Chan v Tan

Issues for determination

1. Mr Chan makes a claim for damages for breach of contract. In the alternative, he claims damages for contravention of the Australian Consumer Law ("ACL"). Mr Chan also makes a claim in equity, for breach of fiduciary duty. He seeks equitable compensation or an account of profits.
2. Mr Chan's primary claims are against Pittmore as the other joint venture party. But he also pursues claims under the ACL and in equity against Mr Tan personally, based on Mr Tan's direction of Pittmore's actions.
3. Mrs Chan was joined as the second plaintiff in these proceedings but no claim is pursued on her behalf. All of the plaintiffs' claims are made on behalf of Mr Chan as first plaintiff.
4. There was no dispute that the terms of each joint venture deed obliged Pittmore to hold Number 17 for the purposes of the joint venture. At trial, counsel for the defendants conceded that its participation in the joint venture imposed equitable fiduciary obligations on Pittmore to the same effect. It was, however, agreed that those obligations would cease if the joint venture was validly terminated in accordance with the deed.
5. As the purchase condition specified in the first joint venture deed was satisfied by 30 April 2017, Pittmore would not have been entitled to terminate under the terms of that deed. Counsel for the defendants accepted that Pittmore needed to rely on the second joint venture deed to escape liability in the proceedings.
6. Counsel for Mr Chan advanced nine arguments by way of reply to Pittmore's reliance on the second joint venture deed. Those arguments can be grouped into five contentions: (1) the second joint venture deed never came into force; (2) alternatively, as a matter of construction or rectification of the deed, the deed did not entitle Pittmore to terminate for failure to achieve the purchase condition specified in the deed by 30 April 2017; (3) in the further alternative, by its conduct after the deed was entered into, Pittmore deprived itself of any entitlement; (4) in the further alternative, by its inaction between 30 April and 13 June 2017, Pittmore waived any right of termination; (5) in the final alternative, Pittmore's purported exercise of any power of termination was invalid or constituted a contravention of the ACL.
7. Assessment of Mr Chan's contractual claim for loss of bargain damages would involve looking at the cost of development and the value the units would have had if the development had been completed in accordance with the joint venture agreement. This was the subject of conflicting expert evidence from the parties. There were also other assessment issues. In particular, the defendants alleged that Mr Chan failed to mitigate his loss.
8. On the other hand, the process of determining the amount due from Pittmore under an account of profits for breach of fiduciary duty would be quite different from the process of assessing damages for breach of contract. The measure of equitable compensation for breach of fiduciary duty might also be different from the measure of contractual damages.
9. When I raised these divergences with counsel for the plaintiffs, counsel accepted that Mr Chan could not obtain both damages for breach of the joint venture deed and equitable pecuniary relief for breach of fiduciary duty; he would have to choose between them. Counsel also accepted that if Mr Chan pursued a claim to equitable pecuniary relief, he would have to elect between equitable compensation and an account of profits.
10. Counsel submitted, however, that Mr Chan would not have to elect until (at the earliest) the Court had determined the nature of relief to which he was entitled. Counsel for the defendants did not dispute this.
11. As a result, the parties agreed that I should not consider quantum issues at this point. By consent, an order was made in the course of the trial for the separate assessment of any pecuniary relief to which Mr Chan might be entitled, such assessment to take place after the determination of all other issues in the proceedings. The parties agreed that in the present hearing I will decide whether Pittmore has breached any contractual or fiduciary obligations to Mr Chan. They also agreed that I will decide whether the allegations that Pittmore contravened the ACL are made out, on the assumption that if any such contravention were established at least some damage would have been suffered. I am also to decide whether Mr Tan is personally liable to Mr Chan. If I find in Mr Chan's favour, the matter will proceed to assessment.

