Galati v Deans & Ors

1. [1]

   MACFARLAN JA: I agree with the orders proposed by White JA. Although Mr Galati’s entitlement to a 50% interest in the shareholding in Felan’s Fisheries may arguably be founded on a common intention constructive trust, for the reasons given by Basten AJA in [149] I prefer the conclusion that it arises out of a resulting trust. I accordingly agree with his Honour’s reasons for judgment.

2. [2]

   WHITE JA: This is an appeal from orders of the Equity Division (Ward CJ in Eq). The appellant, Mr Dominic Galati, was the sole director and shareholder of Trading Australia Pty Ltd (“TA”), a company now in liquidation. The first respondent, Mr Robert Deans, is the sole director and shareholder of the second respondent, Fishbank Development Corporation Pty Ltd (“Fishbank”), and holds all the shares in the third respondent, TRHS Pty Ltd (“TRHS”).

3. [3]

   TRHS holds all of the shares in the fourth respondent, Felan’s Fisheries Pty Ltd (“Felan’s Fisheries”). Felan’s Fisheries holds 25% of the shares in SFM Tenants and Merchants Pty Ltd (“Tenants and Merchants”) which in turn holds 50% of the shares in Sydney Fish Markets Pty Ltd, the lessee of the Sydney Fish Markets.

4. [4]

   TA originally joined with Mr Galati as co-plaintiffs. During the course of the proceedings below, TA went into liquidation. Mr Galati has taken an assignment from the liquidator of TA of TA’s rights that Mr Galati sought to assert in the proceedings.

5. [5]

   Amongst other claims, Mr Galati and TA sought a declaration that TRHS held the shares in Felan’s Fisheries on trust as to 50% for TA or Mr Galati. Alternatively, they sought a declaration that Mr Deans held the shares in TRHS on trust as to 50% for himself and 50% for Galati.

6. [6]

   The primary judge rejected those claims (Galati v Deans [2021] NSWSC 1094). On appeal, Mr Galati contends that the primary judge erred in rejecting the claim. Mr Galati seeks a declaration that TRHS holds the shares in Felan’s Fisheries shares as to 50% for Mr Galati and 50% for Fishbank.

7. [7]

   The shares in Felan’s Fisheries were originally held by a company called Bidvest Australia Pty Ltd (“Bidvest”). A related company of Bidvest’s, Stevenson and Co Pty Ltd, owned land adjoining the Fish Market. This land was referred to as the Bidvest Site. Mr Deans was a real estate agent. On 2 July 2002 Bidvest entered into an agency agreement with Mr Deans’ company, Deans Property Pty Ltd, for payment of commission if it effectively introduced to Bidvest a purchaser for the Bidvest Site during the “Continuing Agency Period” and if the purchaser subsequently entered into a binding contract.

8. [8]

   The primary judge found that from in or around 2014 Mr Galati and Mr Deans engaged in a joint venture to identify and liaise with particular funders of or investors in a project that Mr Deans contended was his conception for the redevelopment of the Sydney Fish Markets and adjoining and nearby lands in Blackwattle Bay. These included the Bidvest site (at [12]-[14]; [572], [576], [581]-[582].

9. [9]

   Either on 22 April 2015 or 7 June 2015, (at [104]) Mr Galati and Mr Deans signed a document called “Agreement Principles” which stated that Mr Deans would be responsible for project design of a redeveloped fish market and would manage the architectural process and Mr Galati would arrange finance for the deal, would be involved in “strategic and tactical management” and would manage the political process.

10. [10]

    The primary judge summarised the financial arrangements appearing in that document as follows:

11. [11]

    Mr Deans and Fishbank filed a cross claim in which they sought, amongst other relief, damages or equitable compensation from Mr Galati and TA in respect of Mr Galati’s dealing with moneys from an ultimate buyer of the Bidvest Site, EJC Pyrmont Pty Ltd (“EJC”) which they characterised as the receipt of a secret commission. The secret commission was received by TA on 9 December, having been paid by EJC to an agent, a Ms Pritchard, on 8 December 2015 (at [333]).

12. [12]

    The primary judge found that each participant in the joint venture was under a fiduciary duty to refrain from pursuing, obtaining or retaining for itself or himself any collateral advantage in relation to the proposed project without the knowledge and informed assent of the other participants (at [821]). Her Honour found that the payment of $1,799,820.95 by EJC was a secret commission and that the payment was made to TA on behalf of, and thus as an agent of, the joint venturers (at [822]). The receipt was concealed from Mr Deans. The primary judge found that Mr Galati was liable to pay half that sum to Fishbank, either as damages at law for the tort of deceit, or as equitable compensation (at [930(1)]).

13. [13]

    Her Honour found that Mr Galati was also liable to pay $100,000 to Fishbank as exemplary damages for the tort of deceit.

14. [14]

    Mr Galati challenged the quantum of the award of damages or equitable compensation. He did not challenge the finding that he received and retained moneys in breach of his fiduciary obligations. Mr Galati had claimed unsuccessfully that much of the money received was used to pay the debts of Fishbank. The primary judge was not satisfied that the payments Mr Galati identified discharged any obligations that, as between Fishbank and TA or Mr Deans and Mr Galati, were the responsibility of Fishbank (at [829]). A ground of appeal that alleged that $822,000 of the $1,799,820.95 received was used to pay Project creditors was not pressed.

15. [15]

    A ground which was pressed as a partial answer to the obligation to account, or the award of damages for deceit, was that prior to November 2015 Mr Deans had allegedly taken a secret commission of $550,000 during the period in which he was found to have fiduciary duties to Mr Galati. It was submitted that half of that sum needed to be brought into account to reduce the amount of equitable compensation by $275,000.

16. [16]

    The same ground was relied upon to challenge the award of exemplary damages. Mr Galati accepted that in order to disturb that award, he needed to demonstrate House v King error. In oral submissions, counsel for Mr Galati accepted that that could only be done if he succeeded in his contention that the primary judge gave insufficient emphasis to Mr Deans’ allegedly making a secret commission on an earlier transaction. Counsel submitted that if it were established that Mr Deans had himself made a secret commission, this would mean that the primary judge’s discretion miscarried and would need to be re-exercised. Counsel submitted that the primary judge ought to have treated the case as one in which there was a fractious relationship and breaches of fiduciary duty on both sides, Mr Galati acted in accordance with his notion of right and justice and hence it was not an appropriate case for an award of exemplary damages.

17. [17]

    The questions arising on the appeal are

    1. (1)

       Whether the primary judge erred in refusing to declare that TRHS holds its shares in Felan’s Fisheries on trust for TA (now Mr Galati as TA’s assignee) as to a 50% interest as tenant in common with Fishbank;

    2. (2)

       Whether the primary judge ought to have found that Mr Deans was liable to account to TA or Mr Galati for commission paid by Bidvest to Mr Deans’ company as the result of the sale of the Bidvest Site referred to below; and

    3. (3)

       If so, whether the question of equitable compensation or damages awarded against Mr Galati should be reduced by $275,000 and the award of exemplary damages should be set aside.

18. [18]

    For the reasons which follow, I would answer question 1, yes. I would answer question 2, no. Question 3 does not arise.

Further Background

1. [19]

   On 19 December 2014 Bidvest entered into agreements for the sale of Bidvest’s shares in Felan’s fisheries and for the sale of the Bidvest Site. The primary judge observed that Mr Galati claimed credit for identifying a Chinese investment or property company called Dahua Group Fish Market Project Pty Ltd (“Dahua Group”) as a proposed investor and purchaser of the Bidvest site.

