A & J Morphett Nominees Pty Ltd v JBT Lawyers Pty Ltd & Anor [2022] VSC 238 (17 May 2022): role of Stakeholder, where deposit held by solicitor as stakeholder on behalf of both parties to sale transaction & failed to refund deposit to purchaser who validly terminated the contract.

May 22, 2022 |

In A & J Morphett Nominees Pty Ltd v JBT Lawyers Pty Ltd & Anor [2022] VSC 238 Justice Dixon in upholding an appeal made important statements for practitioners on the role of stakeholders.


On 26 November 2018 the appellant and Chloe Estelle Pty Ltd entered into the contract with the appellant paying the deposit of $42,000 to the respondent on 6 December 2018 [4].

On 21 March 2019, the appellant by written notice terminated the contract and requested that the respondent repay the deposit to it [4].

The appellant, A & J Morphett Nominees Pty Ltd, commenced proceedings against Chloe Estelle Pty Ltd, as first defendant, and the respondent, JBT Lawyers Pty Ltd, as second defendant in the Magistrates Court.  In its defence the respondent admitted that it received the deposit sum as a stakeholder as alleged by the appellant [6].

On 24 June 2019, the appellant entered default judgment in the proceeding against Chloe Estelle Pty Ltd, which included an amount for interest and costs [7]. The appellant did not recover against Chloe Estelle Pty Ltd as it was and on 18 July 2019, an administrator was appointed and it was subsequently ordered to be wound up. The liquidators made no claim for the deposit.

It was never been in dispute that the respondent received that sum as a stakeholder for the appellant and Chloe Estelle Pty Ltd [3].

On 29 March 2019, the Federal Circuit Court, per Small J,made an order in a Family Law dispute between different parties.  It relevantly stated. at [9], that:

[JBT Lawyers Pty Ltd] be and are hereby restrained from dealing with or disbursing any monies held on behalf of [Christopher Fitzpatrick] as a result of … the sale or attempted sale of the business without the written agreement of the parties first having been obtained or pursuant to an Order of a Court.

Christopher Fitzpatrick was then a director of Chloe Estelle Pty Ltd and the order refers to the sale of the business to the appellant. Each of Mr Fitzpatrick and Chloe Estelle Pty Ltd retained JBT Lawyers to represent them in their respective legal transactions [10].

The respondent took the view that it was prohibited from returning the deposit to the appellant by the operation of the order  but on 24 July 2019 wrote stating its intention to pay the sum of $42,000 into the Magistrates Court if the solicitors for the wife consented to that course, stating:

We confirm that we hold the deposit for the sale of the business which did not occur in the sum of $42,000 as Stakeholder and not on behalf of Christopher Fitzpatrick, and to be clear as Stakeholder between the Vendor, Chloe Estelle Pty Ltd, and the Vendor, A & J Morphett Nominees Pty Ltd, the Purchaser.

We propose to pay the monies into the Magistrates’ Court. Please confirm your clients consent to same by way of return letter or email by close of business Thursday 25 July 2019.

At the hearing, the appellant argued that by virtue of the default judgment against Chloe Estelle Pty Ltd, the respondent is no longer holding the deposit on behalf of Mr Fitzpatrick, and hence is not constrained by Judge Small’s order [12].

The magistrate reserved his judgment and, before he handed it down on 26 July 2021, the appellant’s solicitors established that the proceeding between Mr Fitzpatrick and his wife had been finalised in the Family Court of Australia. They filed an affidavit with the Magistrates’ Court deposing to these matters. The appellant accordingly argued, in the alternative, that because the Family Court proceedings have concluded, even if Judge Small’s order still constrained the respondent, such order has been discharged by the finalisation of the family proceeding [13].

The magistrate nevertheless dismissed the appellant’s claim [14].


The appellant appealed the Magistrates Court decision pursuant to s 109 of the Magistrates’ Court Act 1989 (Vic), seeking orders that:

  • the Magistrates’ Court judgment be set aside,
  • a declaration that the respondent held certain monies as stakeholder or trustee for the appellant,
  • an order that the respondent forthwith return the monies to the appellant and
  • an order that the respondent pay the appellant’s costs both of the appeal and of the proceeding in the Magistrates’ Court.

The four grounds of appeal were that the learned magistrate erred—

(a) by failing to find that the respondent held the deposit monies as stakeholder or trustee for the appellant;

(b) by failing to order the respondent to return the deposit monies to the appellant;

(c) to the extent that he considered the preceding order precluded him from finding that the respondent held the deposit monies for the appellant as stakeholder or trustee, or from ordering the respondent to return them; and

(d) in those circumstances by making no order as to costs.

The four questions of law were whether:

(a) the orders of the learned magistrate ought be set aside;

(b) The court ought to declare that the respondent held the deposit monies as stakeholder or trustee for the appellant;

(c) the respondent ought forthwith to return the deposit monies to the appellant; and

(d) the respondent ought to pay the appellant’s costs, both of the appeal and of the proceeding below, on a standard basis to be taxed in default of agreement.

