Lin v Chu [2025] FCAFC 130

If the primary judge was in error by finding at J[211] that a director of a trustee company acting as such can be liable for knowingly procuring or inducing the company's breach of trust, or for being knowingly concerned in a breach of trust by the company, then the plaintiffs' claims should nevertheless have succeeded because:

(a) to the extent that a director acting as such cannot be liable as an accessory to a breach of trust by the company, that exception only applies where the director is acting bona fide, within the scope of the director's authority, and in accordance with the director's duties to the company;

(b) the conduct for which Lin [and Cai were] found to have been liable was not bona fide, was not within the scope of [their] authority as [directors] of Gold Stone, and was in breach of [their] duties as [directors], for the reasons the plaintiffs had alleged; and

(c) accordingly, if there is an exception to accessorial liability for a director acting as such, the exception does not apply in this case.

1. Counsel for Ms Lin and Mr Cai objected to the notice of contention. They submitted that it raised a new argument, not made below, that there is an exception to the rule in Said v Butt and the exception is engaged because Ms Lin and Mr Cai were not acting bona fide within the scope of their authority.
2. They submitted that the "new case" should be rejected for that reason, and because it was said to be inconsistent with the case pleaded by Ms Chu and Mr Xu below "(which relevantly included an allegation that Ms Lin's authority extended to 'identifying and negotiating investments into which Gold Stone would invest the Fund's money': 3FASOC (c)(iii) and (d)(i)(C)) being the precise conduct relied on as the act of procurement in 3FASOC [158]".
3. It was also submitted that it could not be said that Ms Lin acted other than bona fide because her purpose was the purpose of Gold Stone (which Ms Chu and Mr Xu alleged was to further the relationship between GDI and Mr Fong: see 3FASOC [153(a)]).
4. In the alternative, it was submitted that if the argument were allowed to be run, "then the short point is that the [Said v Butt] 'exception' does not form part of the law of Australia and is irrelevant on the case as run below".
5. I do not accept those submissions.
6. First, the matters raised by the notice of contention are consistent with the pleaded case and the case run at trial. As I explain below at paragraph 230 and following, the pleading made sufficiently clear that the case alleged was that Ms Lin and Mr Cai caused Gold Stone to enter into each of the three loans, and that they knowingly assisted in the company's dishonest and fraudulent design. (As I have noted above, no pleading complaint was pressed about the knowing procurement pleas.)
7. Secondly, the submissions filed and made on behalf of Ms Chu and Mr Xu below made it quite clear how the case was put. The submissions below also made it clear that counsel for Ms Lin and Mr Cai understood that the plea of knowingly procuring a breach of trust included the making of three loans to further the proposed relationship between GDI and Mr Fong, and to facilitate the commercial interests of GDI and their own personal interests.
8. Thirdly, the notice of contention does not raise a "new case" because counsel for Ms Lin and Mr Cai below well understood that the principle in Said v Butt, and whether it applies in the context of directors of a trustee company, was in play. In that regard, I refer, without repeating at any length, and by way of example, to:

(a) Ms Lin's written closing submissions below at [4] ("The rule in Said v Butt remains good law in both Australia and in the United Kingdom and cannot be described as 'weak as a matter of authority'. Nor is the rule anomalous. Rather, it is consistent with the wealth of authority that directors are not liable as accessories to a tortious claim unless they are found to personally owe and breach a direct duty of care ..."); and

(b) Mr Bagley's closing oral submissions at transcript pages 739 and following (see Appeal Book Part C at page 1038), citing Said v Butt, O'Brien v Dawson and Leeming JA in Pittmore v Chan, and at transcript pages 966 and following (see Appeal Book Part C at page 1265). Counsel for Mr Cai adopted those submissions at transcript page 1013 (see Appeal Book Part C at page 1312).