Chronology of key facts

1. Mr Chan purchased Number 15 in August 2002. The purchase took place at an auction sale of Numbers 15 and 17 conducted by the Roads and Traffic Authority ("RTA"). The RTA had previously acquired the properties for the Gore Hill Freeway, but they had proved surplus to requirements and had been, or were shortly to be, rezoned for residential purposes.
2. At the auction, one of the other parties who bid for Number 15 was Julia Tan (no relation of Joo Kee Tan). She was bidding on behalf of her mother, Mrs Melly Tanudjaja. Mrs Tanudjaja was then about 75 years old and lived in Malaysia. She (or her daughter on her behalf) appears to have been looking to buy one of the properties as an investment. Mr Chan won the bidding for Number 15, and Julia Tan then won the bidding, on behalf of her mother, for Number 17.
3. Thereafter the Chans moved in to Number 15. Neither Julia Tan nor her mother ever lived in Number 17. It was rented out.
4. In 2010, Willoughby Local Council issued a draft Local Environmental Plan ("LEP") which permitted construction of apartment buildings of up to four storeys in the area. The Chans wished to take advantage of this and consulted a solicitor known to Mrs Chan, Peter Mete, of the firm Wight & Strickland. But to carry out such a development the proposed LEP would require a land area of at least 1,100 square metres. Number 15 and Number 17 were both about 700 square metres. Thus, while Number 15 could not be redeveloped on its own, it could be redeveloped in conjunction with Number 17.
5. In January 2013, the revised LEP was formally adopted. The Chans obtained further advice from Mr Mete. He also referred them to Greg Vale, a solicitor specialising in taxation and stamp duty questions. The Chans decided that if they undertook the development, it would be more tax advantageous to do it through a trust structure. They already had a company which they had set up called Kienan Pty Limited ("Kienan"), which they could use as the trustee.
6. After the rezoning, the Chans conducted discussions and negotiations with Julia Tan about a joint venture. Mrs Chan undertook some architectural work on the project. But no agreement was reached and the relationship between Julia Tan and Mrs Chan, in particular, became strained.
7. These negotiations and discussions took place against a background of other houses in the street being acquired for redevelopment. Numbers 5, 7 and 9 were sold in February 2016. The Chans also had some discussions with the owners of Numbers 13 and 13A, who were interested in selling but not immediately.
8. Towards the end of March or the beginning of April 2016, the Chans decided to change tack in their dealings with Julia Tan. Rather than trying to undertake a joint venture with her, they decided to try to persuade her to sell Number 17 to them so that they could undertake a joint venture with someone else. The negotiations were handled by Mr Chan by text message to Julia Tan. On 9 April, Julia Tan eventually agreed, on her mother's behalf, to sell Number 17. The sale price was to be $3 million, with settlement deferred for six months.
9. Three days later, on 12 April, Mrs Chan approached Mr Tan about participating in a joint venture development of Numbers 15 and 17. On the following day they discussed it over lunch. Mr Tan's younger son, Puay Song (known as Daniel) Tan, also attended. The Tans visited Number 15 on 18 April and Jo Kee Tan agreed to go ahead.
10. Once Joo Kee Tan made his decision, he delegated Daniel Tan to look after his side of the joint venture. He thought it would be a good way for Daniel to gain experience. Thereafter the communications took place between Mrs Chan and Daniel Tan, with Daniel keeping his father informed behind the scenes.
11. At this time, the Chans were still waiting for Mrs Tanudjaja's solicitor to issue the contract. Acting on instructions from Joo Kee Tan, Daniel Tan nominated David Kam as the solicitor to act on the purchase. Mr Kam's firm is called David Kam & Co. Joo Kee Tan also nominated Pittmore as his joint venture vehicle. Pittmore was a company belonging to Joo Kee Tan. He was the only director, and Bruce Needs, his accountant, was the secretary.
12. While this was taking place, Mr Chan continued to communicate with Julia Tan by way of text message. He had previously nominated Mr Mete as the solicitor who would be acting on the purchase. Following the nomination of Mr Kam, Mr Chan advised Julia Tan that he would be acting. Mr Chan did not tell her of Joo Kee Tan's involvement.
13. The first draft of what became the first joint venture deed was prepared by Mr Kam and sent out on 18 April. Mr Mete appears to have provided some informal advice or assistance to the Chans, but was never formally retained by them to act on the joint venture arrangements.
14. On 28 April, Mrs Chan gave instructions to Mr Mete to proceed with setting up the discretionary trust as had previously been decided. The name chosen for it was the "Chanestate Trust". Mr Mete prepared a trust deed and associated documents that afternoon. The documents were executed the following day.
15. Contracts for the purchase of Number 17 were due to be exchanged on 29 April. At 1:33 pm that day Daniel Tan forwarded to Mrs Chan a second draft of the joint venture deed. The deed identified the parties as Mr Chan and Pittmore. The recitals relevantly stated: B. [Pittmore] wishes to acquire [Number 17]. C. Subject to [Pittmore] becoming the registered proprietor to [Number 17], the parties have agreed to develop [Number 15] and [Number 17] (hereinafter called "the Site") as hereinafter set out. D. The parties intend to develop the Site together, prepare and submit development application, construction certificate for the further development, namely the Construction of a block of units and the subdivision of the units.
16. Clause 1 provided: 1. CONDITION PRECEDENT 1.1. This deed is subject to and conditional upon [Pittmore] becoming the registered proprietor of [Number 17] on or before 30 April 2017. 1.2. If the condition precedent as referred to in 1.1 is not satisfied on or before 30 April 2017, or any other date agreed in writing by the parties, then either party may terminate this deed by notice in writing to the other party whereupon this deed shall be at an end.
17. Clauses 2 and 3 dealt with the general obligations of the parties to each other and the duration of the joint venture. The joint venture's objectives were defined as completing renovation works on Numbers 15 and 17; subdividing the properties into separate titles; and then dividing the units equally between the joint venturers.
18. Clause 5 dealt with the management of the development. It provided for the establishment of a committee, styled the Development & Architecture Committee, consisting of Mrs Chan and Daniel Tan, for this purpose. In particular, the committee was to have power to appoint, and retain consultants, builders and contractors. Mrs Chan's firm was to be engaged as the architect for the purposes of obtaining approval of the development application (cl 5.7).
19. Clauses 4, 6, 7 and 8 dealt with financial matters. There was to be a joint bank account. For the purposes of the joint venture accounts, Number 15 was valued at $3.5 million and Number 17 at $3 million. On the condition precedent specified in clause 1 being satisfied, Pittmore was to contribute the sum of $500,000 into the joint venture bank account, thereby equalising the parties' capital contributions. All expenses associated with the conduct of the joint venture were to be shared equally.
20. The deed also referred to the Chans' plans to put Mr Chan's share of the joint venture into a family trust structure. Clauses 10.3 and 10.4 provided: 10.3. The parties hereto further acknowledge that [Mr Chan] may, but is not obliged to, at [Mr Chan's] own expense, transfer [Number 15] to [Mr Chan's] family trust on or prior to 30 October 2016. 10.4. [Mr Chan] shall cause the trustee of [Mr Chan's] Family Trust to enter into a new joint venture agreement with [Pittmore]. In the event that the trustee of [Mr Chan's] family trust is a corporate trustee, [Mr Chan] shall cause the director of [Mr Chan's] family trust trustee to execute a new joint venture agreement both in the capacity as a director to [Mr Chan's] Family Trust trustee and in his own personal capacity to guarantee the performance of the terms and obligations under this deed.
21. Later that day, at 3:15 pm, Mrs Chan emailed Daniel Tan. Her email purported to "confirm" an amendment to clause 5.7 by adding that her firm was to be engaged as architect, not just for the purpose of obtaining the development approval, but right through to the completion of the project.
22. The email then stated: We confirm that Edward Chan consent to enter into an agreement with Pittmore Pty Ltd. Further Understanding The Chanestate Trust. Kienan Pty Ltd (a company that both Edward and I are directors of) is acting as Trustee for The Chanestate Trust. As per our discussions and conversations earlier, we confirm that it is our intention for Edward to transfer 100% of the property to our family trust, The Chanestate Trust, on or before the 31st October 2016. It is our intention that Kienan Pty Ltd [as Trustee for] The Chanestate Trust will enter into agreement with Pittmore Pty Ltd to carry out the development. Our aim and goal at the end of the development would be to hold on to as many of the completed units as possible. Based on our current circumstance, our capacity to provide funding for the Trust for the purpose of the project would be approx. 1.5M in equity on top of the land to facilitate the finance of the development. We would be prepared to pay the interest component for the remainder of our portion of the finance required to carry out the development whether it be from a Third Party Lender or Pittmore Pty Ltd. We confirm and proceed on the above basis. We can have the Deed signed this evening and emailed to you.
23. Soon afterwards, contracts were exchanged on Number 17. At 4:46 pm Daniel Tan emailed Mrs Chan: Confirmation of exchange done! The wheels are set in motion now.
24. Later that evening, when Mr Chan returned from work, Mrs Chan obtained his signature on the joint venture deed.
25. As already noted, the deed described Pittmore's registration as proprietor of Number 17 as a "condition precedent". The rest of the deed was also worded in such a way as to suggest that it would not be until the purchase was completed that the parties' joint venture obligations would begin. But this is not the way in which they conducted themselves.
26. Following execution of the deed, the parties treated the joint venture as being on foot. Joo Kee Tan made arrangements for Baker Stephenson, a firm with which he had connections, to act as the project manager. The first meeting of Mrs Chan and Daniel Tan as the Development & Architecture Committee took place on 7 June, with representatives of Baker Stephenson in attendance and preparing minutes.
27. Baker Stephenson prepared a bar chart setting out the expected timetable for the project, which was provided at each meeting of the Committee and included in the minutes. The bar chart which accompanied the minutes of the first Committee meeting, on 7 June, showed the process of development approval beginning in November 2016, with approval expected at the end of April 2017. Following building tenders, construction was to begin in September 2017.
28. Despite the exchange of contracts on Number 17, other developers were still interested in acquiring it and Number 15 to include in other proposed developments in the street. One of these developers was a man called Ted Manny. It seems that he had been behind the purchase of Numbers 5, 7 and 9, and perhaps other properties in the street. On 14 July he made an offer to Mrs Chan of $10 million for Numbers 15 and 17. According to Mrs Chan, she notified Daniel Tan of this offer but neither party took any action to pursue it.
29. Meanwhile discussions continued concerning the restructure foreshadowed in clause 10.4 of the joint venture deed and Mrs Chan's email of 29 April. Mr Kam provided advice to Daniel Tan about this on 5 July, which Daniel Tan forwarded on to Mrs Chan. Mr Kam recommended that the existing contract for the purchase of Number 17 be rescinded and replaced by a contract under which Pittmore and Kienan (as trustee of the Chans' trust) would be the purchasers as tenants in common. Mr Kam noted that this required the co-operation of the vendor.
30. Following this advice, Mr Kam drew up another version of the joint venture deed, presumably on the instructions of Daniel Tan. Daniel Tan forwarded the deed to Mrs Chan at 4.24 pm on 21 July.
31. The new deed was dated 29 April 2016, the same date as the then existing joint venture deed. It was clearly based on the earlier document, and most of it was exactly the same. But there were changes to the recitals and clause 1.
