Great Investments Ltd v Warner

The findings of fact 4 The primary judge dealt with the factual issues in detail in the first 148 paragraphs of his judgment. None of the findings of fact was challenged on this appeal, although some of the conclusions from those facts were contested. We are indebted to his Honour's discussion of the facts which we summarise below. 5 On 5 August 2008, Bellpac settled a dispute that it had with a company called Gujarat NRE Coking Coal Limited (Gujarat). As part of the settlement of that dispute, Gujarat issued to Bellpac $10 million (face value) of convertible bonds (in denominations of $50,000).

The $4 million of Gujarat Bonds with which this appeal is not concerned 6 This appeal is not concerned with $4 million of the $10 million face value bonds. 7 Of the $4 million of bonds with which this appeal is not concerned, $2 million were transferred to various parties, including Mr Alfred Wong (Mr Wong), and ultimately to Mr Ken Hung (Mr Hung). The liquidators of Bellpac commenced proceedings in this Court in relation to the Hung bonds. In those proceedings, Emmett J held that Bellpac was entitled to a declaratory order that it was true owner of the Hung Bonds: see Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (in liq) (No 2) [2011] FCA 1123. Appeals from the decision of Emmett J were dismissed, and an application to the High Court for special leave was refused: see Hung v Warner, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (In liq) [2013] FCAFC 48; and Hung v Warner (in liq) [2013] HCATrans 280. 8 Those proceedings concerning the $2 million of bonds also involved findings which relate to circumstances concerning the $6 million of bonds with which these proceedings are concerned. However, it was not in dispute before the primary judge, and his Honour found, that he was not bound by any of those findings. That is also the position on this appeal. 9 A further $2 million of the $4 million bonds with which this appeal is not concerned remained registered in the name of Bellpac. One of the additional defendants in the trial was Mr Chiah Lee (Mr Lee). Mr Lee claimed that these $2 million of bonds had been transferred to him. But the liquidators were unable to locate any documents which recorded a transfer or assignment of the bonds from Bellpac to Mr Lee, nor was there any evidence of any consideration being paid by Mr Lee to Bellpac ([62]). However, following communications with Mr Wong concerning an alleged debt that Mr Wong owed to Mr Lee, $2 million of bond certificates were provided to Mr Lee ([268]). Mr Lee did not actively participate in the trial ([169]). He made no submissions ([204]). The primary judge held that the $2 million of bond certificates were held by Mr Lee on constructive trust for Bellpac ([269]). There is no appeal from the primary judge's orders in relation to that finding. Mr Lee is not an appellant.

The $6 million of bonds which are the concern of this appeal 10 Of the $10 million of bonds, this appeal is concerned with the $6 million face value bonds that were transferred from Bellpac to the appellants by Mr Wong. Those transfers were effected by registration as follows ([39]): (1) On 5 December 2008, bonds with a $1 million face value were transferred to Good Team Investments Ltd (Good Team Investments, the fifth appellant); (2) On 16 December 2008, bonds with a $2 million face value were transferred to Great Investments Ltd (Great Investments, the first appellant); (3) On 1 May 2009, bonds with a $2 million face value were transferred to Dr Osmond Tze Leung Kwok (Dr Kwok, the fourth appellant); and (4) On 1 May 2009, bonds with a $1 million face value were transferred to Mr Hong Xu (Mr Xu, the second appellant). 11 The third appellant is Mr Zhi Hong (Mr Hong). Mr Hong's wife, Ms Zhang, was the sole director of Great Investments ([74]). Mr Hong procured the transfer of the bonds to Great Investments and arranged for the registration of that transfer. 12 As the primary judge explained, the register of bond holders maintained by Gujarat at the date of hearing was as follows (with the relevant bonds for this appeal indicated in bold) ([39]): SL No Bond Series Distinctive No Face Value Current Listed Holder Date of Ownership 1 I series 1000001-1000010 $0.5m Bellpac Since Issue 2 I series 1000011-1000050 $2.0m Dr Kwok 1/05/2009 3 II series 2000001-2000010 $0.5m Bellpac Since Issue 4 II series 2000011-2000030 $1.0m Great Investments 16/12/2008 5 II series 2000031-2000050 $1.0m Mr Xu 1/05/2009 6 III series 3000001-3000030 $1.5m Bellpac Since Issue 7 III series 3000031-3000050 $1.0m Great Investments 16/12/2008 8 IV series 4000001-4000020 $1.0m Good Team Investments 5/12/2008 9 IV series 4000021-4000050 $1.5m Bellpac Since Issue TOTAL VALUE $10m

The issue and terms of the bonds 13 When the $10 million of convertible bonds were issued, Bellpac was registered in the Gujarat bond register as the holder of the bonds. On 6 August 2008, the certificates in respect of all the convertible bonds were delivered by Gujarat to Bellpac's office. They were received by Mr Wong, who arranged for them to be handed to his brother, Mr Ivan Wong, for safe custody. 14 The terms and conditions of the bonds were as follows. Title to a convertible bond was vested absolutely in the person entered in the bond register as the holder of the bond. Title would pass by transfer and registration. Application for the transfer of the bond was to be made by lodging a duly completed transfer form with Gujarat. A convertible bond was freely transferrable. 15 The registered holder of the bonds had the right to convert the bonds into fully paid ordinary shares in Gujarat at any time during the months of July and January, on or after 1 July 2011. The conversion price would be calculated by reference to a formula which was set out in the terms and conditions. The shares issued to a bond holder upon conversion were to be held in escrow for six months, after which time Gujarat was to apply to have the shares listed. 16 The convertible bonds were to mature on 1 July 2028 unless previously redeemed, converted or purchased and cancelled.

The circumstances involving potential lack of authority known to the appellants

Good Team Investments 17 On 5 December 2008, bonds with a $1 million face value were transferred to Good Team Investments. Bellpac was described as the transferor on the transfer form. It was executed by Mr Wong as the attorney for Bellpac. The transfer was signed by Mr Luk as the director of Good Team Investments. 18 Although Good Team Investments filed a defence which consisted mostly of non-admissions, it did not take part in the proceedings ([14]). Its solicitors ceased to act for it before trial. And the liquidators were unable to contact the company at its last known address, or through its solicitors. 19 The liquidator of Bellpac gave evidence before the primary judge that he had not located any evidence of any consideration being paid by Good Team Investments to Bellpac in respect of the bonds. Mr Wong said that he transferred the bonds to Good Team Investments in satisfaction of a debt. But Mr Wong also told the liquidator that he (Mr Wong) was unable to locate any documents establishing that Good Team Investments was one of his creditors. Mr Wong dealt with the company through a law firm, Lui & Co, who did not act for Good Team Investments in the proceedings. 20 The primary judge did not need to resolve whether the bonds were transferred in discharge of Mr Wong's personal debt or whether they were a gift from Mr Wong to Good Team Investments. In either case, he concluded that Good Team Investments held the rights that arise from registration, and the bond certificates, on constructive trust for Bellpac ([265]).

Great Investments 21 On 16 December 2008, bonds with a $2 million face value were transferred to Great Investments. The sole director of Great Investments was Ms Zhang. The primary judge concluded that although Ms Zhang was the sole director of Great Investments, she always acted on Mr Hong's instructions and made no independent decisions ([254]). 22 Mr Hong's evidence was that Mr Wong was a friend of his. Mr Hong said that he had lent Mr Wong $1.1 million in July 2007. The loan had been made through a friend of Mr Hong's and Mr Hong said that he took full responsibility for it and that he had repaid his friend (although he had also suggested that another person was involved in repayment). Nothing was documented. He had become concerned about repayment, and had spoken and written to Mr Wong from September 2007. After increasing agitation, Mr Hong and Mr Wong formally recorded a loan agreement in early April 2008. Mr Hong said that Mr Wong told him that he would be unable to repay the loan for some time but he offered Mr Hong bonds with a face value of $2 million from an ASX listed mining company. Mr Hong said that he reluctantly agreed to that proposal. He said that he told Mr Wong that if anything went "wrong" with the bonds and they dropped in value, Mr Wong would have to pay the difference. The reference to the "difference" was to the difference between the value of the bonds and the interest payments of $10,000 per month which Mr Wong was required to make under the loan agreement. 23 The transfer of the bonds was signed by Ms Zhang, on behalf of Great Investments. Ms Zhang reviewed the transfer form twice because she initially signed it in the wrong place. She had collected the transfer form from Bellpac's holding company's office. She also noticed Bellpac's name as transferor on the transfer form ([254]). 24 Mr Hong said that he received the signed transfers and that he registered them in the name of Great Investments. Mr Hong said that when he received the transfer form for the convertible bonds he did not notice Bellpac's name on the form. However, in cross-examination he said that he asked Mr Wong about the bonds and the company to which they related and was told by Mr Wong that it was "a good company". Mr Hong also said that he was aware that it was a public company. He later accepted that he noticed Bellpac's name was on the transfer form but said that he simply assumed that this was one of Mr Wong's many companies. Earlier he had said that he assumed that the bonds were from Mr Wong or his company, General Pacific. 25 The primary judge concluded that Mr Wong had a personal debt to Mr Hong, and that Great Investments and Mr Hong were aware that Mr Wong was transferring the bonds to discharge that personal debt ([255]). The primary judge found that Mr Hong reviewed the transfer forms, saw that Bellpac's name was on the transfer form, but made no inquiries about Bellpac ([254]). The primary judge also concluded that Mr Hong read the transfer documents with some care and saw that they were in the name of Bellpac and not Mr Wong or General Pacific ([86]).