2. [20]

   On 18 November 2014 Mr Deans for Deans Property and a Mr Berson for Bidvest signed a letter which provided as follows:

3. [21]

   It can be inferred from the call option deeds referred to below that on 19 December 2014 two special purpose vehicles, Dahua No 1 Pty Ltd (“Dahua No 1”) and Dahua No 2 Pty Ltd (“Dahua No 2”) entered into agreements for the purchase of the Bidvest Site (by Dahua No 1) and Bidvest’s shares in Felan’s Fisheries (by Dahua No 2).

4. [22]

   Dahua Group entered into two call option deeds both dated 19 December 2014. One deed provided for the grant of a call option by Dahua Group to TA and to Fishbank (together “the Grantee”) for them to acquire all of the shares that were held by Dahua Group in Dahua No 1. The other provided for the grant of a call option by Dahua Group to TA and Fishbank to acquire Dahua Group’s shares in Dahua No 2. The call options were interdependent (cl 3.7). The call option fee was $1. The call options could be exercised by the giving of written notice and delivery of a share sale deed in a form annexed to each option deed. The call options could be exercised within six months, after which they would automatically expire.

5. [23]

   If the options were exercised the price payable under the share sale deed would, in the case of the purchase of shares in Dahua No 1, be the purchase price payable under the contract for sale of the Bidvest Site, plus stamp duty or legal costs and with interest to be computed from the date of the settlement of the purchase of the Bidvest Site (by Dahua No 1) until the date of settlement under the share sale deed (cl 3.6).

6. [24]

   In the case of the option to acquire the shares in Dahua No 2, the call option could be exercised by the delivery of written notice and of a share sale deed in the annexed form, with the purchase price payable under the share sale deed on exercise of the call option to be the aggregate of the purchase price payable under the Felan’s sale deed (being a share sale deed dated 19 December 2014 between Bidvest and Dahua No 2 and others), stamp duty or legal costs and interest at the rate of 8% from the date of settlement of the purchase of the Felan’s sale deed.

7. [25]

   It was agreed on the pleadings that the purchase of the “Bidvest Assets” (being the Bidvest Site and the shares in Felan’s Fisheries) was completed by Dahua in or about early 2015. The primary judge found that the purchase was completed in March to April, 2015.

8. [26]

   It appears that Fishbank and TA exercised the call options and entered into share sale deeds dated 19 June 2015 which were due for completion on 21 July 2015. On 28 July 2015 solicitors for Dahua Group, Dahua No 1 and Dahua No 2 gave notice of termination of the share sale deeds. On 31 July 2015 Fishbank and TA commenced proceedings in the Equity Division seeking orders restraining Dahua Group, Dahua No 1 and Dahua No 2 from taking any steps to act on the purported termination of those deeds.

9. [27]

   Those proceedings were settled when the parties agreed to enter into new call options on 24 September 2015. On 24 September 2015 the parties entered into deeds of rescission of the earlier call option deeds and share sale deeds. On the same day they entered into new call options, one for the Bidvest Site and one for the shares in Felan’s Fisheries. They also executed a deed of settlement and release.

10. [28]

    The new call options were not for the purchase of Dahua Group’s shares in Dahua No 1 and Dahua No 2 but were options granted by Dahua No 1 for the purchase of the Bidvest Site and by Dahua No 2 for the purchase of the shares in Felan’s Fisheries. The options could also be exercised by a nominee of Fishbank and TA. If the option for the purchase of the Bidvest Site were exercised, the Grantee or the Grantee’s nominee became bound by the terms of a contract for the sale and purchase of the Bidvest Site for a price of $20,957,683.46. The option expired at 5.00pm on 20 November 2015.

11. [29]

    The call option for the purchase of the shares in Felan’s Fisheries provided:

12. [30]

    The agreement provided for a form of Notice, that was Schedule 1 to the agreement, to be addressed to Dahua No 2 and to Felan’s Fisheries and state:

13. [31]

    On 18 November 2015, two days before the options were due to expire, Mr Galati had a meeting with Mr Vassallo of a company called Celestino Pty Ltd. He was introduced to Mr Galati through an estate agent, Ms Pritchard, of Wealth Shift, as a potential investor and buyer. Mr Vassallo agreed to pay $24 million for the Bidvest Site. He disclaimed any interest in acquiring the shares in Felan’s Fisheries (at [224]-[226]). The upshot was that, in the course of a meeting on 20 November 2015, it was agreed that a special purpose vehicle that had been incorporated on 19 November 2015, EJC Pyrmont Pty Ltd (“EJC”) would acquire the Bidvest Site and pay the acquisition price for both the land and the shares, but the shares would be acquired by a nominee of TA and Fishbank (at [245]). No notice in or to the effect of the form of notice referred to at [30] was included in the appeal books. The primary judge recorded that there was no formal nomination of TRHS as nominee (at [245]).

14. [32]

    By 4.00pm on 20 November 2015, Fishbank and TA had entered into an agreement with EJC called a Nomination Deed. Under that agreement, Fishbank and TA were named as the “Grantee”. EJC was described as “Property Purchaser”. Recital B to the Nomination Deed stated that “the Grantee has agreed to nominate the Property Purchaser to exercise the call option in place of the Grantee on and subject to the terms and conditions set out in the deed.” One of the terms contained in the deed (cl 16) provided that within 30 days after completion of the redevelopment of the property by the Property Purchaser to its reasonable satisfaction, the Property Purchaser would pay to the Grantee an amount equivalent to 10% of the Development Profit, being gross revenue earned by the Property Purchaser resulting from the sale of the property after redevelopment, less nominated expenses, administration costs and development overheads incurred in carrying out the development.

15. [33]

    Clause 2 contained an acknowledgement by the Property Purchaser that in order validly to exercise the property option it was required to deliver to Dahua No 1 satisfactory evidence that the share option would be simultaneously exercised and that accordingly one solicitor, being the Grantee’s solicitor, would act for both the Share Purchaser and the Property Purchaser in relation to the exercise of the Share Option and the Property Option. “Share Purchaser” was defined as: “the person/s whom the Grantee nominates pursuant to the Share Option Deed to be the buyer of the Shares, or where the Grantee does not make a nomination, the Grantee”.

16. [34]

    The primary judge observed that Mr Galati said, and Mr Deans appeared to accept, that anonymity was regarded as being important in respect of ownership of the shares in Felan’s Fisheries and that neither they nor their companies could be seen to be associated with Felan’s Fisheries for “political reasons” (at [261]).

17. [35]

    The primary judge did not identify who, as at 20 November 2015, was recorded as the shareholder and director or directors of TRHS. It is clear that its sole director was an accountant, Mr Andrew Schultz. Her Honour said:

18. [36]

    The primary judge found that on 1 December 2015 EJC completed the purchase of the Bidvest land and paid for the purchase of the shares in Felan’s Fisheries by TRHS (at [285]).

19. [37]

    Mr Galati pleaded that he nominated Mr Thanh-Chi Pho as his “appointee director” of Felan’s Fisheries and Mr Deans nominated Mr David Turner as his “appointee director” of Felan’s Fisheries on or about 23 November 2015. Their appointment as directors was recorded in a notice dated 10 December 2015 lodged with ASIC.

20. [38]

    Mr Deans alleged that Fishbank accepted Mr Thanh-Chi Pho as a director under economic duress. The primary judge made no such finding. Either on or shortly after 26 February 2016 Mr Pho was removed as a director of Felan’s Fisheries. A Mr Hoben was appointed as a director and secretary in place of Mr Schultz on 23 February 2016. He resigned on 1 April 2016 and was replaced by Mr Deans. It is common ground that Mr Deans is the holder of all of the shares in TRHS.