32. Recitals B to E replaced the former B to D: B. [Mr Chan] agrees to transfer [Number 15] to Kienan Pty Ltd [as Trustee for] The Chanestate Trust and [Pittmore] as tenants in common in equal shares. C. [Pittmore] wishes to acquire the property at [Number 17] together with Kienan Pty Ltd [as Trustee for] The Chanestate Trust as tenants in common in equal shares. D. Subject to [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust becoming the registered proprietor to [Number 15] and [Number 17] as set out in recitals B and C above, the parties have agreed to develop [Number 15] and [Number 17] (hereinafter called the "the Site") as hereinafter set out. E. The parties intend to develop the Site together, prepare and submit development application, construction certificate for the further development, namely the Construction of a block of units and the subdivision of the units.
33. The new version of clause 1 read: 1. CONDITION PRECEDENT 1. 1. This deed is subject to and conditional upon [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust becoming the registered proprietors of [Number 15] AND [Number 17] as tenants in common in equal shares on or before 30 April 2017. All deposit and balance of purchase price payments for the purchase of [Number 17] including stamp duty payment shall be borne solely by [Pittmore]. 1.2. If the condition precedent as referred to in 1.1 is not satisfied on or before 30 April 2017, or any other date agreed in writing by the parties, then either party may terminate this deed by notice in writing to the other party whereupon this deed shall be at an end. 1.3. Upon clause 1.1 being eventuated, in consideration of the payment of the deposit, balance of purchase price and stamp duty liability by [Pittmore] in acquiring [Number 17] in joint names of [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust, [Mr Chan] shall transfer [Number 15], on or before 30 October 2016, to [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust as tenants in common in equal shares. [Mr Chan] agrees to pay for the stamp duty liability for such transfer concerning [Number 15].
34. Clause 10.3 of the first joint venture deed, which allowed Mr Chan to transfer his share of Number 15 to the Chans' family trust by 30 October, was deleted. But clause 10.4 (see [43] above) was retained, being renumbered as the new clause 10.3.
35. Meanwhile, approaches were made by Mr Kam's firm to the solicitors for Mrs Tanudjaja as vendor of Number 17 about rescinding the existing contract and replacing it with a new one in accordance with Mr Kam's advice. On 22 July (Friday) a solicitor at Mr Kam's firm wrote to Daniel Tan advising him that the vendor had agreed to rescind.
36. Daniel Tan sent this email on to Mrs Chan on the Monday. She was also provided with a replacement contract for the purchase of Number 17 which identified the purchasers as Pittmore and Kienan (as trustee for the Chans' trust). Further emails passed back and forth between Mrs Chan and Mr Tan concerning the execution of the replacement contract by Kienan, which was planned for the next day. Although they did not expressly refer to it, the parties both appear to have assumed that the joint venture deed would be executed at the same time.
37. On the evening of Monday 25 July the Chans executed the replacement contract on Kienan's behalf. Mrs Chan also obtained Mr Chan's signature on the version of the joint venture deed which had been sent to her on 21 July. In the course of doing so, she made two changes which Mr Chan initialled. In clause 1.1 she crossed out the words "on or before 30 April 2017" and handwrote the words "prior to construction commences" [sic]. She also added to the reference to clause 5.7 appointing her firm for the purpose of obtaining development approval the handwritten words "and for the construction of works".
38. The following day, Mrs Chan took the replacement contract, as executed by Kienan, and the signed and initialled version of the joint venture agreement, to a meeting with Daniel Tan. There is no direct evidence of what was said on that occasion, but the second joint venture deed was later signed, and the handwritten amendments initialled, by Mr Tan on behalf of Pittmore.
39. While this was happening, Mrs Chan was still in communication with Mr Manny. She attended a meeting with him on 27 July.
40. Mr Manny seemed to have found out some details about the dealings between Mr Chan and Julia Tan. According to Mrs Chan's account of the meeting, Mr Manny was aggressive. He had other people attend the meeting who, he said, were agents who had been advising Julia Tan. Mr Manny asked Mrs Chan to imagine how the vendor would have felt knowing that there was an offer to buy her property for $4 million. He said he would fund litigation by the vendor to rescind the contract. He then proposed that the Chans themselves rescind the contract to purchase Number 17 and sell to him instead.
41. According to Mrs Chan, she believed that this was an elaborate set-up (on her account, no offer had been made for $4 million by Mr Manny in advance of the purchase from Julia Tan). She told Mr Manny there was nothing to discuss, and left.
42. On 9 August, a firm of solicitors, Goldrick Farrell Mullan ("GFM"), wrote to Mr Kam. GFM stated that they were instructed to: Seek to rescind and/or avoid the purported contract or contracts for sale based mainly on Mr Chan's misleading, fraudulent and unconscionable conduct. The letter, however, went on to say that the vendor would be prepared to exchange and complete a contract with Pittmore and Kienan as purchasers for $4 million.
43. The Chans were unmoved by this. They provided to Mr Kam a copy of the text messages passing between Mr Chan and Julia Tan back in April. Mr Kam expressed the opinion that there was no basis for setting aside the contract. The joint venture continued unaffected.
44. It was, nevertheless, clear that the vendor would not be agreeing to rescind the existing contract. On 16 August there was a meeting between Mrs Chan and Daniel Tan to discuss what should be done. According to Mrs Chan, Mr Tan indicated that Mr Kam had devised a way to proceed which would deal with the stamp duty and tax problems. Mr Kam submitted a further version of the joint venture deed on 26 August. The Chans approached Mr Vale who expressed some reservations about the proposal. It was discussed further at a conference with Mr Needs on 26 September.
45. In October 2016, the parties learned that Mrs Tanudjaja had died. This delayed completion of the contract while probate was obtained. Eventually the contract was completed with Pittmore as purchaser on 21 December. On the same day, Mrs Chan's firm lodged the application for approval of the development of Numbers 15 and 17.
46. In February 2017 the parties again took up the question of restructuring the joint venture to meet the Chans' tax requirements. Mrs Chan asked Mr Vale to submit a retainer proposal for providing advice to the joint venture parties. But Mr Needs thought Mr Vale's fee was too high. He believed that one of his colleagues could handle the issue. Eventually a meeting took place on 19 May. It emerged from that meeting that Mr Needs' colleague lacked sufficient expertise. Mr Tan apparently accepted that the parties needed to go back to Mr Vale. A meeting took place with him on 26 May.
47. Meanwhile, a real estate firm called Forsyths made an approach on behalf of a third party to buy Number 17 from Mr Tan. The approach came through Mr Needs. He passed it on to Daniel Tan. The offer amount was not specified, but was said to be "substantially larger" than the price Pittmore had paid.
48. Daniel Tan reported this to his father who instructed him to find out how much the offer was for and whether it was genuine. In the meantime, Daniel Tan reported the offer to Mrs Chan. This took place on the afternoon of 24 May.
49. A meeting took place between Daniel Tan and a representative of Forsyths on 29 May. The offer figure was revealed as $5 million. Daniel Tan reported this to his father who instructed him to respond that the offer should be increased to $6 million. This was agreed by Forsyths on the next day, 30 May.
50. The evidence does not directly establish who was behind Forsyths, but the Chans suspected that it was Mr Manny and that seems plausible. By this time, Mr Manny, or interests associated with him, appear to have secured Number 19. The Chans were concerned that he might seek to develop Numbers 19 and 17 together, leaving them isolated in Number 15.
51. A meeting of the Committee for the joint venture took place on 1 June, which was a Thursday. After the project managers had departed, Mrs Chan stayed back with Daniel Tan to discuss the offer. They were joined by Joo Kee Tan. Mrs Chan was told that the offer was $6 million which was open until Friday 2 June, the following day. Joo Kee Tan indicated that he had some doubts about the genuineness of the offer but if genuine he was seriously considering accepting it. According to Mrs Chan she remonstrated with him pointing out that if he accepted the offer it would leave the Chans in the lurch. According to Mrs Chan, Joo Kee Tan responded that it was "nothing personal" and "just business".
52. According to Mrs Chan's email of 8 June (see below), she and Daniel Tan had a meeting on 2 June where they discussed the situation further. According to the email, Daniel Tan assured her that his father would not accept the offer without the Chans' consent. The acceptance date of 2 June passed but the discussions with Forsyths continued.
53. The Chans' first response to the offer was to ask Daniel Tan to see whether the purchaser would buy Number 15 as well. They wanted $7 million. There was some conflict of evidence as to when this request was made, and the precise sequence of events, but the response was clear: the purchaser was not interested in acquiring Number 15.
54. On Tuesday 6 June Joo Kee Tan put a further proposal to Mrs Chan. This was that the offer should be accepted, with the resulting profit (after deduction of the joint venture costs) being shared equally between the joint venture parties. The parties would also share any profit from the subsequent sale of Number 15.
55. Two days later, on Thursday 8 June, Mrs Chan responded with an email to the Tans. She stated that Joo Kee Tan's proposal still left the Chans exposed, in that they would be left with Number 15 which could not be developed on its own and would be surrounded by potentially hostile forces. Mrs Chan said that the Chans were prepared to waive the requirement that Joo Kee Tan contribute an extra $500,000 on satisfaction of the purchase condition. She also indicated a willingness to renegotiate the profit share arrangement to 55:45 in his favour.
56. On the following day (Friday 9 June) Mrs Chan tried to contact Joo Kee Tan to discuss the position with him. In response, she received a text message, evidently forwarded to her by mistake, which read: I don't want to talk to her. My excuse is that I am in Melbourne. Just hold her back for a few days.
57. Later that afternoon, according to Mrs Chan, she was contacted by Daniel Tan who asked her to give his father time to think. It was agreed that she would ring back at some point after the following Tuesday, 13 June (the intervening Monday was the Queen's Birthday public holiday).
58. There was no further contact between the parties until the late afternoon of 13 June when Mr Kam emailed Mr and Mrs Chan a notice of termination of the joint venture. The ground given was the failure to comply, by 30 April, with the purchase condition in the second joint venture deed. The notice attached a copy of that deed, presumably to make it clear that this was the version of the deed which was relied upon.
59. Mr Kam also forwarded to Mr Chan a payment of $188,616.82. The evidence did not explain how this figure was calculated and the letter made it clear that it was only an "ex gratia" payment. A cheque was also sent to Mrs Chan's firm for $120,000 for fees. At this point Mrs Chan's firm had not rendered any account to the joint venture.
60. On the same day, Pittmore exchanged contracts to sell Number 17 to the purchaser introduced by Forsyths. The contract had been under negotiation between Mr Kam, acting for Pittmore, and the lawyers representing the purchaser, since the previous week.
61. The Chans' solicitors, Wight & Strickland, had lodged a caveat over the property but this was not pressed and on 22 July they wrote to Mr Kam asserting that the notice of termination was invalid and purporting to accept the repudiation of the joint venture agreement. The cheques provided to Mr Chan and Mrs Chan were subsequently returned. Pittmore completed the sale of Number 17 on 14 August.

