Youyang Pty Ltd v Minter Ellison Morris Fletcher

What happened?

Youyang, trustee of a family trust, invested $500,000 in preference shares in ECCCL. Part of the money was to be secured by a bearer certificate of deposit from a prime bank, lodged with a registry, so that the face value would return in ten years; the rest funded a speculative money market venture. Minter Ellison Morris Fletcher held the subscription money on trust, to be released only against that security.

Minters disbursed it without the certificate. The investment later failed.

What did the Court decide?

Youyang's appeal was allowed; Minters had to make good the $500,000.

Causation was still required — the appeal "turns upon the significance for the facts of the causal requirement" ([44]) — and it was satisfied. The required security was never provided and nothing later, including a Deed Poll, repaired that ([62]). Their Honours accepted that subsequent events "could be of significance on questions of causation" had a proper certificate been released and replaced with a defective one, "[b]ut that was not the order of events that transpired". That third parties may also have acted dishonestly was "not to the point": fixing on those acts would be "an ocular illusion", "because the loss of the trust funds occurred as soon as the trustee wrongly disbursed them" ([63]).

The Court was careful to confine what it had decided: this was a misapplication of trust money, "not one merely of the imprudent exercise of a power ... by failure to employ the care and diligence which equity requires" ([38]), and whether common law causation and remoteness apply by analogy to that different kind of breach was left open ([38]–[39]).

Why does this case matter?

Because of what the defendant's story could not do with the facts. Minters had a genuinely bad set of subsequent events to point to — a failed speculative venture, third parties who may have acted dishonestly — and none of it reached the claim, because the deficiency was never repaired at any point in between.

The instructive part is that this was a finding about these facts, not a rule, and it is the opposite of how the case is usually cited: a slogan is what people take from it, and what it actually turned on was a close account of what the trust required, what was lodged instead, and what each later event did or did not repair.

Exam and application relevance

Classify the breach before you choose the measure, and say in one line which kind you are in.

Then prove causation rather than asserting that equity does not ask. Identify what the trust required, what was done instead, and why the loss would not have been suffered but for that. Then take the defendant's subsequent events one at a time and ask what each did to the deficiency, not merely when it happened. Timing alone decides nothing: the Court treats later events as capable of bearing on causation and on quantification. What defeated the defence here is that the required security was never provided at any stage and nothing later supplied it — so each event was answered on what it failed to repair, not on which side of the payment it fell.

Check your understanding

Your client's trustee paid money away in breach, and the investment then failed for reasons nobody foresaw. What do you still have to establish, and at what date is the sum worked out?