21. [39]

    As noted above, the primary judge recorded (at [407]) Mr Deans’ evidence that TRHS was already a trustee of a unit trust. No unit trust deed or register of unit holders was tendered.

22. [40]

    Another document entered into on 20 November 2015 was called a “general security deed”. It was signed by Mr Deans on behalf of Fishbank, Mr Galati on behalf of TA, and Mr Schultz as the sole director and secretary of TRHS “ATF TRH Unit Trust”. It recited:

23. [41]

    The Grantor was TRHS. The Secured Party was Fishbank and TA.

24. [42]

    We were not referred to any signed copy of a loan agreement but it was common ground that an unsigned copy of a loan agreement had been tendered below between Fishbank and TA as lenders, and TRHS as borrowers. It provided that Fishbank and TA would advance $800,350 to TRHS for the following purposes:

25. [43]

    On 10 June 2016 solicitors acting for Mr Galati wrote to Fraser Clancy Lawyers, who acted for Felan’s Fisheries and asserted that Mr Galati was “…one of the two shareholders [sic] in the Unit Trust which is the ultimate beneficial owner of the plaintiff company”. The plaintiff company referred to was Felan’s Fisheries which was then engaged in litigation with Sydney Fish Markets over its licence. The primary judge observed that in so far as that correspondence accurately reflected Mr Galati’s apparent understanding it was not that TRHS held the Felan’s Fisheries shares on trust for Fishbank or for the Deans and Galati interests, but rather was to hold the shares in its capacity as trustee of the TRHS unit trust (at [425]). However there is no inconsistency between those concepts if Fishbank and TA, or Mr Deans and Mr Galati, were or were to be the only unit holders.

26. [44]

    Fraser Clancy responded on 15 August 2016. They asserted:

27. [45]

    Fraser Clancy denied that they were acting for Fishbank or Mr Deans in relation to the issue of who was the ultimate beneficial owner of units in TRHS, but were acting for Felan’s Fisheries in litigation with Sydney Fish Market Pty Ltd. As Mr Deans was by this time the sole director of Felan’s Fisheries and held all of the shares in TRHS which in turn held all of the shares in Felan’s Fisheries, Fraser Clancy’s letter was probative evidence of Mr Dean’s views in so far as they were against interest.

Primary judge’s reasoning on trust claim

1. [46]

   The primary judge rejected Mr Galati’s claim to a 50% beneficial interest in TRHS’s shareholding in Felan’s Fisheries for the following reasons:

2. [47]

   In rejecting Mr Galati’s submissions on equitable estoppel the primary judge said:

3. [48]

   Mr Galati submitted that the primary judge erred because her Honour ought to have found that there was an “agreed trust” whereby TRHS held the Felan’s Fisheries shares on trust as to 50% for Mr Galati. The “agreed trust” was characterised initially as a form of express trust. In Bosanac v Commissioner of Taxation [2022] HCA 34, Gordon and Edelman JJ said (at [93]) that an express trust arises from an objective or manifested intention to create a trust. But there was no written or oral declaration of trust, either by anyone authorised to make a declaration of trust by TRHS, or by a settlor, arguably Fishbank and TA, if their nomination of TRHS could be characterised as a settlement of the Felan’s Fisheries shares on TRHS (which it could not). On her Honour’s findings the objects of any trust lacked certainty. For the reasons below the better characterisation of the asserted trust is that of a common intention constructive trust.

4. [49]

   In their written submissions, counsel for Mr Galati also submitted that the primary judge erred in failing to find a constructive trust to the same effect as the express trust he asserted. Counsel for the respondents appeared to assume that the contention that the shares were held on constructive trust was based upon a constructive trust of the kind of which Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 and Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 are examples, that is, where the parties have been in a joint relationship or joint endeavour which has failed without attributable fault, and where the parties did not specifically intend that the legal owner would enjoy the beneficial interest in the property in the circumstances which then obtained. That was not the form of constructive trust contended for by Mr Galati. Rather, he submitted that the acquisition by TRHS of the shares in Felan’s Fisheries was part of the parties’ continuing joint venture in respect of which each party owed a duty of good faith to the other as the primary judge recognised by requiring Mr Galati to account for 50% of the $1,799,820.95 that he received through Ms Pritchard that had been paid by EJC as part of its arrangements with Fishbank and TA to acquire the Bidvest Site.

5. [50]

   The respondents submitted that this claim had not been pleaded and that although it had been raised in Mr Galati’s closing written submissions, the claim had never been properly particularised. They submitted that the relationship had been terminated. Fiduciary duties can survive the termination of a relationship and justified the primary judge’s finding that Mr Galati was liable to account for the moneys he received. But because the joint venture had ended (so it was contended), Mr Deans had no obligation as director of TRHS to cause TRHS to hold the shares on trust for TA or Mr Galati.

6. [51]

   In his submissions in reply, Mr Galati contended that TRHS held the shares in Felan’s Fisheries on a resulting trust, as to a 50% interest, for TA. As I understood the submission this was because Fishbank and TA held the option to acquire the shares in Felan’s Fisheries granted by Dahua No 2. By nominating TRHS to acquire the shares with no consideration provided by TRHS, they were in the same position as a transferor of personal property who transfers that property to a third party for no consideration in which case there is the presumption that the third party will hold the property on trust for the transferor (Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364-365; [1956] HCA 28).

7. [52]

   But the property in which Mr Galati claims a beneficial interest is not the option rights but the shares in Felan’s Fisheries. To acquire those shares Dahua No 2 was paid $535,785.45 plus interest. The moneys were provided by EJC. Any presumption of resulting trust in favour of EJC was rebutted. Fishbank, TA and TRHS treated the moneys provided by EJC as having been paid to Fishbank and TA. They provided the money to TRHS by way of loan, not as a direct payment for the purchase of the shares. That treatment of the payment negates the presumption of a resulting trust (Calverley v Green (1984) 155 CLR 242 at 246; [1984] HCA 81).

8. [53]

   However, it is not inconsistent with both Fishbank and TA, through Mr Deans and Mr Galati, having a common intention that TRHS would hold the shares on trust for Fishbank and TA giving rise to a common intention constructive trust. A common intention constructive trust arises where the parties have agreed, or it was their common intention, that a claimant should have an interest in property owned by the other and the claimant has acted to his or her detriment on the basis of that agreement or common intention (Grant v Edwards [1986] Ch 638 at 646-647, 651-2; Green v Green (1989) 17 NSWLR 343 at 354-6; Maharaj v Chand [1986] AC 898 at 907; Shepherd v Doolan & Ors; Shepherd v Doolan & Anor; Est. Doolan [2005] NSWSC 42).

9. [54]

   I venture to repeat what I said in Shepherd v Doolan:

10. [55]

    These principles were stated in the context of domestic relationships, but are not on that account to be disregarded. In the context of domestic relationships they have been said to be equally applicable to arrangements of a commercial or quasi-commercial nature as to those of a purely domestic kind (Green v Green at 354).

11. [56]

    In Austin v Keele (1987) 10 NSWLR 283, the Privy Council dismissed a claim made between parties to a commercial arrangement for a trust over land based on the parties’ common intention not because the principles in Grant v Edwards (later applied in Green v Green) applied only to domestic relationships, but because the plaintiff did not act to his detriment in a way referable to the parties’ common intention (at 291).

12. [57]

    In Austin v Keele Lord Oliver opined (at 290) that, in essence, the doctrine in Grant v Edwards is an application of proprietary estoppel. As Basten JA observes (at [149]), in Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336, Leeming JA raised a question as to whether common intention constructive trusts continue in Australia or are subsumed in the principles of proprietary estoppel, (at [113] to [119]). His Honour expressed no concluded view. Having regard to his Honour’s observations at [118], I do not assume that his Honour even inclines to a negative answer to that question.