Witnesses

1. Both of the Chans gave evidence in the plaintiffs' case, and Daniel Tan and Mr Tan gave evidence in the defence case. There was one further witness, Brian Baker, who was not cross-examined and whose evidence was uncontroversial.
2. Counsel for the defendants cross-examined both Mrs Chan and Mr Chan at length. Counsel took each of them through text messages between Mr Chan and Julia Tan in April. When I asked about the relevance of the cross-examination, I was told that it went to credit. Presumably the point of the cross-examination was to establish that Mr Chan had misled or deceived Julia Tan. The relevance of the cross-examination of Mrs Chan was harder to see, but perhaps the idea was that she had connived in her husband misleading Julia Tan.
3. Mr Chan and Mrs Chan were also cross-examined about the $10 million offer made by Mr Manny in July 2016. When I asked about the relevance of this, I was told that it "at least" went to credit. Following this exchange, counsel applied to amend the defence to allege that the Chans did not disclose the offer to Mr Tan, and this was a breach of the joint venture agreement. I refused this application because the proposed amended pleading did not identify why, even if such a breach were established, that would be a defence to the plaintiffs' claim. Furthermore, even if articulated, any such defence would have raised factual questions such as causation and, for this reason, the application came too late.
4. There was some conflict on points of detail between the parties' affidavits. But these were not significant in deciding the case. Counsel for the defendants did not, in his final submissions, identify any specific conflicts of evidence and invite me to resolve them against the Chans. The cross-examination as to credit therefore went nowhere. Nor is it necessary to make any general analysis of the credibility of Joo Kee Tan or Daniel Tan.
5. It is, however, only fair to the Chans to say that I saw nothing in the communications between Mr Chan and Julia Tan which was misleading, let alone fraudulent. As to the $10 million offer by Mr Manny, Mrs Chan's affidavit stated that she disclosed the offer to Daniel Tan at the time and this was not challenged by him or by counsel in cross-examination.