Dr Kwok 26 On 1 May 2009, bonds with a $2 million face value were transferred to Mr Kwok. 27 Evidence was given before the primary judge by Dr Kwok and his wife. Dr Kwok is a medical practitioner who lives in Hong Kong with his wife, Ms Kwok. Much of their evidence concerned family business affairs. The primary judge found that Ms Kwok had business acumen and was trusted in business affairs by Dr Kwok ([127]). One of Ms Kwok's brothers is Mr Wong. Dr Kwok and Ms Kwok were shareholders in some of Mr Wong's companies. Another of Ms Kwok's brothers is Mr Ivan Wong (whom we will refer to as Ivan, without disrespect and only to avoid confusion). Dr Kwok had given Ivan a power of attorney which was in force between 1994 and 2013. Ivan also often dealt with the business affairs of his and Ms Kwok's brother, Mr Wong. Ivan was physically present in court but he did not give evidence. 28 Dr Kwok said that since 1999 he and his wife provided loans to his brother-in-law, Mr Wong, for business and investment activities in Australia and China. Dr Kwok said that the loans were not documented because Mr Wong was part of their family and they trusted him. Dr Kwok said that he left it to his wife and Mr Wong to keep track of the loans. In mid-2006, Dr Kwok and Ms Kwok agreed with Mr Wong to consolidate the loans into a single sum of $2 million with interest. 29 In 2008, Mr Wong told Ms Kwok that his finances were very tight and that he did not know when he would be able to repay the loan. Ms Kwok said that in late 2008, Mr Wong proposed to her that he transfer convertible bonds in Gujarat for an aggregate base value of $2 million as payment of the outstanding consolidated loan. Ms Kwok said that she and Dr Kwok agreed to accept a transfer of the bonds and decided that they should be in Dr Kwok's name. Ms Kwok and Mr Wong agreed that if there was a significant shortfall when the bonds were converted, then Mr Wong was required to pay the balance of the principal and interest owing. 30 Ms Kwok said that Mr Wong told her that he would ask their brother, Ivan, to arrange for the bonds to be transferred to Dr Kwok. Dr Kwok also gave evidence that he instructed Ivan to arrange the transfer. Dr Kwok said that he expected Ivan to do everything that Dr Kwok would have done to arrange the transfer. 31 Ms Kwok said that her brother, Ivan, told her in mid-2009 that the bonds had been registered in Dr Kwok's name. Ivan told her that he would keep the certificates in safe custody. Ms Kwok said that she never saw the transfer form or the bonds. She said that she knew the details about converting the bonds because she probably asked about them. The primary judge accepted that Mr Wong had told Ms Kwok that he was using his own bonds to repay the debt ([130]). 32 After the transfer, Ms Kwok said that Mr Wong continued to owe them $2 million plus all outstanding interest, but that the debt would be reduced by the net proceeds of any sale of the shares which were the subject of the bonds. 33 The primary judge found that both Dr Kwok and his wife believed that Mr Wong owned the bonds. However, the primary judge held that Dr Kwok should be attributed with the knowledge that his attorney (Ivan) must or ought reasonably to have acquired when he reviewed the transfer form and certificates ([260]). Ivan ought reasonably to have observed that the bonds were being transferred from Bellpac to Dr Kwok. Ivan also attended Court on several days of the hearing but was not called as a witness. The primary judge concluded that there was nothing that Dr Kwok's attorney could have said that would have assisted Dr Kwok's case: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (see [260]).

Mr Xu 34 On 1 May 2009, bonds with a $1 million face value were transferred to Mr Xu. 35 The primary judge found Mr Xu's evidence to be self-serving and, at times, inconsistent with relevant documentation. He was not prepared to accept Mr Xu's evidence unless it was corroborated by relevant documentary material or other objective evidence ([116]). However, there were some aspects of Mr Xu's evidence which were not self-serving and which the primary judge accepted. 36 Mr Xu's evidence was that he was a friend and business associate of Mr Wong. He said that in March 2007 he had lent $1.5 million to a joint venture company established by him and Mr Wong. He said that Mr Wong agreed to be personally liable for the company's repayment of the loan on completion of the joint venture. After completion, he and Mr Wong entered a deed in 2008 which contained the following recital: Alfred Wong, without the consent of the Lender, effected withdrawals from the bank account of Auspac with St George Bank Limited, Account No. 0000552651602 ("the Bank Account") with the result that the money that the Lender, at the request of Alfred Wong, deposited in the Bank Account was appropriated at the direction of Alfred Wong and for his benefit. 37 Mr Xu accepted that Mr Wong had "stolen" $1.5 million from the joint venture company ([99]). Mr Xu accepted that he knew that Mr Wong was a dishonest man ([101]). 38 Mr Xu said that he placed a caveat on a property owned by Mr Wong but Mr Wong failed to make any repayments of the loan. Mr Xu said that in about April 2009, Mr Wong told Mr Xu that although Mr Wong was unable to repay the joint venture loan he would transfer bonds issued by Gujarat for an aggregate value of $1 million in part payment if Mr Xu withdrew the caveat. Mr Xu accepted the offer and entered an agreement on 1 May 2009 which recited in cl 3.1 that the transfer of the bonds was "valid, effective and binding on Alfred and the registered holder of the Bonds" (emphasis added). 39 Mr Xu said that he received the transfers and the bond certificates from Mr Wong and that he signed the transfers and gave them and the bond certificates to Mr Wong to be given to Gujarat for registration. 40 The primary judge accepted that Mr Xu read the transfer forms carefully when he signed them ([106]). Mr Xu had accepted that when he signed the transfers he noticed that Mr Wong had signed under a power of attorney from Bellpac ([109]). The primary judge found that Mr Xu knew that Bellpac was the registered holder of the bonds and that he had read the transfer form carefully when he signed it and either saw, or ought reasonably to have seen, that Bellpac was the transferor ([256]). Mr Xu also knew that the transaction was being carried out to discharge Mr Wong's personal debt to Mr Xu ([257]).

The primary judge's legal conclusions 41 The primary judge considered two alternative ways in which the appellants were said to be liable. The first was strict liability, subject to defences, based upon a decision of the House of Lords and a decision of the High Court of Australia. The second was based upon principles of knowing receipt of property obtained in breach of fiduciary duty. 42 The first basis of liability considered by the primary judge involved the decisions in Reckitt v Barnett, Pembroke and Slater, Ltd [1929] AC 176 and Tobin v Broadbent [1947] HCA 46; (1947) 75 CLR 378. 43 In Reckitt v Barnett, Sir Harold Reckitt had given a power of attorney to a solicitor, Lord Terrington, who used it to draw cheques on Reckitt's bank account. Lord Terrington wrote a cheque to the respondents to discharge his private debt. Reckitt's claim was for a declaration and for damages for conversion of the cheque or alternatively for money had and received. All of their Lordships accepted that the respondents were liable if the cheque was paid without any authority. As Lord Warrington said (at 193): it seems to me quite plain that the respondents would be held both at law and in equity to be liable to repay the money in question to the appellant unless they could establish that Lord Terrington had either actual or apparent authority to pay his own debts with his principal's money. 44 All their Lordships held that on the proper construction of the power of attorney, Lord Terrington had no express or implied authority to use it to pay his own debts. And since the respondents knew that the cheque was drawn from Reckitt's account, there could be "no holding out and no estoppel" (at 190 per Viscount Sumner). As Lord Hailsham explained, the case was "a simple case of receipt by the respondents of [Reckitt's] money with the knowledge that it was [Reckitt's] money in payment of Lord Terrington's debt" (at 182). 45 The second case relied upon by the primary judge was Tobin v Broadbent. In that case, Dr Tobin executed a power of attorney in favour of his stockbroker. The stockbroker fraudulently pledged non-negotiable share certificates belonging to Dr Tobin and his wife to the respondent in exchange for a loan. The respondent did not inspect the power of attorney and made no enquiry about the power of the stockbroker to pledge the certificates. Dr Tobin and his wife sought specific restitution of the share certificates or damages for conversion from the respondent. The High Court of Australia held that Dr Tobin and his wife were entitled to delivery up of the share certificates. All of their Honours focused on the question of authority. As Dixon J explained (at 400), there were four possibilities to be examined in order to determine the appeal: (i) that the stockbroker had actual authority, (ii) that the conduct of Dr Tobin and his wife had permitted the stockbroker to become the ostensible owner of the shares, (iii) that the stockbroker had ostensible authority, or (iv) that Dr Tobin and his wife were estopped from asserting that they were the owners of the shares. None of these defences was established. 46 The reason why the primary judge reasoned by analogy with Reckitt v Barnett was because, unlike Reckitt v Barnett, the orders which his Honour made were in equity not at common law. We return to that point in more detail below. 47 The primary judge also held that ss 128 and 129 of the Corporations Act did not provide statutory authority for the appellants to retain the bonds. The primary judge said, at [238], that the provisions in ss 128 and 129 "do not operate to modify or amend the proper construction of cl 6 of the power of attorney". This point is also considered in more detail later in these reasons. 48 The primary judge also considered the liquidators' alternative case concerning liability of the appellants for knowing receipt; the first limb of Barnes v Addy (1874) LR 9 Ch App 244. His Honour held that the appellants who received bonds would have been liable on this alternative basis. As we explain below, during oral argument on the appeal it was accepted that this issue did not arise. 49 The primary judge also concluded that none of the appellants had a defence of bona fide purchase for value without notice. His Honour found that the defence did not apply for two reasons corresponding to a failure to prove "lack of notice" and a failure to prove "value". First, the appellants had either actual or constructive notice of Bellpac's legal interest in the bonds but they made no reasonable enquiry into how Mr Wong could treat Bellpac's property as his own in order to settle his debts ([279]). Secondly, the appellants were not purchasers for value because they paid no consideration to Bellpac and any consideration received by Mr Wong personally in respect of the transactions is irrelevant ([280]).

The primary judge's orders 50 The primary judge made 22 orders. As we explain below, the issue on this appeal was liability, not the form of relief. It suffices to summarise the relevant relief granted in relation to the appellants: (1) declarations were made that Bellpac was the "true owner" of the bonds issued to Good Team Investments, Great Investments, Dr Kwok, and Mr Xu; (2) orders were made against Good Team Investments, Great Investments, Dr Kwok, and Mr Xu for delivery up of the original bond certificates, the signed transfer forms, and any forms or applications to redeem the bonds; and (3) orders were made requiring Gujarat to (i) rectify its register of bondholders to record the owner of the relevant bonds as Bellpac in place of Good Team Investments, Great Investments, Dr Kwok, and Mr Xu, (ii) reissue bond certificates to Bellpac, and (iii) cancel the bond certificates in favour of Good Team Investments, Great Investments, Dr Kwok, and Mr Xu. 51 In relation to the appellants to this appeal, the broad effect of each of these orders was to return to Bellpac its rights as bondholder of the $6 million face value bonds.