1. Fourthly, as Mr Thomas said in the course of his oral address, and I agree, "it is inherent in the [cause of] action and therefore inherent in the rule in Said v Butt that it only offers protection to a director, officer or agent of a company if they can bring themselves within it; that is if it was a bona fide exercise of the power of the company in the ordinary course and without knowledge of the facts that would elicit or identify the wrong. And that is not this case".
2. Fifthly, as Mr Thomas also said, the findings of fact set out at paragraphs 187 and 188 above - in particular, that (i) Ms Lin and Mr Cai knew that the investments were hazardous and that there was no proper security for the trust money loaned; and (ii) they used trust money for the purpose of advancing their own commercial interests knowing that such use was detrimental to the interests of Ms Chu and Mr Xu - "stand in the way clearly of a finding that there was a bona fide reasonable exercise of power by a director without notice or knowledge of wrongdoing".
3. Counsel for Ms Lin and Mr Cai further submitted that to allow the notice of contention would cause them "prejudice" because, as Mr Hutley put it, "one has made decisions about how one runs a case, who one calls and when, on the basis of a case as run" and because it "raises the whole question of what does 'bona fide' mean in that context".
4. I do not accept those submissions either, in particular because it was not explained quite what different case counsel for Ms Lin and Mr Cai might have run.
5. If a plaintiff proves that directors breached their duties to the company, the directors will not be afforded the immunity contemplated by the principle in Said v Butt. That is what is meant by the words of limitation used by McCardie J in that case (at 506): "if a servant acting bona fide within the scope of his authority procures or causes the breach of a contract ... he does not thereby become liable ..." (emphasis added). And the words of limitation were important in the context, and were a product, of the facts of that case because, as McCardie J was careful to explain (at 504), "[i]t is well to point out that Sir Alfred Butt ... clearly acted within [his] powers [as chairman and managing director] when he directed that [Mr Said] should be refused admission [and] ... that [Sir Alfred Butt] meant to act and did act bona fide for the protection of the interests of his company".
6. Absent such a limitation, a boardroom would be permitted by operation of the immunity to do exactly that which Sir Frederick Jordan in the NSW Full Court said the principle would not allow - namely, to "constitute[] an Alsatia in which persons may conspire to their heart's content and with complete impunity so long as they do so in the character of directors of a company and employ the machinery of their company for carrying their conspiracy into effect": O'Brien v Dawson [1941] NSWStRp 39; (1941) 41 SR (NSW) 295 at 308. (Alsatia was in the Whitefriars district of London. Until 1697, it was a haven for debtors and criminals, where law did not run. See Woods v Multi-Sport Holdings Pty Ltd (2002) 208 CLR 460 at 483 [79] and footnote 58 (McHugh J). See also Lord Hoffmann in Standard Chartered Bank v Pakistan National Shipping Corporation (No 4) [2002] UKHL 43; [2003] 1 AC 959 at 968 [22] (Lords Mustill, Slynn and Hobhouse agreeing) ("[n]o one can escape liability for his fraud by saying: 'I wish to make it clear that I am committing this fraud on behalf of someone else and I am not to be personally liable'").)
7. The so-called principle in Said v Butt only operates to confer immunity on a director for inducing a breach of contract in circumstances where the director acting qua director acted bona fide and within the scope of his or her authority. And nothing that McCardie J said in his reasons, or in what Starke and McTiernan JJ said in O'Brien v Dawson, has been read to suggest otherwise. See, by way of example only, Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88; (2023) 111 NSWLR 304 at 347 [293] (Ward P, Brereton JA and Griffiths AJA) ("In order to incur liability as a joint tortfeasor, the director must be so personally involved in directing or procuring the tort as to 'make it his or her own' above and beyond reasonably and in good faith directing the company's decision-making as a director"); ADGA Systems at [35] (Carthy JA) ("an officer is disentitled to the Said v Butt defence if he is not acting bona fide in the interests of the company"). As Steven Chong JA for the court said in PT Sandipala [2018] SGCA 17; [2018] 1 SLR 818 at 843 [65]-[66]:

[O]ur view is that the most appropriate elucidation of the Said v Butt principle is that a director would ordinarily be immune from tortious liability for authorising or procuring his company's breach of contract in his capacity as a director, unless his decision is made in breach of any of his personal legal duties to the company. ... Such breach may be a breach of a fiduciary duty to act in the best interests of the company, or it may be a breach of his contractual duty towards the company to act within the scope of his authority as granted by the company. ...

Importantly, the applicability of the principle focuses on the director's conduct and intention in relation to his duties towards his company, and not towards the third party. This was succinctly explained by Kan Ting Chiu J in his decision in Otech Pakistan Pvt Ltd v Clough Engineering Ltd [2005] SGHC 98 ("Otech") at [25], where he interpreted the requirement of bona fide in the Said v Butt principle to mean that the defendant was acting in good faith in the discharge of his office, and not that he was acting in good faith in the action complained of; a director may believe that it is for the good of the company to breach a contract intentionally.

(Emphasis in original.)