Chans' understanding of legal arrangements after second joint venture deed

1. Mrs Chan said that when it became clear in August 2016 that the vendor was not prepared to rescind the existing contract and replace it with a contract under which Pittmore and Kienan would be joint purchasers she thought that the second joint venture deed was off. She said it was never referred to thereafter until it was relied on in the notice of termination on 13 June 2017.
2. Mr Chan similarly said that after the letter from GFM and the drafting of the third version of the joint venture deed he thought that the second joint venture deed "never came into effect". He said that he continued thereafter on that understanding right through until June 2017. He said that if he had been told that he needed to transfer Number 15 into the names of Pittmore and Kienan, he would have done so. He said he would have taken the step as he was committed to keeping the joint venture going.
3. Mr Chan's evidence on this point was not challenged. There is no reason not to accept that evidence. It is supported by the Chans' subsequent conduct in offering concessions to Mr Tan to persuade him to continue the joint venture in the face of the offer made by Forsyths.
4. Indeed there was no challenge to the evidence of the Chans on this topic generally. The Chans' evidence is plausible and I accept it.

Joo Kee Tan's decision to issue notice of termination

1. In his affidavit, Joo Kee Tan presented himself as an upright businessman who was involved in larger scale developments but had gone into the deal concerning Numbers 15 and 17 as a favour to Mrs Chan. Mr Tan said that when told of the offer through Forsyths by Mr Needs in May 2017, he referred to a feasibility study done by Daniel Tan in February 2017. That study showed that each party would make a profit of "only" $1 million which Mr Tan thought was unappealing.
2. In his evidence Mr Tan confirmed that he wanted to accept the increased $6 million offer which he solicited from Forsyths. He said he went along with Mrs Chan putting an offer of $7 million but when the purchaser did not want to buy Number 15, and the Chans rejected his offer of half the profit, he decided that he wished to sell.
3. Mr Tan also claimed that he decided to sell because the Chans did not "disclose any need" to comply with their obligation under the second joint venture deed to transfer Number 15 into the joint names of Pittmore and Kienan. He also said that Pittmore had been required to bear all of the costs of the joint venture. But Mr Tan never asked the Chans to transfer Number 15 into the joint names of Pittmore and Kienan, nor did he ask them to contribute to the costs of the joint venture. I think that these claims by Mr Tan were specious.
4. Mr Tan may have been frustrated by the Chans' wish to reorganise the transaction for their own taxation benefits. He may also have seen the profit as relatively trivial. But he never acknowledged Mrs Chan's point that for Pittmore to accept the profit and sell would leave the Chans stranded. In the end, he simply did not wish to subordinate his interests to the objectives of the joint venture.
5. In the course of cross-examination, Mr Tan said that he thought that his solicitor had included a clause in the joint venture deed which would enable him to terminate the venture should he no longer wish to pursue it. The suggestion was that the solicitor had made a mistake. This could be true. But in fact there was no such clause in the deed. It is clear that once the Chans refused to consent to the sale of Number 17, on Mr Tan's side it became an exercise in finding a legal justification for his wish to terminate.
6. Counsel for the plaintiffs put that Mr Tan had no genuine belief in the right of termination asserted on Pittmore's behalf. But on the face of it, the terms of the second joint venture deed did allow termination on the basis which was stated in Pittmore's notice. Mr Tan's conduct in seizing on this was opportunistic but there is nothing in the evidence to suggest that he considered there was no genuine legal basis for the termination. I reject counsel's submission.