Legal principles concerning liability of recipients of company assets

The concession 52 Much of the trial, and some of this appeal, was devoted to submissions by the parties about liability based upon "knowing receipt" of property transferred in breach of fiduciary duty. However, during the course of the appeal, senior counsel for the appellant properly conceded that if the transfer was without authority (including statutory deeming of authority under ss 128 and 129 of the Corporations Act) then questions of knowing receipt would not apply; the appellants could only succeed on the appeal if they could establish that they were bona fide purchasers for value without notice (ts 25). Conversely, as we explain below, if the transfers were made with authority then the question would be whether the transfers could be rescinded. Again, issues of knowing receipt would not arise. 53 In the next section of our reasons we discuss the principles concerning liability for receipt of company assets in order to explain why we accept the concession that the doctrine of knowing receipt is unnecessary where a company seeks only to recover rights, or their value, transferred without authority to a recipient. The position would be different if the company sought to recover consequential losses as equitable compensation or, in the alternative, to obtain an account and disgorgement of a recipient's profits. An action for knowing receipt would be needed for those remedies: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 359 [253] (the Court). 54 One obstacle to this conclusion is a potential argument that recognition (subject to defences) of a strict liability claim against a recipient, without authority, of company assets would "outflank" the liability in Barnes v Addy. In Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81, the New South Wales Court of Appeal considered this submission which asserted that strict liability would be inconsistent with the decision of the High Court of Australia in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89. In Farah Constructions v Say-Dee, the High Court said at 151 [134] that: … If, on the other hand, the Court of Appeal is to be treated not as abandoning the notice test for the first limb of Barnes v Addy, but rather as recognising a new and additional avenue of relief, it is an avenue which tends to render the first limb otiose. That too is not a step which an intermediate court of appeal should take in the face of long-established authority and seriously considered dicta of a majority of this Court. 55 In a close examination of the reasoning of the High Court, both Leeming JA and Sackville AJA explained in Fistar that the High Court was not denying, by this passage, the existence of concurrent liability, including strict liability, based upon different principles. We respectfully agree with all their Honours' observations on this point. In particular, as Leeming JA observed (Bathurst CJ agreeing), the High Court could not have been rejecting the numerous well recognised claims of strict liability, subject to defences, which exist alongside Barnes v Addy. One of those is the strict liability trust imposed upon the recipient of stolen property. A second example is the liability imposed upon a subsequent dealing by a recipient of trust property which also creates the obligation of trusteeship. A third example is a claim for specific restitution of a chattel: McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303, 307-308. A fourth example is an equitable proprietary claim based upon a better equitable title. Even closer to the present circumstances, another instance that could be added to the examples given by Leeming JA is the power of a trustee (or replacement trustee) to rescind a transfer to a third party which was made within power but in breach of fiduciary duty: Pitt v Holt [2013] UKSC 26; [2013] 2 AC 108, 131-132 [43] (Lord Walker with whom Lord Neuberger, Baroness Hale, Lord Mance, Lord Clarke, Lord Sumption and Lord Carnwath agreed). It has even been argued that the adjective "fiduciary" should be removed due to the breadth and liberality in the concept of a "fiduciary" duty used here by the Supreme Court: Ashdown M, Trustee Decision Making: The Rule in Re Hastings-Bass (Oxford University Press, 2015) 63-67 [4.04]-[4.07].

The reasons why the concession should be accepted 56 If a company transfers a benefit to a recipient under a valid contract then, unless the contract is rescinded, the contract will be a reason why the recipient can retain the benefit. The company's officer or agent might have actual authority (express or implied). The company's officer or agent might have ostensible authority. But if the company officer or agent is acting fraudulently, the contract might be avoided if the recipient is not bona fide or has notice of a lack of authority: Richard Brady Franks Ltd v Price [1937] HCA 42; (1937) 58 CLR 112, 142 (Dixon J). 57 On the current state of Australian law, until the contract is avoided the valid contract will provide the right for the recipient to retain the benefit: Daly v Sydney Stock Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371, 387-390 (Brennan J); Hancock Family Memorial Foundation Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198, 214 [184] (the Court). 58 There are difficult questions concerning whether an election to rescind is sufficient or whether a court order for rescission must be obtained. Some authorities have suggested that a court order must be obtained where it is necessary to rescind the transaction and until then the benefit can be retained and no trust of the benefit will arise: Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198, 216-217 [196]-[197] (the Court) relying upon Greater Pacific Investments Pty Ltd (In Liq) v Australian National Industries Ltd (1996) 39 NSWLR 143, 153 (McLelland A-JA with whom Priestley and Meagher JJA agreed). This restrictive approach has been doubted: Grimaldi v Chameleon Mining at 359-360 [254] (the Court); O'Sullivan D, Elliott S, and Zakrzewski R, The Law of Rescission (2nd ed, Oxford University Press, 2014) 337-338 [16.35]-[16.38]. But the essential point is that the issue is one of rescission and re-vesting of a benefit. Questions of knowing receipt do not arise. 59 For these reasons, if the company seeks only restitution of the benefit or its value then principles of knowing receipt are not needed once the agreement is set aside. As Lord Nicholls said in Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28; [2004] 1 WLR 1846, 1848 [4]: …If, however, the agreement is set aside, B will be accountable for any benefits he may have received from A under the agreement. A will have a proprietary claim, if B still has the assets. Additionally, and irrespective of whether B still has the assets in question, A will have a personal claim against B for unjust enrichment, subject always to a defence of change of position. B's personal accountability will not be dependent upon proof of fault or "unconscionable" conduct on his part. B's accountability, in this regard, will be "strict". 60 This appeal is concerned with an even simpler scenario where a benefit is transferred to a recipient from the company, without the authority of the company and without a contract. As we explain below, in this scenario the company may be entitled, subject to defences, to a proprietary claim if the recipient still has the specific benefit. Even if the recipient does not retain the benefit, the company will have a personal claim against the recipient, again subject to defences. These principles apply with at least the same force where the person making the transfer is a director who owes fiduciary obligations to the company. In the exclusive jurisdiction of the Court of Chancery, where a decree was sought of restitution of property affected by a fiduciary obligation it was said "Let the hand receiving it be ever so chaste, yet, if it comes through a polluted channel, the obligation of restitution will follow it": John v Dodwell and Co Ltd [1918] AC 563, 576 (Viscount Haldane LC quoting Huguenin v Baseley (1807) 14 Ves Jun 273, 289; (1807) 33 ER 526, 532 (Lord Chancellor Eldon)). 61 Perhaps the first reported case which recognised this liability of a recipient of a benefit transferred from a company was the decision in Harrison v Harrison. That decision was reported by both Barnardiston ((1740) Barn 324; 27 ER 664) and Atkyns ((1740) 2 Atk 121; 26 ER 476). In 1720, the South Sea Company transferred £1,000 of stock to Mr Edward Harrison. The transfer was an error. It should have been transferred to the Governor of the East-Indies. Mr Harrison transferred the stock to his broker, who sold it. The Lord Chancellor held that the Harrison (by his executor) was liable to the Governor's estate for the proceeds of sale. Barnardiston's report of the case describes the Lord Chancellor (then Hardwicke LC) speaking of the action as if it were one at common law for "conversion". But Barnardiston's reports are notoriously unreliable and it is unlikely that Hardwicke LC would have confused the bill in equity with an action for trover. The point would have been made only as an analogy. The essential point was that Harrison was strictly liable, as he would have been in an action for trover, to make restitution of the proceeds from the shares that he received without authority from the South Sea Company. There was no need for any enquiry into his knowledge. The Atkyns report explained that the plaintiff could elect for the restoration of the stock or the proceeds. Although the claim was brought by the Governor's estate rather than the South Sea Company, the principles applied equally to a claim by the company. Indeed, there was an argument that the Governor's estate should have joined the South Sea Company as the proper plaintiff. 62 Much more recently, in Blue Station Ltd v Kamyab [2007] EWCA Civ 1073, a director with power to sign cheques wrote a cheque from the company to himself for £100,000. He was not authorised to pay money for his personal benefit. The English Court of Appeal ordered restitution of the payment. At [18], Chadwick LJ said that "the claimant company needed to prove only that the payment was one which the payee was not entitled". 63 Most recently, in Prestige Lifting Services Pty Ltd v Williams [2015] FCA 1063, Beach J considered a claim for money had and received that had been brought by the applicant company against Mr Williams in the alternative to a claim based on Barnes v Addy. His Honour explained (at [270]) that Mr Williams had caused the company to pay money for Mr Williams' own personal expenses. The payment was for no proper purpose and in breach of the duties Mr Williams owed to the company. Since the company suffered detriment, and Mr Williams had benefitted, Beach J held that it would be unjust for Mr Williams to retain the benefit of the payments and that the company was entitled to restitution. 64 The principle concerning liability for receipt of a company asset without authority reflects a consistent and coherent pattern across the law. The same principle can be seen in the strict liability claim (subject to defences) recognised by the House of Lords in Lipkin Gorman v Karpnale Ltd [1991] 3 WLR 10; [1991] 2 AC 548. The plaintiffs in that action were a firm of solicitors rather than a company, but the House of Lords recognised strict liability to make restitution for the receipt of the traceable proceeds of funds taken from Lipkin Gorman by a partner who had no authority to use the client trust funds he withdrew to gamble with the innocent recipient, Karpnale Ltd (the "playboy club", an anagram of Park Lane). The strict liability was subject to defences: although bona fide purchase was not satisfied, the defendant had a partial defence of change of position. The decision in Lipkin Gorman has been referred to with approval, or applied, in numerous cases in Australia: for instance, Spangaro v Corporate Investment Australia Funds Management Ltd [2003] FCA 1025; (2003) 54 ATR 241, 256 [50] (Finkelstein J); Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd [2012] NSWCA 380; (2012) 295 ALR 147; Heperu Pty Limited v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230. 65 The principle was stated in general terms by the American Law Institute in the Restatement of the Law Third: Restitution and Unjust Enrichment (American Law Institute Publishers, 2011). In s17, the rule adopted by the Restatement is expressed as: A transfer by an agent, trustee, or other fiduciary outside the scope of the transferor's authority, or otherwise in breach of the transferor's duty to the principal or beneficiary, is subject to rescission and restitution. The transferee is liable in restitution to the principal or beneficiary as necessary to avoid unjust enrichment. 66 One of the illustrations that the reporter (Professor Kull) gave of this rule is as follows (vol 1, 237-238): A and B form a joint venture for the purchase and subdivision of Blackacre. A takes title to the property for the benefit of the partners. In violation of this agreement, A conveys Blackacre to C for $50,000 paid to A personally. C is aware, at the time of the transaction, of the terms of the joint venture agreement between A and B; notice on the part of C forecloses any defence that C might otherwise interpose as bona fide purchaser. 67 In other words, a transfer of title by a joint venturer without authority renders the transferee liable to make restitution of the benefit received, subject to defences such as bona fide purchase for value without notice. 68 This selection of cases illustrates the substantial authority that supports strict liability, subject to defences, for the receipt by a respondent of a company asset transferred without authority. Some of the cases were brought in equity for specific restitution of the rights transferred. Other cases were brought in equity as personal money claims for restitution. Others were brought at common law for restitution, sometimes still described as a count of money had and received in indebitatus assumpsit. The difference between whether the personal claims are described as "equitable" or as "common law claims" is not a difference of principle because although the claim for money had and received is a common law claim, it has equitable roots: Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 548-551 [83]-[89] (Gummow J). 69 The two claims recognised in equity based simply upon the unauthorised receipt of a benefit from a company are (i) a personal claim for restitution of the value of the benefit and (ii) a proprietary claim for specific restitution. The personal claim has been described as being based upon unjust enrichment: Criterion Properties plc v Stratford UK Properties LLC at 1848 [4] (Lord Nicholls, quoted above). This might also be the underlying basis of the proprietary claim where the recipient obtains legal title from the company without authority: see Burrows A, The Law of Restitution (3rd ed, Oxford University Press, 2011) 432-434; Mitchell C, Mitchell P, and Watterson S, Goff and Jones' The Law of Unjust Enrichment (8th ed, Sweet & Maxwell, 2011) Ch 37, 38. More than a century ago, in his lecture on the origin of uses, Professor Ames described the ethical character of specific equitable relief where pecuniary compensation is inadequate, such as a bill by a bailor for the recovery of a chattel from a defendant in possession after the death of the bailee. He explained that in these cases "the plaintiff is seeking restitution from the defendant, who is trying to enrich himself unconscionably at the expense of the plaintiff": Ames JB, Lectures on Legal History and Miscellaneous Legal Essays (Harvard University Press, 1913) 234-235. It is unnecessary to explore those foundational issues in this case. There was no submission, for instance, that any of the appellants had any defence of change of position which would raise other issues such as whether a defence of change of position could be effected by an order that specific relief was subject to a condition: see the discussion in Häcker B, Consequences of Impaired Consent Transfers (Mohr Siebeck Tübingen, 2009) 155-156 and Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538.

