Deloitte Services Pty Ltd v HBO EMTB Interiors (NSW) Pty Ltd (In Liquidation) [2016] NSWSC 1597 

Significance

Notwithstanding the absence of an express provision in an agreement appointing one party as the trustee of the other party's moneys, where the parties' actions indicate the existence of a trustee/beneficiary relationship, an express or purpose trust will be deemed to exist, the consequence of which is that the trustee party will be deemed to have fiduciary duties to the beneficiary.

Read on for the analysis by Simon Moses.

Facts

Deloitte contracted with two members of the HBO+EMTB Group of companies, Interiors and Projects, to provide project management services for the fit out of one of Deloitte's office. The contract between Deloitte and Projects provided that each month either Interiors or Projects would receive, analyse and certify progress claims issued by contractors directly engaged by Deloitte, following which Deloitte would pay the relevant contractor directly.

Following commencement of the contract the parties agreed both verbally and via email that, rather than Deloitte paying the contractors directly, Projects would issue an invoice to Deloitte who would then pay the monies into a ‘client monies trust account’ maintained by Projects. Following receipt of the funds into the 'client monies trust account', Projects would then pay the certified amount to the contractor. This arrangement was not contemplated by the contract between the parties.

Notwithstanding that Projects purported to maintain a 'client monies trust account', during proceedings it was revealed that the account was a trust account in name only and that Projects, in breach of its fiduciary duties as a trustee, did not operate the account in accordance with its obligations to the beneficiaries of the account (including Deloitte).

Deloitte argued that Projects made a series of false representations, on which Deloitte relied, with regards to repayment of the certified amounts into the 'client monies trust account'. Deloitte contended that Projects failed to account for $3.5 million of certified progress claims on the basis that:

  • $1.3 million had never been claimed by the contractors and Projects had therefore over-invoiced Deloitte; and
  • $2.3 million was not on-paid to the contractors, but was rather retained by Projects for its personal enjoyment (without Deloitte's authority).

Decision

McDougall J held, among other things, that notwithstanding that the contract between Projects and Deloitte did not contemplate that Projects would ultimately pay Deloitte's contractors on Deloitte's behalf, the parties' actions (which included extensive correspondence between the parties and evidence that Projects had traditionally taken care of payments on behalf of Deloitte) were such that it was clear that the parties' intentions were that such was to occur. The court held that Interiors (rather than Projects) was liable to repay Deloitte $2,509,070 because, in the particular circumstances, it was Interiors that was in breach of its own fiduciary duties to Deloitte as the deemed trustee of certain funds held in the 'client monies trust account'.

The court also held that Interiors and Projects each contravened section 18 of the Australian Consumer Law by engaging in misleading or deceptive conduct when they over-invoiced Deloitte for the amounts purported to be owed to Deloitte's contractors. As a result, Interiors was found liable to damages under section 236 of the Australian Consumer Law and Projects was liable to pay Deloitte the full $3.6 million claimed.