Whether the second joint venture deed came into force

1. I now come to the first of the contentions that Pittmore was not entitled to terminate under the second joint venture deed. Counsel's arguments on this point focused on the formal delivery of the deed. This is one of the requirements for a deed to be valid. Physical delivery of the deed is neither necessary nor sufficient. The question is whether the relevant party has evinced an intention, as objectively determined, to be bound by the terms of the deed: see Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253 at [58].
2. In this case, a focus on the technical requirement of delivery might appear rather artificial. The parties' joint venture agreement did not need to be recorded in a deed to be contractually effective. The fact that it was so recorded does not seem to have been treated as having been of any significance, if it was noticed at all, by the parties.
3. But even if the agreement had been recorded in a written contract rather than a deed, it would be necessary to ask whether there had been offer and acceptance, and an intention to create legal relations. In substance the same questions about the parties' intentions would arise. I will therefore deal with those questions as ones arising under the requirement of delivery, in accordance with counsel's approach.
4. Counsel's first argument was that the delivery of the deed by Mrs Chan on behalf of Mr Chan was a delivery in escrow. Counsel argued that it was subject to the condition that the existing contract for the purchase of Number 17 by Pittmore be rescinded and replaced by a contract for purchase by Pittmore and Kienan as tenants in common. The second argument was that even if the deed was unconditionally delivered on behalf of Mr Chan, it was never formally delivered by Pittmore.
5. In support of the second argument, counsel pointed out that the deed was never physically delivered back to the Chans. Counsel submitted that, on the evidence, Pittmore never did anything to evince an intention to be bound by the deed.
6. The first difficulty with this argument is that there was no challenge to Mr Tan's evidence that he executed the deed on Pittmore's behalf on or about 27 July. That fact of itself suggests an intention on Mr Tan's behalf that Pittmore would be bound by the deed. It did not itself amount to delivery but delivery can be presumed from execution: Hall v Bainbridge (1848) 12 QB 698; 116 ER 1032.
7. There was no evidence in this case that after execution anything was done on Mr Tan's side to evince an intention that some further step would be required before the deed was to come into effect. The deed was not, for instance, put in a safe, or handed over to the solicitor, Mr Kam, with some instruction to hold it pending the happening of some event.
8. In any event, even if Pittmore did not deliver the deed at the time of execution, Pittmore certainly adopted the deed as binding by attaching a copy of it to the notice of 13 June 2017. The point was not fully argued but I see no reason why that should not constitute delivery, provided that it was consistent with the basis on which Pittmore had received the deed from Mr Chan in the first place.
9. It follows that the critical question is the one raised by counsel's first argument, namely whether the deed was handed over by Mrs Chan in escrow. There was no dispute that a deed may be delivered in escrow without the need for express words. An implication of escrow can arise from the surrounding circumstances. Counsel relied on the statement of principle by Parke B in Bowker v Burdekin (1843) 11 M & W 128; 152 ER 744 (at 147; 751): [I]n order to constitute the delivery of a writing as an escrow, it is not necessary it should be done by express words, but you are to look at all the facts attending the execution, - to all that took place at the time, and to the result of the transaction; and therefore, though it is in form an absolute delivery, if it can reasonably be inferred that it was delivered not to take effect as a deed till a certain condition was performed, it will nevertheless operate as an escrow.
10. The purchase condition in clause 1.1 of the second joint venture deed was that (relevantly) Pittmore and Kienan should become registered as the proprietors of Number 17. Clearly the completion of the existing contract under which Pittmore purchased Number 17 on its own would not satisfy that condition. The logical and straightforward way for the condition to be satisfied was if the existing contract was rescinded and the purchase was then carried out by Pittmore and Kienan.
11. This is consistent with the matrix of fact. The deed was executed and handed over on the understanding, common to both parties, that the vendor had agreed to proceed in this way. Furthermore, the second joint venture deed was modelled on the first. The first deed was prepared in advance of, but not entered into, until after the exchange of contracts with the vendor of Number 17. There is every reason to suppose that the parties contemplated that the second joint venture deed would operate in the same way.
12. Counsel for the defendants suggested that the purchase condition could still be satisfied if Pittmore completed the existing contract on its own and later transferred Number 17 into its and Kienan's joint ownership. But there is nothing in the matrix of fact to suggest that the parties had this in mind. It is also highly unlikely that parties who were so determined to minimise their tax obligations would have contemplated incurring a double liability for stamp duty and other transaction costs.
13. I think this last point is reinforced by clause 1.3. The consideration for Mr Chan's obligation to transfer Number 15 was the payment by Pittmore of the deposit, purchase price and stamp duty on the purchase of Number 17. Pittmore was to pay the whole of the stamp duty on Number 17 even though it would only be a joint owner; but Pittmore would then get a half share of Number 15 and Mr Chan would pay the stamp duty on that transfer. A second payment of stamp duty would have taken away the point of this carefully planned sequence of transactions.
14. In my opinion these considerations are sufficient to show that the joint venture deed was implicitly conditional upon rescission of the existing contract for the purchase of Number 17 by Pittmore and its replacement with a fresh contract between the vendor and Pittmore and Kienan as tenants in common.
15. There are also the circumstances of delivery to take into account. The second joint venture deed was handed over along with the signed contract of purchase by Pittmore and Kienan. Clearly this fresh contract was only intended to come into force if the existing contract was rescinded. It is hard to see why the delivery of the second joint venture deed would have been intended to take effect on any other basis.
16. For these reasons I am satisfied the second joint venture deed was delivered, implicitly, in escrow. The condition on which its delivery was based was never satisfied and the deed never became effective.

Terms governing termination of second joint venture deed

1. Given my conclusion that the deed was delivered in escrow, it is strictly speaking unnecessary to deal with the further contractual issues in the case. Nonetheless I think it is convenient to deal with the issues concerning the construction of the joint venture deed.
2. Counsel propounded two arguments to the effect that, in spite of its wording, the second joint venture deed did not have the effect of enabling the termination of the joint venture if Pittmore and Kienan had not become the registered proprietors of Numbers 15 and 17 by 30 April 2017. In considering these arguments it is convenient first to set out again the provisions of clause 1 (as amended in handwriting): 1.1. This deed is subject to and conditional upon [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust becoming the registered proprietor of [Number 15] AND [Number 17] as tenants in common in equal shares on or before 30 April 2017 prior to construction commences. All deposit and balance of purchase price payments for the purchase of [Number 17] including stamp duty payment shall be borne solely by [Pittmore]. 1.2. If the condition precedent as referred to in 1.1 is not satisfied on or before 30 April 2017, or any other date agreed in writing by the parties, then either party may terminate this deed by notice in writing to the other party whereupon this deed shall be at an end. 1.3. Upon clause 1.1 being eventuated, in consideration of the payment of the deposit, balance of purchase price and stamp duty liability by [Pittmore] in acquiring [Number 17] in joint names of [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust, [Mr Chan] shall transfer [Number 15] on or before 30 October 2016, [Pittmore] and Kienan Pty Ltd [as Trustee for] The Chanestate Trust as tenants in common in equal shares. [Mr Chan] agrees to pay for the stamp duty liability for such transfer concerning [Number 15].
3. Counsel's first argument relied on the principle of contractual construction recognised by the High Court in Fitzgerald v Masters (1956) 95 CLR 420 (see at 426-427 per Dixon CJ & Fullagar J). That principle is that words may be supplied, omitted or corrected where it is "clearly necessary to avoid absurdity or inconsistency". Counsel submitted that the reference in clause 1.2 to 30 April 2017 fell in to this category. Alternatively, counsel contended that the second joint venture deed should be rectified to reach the same result.
4. As drafted, before Mrs Chan's alterations, clause 1.1 made the parties' joint venture obligations conditional on Pittmore and Kienan becoming the joint registered proprietors of Numbers 15 and 17 by 30 April 2017. Clause 1.2 then gave either party a right to terminate if the condition in clause 1.1 was not satisfied by 30 April 2017.
5. This drafting was clumsy. If clause 1.1 had stood on its own, it could have been interpreted as providing for automatic termination of the joint venture if the condition was not satisfied. But the presence of clause 1.2 meant that it could not sensibly be read in that way. Clause 1.1 must be understood as having provided, implicitly, for the termination of the joint venture if the purchase condition was not satisfied, but only if notice was then given under clause 1.2.There was an implicit link between the two clauses which was not spelt out. And rather than expressly linking the timing of the clauses together, the drafter simply used the same date, 30 April 2017, in both of them.
6. Clause 1.3 created a problem which went beyond clumsiness of expression. The obligation on Mr Chan was to transfer Number 15 by 30 October 2016. The consideration for that transfer was the payment of the purchase price of Number 17 by Pittmore. The contemplation was thus that the purchase of Number 17 would be completed first. For the dates to work, that would need to happen before 30 October 2016. But clause 1.1 allowed until 30 April 2017 for it to happen.
7. Against the background, Mrs Chan's handwritten amendment to clause 1.1 but not clause 1.2 cut the temporal link between the clauses. As the extrinsic evidence shows, construction was not expected to commence until well after 30 April 2017. Thus clause 1.2, read literally, allowed the joint venture to be terminated well before the deadline in clause 1.1 was reached. The amendment did not create the temporal problem with clause 1.3, which already existed, but it made that problem more acute.
8. The principle in Fitzgerald v Masters is an exception to the basic rule that the parties are bound by the language they used in their contract. The principle does not come into play merely because the wording of the contract is unexpected, or slightly incongruous. The supply, omission or correction of words must be "clearly" necessary to avoid "absurdity" or "inconsistency".
9. But in the present case, it was clearly the intention of the parties, as reflected in the handwritten amendment to clause 1.1, that Mr Chan should have until the commencement of construction to register the transfer of Number 15 to Pittmore and Kienan. To allow either party to terminate after 30 April 2017 when the time allowed had not expired would be to make nonsense of that handwritten amendment. In my opinion, such an outcome would be sufficiently repugnant to the purpose disclosed by the agreed form of clause 1.1 to be described as an "absurdity" or an "inconsistency" of the type which attracts the Fitzgerald v Masters principle.
10. I therefore conclude that the Fitzgerald v Masters principle was available in the present case. And it could readily be applied. The words "on or before 30 April 2017, or any other date agreed in writing by the parties", could be treated as surplusage. So too could the words "on or before 30 October 2016" in clause 1.3. Omission of those words restores the temporal links between the clauses and allows them to operate harmoniously.
11. Thus the reference to 30 April 2017 could be read out of clause 1.2 as a matter of interpretation and it would not, strictly speaking, be necessary to rectify the deed. But equity was prepared to rectify an instrument so as to make it comply with the parties' intentions even if, as a matter of construction at law, that rectification might not be absolutely necessary.
12. The evidence in the present case did not directly address the requirements for rectification. Nevertheless, I think they are established as a matter of clear inference. Mrs Chan noticed the error which resulted from leaving the date as 30 April 2017 in clause 1.1. Mr Chan also recognised it as an error. Neither of them gave any evidence, or was asked in cross-examination, about whether they noticed the date in clause 1.2 (nor the October 2016 date in clause 1.3). But had either of them done so, they plainly would have altered those dates also. Presumably Joo Kee Tan (or, more likely, Daniel Tan on his behalf) noticed the handwritten change to clause 1.1 and went along with it. There is no evidence that either of the Tans placed any reliance on the reference to 30 April 2017 in clause 1.2. All the evidence suggests that they overlooked it just as the Chans did.
13. In my view, the requirements for rectification are established. The rectification would be effected, if necessary, by deleting the words in clauses 1.2 and 1.3 which I have identified as surplusage.
14. I therefore conclude that, even if the second joint venture deed had come into effect, Pittmore would have had no right under the deed to terminate the joint venture under clause 1.2 when it purported to do so.