The remedy for a disposition without authority 70 The cases and authorities discussed above all concern orders for payment of money consequent upon the receipt of an unauthorised disposition. However, the orders made by the primary judge in this case were for rectification of the register, declarations that Bellpac was the "true owner" of the bonds that had been registered in the names of appellants, and delivery up and reissue of bond certificates. These orders were made in equity because legal rights had arisen upon the appellants' registration as bondholders and legal title to the bond certificates had passed to the appellants by delivery. The orders broadly had the effect of a conveyance to Bellpac of the rights arising from registration as a bondholder (other than in relation to Mr Lee) and of the bond certificates. 71 It has been suggested that if "the directors dispose of corporate property in a dealing which is beyond their authority, whether actual, ostensible or usual, the dealing ordinarily is void and no interest passes to the third party donee, purchaser, etc": Grimaldi v Chameleon Mining at 359 [254] (the Court). But in this case, the registration of the various appellants as owners of the bonds gave them the common law rights that arose from registration. And the appellants' possession of the bond certificates gave them the common law title to those certificates: see Costello v Chief Constable of Derbyshire Constabulary [2001] EWCA Civ 381; [2001] 1 WLR 1437, 1443-1444 [14], 1446 [22] (Lightman J, Robert Walker and Keene LJJ agreeing) and the discussion in Fistar [37] (Leeming JA). 72 There was no dispute in this case about the orders of the primary judge if liability of the recipients was established. It suffices to explain briefly why, with respect, the primary judge's orders were correct. 73 Although none of the orders made by the primary judge was for a constructive trust, some of the orders were based upon the primary judge's reasoning concerning constructive trusts. For instance, the primary judge concluded that the bond certificates which were ordered to be delivered up to Bellpac were held by the relevant appellants on constructive trust. For this reason, the primary judge held (at [248]) that each of the appellants held the bond certificates and their rights under the register on constructive trust for Bellpac. 74 The use of the expression "constructive trust" in this context is a shorthand description for a trust which is used to describe orders "akin to orders for conveyance": Giumelli v Giumelli [1999] HCA 10; 196 CLR 101, 112 [5] (Gleeson CJ, McHugh, Gummow and Callinan JJ). Used in this sense, the decision does not require consideration of more difficult issues such as whether any positive duties of trusteeship arose: see Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189, 1208 [31] (Lord Sumption JSC). 75 In Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566, 585 [42], the High Court of Australia observed that one concern with imposing a constructive trust is to avoid "a result whereby the plaintiff gains a beneficial proprietary interest which gives an unfair priority over other equally deserving creditors of the defendant". However, their Honours referred to an "unfair" priority, not merely to any priority. This is because priority in any insolvency (and there was no submission that any of the appellants in this case is insolvent) is usually the consequence of the recognition of a proprietary right, not the reason for it. 76 In this case, there is a strong basis for the assumption by the parties that it is not unfair for orders to be made in equity to effect a conveyance of the rights that arise by registration, and the bond certificates, to Bellpac. The bonds involve rights in relation to a private company where pecuniary compensation would be inadequate.

The grounds of appeal 77 The appellants relied upon 11 grounds of appeal. Those grounds were as follows: 1. His Honour erred in failing to hold that on the proper construction of the power of attorney in favour of Alfred Wong fiduciary duties owed by him as the attorney of Bellpac were excluded. 2. His Honour erred in failing to hold that on the proper construction of the power of attorney Alfred Wong was free to dispose of the convertible bonds for his own benefit and was authorised by Bellpac to transfer the convertible bonds to the Appellants. 3. His Honour erred in failing to hold that the evidence did not reveal that Alfred Wong was in breach of fiduciary duty in causing the convertible bonds to be transferred to the Appellants. 4. His Honour erred in failing to hold that the Appellants did not know or have notice of any breach of fiduciary duty by Alfred Wong in connection with the transfer to the Appellants of the convertible bonds. 5. His Honour erred in holding that knowledge of circumstances which would put an honest and reasonable man on enquiry was sufficient notice to make the Appellants liable as accessories to any breach of duty by Alfred Wong. 6. His Honour erred in holding that further enquiries if made by the Appellants would have revealed a breach of duty by Alfred Wong. 7. His Honour erred in holding that the Appellants were liable as constructive trustees of the convertible bonds transferred to them. 8. His Honour erred in failing to find that the Appellants were bona fide purchasers for value without notice of the convertible bonds. 9. His Honour erred in failing to find that the Respondents were estopped from alleging that the convertible bonds were not validly and effectually transferred to the Appellants. 10. His Honour erred in finding (to the extent to which his Honour did so find) that the transfers to the Appellants of the convertible bonds were uncommercial transactions of Bellpac and should have held that the power of attorney in favour of Alfred Wong was part of the circumstances of the company and that a reasonable person in the company's circumstances would have entered into the transaction. 11. His Honour erred in finding (to the extent to which his Honour did so find) that in the circumstances orders should be made against the Appellants rather than against Alfred Wong under section 588FF of the Corporations Act. 78 It was not entirely clear which of the appellants' submissions were concerned with which of these grounds of appeal. The appellants' written submissions were grouped together by reference to issue: (i) the construction of the power of attorney (said to relate to grounds 1 to 3), (ii) the case "by analogy with Reckitt and Tobin" (said to relate to grounds 4-7), (iii) the Barnes v Addy case (also said to relate to grounds 4-9), (iv) the defence of bona fide purchase for value without notice (not referenced to any ground although it would appear to be the concern of ground 8), and (v) statutory estoppel (not referenced to any ground, although it would appear to be the concern of ground 9). Grounds 10 and 11 were concerned with uncommercial transactions. They are the subject of the notice of contention and they are considered below. 79 Since the appellants did not make submissions by reference to any grounds of appeal, and since the Barnes v Addy issue was no longer a live issue on appeal and there was no issue concerning remedy on the appeal, it is convenient to focus on the issues as they were presented in submissions. The issues can be conveniently grouped into two categories. The first is whether Mr Wong had authority to transfer Bellpac's bonds to the appellants (including the issue of statutory estoppel in ss 128 and 129 of the Corporations Act). The second is whether the appellants have a defence of bona fide purchase for value without notice.

Did Mr Wong have authority to transfer Bellpac's bonds to the appellants?

The 2008 Power of Attorney 80 The power of attorney, executed on 7 May 2008, was as follows: BY THIS POWER OF ATTORNEY the person named in schedule 1 (the "Grantor" appoints each person described in schedule 2 (each an "Attorney") severally as the Grantor's attorney, on behalf of the Grantor, and in the name of the Grantor to do any one or more of the following: 1. execute under hand or under seal and deliver (conditionally or unconditionally) in a place specified in schedule 3, any of the documents described in schedule 4 (each a "Document"); 2. complete any blanks which may be left in a Document; 3. make any amendments or additions to a Document as the Attorney may approve, the approval to be evidenced conclusively in each case by the Attorney's execution of the Document; 4. do anything which, in the opinion of the Attorney, ought to be done to perfect any Document or bring it into effect including, without limitation, signing any notice or ancillary instrument and any document dealing with an estate or interest in land; 5. execute under hand or under seal and deliver (conditionally or unconditionally) any document supplemental to or varying a Document; and 6. for the purposes of any of the above, appoint and subsequently remove, any sub-attorney or sub-attorneys. AND THE GRANTOR DECLARES THAT: 1. The rights and powers given to an Attorney under this Power of Attorney remain in full force and effect until revoked by written notice from the Grantor to that Attorney. 2. Until revoked under clause 1, the rights and powers given to an Attorney extend to any sub-attorney appointed by that Attorney under this Power of Attorney. 3. The Grantor ratifies and confirms whatever an Attorney does or causes to be done under this Power of Attorney. 4. The Grantor indemnifies each Attorney against all claims, damages, losses and expenses suffered or incurred as a result of anything done under this Power of Attorney. 5. Upon execution of this Power of Attorney, the Grantor shall stamp it and register it as required by any applicable law. If the Grantor fails to do so, it authorises any person or corporation who is a party to a Document, to do so on its behalf. The Grantor shall pay all reasonable costs associated with the stamping and registration within a reasonable time after payment is demanded by the relevant person or corporation. 6. An Attorney may exercise the powers conferred by this Power of Attorney or by law even though that Attorney may have a conflict of interests [sic] in exercising those powers or a direct or personal interest in the means or result of that exercise of those powers. SCHEDULES 1. THE GRANTOR Bellpac Pty Ltd A.C.N. 101 713 017 of Level 23, 123 Pitt Street, Sydney, New South Wales 2000. 2. THE ATTORNEY Alfred Chi Wai Wong of Level 23, 123 Pitt Street, Sydney, New South Wales 2000. 3. PLACE IN WHICH DOCUMENTS ARE TO BE EXECUTED Sydney or any other place which the Attorney chooses. 4. DOCUMENTS TO BE EXECUTED Any document that which Grantor is party (including a document that is to be signed by the Grantor, by itself). 81 The power of attorney was executed as a deed poll by Bellpac under s 127 of the Corporations Act. It was signed by directors Mr Au-Yeung and Mr Alfred Wong. It was registered on 28 July 2008. There was no pleading or submission at trial, and no submission on this appeal, which suggested that the power of attorney was invalid or beyond the power of the directors.