1. And there can be no doubt that whatever arguable ambiguity might exist in the expression "bona fides" in this context, the uncontested findings in relation to the conduct of Ms Lin and Mr Cai in their capacity as directors of Gold Stone, make irresistible the conclusion that their conduct was not bona fide within the scope of their authority, including because they acted in their own personal interest and in breach of their duties to Gold Stone under the Corporations Act and as fiduciaries. It seems to me trite to say that if a director knowingly procures or assists in a serious and dishonest breach of trust by a trustee company, he or she could not be said to be acting in its best interests. In any event, in light of his Honour's findings of fact, it is not open to Ms Lin or Mr Cai to contend - and they did not contend - that they acted reasonably and in good faith with respect to any of their impugned conduct.
2. As the primary judge said in the context of the claims pleaded by Ms Chu and Mr Xu, as unitholders and beneficiaries of the Fund, seeking to bring claims against Ms Lin and Mr Cai, among others, for breach of the equitable and statutory duties they owed to Gold Stone in its capacity as trustee (J [296]):

Ms Lin and Mr Cai owed duties to Gold Stone as directors of the company, both under the Act and as fiduciaries ... For the reasons given above in relation to the liability of those ... defendants for the breaches of trust committed by Gold Stone, there is a compelling case that [they] breached those statutory and equitable duties, thereby causing loss to Gold Stone, which had an obligation to restore the Fund to the position it would have been in if Gold Stone's breaches of trust (procured by them) had not been committed.

1. As the primary judge also said (J [295]), it is well-established that a beneficiary who can establish "special circumstances" may sue in his or her own name on a cause of action against a third party which belongs to a trustee, if the trustee fails to bring a proper claim to protect the trust property. His Honour said (J [297]) that because he had held that Ms Chu and Mr Xu (as beneficiaries of the Fund) had a direct cause of action against Ms Lin and Mr Cai (as parties who knowingly procured or induced the breaches of trust by Gold Stone and who knowingly assisted in Gold Stone's dishonest and fraudulent design) which yielded substantially the same remedial outcome as the proposed derivative suit on their part to sue in Gold Stone's name as trustee, the requirement of special circumstances was not satisfied. It was for that reason only that it was not part of the ratio of his Honour's reasons that Ms Lin and Mr Cai breached their statutory and equitable duties to Gold Stone. In any event, the conclusion that they did is ineluctable.
2. Ms Lin and Mr Cai were obliged to "act in good faith to ensure that the company administer[ed] the trust in accordance with the trust deed having regard to the rights and interests of the beneficiaries". See Australasian Annuities Pty Ltd (in liq) (receivers and managers appointed) v Rowley Super Fund Pty Ltd [2015] VSCA 9; (2015) 318 ALR 302 at 350 [228] (Garde AJA, with whom Neave JA agreed). That they self-evidently did not do. On the contrary, they acted in their own commercial interests and in breach of their duties to Gold Stone (to the detriment of the rights and interests of the beneficiaries).
3. Much was said in the course of submissions about the maxim "equity follows the law". In a case such as this, involving breaches of trust which were serious and dishonest, and where the investments were "of such a kind that [they] ought never to have been made at all for any amount large or small" (see Fouche at 637), equity would not "follow" any law that would fix the directors with immunity. On the contrary, it would "do everything necessary both to prevent the breach of trust from being carried out or further carried out, and to redress the position and restore the trust fund" (see Fouche at 637).
4. For those reasons, I reject the submission by Ms Lin and Mr Cai that they "cannot" be liable - either for knowingly inducing a breach of trust or under the second limb of Barnes v Addy - because the primary judge found that their conduct was the conduct of Gold Stone. In my view, they are liable, for the reasons set out above.
5. Accordingly, I would allow the notice of contention.
6. For those reasons, ground 4 in both Ms Lin's and Mr Cai's appeals should fail.

Both appeals - Ground 2 (alleged failure to plead or prove that the making of the second MVDA loan was for the improper purpose of procuring Mr Fong's assistance with the Turramurra project)

1. Ground 2 in both appeals alleged that the primary judge erred in finding (at J [207]) that the second MVDA loan was made for the improper purpose of procuring Mr Fong's assistance with the Turramurra development, and ought to have found that that claim for breach of trust was not made out.
2. The primary judge's conclusion was based on several unchallenged factual findings. First, his Honour found that Ms Lin was determined to extricate herself from the Turramurra project by enticing Mr Fong to assume the burdens of developing that project, and that she expressly recognised the need to provide financial incentives to Mr Fong in doing so. Secondly, in relation to the second MVDA loan specifically, his Honour found that although that loan was made after the deed of novation had been entered into in July 2014, there was a commercial imperative to keep Mr Fong and his entities in funds in order to meet the payment obligations under that deed, and in any event the company receiving the novation, MVGD, was half-owned by each of GDI and Mr Fong.
3. Mr Hutley described ground 2 as a "pleading issue" in the course of his oral address (see transcript at page 43). But the ground of appeal was not confined to a pleading point (indeed, it made no mention of the pleading). And Mr Thomas argued the ground on the basis that it raised both a pleading point and an "evidence point" (see transcript at pages 178-179) - namely that, as Mr Hutley put it, "the objective factual material should have led the primary judge to reject the contention that [Gold Stone's] purpose was to secure [its] interest in the Turramurra development for the second [MVDA] loan".
4. To the extent that ground 2 sought to raise an evidence point, it must be rejected. Quite apart from anything else, in an affidavit dated 27 November 2015 (which the primary judge relevantly mentioned at J [101], [207] and [215]), Ms Lin positively asserted that Gold Stone agreed to make the MVLC loan, the first MVDA loan and the second MVDA loan "[i]n the interests of furthering the proposed relationship between GDI and Fong". That is more than enough "objective factual material" to found the primary judge's conclusion that Gold Stone's purpose in making the second MVDA loan was to secure its interest in the Turramurra development.
5. The relevant pleading for the purposes of ground 2 is contained in paragraph [147A] of the 3FASOC which is as follows:

Lin, Cai and Darmali caused Gold Stone to make each of the Loans for the purpose of furthering the proposed relationship between GDI and Fong in relation to the Turramurra development in which GDI held an interest, because Lin, Cai and Darmali were concerned that if Fong did not become involved in the Turramurra development then GDI might:

(a) lose the money it had contributed to the Turramurra development (including a deposit of about $1.5 million);

(b) lose any opportunity to profit from the Turramurra development; and

[(c)] become liable to the vendors of the Turramurra properties for damages for failure to complete the purchase contracts, which liability would be guaranteed by Cai and Xufeng Wu.

1. On its terms, the allegation in paragraph [147A] is directed to each of the loans, and therefore necessarily includes the second MVDA loan. However, Ms Lin and Mr Cai focused on the second half of the paragraph which refers to Mr Fong becoming involved in the Turramurra development. The appellants argued that Mr Fong became involved in the Turramurra development when GDI entered into a deed of novation with MVGD (a company half-owned by each of GDI and Mr Fong) in July 2014, which was prior to the execution of the second MVDA loan on 8 August 2014 and the advance of the loan in two tranches ($3 million on 11 August 2014 and $200,000 on 13 August 2014). Having regard to that chronology, the appellants argued that paragraph [147A] could not be understood as referring to the second MVDA loan.
2. In my view, the pleading point in this ground of appeal should be rejected for three reasons.
3. First, the allegation concerning the improper purpose for making the second MVDA loan is adequately pleaded at paragraph [147A]. As already noted, the allegation expressly extends to all three loans. Pleadings are not to be construed like a contract or statute. As explained by the High Court in Dare v Pulham (1982) 148 CLR 658 at 664, the purpose of a pleading is to ensure procedural fairness in the conduct of a proceeding: to furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it, and to define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial. The express allegation that Ms Lin, Mr Cai and Mr Darmali caused Gold Stone to make each of the loans for the purpose of furthering the proposed relationship between GDI and Mr Fong in relation to the Turramurra development in which GDI held an interest was sufficient to put Ms Lin and Mr Cai on notice of the case they had to meet, notwithstanding the infelicity in the remainder of the pleading.
4. Secondly, the allegation concerning the improper purpose for making the second MVDA loan was addressed in the opening and closing submissions below of Ms Chu and Mr Xu. In their opening submissions at trial dated 28 May 2024, Ms Chu and Mr Xu submitted that the second MVDA loan was made for improper purposes (at [29]), and submitted that each of the loans was made for the improper purpose of procuring Mr Fong's assistance for the Turramurra project (at [62]). The allegation was clearly opened on the basis of all three loans. Those submissions were repeated by Ms Chu and Mr Xu in their closing submissions at trial dated 17 June 2024 at [31], [37] and [221].
5. Thirdly, I am not persuaded that Ms Lin and Mr Cai raised this specific pleading issue at trial. In the course of argument on the appeal, the appellants conflated other pleading complaints (which are the subject of other grounds of appeal below) with this pleading complaint. Indeed, in her opening submissions at trial, Ms Lin specifically recited paragraph [147A] of the pleading and referred to the "loans to MVLC and MVDA" without any reference to, or complaint about, the express inclusion of the second MVDA loan (at [20] and [21]). In her closing submissions at trial, Ms Lin squarely confronted the allegation on the basis of the evidence and submitted that the court "will not be satisfied that the three loans were entered into for the purpose of furthering the relationship between GDI and Fong in relation to the Turramurra development" (at [70]) and, in relation to the second MVDA loan specifically, submitted (at [72]):

The Court will also not be satisfied that the second MVDA loan of 8 August 2014 was entered into for the purpose of furthering GDI's relationship with Fong. By the time of this loan, the novation deed between GDI and MV Golden Destiny Development (Turramurra) Pty Ltd had been executed.

1. Mr Cai's opening submissions at trial did not advert to this specific allegation, and Mr Cai's closing submissions at trial confronted the allegation on the basis of the evidence by submitting that the second MVDA loan "took place" after the novation deed between GDI and MVGD and that, logically, the second MVDA loan "could not have been used as an influencing factor" (at [32]).
2. No submission was advanced that Ms Chu and Mr Xu had failed to plead that the second MVDA loan was made for the improper purpose of procuring Mr Fong's assistance with the Turramurra development.
3. It follows, in my view, that ground 2 in both appeals, whether put as a pleading point or an evidence point, should fail.