13. [58]

    Neither party contended that the doctrine of common intention constructive trusts is no longer law in Australia.

14. [59]

    Green v Green and Parsons v McBain [2001] FCA 376; 109 FCR 120 were decided after Austin v Keele and neither suggested that the doctrine of common intention constructive trusts was subsumed in the doctrine of proprietary estoppel.

15. [60]

    Proprietary estoppel, whether by encouragement or acquiescence, requires that the defendant induce an expectation by the plaintiff that he or she has, or will acquire, rights in respect of the property. The element of “inducement” has not been described as necessary for the formation of a common intention constructive trust, although the facts in a particular case, particularly where the common intention arises from agreement (as in Austin v Keele), might also support a finding of inducement.

16. [61]

    Although Mr Galati did not press his challenge to the primary judge’s rejection of his claim based on equitable or conventional estoppel, he did challenge some of the primary judge’s factual findings relevant to that claim. I would uphold that challenge (see [73]-[76] below). As no issue was raised that the doctrine of common intention constructive trusts was subsumed in the principles of proprietary estoppel, there is no occasion to consider whether the primary judge’s estoppel findings, if challenged, would be upheld.

17. [62]

    Mr Galati did not contend that there was an express oral agreement between Mr Deans and him that TRHS would hold the Felan’s Fisheries shares on trust for Fishbank and TA, or for Mr Deans and him. Any such agreement would be contrary to the primary judge’s finding (at [618]-[620]). Nor does the evidence suggest that such an agreement should be inferred.

18. [63]

    But there is powerful evidence, not inconsistent with the primary judge’s findings, that at the time Mr Galati and Mr Deans agreed that TRHS would acquire the shares in Felan’s Fisheries, they had a common intention that the shares would be held by TRHS on behalf of TA and Fishbank.

19. [64]

    First, TA and Fishbank could have acquired the shares using the moneys provided by EJC. Mr Deans could not have prevented that from happening.

20. [65]

    Secondly, the reason for the shares not being acquired by Fishbank and TA equally was the desire for secrecy.

21. [66]

    Thirdly, the suite of documents entered into on 20 November 2015 showed that the joint venture agreement was still on foot. By the Nomination Deed with EJC, it was agreed that both Fishbank and TA would be entitled to 10% of any Development Profit earned by EJC from redevelopment of the Bidvest Site (at [32] above). By the general security deed and the unsigned loan agreement (at [40] above), the parties agreed that Fishbank and TA would jointly lend the purchase price and other moneys to TRHS.

22. [67]

    The primary judge did not find that the joint venture had come to an end before the nomination of TRHS to acquire the shares in Felan’s Fisheries. Her Honour found (at [619]) that it was intended that the shares in Felan’s Fisheries be held by TRHS for the purposes of the overall joint venture proposed to be progressed. Her finding in the last sentence of [619] was that the proposed joint venture “has” come to an end, not that it “had” come to an end before the nomination of TRHS as the party to acquire the shares. Her Honour found (at [629]) that by the time of the nomination of TRHS, the parties were “largely, if not indeed wholly, pursuing their own objectives” but did not find that, for that reason, the joint venture had already come to an end. Her Honour’s conclusion in the last sentence of [629] is not a finding that the joint venture had come to an end before the nomination of TRHS.

23. [68]

    Her Honour found (at [822]) that the payment of $1,799,820.95 by EJC to TA was a secret commission that was paid to TA on behalf of (and thus as an agent of) the joint venturers. That was a finding that the joint venture had not come to an end by the time that payment was made. The payment by EJC to Ms Pritchard was made on 8 December 2015 (at [333]). $1,799,820.95 was transferred by Ms Pritchard to TA on 9 December 2015 (at [333]). The primary judge found that EJC paid for the purchase of the shares in Felan’s Fisheries from Dahua No 2 by TRHS on 1 December 2015 (at [285]). Accordingly, her Honour found the joint venture was subsisting when TRHS was nominated to acquire the shares in Felan’s Fisheries. As Mr Galati submitted, in those circumstances it would be a breach of Mr Deans’ and Fishbank’s fiduciary duties owed to TA and Mr Galati to claim that they were entitled to the whole beneficial interest of the Felan’s Fisheries shares held by TRHS, or to claim that TRHS held its legal title free from the claim of any beneficial owner.

24. [69]

    Fourthly, both parties appointed a nominee director to Felan’s Fisheries. Although Mr Deans said that this was done under duress, the primary judge made no such finding and the respondent’s notice of contention does not include a contention that her Honour ought to have done so.

25. [70]

    The primary judge’s reasoning at [617]-[619] quoted at [46] above contains three related themes. One is that the parties anticipated that a unit trust would be established. Her Honour had recorded Mr Deans’ evidence that a unit trust had already come into existence. There was some corroboration of that in the execution of the general security deed of 20 November 2015 in which Mr Schultz executed the deed on behalf of TRHS “ATF TRH Unit Trust”. But if such a trust deed had been executed and units issued, but not to Mr Galati or TA, it is striking that no trust deed, nor register of unit holders, was tendered.

26. [71]

    Fraser Clancy’s letter of 15 August 2016 quoted at [44] above suggests that as late as that date no units had been issued. The primary judge recognises this at [617] and [618] in finding that there was no express agreement between the parties as to the basis upon which TRHS was to hold the shares and that units were to be issued to Mr Galati “in a proportionate amount then still to be agreed” (at [618]). Likewise, her Honour concluded that the parties were at that stage “yet to agree what interests the TRHS unit trust was to be acquired by Mr Galati or the Galati interests as part of the proposed joint venture” (at [619]).

27. [72]

    However, this is not a reason for denying TA a beneficial interest in the Felan’s Fisheries shares. Rather, it is consistent with the parties’ intending that TA have a beneficial interest in the shares but not having agreed upon the quantum of that interest. In the absence of evidence or a finding of disproportionate contributions to the acquisition of the shares, the maxim that equality is equity would apply (Green v Green at 355; Shepherd v Doolan at [42]). In any event, for the reasons above, it can be inferred that the parties’ intentions at the time the shares were acquired, was that they be held equally.

28. [73]

    The third theme in the primary judge’s reasoning is that the purpose of the proposed joint venture had come to an end (at [619]) and her Honour concluded that the most likely conclusion was that units would at some stage be issued to Mr Galati in an amount still to be agreed and on the assumption that the project was to proceed “at that stage” (at [618]), which I take to be at the stage that units were to be issued. The respondents submitted that this negated the requisite common intention to provide a basis for equitable intervention by way of constructive trust.

29. [74]

    The respondents also relied upon the primary judge’s reasoning at [624], [625] and [629] quoted above, which implies a finding that the parties’ intention was only that Mr Galati would have a beneficial interest in the shares if and when units were issued to him, which would depend upon the joint venture project still proceeding at that time.

30. [75]

    But that conclusion is inconsistent with Fraser Clancy’s letter of 15 August 2016 which recognised that Fishbank and TA were the “ultimate beneficial owners of units in TRHS following TRHS’ being nominated to exercise the option to buy the shares in Felan’s”, albeit in proportions yet to be determined.

31. [76]

    Mr Deans denied the accuracy of that statement. He says that Mr Fraser was not acting as his solicitor at the time, although he had acted for him when TRHS was established. However, the letter was probative evidence of Mr Deans’ view at the time, as he was then the sole director of Felan’s Fisheries for whom Mr Fraser was acting. Mr Fraser was not called. He was in Mr Deans’ camp and the respondents were the parties who could be expected to call Mr Deans if his evidence would have assisted their case.