Express or implied authority in the power of attorney 82 The appellants submitted that Bellpac, by Mr Wong and Mr Au-Yeung, had granted Mr Wong an almost unlimited power which enabled him to dispose of Bellpac's assets. The appellants submitted that the power in cl 1 to execute any document to which Bellpac was a party conferred a power upon Mr Wong to transfer any of Bellpac's assets without restriction. He submitted that this power entitled Mr Wong, if he wished, to transfer any of Bellpac's assets to himself or for his benefit, contrary to the best interests of Bellpac. It was common ground on this appeal, as it was before the primary judge, that the power of attorney was to be construed by reference to general law principles and that the Powers of Attorney Act 2003 (NSW) did not apply. 83 The basis of the appellants' construction of the power of attorney was that the scope of cl 1 in the grant of power was almost unlimited because of cl 6 (in the declaration section). In other words, the appellants submitted that cl 1 should not be read as having any restriction impeding Mr Wong from benefiting from the power because cl 6 (in the declaration section) permitted him to exercise the power despite a conflict of interest or a personal interest in the means or result of that exercise of those powers. 84 We do not accept this construction for four reasons. 85 First, and fundamentally, if the appellants' construction were correct then the instrument could operate contrary to the long established principles which generally govern powers of attorney. Although it is always the terms of the grant that must be construed, those terms should also be construed in the context of an understanding of a core feature of a power of attorney. The primary object of a power of attorney was described by Russell LJ in Reckitt v Barnett [1928] 2 KB 244, 268 in a judgment upheld by the House of Lords. That judgment was described in the House of Lords by the Lord Chancellor as one which he "should have been content to adopt … as my own" (183). It was adopted by Dixon J in Tobin v Broadbent (401). As Russell LJ explained, the "primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property". 86 The declaration in cl 6 of the power of attorney is not an additional grant of power. It does not appear in the section of the power of attorney which grants the power. It appears only in the declaration section. It is concerned with the manner in which the power of attorney, to act for the interests of the principal, is to be exercised. It declares an immunity where power is exercised in the interests of the principal but which might incidentally involve a conflict for the attorney or a personal interest of the attorney. 87 A similar point was made by McMurdo J in Smith v Glegg [2004] QSC 443; [2005] 1 Qd R 561. In that case, a broad power of attorney was granted which empowered the attorney to enter transactions on the principal's behalf. That power was subject to a qualification as follows: I expressly allow and authorise my attorney to enter into transactions on my behalf where my interests and duty could conflict with my attorney's interests and duty in relation to the transaction even though my attorney might derive a direct or indirect benefit therefrom. 88 In considering the scope of the qualification, McMurdo J held (at 574 [60]) that the effect of this clause "was to widen the circumstances in which the attorney could enter into a transaction on the principal's behalf. It did not affect the content of any fiduciary duty in circumstances which do not involve such a transaction". 89 Secondly, all relevant authority is against the appellants' construction. In Reckitt v Barnett, the House of Lords considered a letter to the bank, which Viscount Dunedin described as having the effect of a clause in the power of attorney that said "for the purposes aforesaid I wish that Lord Terrington be allowed to draw cheques without restriction" (184). The House of Lords unanimously rejected the submission that the letter empowered the attorney to draw cheques on Reckitt's account for his own purposes. As Lord Atkin explained in later, related, litigation, "in simple language the attorney stole the money and applied it to his own purposes": Midland Bank Ltd v Reckitt [1933] AC 1, 12. 90 Again, in Tobin v Broadbent, the terms of the power of attorney included a clause that empowered the attorney to act "as my attorney may think fit in relation to my affairs generally and the conduct and management thereof…" (383). As Dixon J explained, the words of the power of attorney were "very wide" (400) but did not empower the acts for the attorney's own benefit because "[p]rima facie, a power, however widely its general words may be expressed, should not be construed as authorizing the attorney to deal with the property of his principal for the attorney's own benefit" (401). 91 Thirdly, the context in which the power of attorney is created is a matter which is relevant to its construction. The power of attorney was executed by two directors of Bellpac on behalf of Bellpac in favour of one of the directors. The directors' act of authorising the power of attorney was one that was required to be undertaken "in good faith in the best interests of the corporation" (s 181(1)(a) Corporations Act). Further, the named attorney in the power, Mr Wong, was a director of Bellpac. That context militates against a construction that has the effect that the directors created a power of attorney which empowered one of them, as attorney, to dispose of Bellpac assets contrary to the interests of Bellpac and for his own personal interests. 92 Fourthly, a long line of authority has held that powers of attorney are construed strictly in favour of the principal: Attwood v Munnings (1827) 7 B & C 278; (1827) 108 ER 727, 729 (Lord Tenterden CJ); Withington v Herring (1829) 5 Bing 442; (1829) 130 ER 1132, 1137 (Best CJ); Bryant, Powis, and Bryant, Limited v La Banque du Peuple [1893] AC 170, 177 (Lord Macnaghten for the Court); Tobin v Broadbent at 390-391 (Latham CJ). The basis for this rule has been questioned: Dal Pont G, Law of Agency (3rd ed, Lexisnexis, 2014) 151 [7.7]. But it was not in dispute in this case, and it provides a further reason why the power of attorney should not be construed to empower Mr Wong, as attorney, to use Bellpac's assets for his own purposes. 93 For these reasons, the power of attorney conferred neither express nor implied authority for Mr Wong to transfer the bonds held by Bellpac to his own creditors. The conclusion of the primary judge should be upheld.

Statutory authority: Corporations Act ss 128 and 129 94 The appellants did not rely upon any claim for ostensible authority under general law principles. Instead, they relied upon ss 128 and 129 of the Corporations Act. As we have explained, the primary judge held that the provisions in ss 128 and 129 do not operate to modify or amend the proper construction of cl 6 of the power of attorney. 95 Section 129 of the Corporations Act provides: 129 Assumptions that can be made under section 128 Constitution and replaceable rules complied with (1) A person may assume that the company's constitution (if any), and any provisions of this Act that apply to the company as replaceable rules, have been complied with. Director or company secretary (2) A person may assume that anyone who appears, from information provided by the company that is available to the public from ASIC, to be a director or a company secretary of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company. Officer or agent (3) A person may assume that anyone who is held out by the company to be an officer or agent of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company. Proper performance of duties (4) A person may assume that the officers and agents of the company properly perform their duties to the company. Document duly executed without seal (5) A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices. Document duly executed with seal (6) A person may assume that a document has been duly executed by the company if: (a) the company's common seal appears to have been fixed to the document in accordance with subsection 127(2); and (b) the fixing of the common seal appears to have been witnessed in accordance with that subsection. For the purposes of making the assumption, a person may also assume that anyone who witnesses the fixing of the common seal and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices. Officer or agent with authority to warrant that document is genuine or true copy (7) A person may assume that an officer or agent of the company who has authority to issue a document or a certified copy of a document on its behalf also has authority to warrant that the document is genuine or is a true copy. (8) Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section. 96 Section 128 of the Corporations Act provides: 128 Entitlement to make assumptions (1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (2) A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings. (4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect. 97 On this appeal, the appellants relied only upon s 129(4) (ts 34). The appellants submitted that s 129(4) had the effect that they were entitled to assume that Mr Wong properly performed his duties to Bellpac. They relied upon s 128 as precluding Bellpac from asserting that Mr Wong had not properly performed his duties to Bellpac. 98 Section 129, read with s 128, is concerned with both authority to act and performance of duties. The latter is a separate issue from authority. A company director can act in breach of duty independently of whether the act was authorised. The first three subsections of s 129 are expressly concerned with authority. The first subsection is concerned with any lack of authority that could arise from failure to comply with the constitution. The second and third subsections are concerned with whether someone is authorised to act as a director or company secretary, or authorised to act based on holding out as a company officer or agent. The next three subsections are then expressly concerned with performance of duties. The express focus of s 129(4) is the performance of duties, not questions of authority. Therefore, the conduct to which s 129(4) is directed is not whether acts are authorised or not but whether the acts involve a breach of duty. For instance, ss 129(4) and 128(1) preclude a company from denying that acts were performed other than with care and diligence, in good faith and in the best interests of the company, or for an improper purpose: Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13; (2005) 214 ALR 392, 405 [58] (the Court). 99 This construction is also confirmed by the 1983 Explanatory Memorandum which introduced the Companies and Securities Legislation (Miscellaneous Amendments) Bill 1983 (Cth). This Bill was the origin of s 129. Clause 205(f) of the Explanatory Memorandum set out the terms of what is now s 129(4) and explained that "[t]his statutory presumption of regularity restates the common law rule (e.g. see Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 142)". In that passage, Dixon J explained the rule and its concern with acts involving the exercise of authority: Directors are fiduciary agents and their powers must be exercised honestly in furtherance of the purposes for which they are given. Under the general law of agency it is a breach of duty for an agent to exercise his authority for the purpose of conferring a benefit on himself or upon some other person to the detriment of his principal. But, at the same time, if his act is otherwise within the scope of his authority it binds the principal in favour of third parties who deal with him bona fide and without notice of his fraud (Hambro v Burnand [1904] 2 KB 10; Lloyds Bank v Chartered Bank of India, Australia and China [1929] 1 KB at 56, per Scrutton L.J.). The rule, no doubt, is the same with respect to the acts of directors. It follows that a transaction carried out by directors for their own or some other persons' benefit and not to further any purpose of the company is voidable but not void. In the present case, for the reasons discussed above, Mr Wong did not have authority to execute the transfers. An assumption regarding the proper performance of duties in the exercise of authority is insufficient to overcome the absence of authority. 100 As we have explained, on this appeal the appellants did not rely upon s 129(3). That subsection is concerned with the authority of a company officer. It is a statutory provision concerned with ostensible authority. The 1983 Explanatory Memorandum, cl 205(b)(ii), explained that "[i]t is believed that this also is in accordance with existing case law and normal agency principles". The appellants were right to concede this point. For the same reasons given in Reckitt v Barnett and in Tobin v Broadbent, Mr Wong's acts of giving away company assets for his own benefit (as the appellants knew) could not be said to be the performance of "the duties customarily exercised or performed by that kind of officer or agent of a similar company" (emphasis added). 101 For these reasons, the primary judge was correct in his conclusion that s 129 does not assist the appellants. The transactions by which they received the bonds were without authority. 102 For completeness, we note that the liquidators also argued orally that ss 128 and 129 did not apply to the transactions in this case because there was no "dealing with a company" (ts 72-74). It is unclear whether this point was raised before the primary judge but it was not contained in any notice of contention. The submission was essentially that a "dealing with a company" is a matter to be determined by reference to subjective intentions. On the liquidators' submission, since none of the relevant appellants subjectively thought that they were dealing with Bellpac, there was no dealing with Bellpac which could operate to enliven the statutory assumptions in ss 128 and 129. One difficulty with this submission is that each of the appellants (or, in the case of Dr Kwok, his attorney) saw, or ought reasonably to have seen, Bellpac's name on the transfer form as transferor of the bonds. In oral submissions the argument became that the expectation that Bellpac would divest itself of an asset which would then vest in the relevant recipient was not a "dealing with Bellpac" (ts 74). It suffices to say that we do not accept this submission and that senior counsel for the liquidators did not seek to rely upon s 128(4) (ts 84). It was not argued, and we need not decide, whether there was no "dealing with the company" simply because each appellant's dealing with Mr Wong was a dealing with a person without actual or ostensible authority to negotiate for the disposal of company assets in exchange for relief from his personal debts. For instance, in Caratti v Mammoth Investments Pty Ltd [2016] WASCA 84 [592], Newnes and Murphy JJA, after a comprehensive discussion of the history of the indoor management rule, explained that whilst, as noted earlier, the word 'dealings' has been liberally construed, it has also been held that for there to be dealings by the outsider 'with a company' for the purposes of s 128(1), the person with whom the outsider has the dealings must be at least a person with the actual or ostensible authority of the company to undertake (relevantly for present purposes) some negotiation. However, that person is not, in addition, required to have actual or apparent authority to enter into the transaction the subject of the negotiation: Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd [2013] NSWCA 459; (2013) 282 FLR 351 [44]-[45], [50].