Both appeals - Lin grounds 6 and 7; Cai grounds 5 and 6 (allegation that second limb of Barnes v Addy was not properly pleaded in respect of Turramurra project improper purpose breaches)

1. His Honour's finding in relation to the pleading complaint about the knowing assistance plea was as follows (J [229]):

A pleading point is also taken concerning this allegation. Again, it is without merit. The pleading of liability pursuant to the second limb in Barnes v Addy is made in para 162 of the Third Further Amended Statement of Claim, which is supported by ample cross-references to the earlier paragraphs which are relied upon. The sub-heading immediately before para 162 is "Dishonest and Fraudulent Design". The Full Federal Court has held that there is no express requirement that the pleading use the words "Dishonest and Fraudulent Design": Zibara v Ultra Management (Sports) Pty Ltd [2021] FCAFC 4 at [116] (McKerracher and Anderson JJ). However, as I have said, the pleading in the present case expressly uses that expression.

1. Ground 6 of Ms Lin's amended notice of appeal dated 17 February 2025 was as follows: "The primary judge erred at J [229] in finding that the plaintiff had pleaded a dishonest and fraudulent design on the basis of 'having the improper purpose of procuring Mr Fong's assistance with the Turramurra project' and ought to have found that allegation did not form part of the pleaded dishonest and fraudulent design by Gold Stone".
2. Ground 5 of Mr Cai's amended notice of appeal was identical.
3. It is unnecessary to deal separately with Lin ground 7 and Cai ground 6 because, as I have already explained at paragraph 143 above, those grounds were not intended to raise any issues beyond the pleading points contained in Lin ground 6 and Cai ground 5.
4. Mr Hutley's principal complaint about the pleading (which Mr Pritchard adopted) was, in substance, that the cross-referencing in paragraph [160] of the 3FASOC ("In the premises of paragraphs 145 to 157, each of Lin ... and Cai, through their respective conduct pleaded at paragraphs 158 to 159, assisted with knowledge in the Breaches of Trust and, or alternatively, knowingly procured the Breaches of Trust") was not clear about which of the breaches of trust referred to in paragraphs [145]-[157] were relied on for the purposes of the allegation that Ms Lin and Mr Cai had been relevantly dishonest. Mr Hutley submitted that such a pleading was insufficient, citing a number of cases for the undoubted proposition that particulars of fraud must be pleaded with precision.
5. There is, in my view, no merit in the pleading point, and the primary judge was correct to reject it in J [229].
6. First, the pleading makes sufficiently clear, in particular at [160], that the case alleged was that Ms Lin and Mr Cai caused Gold Stone to enter into each of the three loans "through their respective conduct pleaded at paragraphs 158 to 159" and that "[i]n the premises of paragraphs 145 to 157" they assisted with knowledge in the "Breaches of Trust" and/or knowingly procured them.
7. The reference to paragraphs [145]-[157] self-evidently included the plea of the Turramurra project improper purpose breaches ([147A]); the plea of the imprudent investments breaches ([152(a)]); the plea of the unauthorised investments breach ([152(c)]); and the plea of Gold Stone's breaches of its duties as a trustee ([153]).
8. Secondly, the submissions made on behalf of Ms Chu and Mr Xu below made it quite clear how the case was put, and that counsel for Ms Lin and Mr Cai (despite making the same pleading point below that they pressed on appeal) understood that the pleas of breaches of trust included dishonestly making the three loans (including by negotiating and agreeing to them and by signing documents to give effect to them) to further the proposed relationship between GDI and Mr Fong and to facilitate the commercial interests of GDI as well as their own personal interests.
9. In their written opening submissions below, counsel for Ms Chu and Mr Xu submitted as follows:
   1. Almost all of the money invested by the plaintiffs was lost by Gold Stone, as trustee, through unsecured loans to companies associated with Mr Victor Fong, a property developer. The provision of loans without effective security was prohibited by the Fund's Trust Deed, cannot be reconciled with the Fund's claim to adopt a "conservative lending policy", and was contrary to its very purpose as a "secured" income mortgage fund. The loans to Mr Fong were not only imprudent, they were improperly made to benefit the defendants and not the Fund's unitholders. Other monies were misappropriated in various smaller transactions.

...

1. ... The plaintiffs say that the MVLC Loan was unsecured and was made for the improper purposes of benefitting Gold Stone's stakeholders (not the unitholders of the Fund) and procuring Mr Fong's assistance for a separate property development in Turramurra, in which the Fund had no interest but in which interests associated with Ms Lin [and] Mr Cai ... were involved) ...