32. [77]

    Having regard to this, together with the four considerations identified at [64], [65], [66] and [69] above, I conclude that at the time of TRHS’ nomination it was the parties’ common intention that TRHS would hold the shares beneficially for Fishbank and TA in equal shares.

33. [78]

    TA acted to its detriment in a way referable to that common intention by agreeing that TRHS be nominated to acquire the Felan’s Fisheries shares and providing the funds jointly with Fishbank to allow it to do so.

34. [79]

    The respondents submitted that it was not open to Mr Galati to pursue such a claim on appeal because it had not been raised below. The respondents did not dispute that the claim to an inferred express trust arising from an inferred agreement had been raised below. The respondents’ solicitor made an affidavit that was read on the appeal in which he argued that the respondents would be prejudiced if Mr Galati were permitted to pursue his resulting trust claim as articulated in his written submissions in reply. Although not repeated in the respondents’ final written submissions provided with leave after the hearing of the appeal, I take it that the respondents make the same objection to Mr Galati’s claim to be the beneficiary of a common intention constructive trust.

35. [80]

    The respondents’ solicitor deposed that had Mr Galati sought leave at trial to amend his pleading to allege a resulting trust he would have sought instructions and obtained counsel’s advice with a view to pursuing various evidentiary inquiries. However the inquiries referred to were equally relevant to the claim of an inferred express trust as to the claim for a common intention constructive trust.

36. [81]

    At trial the respondents contended that if TRHS held the Felan’s Fisheries shares on trust for TA, then TA held its beneficial interest in the shares on a constructive or resulting trust for Fishbank. The primary judge rejected the claim for a constructive trust which was propounded on the basis of the failure of the substratum of the parties’ joint venture (at [910]-[916]).

37. [82]

    By an amended notice of contention the respondents claimed:

38. [83]

    The respondents pleaded:

39. [84]

    The primary judge rejected the constructive trust claim. Her Honour accepted that there had been a failure of the substratum of the joint venture without blame attributable to Mr Deans or Fishbank (at [915]). But her Honour held (at [916]):

40. [85]

    The respondents have not shown any error in this reasoning. In particular, they have not shown that having regard to the parties’ respective contributions to the joint endeavour both financial and non-financial, there was a disproportion of contributions that would make it unconscionable for TA and Mr Galati to assert their 50% beneficial interest in the Felan’s Fisheries shares.

41. [86]

    The primary judge did not deal expressly with the alternative claim that TA held its beneficial interest in the Felan’s Fisheries shares on resulting trust for Fishbank. Her Honour found (at [917]) that because, on her Honour’s findings, TA had no interest in those shares, there was nothing over which a resulting or constructive trust ought to be declared for the benefit of Fishbank.

42. [87]

    In support of its contention that TA held any beneficial interest that it might have in the Felan’s Fisheries shares on resulting trust for Fishbank, the respondents submitted that that Felan’s share option originated with Mr Deans who acquired the option in 2013 and contributed it to the co-venture after August 2014. This is not correct.

43. [88]

    On 25 February 2013 Fishbank entered into an agreement with Bidvest which was then the owner of 25% of the shares in Tenants and Merchants whereby Bidvest agreed to support Fishbank’s proposal to the New South Wales Government for the redevelopment of the land on the Blackwattle Bay foreshore, which included the Bidvest Site. Bidvest did not then grant an option over its shares in Tenants and Merchants to Fishbank.

44. [89]

    The respondents submitted that on 13 August 2014 Fishbank entered into an agreement with Bidvest and N Stevenson & Co Pty Ltd for Fishbank to have the option to purchase the Bidvest Site and Bidvest 25% shareholding in Tenants and Merchants. They submitted that although not stated in the judgment, it was not understood by them to be controversial that the options “conditionally transferred to the Dahua Group had originally been obtained by FDC in August 2014”.

45. [90]

    Mr Deans deposed that on or about 13 August 2014 Fishbank agreed “in-principle terms” for the purchase by Fishbank or its nominees of, inter alia, “the Tenant’s shares from Bidvest”. He annexed a copy of a sales advice setting out the “in-principle terms of these purchases”. The sales advice issued by Deans Property Pty Ltd referred to a sale of the property of the Bidvest Site, the business conducted by Felan’s Fisheries, and Bidvest’s then 25% shareholding in Tenants and Merchants for a price of $15 million to Fishbank or its nominee to be advised before entry into contracts. No such agreement was entered into. The agreement said to have been made on 13 August 2014 was in any event not an agreement for Fishbank to have the option to purchase the Bidvest Site and Bidvest’s shareholding in Tenants and Merchants.

46. [91]

    Fishbank did not transfer to TA for no consideration any option rights to acquire the shares in Felan’s Fisheries. Those rights were granted by Dahua No 2.

47. [92]

    Accordingly, this ground of the notice of contention should be rejected.

48. [93]

    In their notice of contention the respondents also submitted that Mr Galati’s claim that TA held a beneficial interest in the Felan’s Fisheries shares should be rejected on the ground of unclean hands. The respondents acknowledged that the defence of unclean hands had not been pleaded. The respondents do not take issue with Mr Galati’s submission that such a defence was not mentioned at all in written or oral submissions at trial. One of the grounds for the defence of unclean hands was Mr Galati’s obtaining the secret payment of $1,799,820.95 and not accounting for it to Mr Deans and Fishbank. But Mr Galati has been required to account for that receipt. The other grounds said to give rise to a defence of unclean hands were that Mr Galati was secretly seeking to oust Mr Deans and Fishbank from the joint venture and refusing to provide Mr Deans with the final say on financing and sale arrangements as provided for in the Agreement Principles document.

49. [94]

    Whatever be the merits of those contentions, they do not have “an immediate and necessary relation to the equity sued for” (Dewhirst v Edwards [1983] 1 NSWLR 34 at 51; Carantinos v Magafas [2008] NSWCA 304 at [58]).

50. [95]

    For these reasons I would reject the respondent’s amended notice of contention. I conclude that Mr Galati as assignee of TA’s interest is beneficially entitled to a 50% interest in the shares held in TRHS and Felan’s Fisheries as tenant in common with Fishbank. I propose that a declaration be made to that effect.

Was Mr Deans liable to account to TA or Mr Galati for a secret commission?

1. [96]

   At [7] above I have referred to the agency agreement Bidvest entered into with Deans Property Pty Ltd on 2 July 2002. At [20] I have quoted the letter signed by Mr Deans for Deans Property and Mr Berson for Bidvest providing for the payment of commission to Deans Property.

2. [97]

   The 2002 agency agreement between Bidvest and Deans Property included the following terms:

3. [98]

   The Agency Period specified in cl 2 expired on 31 October 2002.

4. [99]

   The Continuing Agency Period was to continue after that time until either the property was sold or either party gave notice of termination of that period. Evidently, no notice of termination of the Continuing Agency Period was given by either Bidvest or Deans Property. Their agreement of 18 November 2014 acknowledges as much. By cl 2 of the agreement of 18 November 2014 Deans Property agreed to accept $500,000 plus GST if the sale of the business to Dahua was completed by the end of April 2015 for at least $18 million.

5. [100]

   On 1 December 2014 TA, Fishbank, Mr Deans, Mr Galati and Madison Marcus Advisory Pty Ltd (“Madison”) entered into a Commission Sharing Agreement which provided for Madison to assist TA in procuring investors to invest into the Blackwattle Bay Project. The Deed of 1 December 2015 called a “Deed of Binding Commission Distribution Direction” provided that the parties acknowledged that Madison Marcus Advisory was the effective cause of the introduction of Dahua to the investment. Other details of that deed are not presently relevant.