Whether Pittmore's conduct deprived it of any contractual entitlement to terminate

1. Counsel argued that, by its conduct after 26 July 2016, Pittmore represented that it would not require that the purchase condition specified in the second joint venture agreement be satisfied by 30 April 2017. Counsel submitted that this representation gave rise to an estoppel which prevented Pittmore from purporting to terminate the joint venture deed when it did. Counsel also submitted that the representation was a form of misleading or deceptive conduct on the part of Pittmore which would entitle Mr Chan to equivalent relief under the ACL.
2. I have concluded that Pittmore had no such right of termination. But as Pittmore's claim under the ACL is a statutory claim independent of the law of contract, I think I should deal with it.
3. Counsel relied on three acts or omissions by Pittmore as giving rise to the alleged representation. The first was Pittmore's involvement from August 2016 onwards in negotiations concerning the restructuring of the joint venture. The second was proceeding with the completion of the purchase of Number 17 in December 2016. The third was Pittmore's failure, up to April 2017, to call on Mr Chan to perform his supposed obligations under the second joint venture agreement.
4. It is true that once it became clear that the vendor of Number 17 would not agree to rescind the existing purchase contract, that Daniel Tan on behalf of Pittmore began negotiations for a further restructuring of the joint venture. But this was not necessarily inconsistent with the terms of the second joint venture agreement continuing to apply until such negotiations resulted in a change, which they did not do before 30 April 2017. I do not think that by participating in those negotiations the Daniel Tan represented that Pittmore would not rely on the terms of that deed. Nor do I think that the purchase of Number 17 of itself gave rise to a representation that the deed would not apply.
5. It is true that in the period leading up to 30 April 2017 the Tans never asked for Mr Chan to comply with any obligations under the second joint venture deed. But nor did they say that he did not have to do so, if those obligations were truly binding on him. The simple fact is that neither Mrs Chan nor the Tans said anything to each other about this subject at all. I do not think there was anything in their dealings which required Pittmore to take the initiative on this point. I do not consider that any representation arose.
6. For these reasons, I reject the allegation of misleading and deceptive conduct against Pittmore. Had I taken a different view and concluded that the terms of the second joint venture agreement were binding, I would not have upheld Mr Chan's estoppel claim.

Whether contractual entitlement to terminate was waived

1. Counsel next argued that, if any contractual entitlement to terminate under the second joint venture deed persisted after 30 April 2017, that right had been lost by election. Counsel pointed out that after 30 April both parties continued their relationship as if the joint venture was still on foot. The meetings continued and expenses continued to be incurred in advancing the joint venture project. Counsel argued that this necessarily involved Pittmore calling for, and receiving, continued performance of Mr Chan's obligations under the deed. This was inconsistent with the exercise of Pittmore's supposed right of termination. As a result, Pittmore had elected to continue with the joint venture.
2. On the face of it, this submission appears correct. However, as I have decided that there was no contractual entitlement to terminate, I do not need to decide the point finally.

Whether termination was wrongful

1. Counsel contended that, even if a contractual right of termination continued to subsist as at 13 June 2017, the purported exercise of that right of termination was wrongful, on two grounds. Counsel's first argument was that the purported exercise of the right was a breach of Pittmore's implied contractual obligation of good faith: see Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369. Secondly, counsel argued that it was unconscionable conduct under ACL, s 21.
2. I found that Joo Kee Tan's conduct on behalf of Pittmore in purporting to terminate under clause 1.2 of the second joint venture agreement was opportunistic but that he did not lack a genuine belief that Pittmore was entitled to do so. However, I have also concluded that at the time Pittmore had no such right of termination. Accordingly, there was no valid exercise of any power of termination which could be the subject of Pittmore's obligation of good faith. Nor was there any legally effective action which could have amounted to unconscionable conduct. Whether Mr Tan's conduct on behalf of Pittmore would, if otherwise valid, have amounted to a lack of good faith, or unconscionable conduct, does not need to be decided.