...

1. ... The plaintiffs say the First MVDA Loan was unsecured and was made for improper purposes.

...

1. ... The plaintiffs say the Second MVDA Loan was unsecured and was made for improper purposes.

...

1. Gold Stone committed numerous breaches of trust by making the Loans. Clause 20.4(j) of the Trust Deed only permitted Gold Stone to invest in loans if they were secured by mortgage over defined classes of assets, including real property (CB 5/2087). It is also a breach of trust to make recklessly imprudent investments on a hazardous security: Fouche v Superannuation Fund Board [1952] HCA 1; (1952) 88 CLR 609 at 637. Gold Stone also had duties under ss 14A(2) and 14C(1) [of the Trustee Act 1925 (NSW)] to invest prudently. It held itself out as a professional corporate trustee and should be held to a high standard: ASIC v Drake (No 2) [2016] FCA 1552; 340 ALR 75 at [272]- [273], [276].

...

1. The Loans were also made for the improper purpose of procuring Mr Fong's assistance for the Turramurra project ...

2. It follows that the Loans were negligent and were procured for an improper purpose in order to benefit Gold Stone's shareholders rather than the Fund's unitholders. In short, the Loans were procured in breach of trust. ...

3. Each of Ms Lin [and] Mr Cai ... was involved in effecting the breaches of trust through negotiating and agreeing to the Loans or through signing documents to give effect to the Loans. Each of them thereby knowingly procured or instigated Gold Stone to act in breach of trust: Pittmore Pty Ltd v Chan [2020] NSWCA 344; 104 NSWLR 62 at [186]- [196]; or assisted Gold Stone with a dishonest and fraudulent design: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [173]-[179]. Because of their involvement in the breaches, they are liable to restore the trust fund: Twigg v Twigg [2022] NSWCA 68; 402 ALR 119 at [175]- [183].

(Emphasis added.)

1. Mr Thomas' oral opening submissions below were to similar effect:

MR THOMAS: Your Honour, an immediate question we say that arises, having regard to even that, we say, uncontestable statement of documentary facts is why [Gold Stone] as trustee would engage effectively from the outset of its existence in a clear violation of its investment mandate.

...

Our submission, your Honour, in the absence of an explanation from the defendants is that the overwhelming inference from the documents, even getting to - before one gets to cross-examination, is that the lending, the unsecured lending, took place in order to further the private interests of the first to third defendants: that's Ms Lin, Mr [Cai], her husband at that time, and Mr [Darmali]. Those private interests included, in our submission, a need to find a developer to rescue Ms Lin and Mr [Cai] from a substantial investment that they had made through a corporate vehicle called Golden Destiny Investments, or GDI, in a Turramurra property development.

Now, at the time the mortgage fund was established, GDI needed to source almost $15 million to complete a contract to purchase that development. And Mr [Cai] had personally guaranteed those obligations. Ms Lin herself tells this court in her evidence that for Golden Destiny to go it alone without the support of a property developer would be "a financial disaster". The documents, in our submission, reveal that Mr [Darmali] introduced Mr Fong to Ms Lin, and that the payments made to Mr Fong from the mortgage fund were to further the proposed relationship between Golden Destiny and Mr Fong. Now, they are not my words. Those are the words of Ms Lin herself in sworn affidavit evidence she gave in earlier Supreme Court proceedings. So she has sworn that the payments were made, all of the payments, the three loans that we impugn, were used to "further the proposed relationship between GDI and Mr Fong".

...

MR THOMAS: The intention being, in our submission, that Mr Fong would take over the project and relieve GDI and Mr [Cai] from their obligations, as he ultimately did. Those private interests we say also included placing Mr Fong's companies in funds so that they were able to repay loan - a loan that Mr [Darmali's] mother had made to Mr Fong's companies. We say private interest both with Ms Lin and Mr [Cai] and with Mr [Darmali] that aligned, unfortunately for our clients, in a fundamental collateral purpose contrary to the terms of the trust deed.

...

MR THOMAS: Now, our submission is that the private interests that I've identified were plainly foreign to the fund. No clause of [the Fund Constitution] permitted the trustee to breach its investment mandate in order to further those private interests, and therefore, among other things, we will submit to the court that your Honour should find that Ms Lin, Mr [Cai] and Mr Darmali knowingly procured or instigated breaches of trust or otherwise assisted in a design on the part of the trustee that was fraudulent and dishonest in the relevant sense. I emphasise that we advance our accessorial liability case on two bases; the Barnes v Addy second limb bases but also on the, as it were, perhaps more classic knowing instigation or procurement cause of action that Farah recognised was still available under Australian law and does not require us to demonstrate the existence of a fraudulent and dishonest design on the part of the trustee.