6. [101]

   The fact that by this deed TA and Mr Deans acknowledged that Madison, and not Deans Property, was the effective introducer of the Dahua Group does not affect the primary judge’s conclusion that Deans Property’s receipt of the $550,000 commission from Bidvest arose from arrangements entered into before the joint venture with TA. The position might have been different if TA or Mr Galati had been the effective introducer of the Dahua Group, but Mr Galati does not contend for such a finding.

7. [102]

   Mr Galati denied that Deans Property was the effective introducer of the Dahua Group to Bidvest. But that was a matter between Bidvest and Deans Property. Moreover, the commission was earned by Deans Property, not by Mr Deans.

8. [103]

   The primary judge found (at [821]) that the commission earned by Deans Property was earned “by reference to an arrangement entered into before, and therefore unrelated to, the joint venture and there is nothing to indicate that the Deans’ interests undertook to bring such amounts in the joint venture”.

9. [104]

   This conclusion was clearly right.

10. [105]

    For these reasons I would reject those parts of grounds 4 and 5 of the notice of appeal that were pressed.

Costs

1. [106]

   The parties have had mixed success on the appeal. Counsel for Mr Galati submitted that, in that event, the parties should be given the opportunity to make submissions in writing on costs of the appeal and on what costs orders should be made in respect of the proceedings below. That course is appropriate.

Proposed orders

1. [107]

   For these reasons I propose the following orders:

   1. (1)

      Appeal allowed in part.

   2. (2)

      Set aside order (1) made on 1 September 2021 in the court below.

   3. (3)

      In lieu thereof,

   4. (4)

      Order that within 28 days the parties file and exchange written submissions of no more than 8 pages as to the appropriate costs orders to be made in respect of the proceedings below and of the appeal.

2. [108]

   BASTEN AJA: I agree that the appellant is entitled to a declaration that the shares in Felan’s Fisheries Pty Ltd held by the third respondent (TRHS Pty Ltd) are held on trust for the appellant, Dominic Galati, and the second respondent (Fishbank Development Corporation Pty Ltd) as tenants in common in equal shares. Otherwise, this appeal from a complex set of proceedings determined by Ward CJ in Eq in September 2021 [1] should be dismissed.

3. [109]

   As is often the case, the complexity of the proceedings at trial did not flow through to the proceedings on appeal, where the issues were quite limited. It is necessary to identify the context in which the two issues for determination by this Court arose.

Background circumstances

1. [110]

   The proceedings arose from a proposed redevelopment of the Sydney Fish Markets and surrounding areas at Blackwattle Bay, Ultimo. As the trial judge explained in her opening:

2. [111]

   Although the redevelopment did not come to fruition, the present dispute was not concerned with why that was so. Rather, it was concerned with the fate of certain assets and funds which were acquired in the course of a joint venture between two parties which had hoped to benefit from the proposed redevelopment.

3. [112]

   The site of the proposed redevelopment included the Sydney Fish Markets and a number of adjourning or nearby parcels of land. One parcel was originally owned by Bidvest Australia Ltd and was known as the Bidvest Land. Bidvest Australia also owned a parcel of shares in a company which in turn had an interest in the company which operated the Sydney Fish Markets, namely Sydney Fish Markets Pty Ltd (SFM).

4. [113]

   From sometime in 2002, Bidvest Australia was considering selling the Bidvest Land and its shareholding in SFM. At that time, the first respondent, real estate agent Robert Deans, through his corporate vehicle, Deans Property Pty Ltd, entered into an agency agreement with Bidvest Australia for payment of a commission on the introduction of a purchaser for the Bidvest Land. [2] At about the same time, Mr Deans was formulating his own proposal for a redevelopment of the Sydney Fish Market site and incorporated Fishbank Development Corporations Pty Ltd (“Fishbank” or “FDC”) as a corporate vehicle through which to pursue that proposal.

5. [114]

   Bidvest Australia was interested in disposing of both the Bidvest Land and the shareholding together. The reason for that is important in determining the ultimate fate of the shareholding. SFM, the company operating Sydney Fish Market, had two shareholders, one being a company which represented suppliers of fish for sale at the markets and referred to as “Catchers”. [3] The other shareholder, SFM Tenants and Merchants Pty Ltd, referred to as “Buyers”, represented the retail outlets which leased or licensed stalls in Sydney Fish Market. Felan’s Fisheries Pty Ltd held 25% of the shares in Buyers. Bidvest Australia was the sole shareholder of Felan’s Fisheries. The trial judge noted:

6. [115]

   The appellant, Dominic Galati, became involved with Mr Deans in relation to the redevelopment project at some stage in or about 2014. [4] It is common ground that Mr Galati’s corporate vehicle, Trading Australia Pty Ltd, and Fishbank entered into a joint venture, although the precise timing and the terms of the agreement were unclear. The timing and terms are only relevant now in relation to Mr Galati’s defensive claim that if he is required to disgorge a commission he received from a later investor, Mr Deans should bring into account a commission he received from Bidvest Australia.

7. [116]

   The Bidvest Land and the shareholding in Felan’s Fisheries were sold in April 2015 to two special purpose vehicles within the Dahua Group. Although Mr Galati claimed some role in the introduction of Dahua, the judge accepted that the “effective cause” of the introduction of the Dahua Group to the project was a different entity, Madison Marcus Advisory. Deans Property was paid a commission of $500,000 (plus GST) for the sale of the Bidvest Land to a special purpose vehicle known as Dahua Fish Market No 1 Pty Ltd (“Dahua No 1”). Mr Galati’s claim that Mr Deans should have accounted to the joint venture for the commission was rejected by the trial judge on the basis that the commission was payable pursuant to the agreement originally between Bidvest Australia and Deans Property in 2002 (subsequently renewed) and was not subject to the later joint venture agreement between Galati and Deans, or their respective corporate entities. [5] However, on the appeal, the respondents contended that because Mr Galati had not introduced Dahua to the project, he had no interest in the arrangements created by the sale of the Bidvest Land and the shareholding. That submission requires attention to those arrangements.

8. [117]

   In early 2015, the Bidvest Land and shareholding in Felan’s Fisheries were sold by Bidvest Australia to Dahua No 1 and Dahua No 2 respectively. The intention, however, was that the Dahua Group be, in effect, an interim investor. Each company granted to Fishbank and Trading Australia “together”, [6] that is jointly, options to purchase the Dahua interests in the Bidvest Land and the shareholding in Felan’s Fisheries respectively. Those options were eventually exercised on 20 November 2015. By that stage, Mr Galati had arranged for the purchase of the land by a company EJC Pyrmont Pty Ltd (“EJC”). While EJC provided funding to Fishbank and Trading Australia jointly, it was only interested in the purchase of the land. Nevertheless, it was a condition of the Dahua option agreements that each be exercised at the same time. EJC agreed to provide funds to allow the exercise of the option with respect to the shares.

9. [118]

   Pursuant to each option, the Grantee, Trading Australia and Fishbank, was entitled to nominate a third party as the purchaser. ECJ was nominated as the purchaser of the land; and a separate company, TRHS, owned and controlled by Mr Deans, was nominated as the purchaser of the shareholding in Felan’s Fisheries.

10. [119]

    The primary claim made by Mr Galati was that the shares held by TRHS were the subject of a joint venture arrangement between Trading Australia and Fishbank and the shares were beneficially owned equally by the two companies from the time they were transferred to TRHS.

