Two plaintiffs invested money with the first defendant for a fixed term having signed various documents titled “Declaration of Trust”.

At the end of the term of investment, the first defendant did not repay the money.

The plaintiffs said that the first defendant held the funds on trust. The plaintiffs also said that the second and third defendants might be holding some of the money and that, if they were, they were doing so as constructive trustees. (However, this “constructive trustee” issue was saved for another day.)

The defendants did not attend the hearing. The Court nonetheless found it was appropriate to proceed in their absence.

Thus the Court was left to decide various issues including whether the first defendant held the funds on trust.

Before the investment, the first defendant had made various representations about an investment with him being “100% safe and secure”. The Ps subsequently made a number of investments with him. As many of the investments were made, the first defendant would send a document titled “Declaration of Trust” for the relevant plaintiff to sign.

Between them the plaintiffs invested around $2.4m in this way.

In considering whether a trust had arisen the Court had to consider whether there was certainty of intention, subject matter and object.

The test of certainty of subject matter (the money) and object (investing with the hope of a return) were comfortably met. But did the parties intend that the money be held on trust?

Yes, the Court found.

The reasons were: (i) the terms of the relevant document referred to the sums being held “in trust”; (ii) the use of the word “trust” in the documents was purposeful; (iii) the surrounding circumstances suggest a trust purpose; and (iv) even if the relationship was debtor/credirtor, such a relationship does not negative the obligations of a trust arising.

The Court declared first defendant held the sums on trust for the benefit of the plaintiff and left the issue of pursuing the other defendants for another day. Costs followed the event.


Interested in learning more on Litigation & Dispute Resolution?

Click our recent articles below to find out more:

Exposure to penalties under the Work Health and Safety Act 2011 (NSW)

Some implications for costs under the CPA 2005 (NSW)

Witnessing Documents and Giving Evidence by AVL