(Emphasis added.)

1. It is thus quite plain that the case being opened included the case that the claim for dishonest and fraudulent design against Ms Lin and Mr Cai was founded on the improper purposes of the three loans.
2. Further, counsel for Ms Lin and Mr Cai understood as much. In Ms Lin's written opening submissions below, for example, having made the pleading point at [3], counsel make clear that they understood how the case was being put, as follows:
   1. The core breach of trust case against Lin is centred on two allegations. First, that Lin caused Gold Stone to make loans to MVLC and MVDA using the Plaintiffs' investments into the Fund "for the purpose of furthering the proposed relationship between GDI and Fong in relation to the Turramurra development in which GDI had an interest" [citing 2FASOC [147A]]. And second, that it was in Lin's interests (which were at odds with the interests of Gold Stone's unit holders) for the Fund to make investments which were risky ... because Lin had interests in Gold Stone through her interests in GDI and DCK Assets Holding Pty Ltd (DCK) [citing 2FASOC [151]].
   2. It is through these allegations that Gold Stone is said to have breached [citing 2FASOC [153]-[155]]: various common law and statutory duties as trustee of the Fund [citing 2FASOC [28]], terms of the [information memorandum], and the trust deed. To establish these alleged breaches, the Plaintiffs must establish that Lin caused Gold Stone to make the loans to MVLC and MVDA, that Lin had a purpose in furthering her relationship with Fong, and that Lin had an interest in the Fund making risky investments. The Court will not be so persuaded. The case for breach of trust depends on assertion, not evidence. There is no contemporaneous evidence supporting the assertion that Lin caused the loans to be made to MVLC and MVDA, let alone that Lin had a purpose in furthering the relationship between GDI and Fong.
3. And, at the risk of stating the obvious, contrary to that submission, the plaintiffs did establish that Ms Lin caused Gold Stone to make the loans to MVLC and MVDA, that she had a purpose in furthering her relationship with Fong, and that she had an interest in the Fund making risky investments.
4. In counsel's written closing submissions, the accessorial liability case put by Ms Chu and Mr Xu was articulated as follows:
   1. Each of Ms Lin [and] Mr Cai ... was involved in effecting the breaches of trust through negotiating and agreeing to the Loans or through signing documents to give effect to the Loans. The plaintiffs put these claims in two ways. They say that these defendants either knowingly procured or induced Gold Stone to act in breach of trust ... or assisted Gold Stone with a dishonest and fraudulent design ...

...

1. In the plaintiffs' submission, the following matters constituted dishonest conduct, such that Gold Stone was engaged in a dishonest and fraudulent design:

(a) entering into the Loans despite knowing that they were unauthorised under cl 20.4 of the Trust Deed;

(b) entering into the Loans in order to obtain Performance Fees well in excess of the 8% per annum payable to investors and with the knowledge that the Loans were high-risk; or

(c) entering into the Loans in order to procure Mr Fong's assistance for the Turramurra contract.

...

1. Ms Lin had sufficient knowledge of the breaches that she is liable as an accessory to them. As the plaintiffs have submitted, she was well aware of the terms of the Trust Deed, the [information memorandum], and the Loan Agreements, and was heavily involved in the establishment and operation of the Fund. She knew that the Loans were made using the Fund's money. She knew that the security for the Loans was non-existent, and given her background as a conveyancer she was well aware that this was unsatisfactory but that the Fund could charge extraordinarily high interest as a result. She knew that this was to Gold Stone's benefit because of the Performance Fee and that GDI thus stood to benefit as a shareholder of Gold Stone. As per her earlier sworn evidence, her primary motivation in procuring Mr Fong's assistance was to protect the money she had invested in the Turramurra project, and one of her ... purposes in procuring the Loans was to encourage Mr Fong to come on board.

1. And Mr Thomas's oral closing submissions before the primary judge were to similar effect. See, by way of example, transcript at page 857 ("... our third strand is one going to foreign or collateral purpose. No provision of the trust deed ... authorised the paying away of trust monies in order to facilitate the commercial interests of GDI or the personal interests of Ms Lin [or] Mr Cai ... with respect to absolving themselves from guarantees and liability in respect of Turramurra ...").
2. In those circumstances, it is clear that Ms Lin and Mr Cai well understood the nature of the accessorial liability claims being brought against them, and that the pleaded case was consistent with the way the case was both opened and closed before the primary judge.
3. I should mention one other point about the pleaded case against Ms Lin, lest it be thought that I overlooked it. Mr Hutley took the court to some correspondence between the solicitors, in which the solicitors for Ms Lin requested further particulars of the accessorial liability case. See the letter from SHL & Associates Lawyers to McCabes dated 26 August 2022. The reply is dated 9 September 2022. The primary judge was taken to the correspondence, but did not refer to it. In my view, that is not surprising, because it did not advance the case one way or the other, as the correspondence predated the incorporation of paragraph [147A] into the second further amended statement of claim by about 18 months and the commencement of the trial by about two years.
4. It follows, in my view, that grounds 6 and 7 in Ms Lin's appeal, and grounds 5 and 6 in Mr Cai's appeal, should fail.