Did any appellant have a defence of bona fide purchase for value without notice? 103 As we have explained, the primary judge rejected the defence of bona fide purchase for two reasons. The purchase was not for "value". And it was not "without notice". With respect, each conclusion was correct.

Was the purchase for "value"? 104 The first basis upon which the primary judge held that the doctrine of bona fide purchase did not apply was because the appellants were not purchasers for "value". His Honour explained that this required Bellpac to receive a benefit from the transfer of the bonds. The focus in this case is upon the defence in equity, not the common law defence which applies in limited circumstances such as the passage of money into currency. It is unnecessary to consider whether the same reasoning applies to the common law defence of bona fide purchase: see Ilich v The Queen [1987] HCA 1; (1987) 162 CLR 110, 128-129 (Wilson and Dawson JJ), 143 (Deane J), cf 140-141 (Brennan J). 105 The concept of a "purchaser" in the doctrine of bona fide purchase is not used in its colloquial sense. The doctrine originated in land law. There, a "purchaser" was a person who acquired an estate otherwise than by descent or escheat: see, for instance, Commissioners of Inland Revenue v Gribble [1913] 3 KB 212, 218-219 (Buckley LJ); H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159, 170 (Denning LJ). The transaction in this case involved a purchase. However, the defence of bona fide purchase applies in equity in cases where the purchase is of an applicant's rights from a third party. The doctrine might be better described as "bona fide purchase from a third party for value without notice" because it "logically applies in those cases in which a defendant has received a benefit under a contract with a third party": see Barker K, "After Change of Position: Good Faith Exchange in the Modern Law of Restitution" in Birks P (ed), Laundering and Tracing (Clarendon Press, 1995) 191, 193. 106 No case of which we are aware has decided that the doctrine cannot be applied in equity where the purchase is of the applicant's rights from the applicant. However, the reasons for the existence of the defence support its availability being restricted to purchases from a third party. One reason for the defence has been said to be that the defence operates as an exception to the rule of nemo dat quod non habet. In other words, it has the effect of creating a good title where a defendant would not otherwise have received one for the purposes of transactional security. In cases where the applicant has good title to give there is no role for the exception: Swadling W "Restitution and Bona Fide Purchase" in Swadling W (ed), The Limits of Restitutionary Claims: A Comparative Analysis (UKNCCL, British Institute of International and Comparative Law, 1997) 79, 94. Another view was that the defence only operates in equity to show that the recipient has a right to retain the benefit. A defendant could not assert a right to retain a benefit based on the very transaction which requires the benefit to be given back: see Ames JB, "Purchase for value without notice" (1887) 1 Harv LR 1; Fox D, Property Rights in Money (Oxford University Press, 2008) 274 [8.21]. 107 In either case, the absence of the defence where only one transaction is in issue may be the reason why none of the judgments in the High Court of Australia in Tobin v Broadbent considered the possibility that bona fide purchase was a defence to the claim for delivery up of the share certificates or the claim for money had and received. Nor was this defence contemplated by the House of Lords in Guinness plc v Saunders [1990] 2 AC 663 when restitution was ordered of £5.2 million paid to the defendant for services performed under a void contract. 108 The defence of bona fide purchase could have been rejected in this case on the simple basis that the transaction was not with a third party. However, even if it could be applied to a two party transaction there would, at least, need to be evidence that value has passed to the transferor, or has passed to another at the transferor's request. As the primary judge observed (at [280]), that did not occur in this case. 109 The liquidators also submitted that the appellants were not bona fide purchasers for value because, apart from Mr Xu (whose evidence was that he accepted the bonds in part payment of the debt owed to him), the evidence of Dr Kwok and Mr Hong (for Great Investments) was that the receipt of the bonds would only discharge the debt to the extent that money was realised from the bonds or to the extent to which they retained their value. In relation to at least Dr Kwok and Mr Hong, the defence of bona fide purchase would fail for this reason also. There is considerable older precedent which establishes that "value" is not provided for the purposes of the doctrine where a promise is executory, not executed: Tourville v Naish (1734) 3 P Wms 307; (1734) 24 ER 1077; Story v Lord Windsor (1743) 2 Atk 630; (1743) 26 ER 776. There may be doubt about the extent of this exclusion: see Farah Constructions v Say-Dee at 166-167 [188] (the Court). However, any doubts have not been extended to suggesting that an unfulfilled, conditional forgiveness of debt could be sufficient value.

Did the appellants have notice? 110 The second reason why the appellants failed to establish that they were bona fide purchasers is because they were not "without notice". In Papadimitriou v Crédit Agricole Corpn and Investment Bank [2015] UKPC 13; [2015] 1 WLR 4265, 4281-4282 [33], Lord Sumption observed that judges had been vexed for many years with the question of the appropriate degree of notice that a bona fide purchaser for value without notice must negate. 111 In Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1992] 4 All ER 161, 235, 242-243, Peter Gibson J differentiated five different categories of knowledge. Those five categories of knowledge provide a helpful form of analysis of the notice that might be required. In Australia, as the High Court of Australia observed in Farah Constructions v Say-Dee at 163 [174], it has been customary to refer to those different degrees of knowledge which are: (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry. 112 The authorities are not wholly uniform in relation to the degree of knowledge sufficient to constitute notice for the purpose of the doctrine of bona fide purchase. The dominant position appears to be that any of the five degrees of knowledge negates the requirement of "without notice". After surveying all of the older cases, the editor of Ashburner's Principles of Equity wrote in 1933 that the "true classification" was (Browne D (ed), Ashburner's Principles of Equity (2nd ed, Butterworth & Co, 1933)) 63: A purchaser who either personally or by his agent has notice of circumstances which in fact affect the property the subject-matter of his purchase and which may be explained on several legal hypotheses takes the risk, if he makes no further inquiry, of that hypothesis being true which is most contrary to his interest. 113 The same position is effectively supported by the American Law Institute in the Restatement of the Law Third: Restitution and Unjust Enrichment (2011). Bona fide purchase is dealt with in s66 which borrows from the same definition of notice in s69 as for all restitutionary claims. A person has notice of a fact if the person either knows the fact or has reason to know it. And, other than cases of imputed notice by law, a person has reason to know the fact if the person has been notified of it or "other facts known to the person would make it reasonable to infer the existence of the fact, or prudent to conduct further inquiry that would reveal it". 114 The appellants pointed to two matters which might, at first blush, create difficulties for the adoption of an approach to bona fide purchase which treated as disqualifying notice any of the five degrees of knowledge. One difficulty is that in other areas, notably in relation to proof of notice in Barnes v Addy, only the first four degrees of notice are sufficient: Farah Constructions v Say-Dee at 163-164 [177]; Grimaldi v Chameleon Mining at 362 [262]. A second difficulty is the potentially stifling effect that a doctrine of constructive notice has been said to have. More than a century ago, Lindley LJ said that "in commercial transactions possession is everything, and there is no time to investigate title; and if we were to extend the doctrine of constructive notice to commercial transactions we should be doing infinite mischief and paralyzing the trade of the country": Manchester Trust v Furness, Withy & Co [1895] 2 QB 539, 545. 115 These concerns were confronted in Papadimitriou v Crédit Agricole. In that case, a customer of the respondent bank called Symes misappropriated art deco furniture belonging to the Papadimitriou family and sold it for US $15 million. Mr Symes devised a fraudulent scheme to launder the money. It was paid to two Panamanian companies, then $10.3 million of the funds from one of those companies were paid on to an account at the respondent bank through a Liechstenstein foundation and then deposited at the Gibraltar branch of the bank and credited to the account of a British Virgin Islands company incorporated at the request of Mr Symes. Symes then borrowed US $10.3 million from the London branch of the bank, and repaid it from the Gibraltar balance. 116 Delivering the advice of the Privy Council, Lord Clarke said, at 4277 [20], that the family was entitled to trace the proceeds of sale into the hands of the bank unless the bank established that it was a bona fide purchaser for value without notice. The bank could not establish that it was a bona fide purchaser because it should have inquired as to the commercial purpose of the arrangement. If it had done so, it would have realised that such arrangement was improper. At 4277 [20], Lord Clarke said that the "bank must make inquiries if there is a serious possibility of a third party having such a right or, put in another way, if the facts known to the bank would give a reasonable banker in the position of the particular banker serious cause to question the propriety of the transaction". 117 A separate concurring judgment was delivered by Lord Sumption. In a passage which senior counsel for the appellants in this case accepted in oral argument, Lord Sumption made the five degrees of knowledge even more explicit at 4281-4282 [33]: If even without inquiry or explanation the transaction appears to be a proper one, then there is no justification for requiring the defendant to make inquiries. He is without notice. But if there are features of the transaction such that if left unexplained they are indicative of wrongdoing, then an explanation must be sought before it can be assumed that there is none. 118 Although the Privy Council had earlier suggested that an approach based on degrees of knowledge is "best forgotten" (see Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, 392), as Professor Watts has observed, the approach in Papadimitriou v Crédit Agricole corresponds to an acceptance of both the fourth and fifth types of knowledge described in Baden: Watts P, "Tests of Knowledge in the Receipt of Misapplied Funds" (2015) 131 LQR 511, 514. 119 Senior counsel for the appellants was correct to concede that this approach should apply to the question of "notice" for the purpose of the bona fide purchase defence. The defence is based upon a different rationale from that for which notice is required for the purposes of establishing liability for knowing receipt. The authorities on the degree of knowledge for the purposes of ensuring security of third party transactions should not be adjusted to make them consistent with the doctrine of knowing receipt which establishes equitable liability to compensate, make restitution, or disgorge profits. 120 Nor is it an objection to the five degrees of knowledge that a "commercial" transaction is involved. The suggestion of a separate rule for "commercial transactions" may have originated from a conflation of the different principles (now in statutory form) concerning negotiable instruments. For instance, the section in Ashburner's Principles of Equity concerned with the purchaser in good faith for value of a negotiable instrument is entitled "Doctrine of constructive notice does not apply to commercial transactions": Browne D (ed), Ashburner's Principles of Equity (2nd ed, Butterworth & Co, 1933) 69. As Sir Peter Millett explained, although Lindley LJ's comments about "commercial transactions" are often repeated like a mantra and considered as high authority: …it is inaccurate and its influence has been harmful. The purchase of land and the giving of a bank guarantee are both commercial transactions; yet the doctrine of constructive notice applies to both. In fact Lindley L.J. was speaking of the doctrine of constructive notice as it was developed by the Court of Chancery in relation to land, with its many refinements and its insistence on a proper investigation of title in every case. This cannot be applied without modification to transactions where there is no recognised procedure for investigating title. The principal modification is to insist on the need to show that the circumstances were such as to put the transferee on inquiry; and in an ordinary commercial context this is very difficult to establish. See Millett P, "Equity's Place in the Law of Commerce" (1998) 114 LQR 214, 214. 121 Each of Good Team Investments, Great Investments (by Mr Hong) and Mr Xu had knowledge of circumstances which would put an honest and reasonable person on inquiry. Crucially, those circumstances were that a transfer was being made by Bellpac to them of bonds to discharge personal debts owed to them by Mr Wong (or possibly making a gift in the case of Good Team Investments). 122 As for Dr Kwok, although he did not see the transfer form, the primary judge properly found that he had imputed notice through his attorney, Ivan, because his attorney had seen the transfer form containing Bellpac's name as transferor. The knowledge of Dr Kwok's attorney of this material matter in the course of the usual aspects of the transaction authorised by Dr Kwok, is imputed to Dr Kwok: Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 649 (Stephen J; McTiernan ACJ agreeing).

