David 2
29 Apr 1991
23 May 1996
03 Feb 2005
B.Com. (Hons), LLM.
Legalbrief sm
Name 1a

Subhead 1a

Tossing the Trustee

Literski v Fresh 2 U Pty Ltd & Ors [2013] VSC 307

When majority shareholders run a company oppressively, the minority can bring a proceeding under s. 232 of the Corporations Act. These proceedings often seek the winding up of the company. But what about where there is a unit trust? A trustee can also operate a trust oppressively to the minority of unitholders but winding the trustee up will not solve the problem.  In Literski v Fresh 2 U Pty Ltd & Ors [2013] VSC 307 the defendant was the trustee of a unit trust that carried on a wholesale fruit business. It allowed related businesses to be registered in the names of the majority unitholders. It  also sold the wholesale business but allowed some of the benefits of the sale to accrue to the majority unitholders. The plaintiff sought an order for removal of the trustee. 

In a 3 day hearing before Sifris J, Literski led further evidence as to the defendant’s failure to bring in trust assets and its alienation of its assets in favour of the majority unit holders.  The defendant compounded the situation during the proceeding by failing to discover critical documents and lack of candour with the Court. Although there were gross breaches of trust, Sifris J explained that an order for removal of the trustee was not penal in character, but an appropriate order to protect unitholders and creditors of the trust. His primary authority was Miller v Cameron (1936) 54 CLR 572, where Starke J said “the only guide is the welfare of the beneficiaries”.