Cross Respondent: Brian Raymond Silvia
Jurisdiction
Australia
Judgment Date
12 June 2009
Procedural Posture
Appeal and Cross Appeal / Judgment Following Appeal and Cross Appeal; Leave Granted; Orders Varied
Outcome
Appeal dismissed; cross-appeal allowed in part; orders varied and new orders made regarding payment of bonuses, reconstitution of the trust, interest, costs and indemnities.
Legal Topics
Unclean Hands, Breach of Trust, Liquidator's Costs, Trust Accounting, Statutory Appeal From Proof of Debt, Dishonesty, Ratification of Expense, Corporate Winding Up, Equitable Compensation, Anshun Estoppel, Addbacks Accounting Convention
Equity Corporations Trusts Evidence Costs Unclean Hands Breach of Trust Liquidator's Costs +8 more

Case Brief

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Parties

Kation Pty Ltd

Appellant and First Cross Respondent

Peter Lawrence Lewis

Second Appellant and Second Cross Respondent

Lamru Pty Ltd

First Respondent and First Cross Appellant

Russell William Lamb

Second Respondent and Second Cross Appellant

Nortex Pty Ltd (In liquidation)

Third Respondent and Third Cross Respondent

Brian Raymond Silvia

Fourth Cross Respondent

Procedural Posture

Appeal and Cross Appeal / Judgment Following Appeal and Cross Appeal; Leave Granted; Orders Varied

Legal Issues

  1. 1 Whether accounts for 1991 and 1992 financial years should be reopened due to improper profit distribution
  2. 2 Whether bonus payments to Mark Lewis were in breach of trust
  3. 3 Whether accounting conventions (addbacks/differential interest) should have been applied post-breakdown between unitholders

Ratio Decidendi

The Court dismissed the appeal and allowed the cross-appeal in part, holding that Lamru was entitled to direct relief for its share of misapplied bonuses and for misappropriated stock (without unclean hands barring statutory relief or equitable compensation against Kation and Lewis). Bonus payments to Mark Lewis were unauthorised and in breach of trust; accounting conventions applied; interest was to be awarded as directed. Costs were apportioned according to the benefit conferred; the liquidator’s costs for active resistance were not to diminish Lamru’s entitlement, with Kation/Lewis to indemnify Lamru for any such diminution.

Court Disposition

Appeal dismissed; cross-appeal allowed in part; orders varied and new orders made regarding payment of bonuses, reconstitution of the trust, interest, costs and indemnities.

Orders

  • Leave to appeal and cross-appeal granted.
  • Appeal dismissed.