The notice of contention: "uncommercial transactions" 123 In light of our conclusions above, it is unnecessary to deal with grounds 10 and 11 of the notice of appeal (set out in paragraph 77 above), which relate to findings which the primary judge would have made, if necessary to do so. Nor is it necessary to deal with the notice of contention, by which the respondents seek to rely on those findings. However, as those grounds of appeal and the notice of contention were the subject of full argument, it is appropriate that we deal with them. 124 At trial, the liquidators advanced an alternative case relying on the provisions of Pt 5.7B of the Corporations Act. This alternative case was predicated on the Court not accepting the liquidators' primary case and instead finding that the power of attorney gave Mr Wong the power to transfer Bellpac's assets for his own personal benefit and to the detriment of Bellpac. In this alternative case, the liquidators contended that an order should be made under s 588FF(1)(b) of the Corporations Act directing the relevant appellants to transfer the convertible bonds to Bellpac because the transactions involving the transfer of Bellpac's bonds to the relevant appellants were either or both: (a) uncommercial transactions within the meaning of s 588FB and insolvent transactions within the meaning of s 588FC; (b) unreasonable director-related transactions within the meaning of s 588FDA, and therefore voidable pursuant to s 588FE of the Corporations Act. 125 In view of his acceptance of the liquidators' primary case, the primary judge held that it was strictly unnecessary to make findings in respect of their alternative case based on Pt 5.7B. Nevertheless, the primary judge considered whether the transactions were uncommercial transactions and insolvent transactions, concluding that they were. In view of this conclusion, the primary judge said it was unnecessary to consider whether the transactions constituted unreasonable director-related transactions. The primary judge then considered whether relief should be granted under s 588FF, which turned on whether the appellants could rely on s 588FG. He concluded that the requirements of s 588FG were not satisfied. The primary judge said that, accordingly, if it were necessary to do so, he would have found that the liquidators were entitled to appropriate relief under s 588FF. 126 As noted above, the appellants included two grounds of appeal - grounds 10 and 11 - relating to the primary judge's findings in relation to Pt 5.7B, and the respondents filed a notice of contention seeking to support the decision of the primary judge on the additional basis of those findings. The notice of contention set out the following grounds: 1. [The primary judge], in paragraphs [295]-[299] of the said Judgment, held that the purported transfers of the bonds to the defendants/appellants were insolvent and uncommercial transactions with[in] the meaning of ss.588FB and 588FC of the Corporations Act 2001 (Cth); 2. [The primary judge], in paragraph [303] of the said Judgment, held that the Respondents were entitled to appropriate relief under s.588FF of the Corporations Act 2001 (Cth); 3. By reason of the [foregoing], His Honour could have made the same orders under s.588FF(1)(b) of the Corporations Act 2001 (Cth) and under s 21, Federal Court of Australia Act 1976 (Cth), as the Orders made on 3 November 2015. 127 As grounds 10 and 11 of the notice of appeal and the grounds set out in the notice of contention cover the same territory, it is unnecessary to determine whether the issues they raise are to be dealt with under the notice of appeal or the notice of contention. We note that the notice of contention does not contend that the transactions were unreasonable director-related transactions; it is therefore not necessary to deal with this matter. 128 Part 5.7B of the Corporations Act deals with recovering property or compensation for the benefit of creditors of an insolvent company. Division 2 in that Part is headed "Voidable transactions". The key provisions for present purposes are ss 588FB, 588FC, 588FE, 588FF and 588FG, which relevantly provided: 588FB Uncommercial transactions (1) A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (a) the benefits (if any) to the company of entering into the transaction; and (b) the detriment to the company of entering into the transaction; and (c) the respective benefits to other parties to the transaction of entering into it; and (d) any other relevant matter. (2) A transaction may be an uncommercial transaction of a company because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. 588FC Insolvent transactions A transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and: (a) any of the following happens at a time when the company is insolvent: (i) the transaction is entered into; or (ii) an act is done, or an omission is made, for the purpose of giving effect to the transaction; or (b) the company becomes insolvent because of, or because of matters including: (i) entering into the transaction; or (ii) a person doing an act, or making an omission, for the purpose of giving effect to the transaction. 588FE Voidable transactions … (2) The transaction is voidable if: (a) it is an insolvent transaction of the company; and (b) it was entered into, or an act was done for the purpose of giving effect to it: (i) during the 6 months ending on the relation back day; or (ii) after that day but on or before the day when the winding up began. … (3) The transaction is voidable if: (a) it is an insolvent transaction, and also an uncommercial transaction, of the company; and (b) it was entered into, or an act was done for the purpose of giving effect to it, during the 2 years ending on the relation back day. … 588FF Courts may make orders about voidable transactions (1) Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders: (a) an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction; (b) an order directing a person to transfer to the company property that the company has transferred under the transaction; (c) an order requiring a person to pay to the company an amount that, in the court's opinion, fairly represents some or all of the benefits that the person has received because of the transaction; (d) an order requiring a person to transfer to the company property that, in the court's opinion, fairly represents the application of either or both of the following: (i) money that the company has paid under the transaction; (ii) proceeds of property that the company has transferred under the transaction; (e) an order releasing or discharging, wholly or partly, a debt incurred, or a security or guarantee given, by the company under or in connection with the transaction; (f) if the transaction is an unfair loan and such a debt, security or guarantee has been assigned - an order directing a person to indemnify the company in respect of some or all of its liability to the assignee; (g) an order providing for the extent to which, and the terms on which, a debt that arose under, or was released or discharged to any extent by or under, the transaction may be proved in a winding up of the company; (h) an order declaring an agreement constituting, forming part of, or relating to, the transaction, or specified provisions of such an agreement, to have been void at and after the time when the agreement was made, or at and after a specified later time; (i) an order varying such an agreement as specified in the order and, if the Court thinks fit, declaring the agreement to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time; (j) an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable. (2) Nothing in subsection (1) limits the generality of anything else in it. (3) An application under subsection (1) may only be made: (a) during the period beginning on the relation back day and ending: (i) 3 years after the relation back day; or (ii) 12 months after the first appointment of a liquidator in relation to the winding up of the company; whichever is the later; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period. (4) If the transaction is a voidable transaction solely because it is an unreasonable director related transaction, the court may make orders under subsection (1) only for the purpose of recovering for the benefit of the creditors of the company the difference between: (a) the total value of the benefits provided by the company under the transaction; and (b) the value (if any) that it may be expected that a reasonable person in the company's circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c). 588FG Transaction not voidable as against certain persons (1) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person other than a party to the transaction if it is proved that: (a) the person received no benefit because of the transaction; or (b) in relation to each benefit that the person received because of the transaction: (i) the person received the benefit in good faith; and (ii) at the time when the person received the benefit: (A) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (B) a reasonable person in the person's circumstances would have had no such grounds for so suspecting. (2) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director related transaction of the company, and it is proved that: (a) the person became a party to the transaction in good faith; and (b) at the time when the person became such a party: (i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and (c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction. (3) For the purposes of paragraph (2)(c), if an amount has been paid or applied towards discharging to a particular extent a liability to pay tax, the discharge is valuable consideration provided: (a) by the person to whom the tax is payable; and (b) under any transaction that consists of, or involves, the payment or application. (4) In subsection (3): tax means tax (however described) payable under a law of the Commonwealth or of a State or Territory, and includes, for example, a levy, a charge, and municipal or other rates. (5) For the purposes of paragraph (2)(c), if an amount has been paid or applied towards discharging to a particular extent a liability to the Commonwealth, or to the Commissioner of Taxation, that arose under or because of an Act of which the Commissioner has the general administration, the discharge is valuable consideration provided by the Commonwealth, or by the Commissioner, as the case requires, under any transaction that consists of, or involves, the payment or application. (6) Subsections (3) and (5): (a) are to avoid doubt and are not intended to limit the cases where a person may be taken to have provided valuable consideration under a transaction; and (b) apply to an amount even if it was paid or applied before the commencement of this Act. 129 Also relevant are the definitions of "party" and "transaction" in s 9 of the Corporations Act, which were in the following terms: party, in relation to a transaction that has been completed, given effect to, or terminated, includes a person who was a party to the transaction. transaction, in Part 5.7B, in relation to a body corporate or Part 5.7 body, means a transaction to which the body is a party, for example (but without limitation): (a) a conveyance, transfer or other disposition by the body of property of the body; and (b) a security interest granted by the body in its property (including a security interest in the body's PPSA retention of title property); and (c) a guarantee given by the body; and (d) a payment made by the body; and (e) an obligation incurred by the body; and (f) a release or waiver by the body; and (g) a loan to the body; and includes such a transaction that has been completed or given effect to, or that has terminated. 