11. [120]

    The proceedings in the Equity Division were commenced by Mr Galati and Trading Australia in 2016. On 23 October 2019, a liquidator was appointed to Trading Australia. On 17 September 2020, the liquidator assigned to Mr Galati all choses in action in Trading Australia in the present proceedings. [7] Thereafter Mr Galati pursued the claimed beneficial interest originally vested in Trading Australia in his own name.

Share-holding in Felan’s Fisheries

1. [121]

   It was not in dispute that the shares held by Dahua No 2 were transferred to, and registered in the name of, TRHS. The evidence suggested that TRHS was the trustee of a unit trust. However, no trust document was produced or tendered, nor was there any evidence of units having been issued. There was no evidence as to what property (if any) was held by the trust (if a trust had been established).

2. [122]

   It was also not in dispute that ECJ, introduced by Mr Galati, provided some $24m in funds, the bulk of which ($21.6m) constituted the purchase price for the Bidvest Land. A further amount of some $535,785 (plus GST) was provided, being the purchase price of the Felan’s Fisheries’ shareholding pursuant to the option given by Dahua No 2. Other smaller amounts included $250,000 provided for Felan’s Fisheries’ anticipated litigation costs, in circumstances where Felan’s Fisheries had been required by SFM to forfeit its licence or lease within the Market on the basis that it had not operated since mid-2015. Unless the proceedings were successful, Felan’s Fisheries’ shareholding in SFM would have to be sold.

3. [123]

   Fundamental to Mr Galati’s claims was the relationship between him and Mr Deans (including by reference to their respective corporate vehicles). At trial, Mr Galati claimed that there was a partnership. That claim was rejected by the trial judge and has not been repeated. Nevertheless, she accepted that they had embarked on a joint venture and that each owed fiduciary obligations to the other with respect to the carrying on of the joint venture. [8]

4. [124]

   Those findings derived partly from the oral evidence of the parties, but primarily from certain key documents. The key findings in this respect appear in the following passages in the primary judgment:

5. [125]

   The primary judge identified the issues raised before her in the following terms:

6. [126]

   The agreement between the parties extended, as the trial judge found, beyond the acquisition of the Bidvest Land and the shareholding; rather, its purpose was participation in the redevelopment of the larger site, with the profits of the redevelopment to be distributed in specified proportions, depending upon the amount involved (namely whether greater than or less than $150m). The joint venture agreement did not address what might happen if the redevelopment did not proceed, or proceeded without the involvement of the Galati and Deans interests. In relation to the financing obtained from ECJ, part of the agreement with ECJ involved ECJ paying 10% of the net profit of the redevelopment to the Galati and Deans interests. However, although ECJ provided funds which paid for the taking up of the option in respect of the shareholding by TRHS, there was no agreement as to what should happen to that shareholding.

7. [127]

   The judge’s critical findings were expressed as follows:

8. [128]

   On appeal, Mr Galati initially contended that there was an express trust established whereby either Mr Deans held his shares in TRHS as to 50% in trust for Mr Galati or, in the alternative, that TRHS held the Felan’s Fisheries’ shares as to 50% on trust for Mr Galati. That submission challenged the judge’s finding that there was no such agreement. As the submissions continued, the exercise of the call options on 20 November 2015 “necessarily implies that the purpose of the joint venture had not failed but was (at that time) continuing”. [9] Accepting that to be so, it does not follow that property acquired in the course of the joint venture and placed in the ownership of one person, with an expectation that it would be deployed for the purposes of the redevelopment, was agreed to have been the subject of an express trust with the relevant interests of the parties identified. The judge found there was no such agreement, a finding which must be accepted.

9. [129]

   In the alternative, the appellant contended that, upon the failure of the joint venture, property acquired as a collateral benefit in the course of carrying out the joint venture, would be held by the legal owner on a constructive trust for each of the joint venturers in equal shares, in the absence of any agreement to the contrary. On this approach, the judge’s finding that “the joint property seems to me to be the option rights” [10] started with the proposition that the option rights were joint venture property immediately prior to the exercise of the option. The nomination of TRHS as the purchaser of the shareholdings in circumstances where the whole of the consideration was provided by the joint venturers, with finance provided by ECJ, was said to rebut any implication that TRHS was intended to be the beneficial owner of the shares. The arrangement between ECJ and the joint venturers meant that the funds obtained from ECJ were for the benefit of the joint venturers and ECJ obtained no interest by way of a resulting trust in the property on which the funds were expended and which it did not seek to acquire. However, the moneys applied by the joint venturers to the purchase of the shareholding provided a foundation for a resulting trust of the property held by TRHS.

10. [130]

    The respondent’s written submissions noted that the primary submissions of the appellant did not address authority, nor the requirements for the imposition of a constructive trust in respect of a breakdown of a relationship without attributable blame. The submissions continued: [11]

11. [131]

    The respondent suggested that the necessary elements for the imposition of a constructive trust had not been pleaded, were not argued at trial but, in any event, did not exist. They did not exist, it was submitted, because Mr Galati had destroyed the substratum of the joint relationship, which had not failed without attributable blame. Further, it was suggested that as the Dahua options had been brought in by Mr Deans it would not be unconscionable for him to retain ownership of the product of the options.

12. [132]

    The trial judge did not accept that the relationship had been destroyed by Mr Galati. True it was that he had sought to retain for himself a commission obtained from ECJ for arranging the finance, but the judge accepted that at the time the commission was obtained, the joint venture remained on foot. It was therefore on foot when the option was exercised. It was also true that both parties were unhappy with the performance of the other, but in fact the venture did not fail for that reason, but because the redevelopment did not go ahead.

13. [133]

    By a notice of contention, the respondents submitted that there was “no pleaded claim for breach of fiduciary duty”. However, it is clear that the case run at trial depended upon the existence of a fiduciary duty owed by each party to the other and that allegations as to its breach went to the heart of the matter. So much appears from the discussion in the judgment at [616]-[620] set out above. As the appellant submitted in his reply, the imposition of a constructive trust over the Felan’s Fisheries’ shares as a remedy for breach of fiduciary duty was canvassed in submissions and addressed by the judge at [587], set out above.

14. [134]

    Although, as noted below, the appellant’s case was put in various ways at different stages of the appeal, the first claim posited an express trust. However, as noted above, I agree with the trial judge that no such declaration of trust can be found on the evidence. The judge’s conclusion that the parties at that time of acquisition in the name of TRHS gave no consideration to beneficial interests in the shares, because they did not then need to, is persuasive. I am not satisfied that the court should uphold an express trust.