The court summarised the Magistrate’s reasoning as:

  • the magistrate recorded that the respondent’s defence was that although he offered to pay the deposit into court, he was restrained from doing so by Judge Small’s order made on 29 March 2019 [17].
  • the magistrate noted that the appellant had served notice on Chloe Estelle Pty Ltd that the contract was terminated and requested a refund of the deposit money on 21 March 2019 prior to Judge Small’s order [17].
  • the magistrate found that at that time Judge Small made the order, there was a live dispute between the appellant and Chloe Estelle Pty Ltd about the sale of the business and the fate of the deposit was contested [18].
  • the magistrate concluded that:
    • Judge Small was seeking to prevent any dealing with monies that the wife may be entitled to and to prevent the husband, Mr Fitzpatrick, from engineering or manipulating an outcome that might see the wife deprived of her entitlement[18]
    • the order was intended to preserve the status quo until the division of matrimonial property was resolved.
  • the magistrate reasoned that:
    • the respondent was obligated to hold the deposit unless there was an agreement between the husband and wife or there was a court order that allowed for it to be disbursed [19]
    • as neither of these conditions had been fulfilled, the order remained binding and operative and
    • a letter from the Associate to the Family Court Judge stating that the proceeding had concluded to be inconclusive as to whether the division of matrimonial property was resolved [19].
  • the magistrate found that he could not be satisfied on the balance of probabilities that the respondent had acted unlawfully or in breach of trust, or that it had been unjustly enriched [20].

His Honour found that the magistrate fell into error in:

  • misconstruing the terms upon which the respondent held the deposit. The respondent never asserted any interest in the deposit itself, admitting that it held the deposit as stakeholder. The only parties with an interest in the stake were the appellant and Chloe Estelle Pty Ltd [22]. The appellant lawfully terminated that contract. The only party with any claim to the deposit was the appellant [23]
  • The respondent, as stakeholder, was required to pay the deposit to the appellant [25]. The applicable principle is that a deposit under a contract of sale is held by a stakeholder to abide the outcome of the contract [26]. If completion occurs it becomes the property of the vendor as part of the purchase price. If completion does not occur for reasons other than the default of the purchaser, it is refunded to the purchaser. If there is any dispute the stakeholder will generally either interplead and pay the money into court or retain the money on trust pending an order of the court charged with resolving the dispute between the parties to the contract [26].
  • the magistrate erroneously considered that the respondent held the deposit for Mr Fitzpatrick, or at least that Judge Small’s order should be understood so as to apply regardless of whether the deposit was held for Mr Fitzpatrick [27]. The magistrate attempted to second guess Judge Small’s intention rather than objectively assessing the outcome of the sale dispute on the evidence and the express text of the order. Fitzpatrick had no entitlement to the deposit and the magistrate ignored the clear and unambiguous meaning of the restraining order [27].
  • Judge Small’s order only restrained dealings by the respondent with ‘monies held on behalf of the husband’. Fitzpatrick was not a party to that sale transaction and did not have any contractual or other entitlement to the deposit. There was no basis for the respondent to contend that it held ‘monies on behalf of the husband’. It did not do so and the respondent knew that [28]
  • the magistrates’ concentration on whether final orders had been made in the Family Court proceeding in respect of a property division was misplaced because the relevant restraining order permitted the respondent to deal with monies held on behalf of the husband pursuant to an order of a court [30].
  • Judge Small’s order was entirely irrelevant. The magistrate was a court and was not constrained from dealing with the deposit when it was unambiguously clear that the deposit was to be returned to the appellant. The respondent’s contention that the order referred to a ‘Court’ rather than a ‘court’ and thereby excluded the magistrate was misconceived [30].

Regarding the the questions of law set out above, the court found, at [31]:

(a) Question 1 – yes;

(b) Question 2 – yes;

(c) Question 3 – yes;

(d) Question 4 – yes.

The court ordered that:

  • the judgment of the magistrate on 26 July 2021 be set aside;
  • a declaration that the respondent held the deposit monies as stakeholder and became obliged on and from 21 March 2019 to forthwith return the deposit monies to the appellant [32].

The court stated that because:

  • the appellant lawfully demanded the return of the deposit on 21 March 2019
  • the respondent did not establish that there was any lawful basis for it to deny that request.
  • the appellant has been held out of these funds since 21 March 2019 without justification.
  • while the respondent admitted in the proceeding below that it held the deposit as stakeholder, it took an active position before the magistrate
    • raising the issue of Judge Small’s order and
    • contending that it was not obliged to repay the deposit for reasons that it has been unable to justify [33].

it was am satisfied that the appellant is entitled to interest pursuant to s 58 of the Supreme Court Act 1986 (Vic) on the sum of $42,000 from 21 March 2019 at the rate affixed under s 2 of the Penalty Interest Rates Act 1983 (Vic) [34]


The court made clear the role of a stakeholder.  In its analysis it also highlighted the falacious approach by the respondent.









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