130 In Demondrille Nominees Pty Ltd v Shirlaw [1997] FCA 1220; (1997) 25 ACSR 535, Foster, Lindgren and Madgwick JJ said (at 547-548) that ss 588FB, 588FC and 588FE attempt to balance the interests of unsecured creditors of a company being wound up and those who would otherwise be the beneficiaries of pre-winding up transactions entered into by the company, referring to paragraph 1034 of the explanatory memorandum which accompanied the Corporate Law Reform Bill 1992 (Cth). Their Honours also noted (at 548) that "a bargain of such magnitude that it could not be explained by normal commercial practice" is the kind of transaction at which s 588FB is aimed, referring to paragraph 1044 of the explanatory memorandum. See also Skouloudis Group Pty Ltd (in liq) v Planet Enterprizes Pty Ltd [2002] NSWSC 239; (2002) 41 ACSR 369, 374 [13]-[15] (Windeyer J); Kazar (in his capacity as the liquidator of Frontier Architects Pty Ltd (in liq)) v Kargarian [2010] FCA 1381; (2010) 81 ACSR 158, 165-166 [19] (Flick J); Assaf F, Shields B and Kincaid H, Voidable Transactions in Company Insolvency (LexisNexis Butterworths, 2015), [5.10]. 131 In Tosich Construction Pty Ltd (In Liq) v Tosich (1997) 78 FCR 363, Burchett, Foster and North JJ said (at 367), in relation to s 588FB(1): What the Court must do is consider each of the matters to which reference is made in s 588FB(1) and, having regard to them, reach a conclusion as to whether a reasonable person in the company's circumstances would not have entered into the transaction. The company's circumstances must include the state of its knowledge, that is, of the knowledge of those who were relevantly its directing mind. Only if the Court can conclude that a reasonable person in the company's circumstances would not have entered into the transaction does the section make that transaction uncommercial. 132 On the predicate that the power of attorney gave Mr Wong the power to transfer Bellpac assets for his own benefit and to the detriment of Bellpac, the liquidators contended at trial and on appeal that the transfers of the convertible bonds to the relevant appellants were "uncommercial transactions" within the meaning of s 588FB(1) and "insolvent transactions" within the meaning of s 588FC. The respondents relied on the primary judge's findings that: (a) Bellpac was insolvent from at least December 2007 onwards, including at the times the relevant transactions occurred ([291]-[295]); (b) the transfers of the bonds to the relevant appellants were uncommercial transactions within the meaning of s 588FB(1) because a reasonable person in Bellpac's circumstances would not have entered into a transaction by which the company's convertible bonds were assigned to the relevant appellants, in circumstances where: (i) Bellpac received no benefits from the transactions; (ii) the company was divested of bonds with a face value of $6 million and plainly suffered detriment from the transactions; and (iii) other parties, namely Mr Wong and the relevant appellants, derived some benefit from the transactions ([297]-[298]); (c) the transactions were therefore voidable under s 588FE(3), there being no issue that the transactions were entered into during the two years ending on the "relation-back day" ([282]); (d) the relevant appellants could not bring themselves within s 588FG(1) because they were parties to the transactions, and in any event the other relevant requirements of that provision were not satisfied ([301]-[302]). 133 The appellants did not challenge the primary judge's finding that Bellpac was insolvent from at least December 2007 onwards, including at the times of the relevant transactions. This issue can therefore be put to one side. 134 The appellant's main contention, which was not put below, was that Bellpac's circumstances included the fact that it had given the power of attorney to Mr Wong (which, it is to be assumed for present purposes, authorised him to cause the company to be a party to the transfers). In these circumstances, the appellants contended, Bellpac had no choice about entering into the transfers and thus the test in s 588FB(1) (namely, that it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to the matters set out in paragraphs (a)-(d) of the subsection) is not satisfied. The appellants noted that paragraph (d) of s 588FB(1) refers to "any other relevant matter" and submitted that the power of attorney is a relevant matter and thus to be taken into account. The respondents did not take issue with the appellants raising the above contention for the first time on appeal. 135 We do not accept the appellant's contention for the following reasons. 136 The relevant transactions for the purposes of applying s 588FB(1) were the transfers of the convertible bonds from Bellpac to the relevant appellants. Each transfer constituted a transaction "of" the relevant company (Bellpac) as referred to in s 588FB(1). (In the present case, no issue arises as to whether the transaction was "of" the company, as discussed in Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; (2007) 63 ACSR 557, 597 [212] (Ipp JA); 600 [236], 601 [239]-[240] (Basten JA, Ipp JA agreeing).) The word, "transaction", in relation to a body corporate, is defined in s 9 as meaning "a transaction to which the body is a party". The examples listed in the definition include (without limitation) "a conveyance, transfer or other disposition by the body of property of the body". In the present case, Bellpac was a party to the transfers as the transferor. The fact that they were executed by Mr Wong pursuant to the power of attorney does not detract from that proposition. So much was accepted by senior counsel for the appellants during oral argument on the appeal (ts 38). 137 It follows that the transactions to be considered, in determining whether (for the purposes of s 588FB(1)) it may be expected that a reasonable person would not have entered into the transactions, are the transfers of the convertible bonds from Bellpac to the relevant appellants. It is beside the point that the particular way the transactions were entered into was by Mr Wong executing the transfers as attorney for the company. 138 The difficulty with the appellants' contention is that it focuses on the dealings between the attorney, Mr Wong, and the relevant appellants (which gave rise to the relevant transactions), rather than the relevant transactions themselves (which are with the company, Bellpac). 139 Further, the appellants' contention, if correct, would undermine the purpose or object which, it has been held, underlies the provisions. As noted above, a bargain of such magnitude that it could not be explained by normal commercial practice is the kind of transaction at which s 588FB is aimed. In the present case, Bellpac received no benefits from the transactions. It would be a very odd result if such transactions were outside the purview of the provisions because the company had granted a power of attorney in unfettered terms and thus had 'no choice' in the transactions. 140 The appellants advanced a second contention in relation to Pt 5.7B. They contended that the Court has a discretion whether or not to order relief under s 588FF(1) and that, in this case, it was inappropriate to order the relevant appellants to transfer the bonds to Bellpac as they did not know that Bellpac was insolvent, they assumed Bellpac was one of Mr Wong's companies, and they gave value for the bonds. The appellants submitted they were innocent parties to the transactions. 141 Different views have been expressed as to whether s 588F(1) confers a discretion or, rather, a jurisdiction. The latter view was taken by Einstein J in Cashflow Finance Pty Limited (in liq) v Westpac Banking Corporation [1999] NSWSC 671, [569] and Nicholas J in Cussen v Sultan [2009] NSWSC 1114; (2009) 74 ACSR 496, 503-505 [24]-[30]. However, the view that s 588FF(1) confers a discretion was assumed or held in BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322, 352 [157], 354 [171] (Spigelman CJ, Mason P and Handley JA agreeing); Ansell Ltd v Davies [2008] SASC 203; (2008) 67 ACSR 356, 364-365 [52] (Doyle CJ, Anderson and David JJ agreeing); and New Cap Reinsurance Corp Ltd v AE Grant [2009] NSWSC 662; (2009) 72 ACSR 638, 649 [59] (Barrett J). See also Buzzle Operations Pty ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWSC 109; (2011) 81 NSWLR 47, 78 [244], 79 [258]-[261] (Young JA); Assaf F, Shields B and Kincaid H, Voidable Transactions in Company Insolvency (LexisNexis Butterworths, 2015), [8.43]. It is unnecessary to decide this issue because (for the reasons set out below) assuming a discretion exists, no grounds are shown not to make an order as contemplated by s 588FF(1). We will proceed on the assumption that the provision confers a discretion. 142 The appellants accepted that they could not rely on s 588FG(1), as this only applies if the person is not a party to the relevant transaction; in the present case, the relevant appellants were parties to the relevant transactions. The appellants did not seek to rely on s 588FG(2). In any event, the findings of the primary judge (albeit in the context of s 588FG(1)), would, unless disturbed on appeal, preclude reliance on s 588FG(2). In paragraph [302] of the primary judge's reasons, his Honour found that each of the transfer transactions did not involve the transferee receiving a benefit in good faith because it was clear on the face of the transfer forms and bond certificates that Mr Wong was not the transferor and that he was using his power of attorney to have Bellpac's property. For these reasons, the primary judge found that the requirement in sub-paragraph (i) of s 588FG(1)(b) was not satisfied, and hence s 588FG(1) was inapplicable. This finding was not challenged on appeal. This finding would apply also to paragraph (a) of s 588FG(2), had s 588FG(2) been relied on by the appellants. 143 The legislature has made express provision, in s 588FG, for circumstances in which a Court is not to make an order materially prejudicing a right or interest of a person. It is difficult to see why the Court would, in the exercise of a discretion, not make orders as contemplated by s 588FF where the relevant party relies on matters of the kind referred to in s 588FG, but is unable to rely on that provision. In any event, in the present case, the appellants have not demonstrated why an order under s 588FF(1) should not be made. The primary judge's finding that each of the transfer transactions did not involve the transferee receiving a benefit in good faith cuts across the appellants' contention that the relevant appellants were innocent parties to the transactions. In the circumstances, no discretionary reason is shown not to make an order pursuant to s 588FF(1)(b) directing the relevant appellants to transfer the bonds to Bellpac. 144 We note for completeness that the appellants, in their written reply submissions, submitted that Good Team Investments had no notice of the "uncommercial transactions" claim, in circumstances where the statement of claim did not make this claim, and Good Team Investments did not participate in the trial. While it is true that the claim was not included in the statement of claim, it was nevertheless included in the originating process, which constituted sufficient notice of the claim. 145 For these reasons, we would dismiss grounds 10 and 11 of the notice of appeal. We would also uphold the decision of the primary judge on the grounds set out in the notice of contention (which reflect findings which the primary judge would have made, if it had been necessary to do so).

Conclusion 146 It follows that the appeal should be dismissed. There is no apparent reason why costs should not follow the event, therefore there will also be an order that the appellants pay the costs of the respondents. I certify that the preceding one hundred and forty-six (146) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jagot, Edelman and Moshinsky.

SCHEDULE OF PARTIES NSD 1488 of 2015 Appellants Fourth Appellant OSMOND TZE LEUNG KWOK Fifth Appellant GOOD TEAM INVESTMENTS LTD