15. [135]

    The second way it was put in oral submissions was a claim for a resulting trust where the underlying purpose for which the property was acquired had failed. After addressing the submission that there was an express trust, senior counsel for the appellant continued: [14]

16. [136]

    In Wirth v Wirth [15] Dixon CJ stated at [235]:

17. [137]

    Counsel referred to Napier v Public Trustee (WA), [16] where Aickin J stated (with the agreement of Gibbs, Mason, Murphy and Wilson JJ):

18. [138]

    The trial judge correctly emphasised that the joint venture between Fishbank and Trading Australia conferred benefits on the parties according to the outcome of the development. The judge was correct to emphasise that the purpose of the joint venture was a completed redevelopment of the Sydney Fish Market site. From that it was readily inferred that the parties gave no thought to the beneficial ownership of property obtained in the course of carrying out the venture. The value to the joint venture of ownership of the Felan’s Fisheries’ shares was the opportunity, as the judge noted, to influence SFM in its consideration of any proposal for redevelopment of the site. For that reason, it was deemed expedient by Mr Deans and Mr Galati that the public record would not disclose their control of the relevant shares. As senior counsel for the appellant submitted, if the purpose of the nomination of a third party to hold the shares was to conceal the true ownership, the underlying premise was that Mr Deans and Mr Galati had a common interest in the shares that needed to be concealed. It was concealment of that interest, rather than an intention to transfer ownership of the shares from one person to another, that underlay the nomination of TRHS to hold the shares. [17]

19. [139]

    That inference was supported by the fact that Mr Deans and Mr Galati agreed that each should nominate one director to the board of TRHS. That occurred, on 23 November 2015 (three days after the Nomination Agreement was executed – see below), each naming a person who, it seems, was not directly associated with his business. [18]

20. [140]

    A further factor relied upon by the appellant was the fact that the options granted by Dahua No 1 and Dahua No 2 each identified Fishbank and Trading Australia “together” as the buyer or grantee of the option. They, together, were given the power to nominate another person to become the registered owner of the shares but they would remain liable for completing their obligations under the option, regardless of any act or omission of the nominee. It was for that reason that the judge identified the holding of the option as relevant joint venture property, rather than the shares the subject of the option.

21. [141]

    Fishbank and Trading Australia entered into a “Nomination Agreement” with ECJ on 20 November 2015 with respect to the purchase of the Bidvest Land. Pursuant to that agreement, they nominated the property purchaser, EJC. That deed was relevant for two reasons. First, it confirmed that as at 20 November 2015, Fishbank and Trading Australia were acting jointly in pursuit of the joint venture. Secondly, it provided for the nomination of EJC as the purchaser of the Bidvest Land, but not of the shares. The deed identified the “Share Purchaser” as “[t]he person/s whom the Grantee nominates pursuant to the Share Option Deed to be the buyer of the Shares, or where the Grantee does not make a nomination, the Grantee”. That aspect was relied upon by the appellant to rebut any suggestion that EJC was entitled to hold the shares on a resulting trust, in the event that the development did not occur. It also provided support for the inference that the funds obtained by the joint venturers would be used by them to purchase, in whatever name they thought fit, the shareholding the subject of the Dahua No 2 option.

22. [142]

    There was evidence that the money provided by EJC to the joint venturers was made available by them by way of a loan to TRHS for payment to Dahua No 2. That inference was derived from the existence of a loan agreement and a “General Security Deed”, the latter being executed by Mr Deans on behalf of Fishbank, by Mr Galati on behalf of Trading Australia and by Andrew Schultz, identified as the sole director and secretary of TRHS; the deed was dated 20 November 2015. The deed was said to give security for payment of amounts owing by TRHS to “the Secured Party”, the latter being identified as Fishbank and Trading Australia. The joint venturers were described as the “lender” and TRHS as the “borrower”. TRHS was able to obtain legal title to the shares, as a result of the provision of funds by the joint venturers.

23. [143]

    It is true that generally a third-party financier will not obtain an equitable interest in a property purchased with funds it lends to the purchaser. However, the joint venturers were not third-party financiers but the parties entitled to purchase the property pursuant to the option agreement with the vendor. The fact that in exercising the option they nominated a third party (which one of them controlled) to which they supplied the funds to complete the purchase, for the acknowledged purpose of concealing their interests, provides an analogous situation to that of the purchaser who provides no consideration for the transfer.

24. [144]

    The appellant noted the reasoning of the trial judge, adopted by the respondent, at [616] (set out above in full) that by mid-2015 Mr Galati believed that the parties “had finished as a team”, so that “there is no reason for the holding of the shares as property for a joint venture the underlying premise of which has failed.”

25. [145]

    Accepting for the purpose of argument the factual premise that Mr Galati believed that the joint venture had collapsed in mid-2015, the appellant submitted that it would be absurd to infer that, some five months later, Mr Galati was content to abandon a significant asset of the joint venture, namely the option to purchase the shares, by making a gift to Mr Deans. Further, the appellant submitted that this involved a misunderstanding of the reasoning of the trial judge, because the judge found that in late 2015 Mr Galati was in breach of his fiduciary duty in retaining the commission paid by ECJ which constituted an asset of the joint venture.

26. [146]

    The fact that, in November 2015, the Nomination Agreement with ECJ expressly provided for a payment of 10% of the net profit of the redevelopment to the joint venturers supports the inference that the arrangement with ECJ was intended to be part of the joint venture, but that no thought was given to the beneficial ownership of the shares in Felan’s Fisheries, should the project collapse. The shares were not being acquired in order to operate stalls at the fish market; rather, they were being acquired so that they could be used by the joint venturers to promote the proposed redevelopment. Consistently with the principles stated in Muschinski v Dodds, affirmed in Baumgartner, this was a case in which a joint venture collapsed leaving one party as the legal owner of a major asset, in circumstances where it would be unconscionable for the legal owner to deny any beneficial interest on the part of the other joint venturer.

27. [147]

    As a further element of joint activity, in 2015 Mr Galati and Mr Deans each nominated a director of TRHS. On 26 February 2016 the director of TRHS nominated by Mr Galati was removed, at Mr Deans’ instigation. [19] That left Mr Deans in sole control of TRHS. Although in a legal sense TRHS may have held 50% of the beneficial interest in the Felan’s Fisheries shareholding for Fishbank, as that was also a Deans’ company, nothing turned on that in a practical sense. However, TRHS having obtained the shareholding with funds provided by the joint venturers, it should be declared that it holds those shares on trust for the joint venturers equally.

28. [148]

    A third possible approach, raised by the Court in the course of argument and adopted by the counsel for the appellant in reply, was that the Court could find a “common intention constructive trust”. The basis for such a trust is said to derive from principles found in such cases as Grant v Edwards [20] and Green v Green. [21] The relevant elements were set out by Ward CJ in Eq in Bassett v Cameron, [22] where the Chief Judge further identified a claim based on a joint enterprise which failed, as seeking “to invoke the so-called ‘joint endeavour’ constructive trust of the kind identified in Baumgartner at 148, namely, where equity intervenes to restore to a party ‘contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them’.” [23]

29. [149]

    However, as explained by White J in Shepherd v Doolan, [24] the existence of an agreement or “common intention” referrable to the beneficial enjoyment of the property is one to be determined on the evidence. In my view, such a determination in the present case would be inconsistent with the findings of fact made by the trial judge as to which the appellant eschewed any challenge. The law does not impute a presumed intention. [25] Further, it is said that the claimant must demonstrate that it acted to its detriment in reliance upon the common intention, although “a less stringent test applies to the requirement of detriment once the common intention has been established”. [26] That element supports the doubts expressed by Leeming JA in Bijkerk Investments v Bikic, [27] noted by this Court in Koprivnjak, as to whether there is available under Australian law a “common intention constructive trust” which may be found in circumstances where no estoppel arises. In the present case, the trial judge expressly rejected a claim in estoppel [28] and the appellant eschewed any reliance on estoppel at the hearing of the appeal. [29]

30. [150]

    Once it is accepted that the ultimate provider of the funds, ECJ, disclaimed any interest in obtaining the shares, pursuant to the Nomination Agreement, the relevant source of funds was the joint contribution of the joint venturers, who were otherwise entitled to obtain the transfer of the property to themselves on payment to the seller.

31. [151]

    In these circumstances, the appellant’s claim to a 50% interest in the shareholding in Felan’s Fisheries transferred to TRHS should be accepted. There should be a declaration to that effect.

Conclusion

1. [152]

   I agree with the reasons of White JA with respect to other matters raised by the appellant. Accordingly, the orders proposed by White JA should be made.