Claim in equity

1. It is a consequence of my findings that in exchanging contracts to sell Number 17 to a third party, Pittmore breached its fiduciary duty to Mr Chan as well as breaching its contractual obligations to him. Counsel argued that in these circumstances Joo Kee Tan was also liable in equity to Mr Chan on account of the breach of duty.
2. In support of this argument, counsel pointed out that at all times Pittmore acted through Mr Tan. His knowledge was its knowledge. Counsel submitted that Mr Tan was liable as accessory for its breach of fiduciary duty.
3. For the purposes of this submission, counsel relied on the High Court judgment in Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89. That judgment referred to the famous statement by Lord Selborne in Barnes v Addy (1874) LR 9 Ch App 244 at 251-252 concerning liability of third parties for breach of trust: Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.
4. As the High Court pointed out (at 141 [113]), it has been assumed that the same principles apply to persons dealing with other types of fiduciaries as well as other trustees. That assumption was not contested in Farah so its accuracy did not need to be considered. The same is so in this case.
5. The first limb of Barnes v Addy, involving "knowing receipt", does not apply here. Mr Tan did not personally derive any property or other benefit from Pittmore's breach of trust. Any profit was derived by Pittmore itself.
6. Counsel acknowledged that the second limb, involving "knowing assistance", was not directly available either. Counsel stated that this would require an allegation of dishonesty against Mr Tan and acknowledged that no such allegation had been pleaded.
7. Counsel's acknowledgement requires some further explanation. In Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, the Privy Council adopted a general test of accessorial liability which is satisfied where a person "dishonestly procures or assists in a breach of trust or fiduciary obligation". The High Court in Farah left open whether this should be adopted as part of the law of Australia but said (at 160 [163]) that unless that happens at High Court level, lower courts should continue to use the formulation in Barnes v Addy.
8. This means that in order to plead a second limb case against Mr Tan it would have been necessary to plead, not that he acted "dishonestly", but that he participated in a dishonest and fraudulent design on the part of Pittmore as fiduciary. But this does not affect the validity of counsel's acknowledgement. There was no allegation in the present case that Pittmore (through Mr Tan) was engaged in a dishonest or fraudulent design. Accordingly, no second limb case is available.
9. But counsel argued that the third party liability was not limited to the two limbs identified in Barnes v Addy. Counsel submitted that in Farah, the High Court recognised that there are other ways in which a third party can be liable for the fiduciary's breach of duty. Counsel submitted that one of these is where the third party, with knowledge of all relevant facts, by his or her actions, causes the fiduciary to breach the fiduciary's duty.
10. Counsel did not specifically identify the part of the High Court judgment on which he relied for this proposition. I think counsel must have had in mind what the High Court said (at [161], footnotes omitted) that Lord Selborne's statement of principle: … was not expressed as an exhaustive statement of the circumstances in which a third party who has not received trust property and who has not acted as a trustee de son tort nevertheless may be accountable as a constructive trustee. Before Barnes v Addy, there was a line of cases in which it was accepted that a third party might be treated as a participant in a breach of trust where the third party had knowingly induced or immediately procured breaches of duty by a trustee where the trustee had acted with no improper purpose; these were not cases of a third party assisting the trustee in any dishonest and fraudulent design on the part of the trustee.
11. In this passage the High Court accepted that a party who "induces or immediately procures" breach of trust by a trustee would be liable, although not within the second limb. Arguably that would apply to Mr Tan. But it is still necessary to consider what state of mind is required. Is it enough, as counsel submitted, that Mr Tan knew all of the relevant facts without himself acting dishonestly?
12. In a footnote at the end of [161] the High Court referred, as instances of this type of liability, to three cases which preceded Barnes v Addy. The first two cases were Fyler v Fyler (1841) 3 Beav 550; 49 ER 216 and Alleyne v Darcy (1854) 4 I Ch R 199. Both these cases involved the investment of trust funds by way of loan where the solicitor had previously acted for, and was owed money by, the borrower. In Alleyne v Darcy, Darcy, the solicitor, made the suggestion to the trustee to make the loan and made representations of the borrower's solvency, knowing at the time that the borrower was in financial difficulties. Darcy knew of the terms of the trust, and must have understood that the loan was a breach of trust. This combination of circumstances was sufficient to make Darcy liable. In Fyler v Fyler, by contrast, the impetus for the transaction came from the trustee client and the borrower's credit was sound (or appeared so). The claim against the solicitor failed.
13. The third case referred to by the High Court was Eaves v Hickson (1861) 30 Beav 136; 54 ER 840. That case concerned a trust for the benefit of children of William Knibb. Knibb had five children, but all of them were illegitimate and therefore had no entitlement under the trust. Knibb nevertheless induced the trustees to pay over the trust funds to the children. He did so by forging a marriage certificate which falsely represented that he had been married to the children's mother before they were born. The trustee was taken in by the forgery and paid out the trust funds in an unwitting breach of trust. The court made Knibb personally liable to replenish the trust fund, to the extent that the monies were not recovered from his children.
14. In the passage quoted above from [161], the High Court simply referred to the third party as acting "knowingly". But in [113] the Court referred to the third party being liable if he or she "dishonestly procures…. a breach of … fiduciary obligation where the …. fiduciary need not have engaged in a dishonest and fraudulent design" (emphasis added).
15. In Eaves v Hickson, Knibb was clearly guilty not only of procuring a breach of trust but of doing so dishonestly. The same may be said of Darcy in Alleyne v Darcy.
16. In my view the High Court judgment does not itself establish that knowledge without dishonesty is enough for liability in accordance with counsel's proposition. Indeed I think that the judgment suggests that some form of dishonesty is necessary.
17. Counsel did not refer to any other authority in support of his proposition. To recognise liability on the broad basis for which counsel contended would be a significant step. I am not sure that step is justified in principle. Even if I did, I would not think it right for me sitting at first instance, to take the step. I reject the equitable claim against Mr Tan.

Claim under ACL

1. So far as the statutory claims are concerned, I have found that there was no contravention. Accordingly, it is not necessary to consider whether, had there been a contravention, Mr Tan would have been liable as an accessory under ACL, s 236.

Conclusions and orders

1. I have concluded that: (1) the second joint venture agreement never came in to effect and the purported termination of the joint venture by Pittmore on 13 June 2017 was invalid; (2) Pittmore thereby repudiated its contractual obligations under the first joint venture agreement, which repudiation was accepted by Mr Chan; (3) Pittmore also breached its fiduciary obligations as joint venturer by appropriating Number 17 to itself for the purpose of selling it to a third party; (4) but Mr Chan's claim against Pittmore under the ACL, and his claims against Mr Tan personally, fail.
2. Mr Chan has succeeded in his claim for breach of contract and breach of fiduciary duty. I will make declarations accordingly. The proceedings will then continue to the assessment of the pecuniary relief, if any, to which Mr Chan is entitled. It will be necessary at some point for Mr Chan to elect between remedies. Should there be a dispute about when Mr Chan must elect, that will need to be decided. The claims by Mrs Chan as second plaintiff, and the claims by Mr Chan under the ACL and against Mr Tan, will be dismissed.
3. I will stand the proceedings over for a short time to allow the parties an opportunity to agree on the formal declarations and other orders necessary to give effect to this judgment.
4. The orders of the Court are:
5. Order that the proceedings be adjourned for a period of 7 days or such other period as may be agreed.
6. Direct that the plaintiffs bring in a minute of order giving effect to this judgment.

Amendments 23 April 2020 - [155] amend typographical error 22 June 2020 - amend typographical errors at [122], [126], [151]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 June 2020