Mr Cai's appeal - Ground 3 (alleged inadequate reasons and insufficient evidence)

1. A trial judge is, of course, under an obligation to give reasons for his or her decision.
2. The adequacy of reasons will depend on the circumstances of the case and the nature of the proceedings.
3. In Lee v Lee [2019] HCA 28; (2019) 266 CLR 129 at 148-149 [55], Bell, Gageler, Nettle and Edelman JJ summarised the well-known applicable standard of appellate review of credit findings as follows:

A court of appeal is bound to conduct a real review of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are glaringly improbable or contrary to compelling inferences is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. ...

(Citations and internal quotations omitted.)

1. Ground 3 of Mr Cai's amended notice of appeal was in these terms:

The primary judge failed to give adequate reasons for finding that [Mr Cai] had knowledge of the breaches of trust by Gold Stone to render him liable for procuring those breaches or being knowingly concerned in them in circumstances where he did not engage with [Mr Cai's] evidence that:

1. he relied upon the advice and assurances given by Ms Lin, who the primary judge found controlled Gold Stone;
2. he relied upon the assurances that she had undertaken due diligence;
3. he believed, in part because of Ms Lin's assurances and his own understanding, that the loans were, or were to be, secured by mortgage.

1. In Mr Cai's amended reply and cross-appeal submissions, counsel submitted (at [17]) the following in support of ground 3:

In the face of the[] findings that Ms Lin and Mr Darmali were primarily responsible for Gold Stone's conduct and in circumstances where (i) Mr Cai's evidence that he relied on Ms Lin was not meaningfully challenged by the plaintiffs' counsel ... and (ii) Mr Cai's evidence was accepted in certain respects (J [73], [184], [212], [213]), detailed reasons were necessary in order to make the inconsistent finding that "Mr Cai was also directly involved as a central participant in Gold Stone entering and performing the three loan agreements": J [26], [158] and [217]. That did not occur.

(Citations partially omitted.)

the primary judge's fact-finding process miscarried. The "proper inference to be drawn from the facts ... established by the findings of the trial judge" in respect of Ms Lin and Mr Darmali is that, in light of them being principally responsible for Gold Stone's conduct, Mr Cai did not play a significant role in its affairs and thus did not have the requisite knowledge to be liable as an accessory: Warren [v] Combes [1979] HCA 9; (1979) 142 CLR 531, 551 (Gibbs A-CJ, Jacobs and Murphy JJ); see also Fox v Percy (2003) 214 CLR 118, [25] (Gleeson CJ, Gummow and Kirby JJ). Put in the context of the findings made against Ms Lin and Mr Darmali and Mr Cai's evidence that he relied on Ms Lin, the finding that Mr Cai had the requisite knowledge as an accessory in equity was "glaring[ly] improbable": Devries v Australian National Railways Commission (1993) 177 CLR 472, 479 (Brennan, Gaudron and McHugh JJ). ... Mr Cai's written opening and closing submissions clearly put his reliance on Ms Lin in issue and that he should not be found liable as an accessory by reason of his reliance on Ms Lin and Mr Darmali: Mr Cai's opening written submissions, [5], [8], [9], [14]-[16], [18], [22]; Mr Cai's closing written submissions, [50] (C149). Those submissions required that the primary judge provide more detailed reasons for his apparent rejection of his evidence: Murray v Sheldon Commercial Interiors Pty Ltd [2016] NSWCA 77, [63]-[67].

(Citations partially omitted.)

1. The primary judge set out most of his findings about the credibility of the various witnesses who testified at the trial at the beginning of the reasons, after a brief introduction to the proceeding, commencing at J [10].
2. As to Mr Cai, the primary judge said (J [25]) that he "regard[ed] Mr Cai as an unsatisfactory and unreliable witness who was determined to say whatever he perceived to be in his forensic interests". He said that he did "not accept his testimony except where it consist[ed] of admissions against interest, or where it [was] corroborated by the contemporaneous documents, or where it [was] consistent with the objective probabilities". His Honour gave the following "three telling instances in his evidence":
   1. First, Mr Cai adamantly denied with great confidence in his cross-examination that he was the person who had the dealings with MVLC and MVDA in relation to the three loan agreements to which I refer below: T435.21-29. However, he was then confronted with an affidavit which he made to support Gold Stone's statutory demand for unpaid amounts pursuant to those loan agreements on 23 June 2015 (CB9/3900) in which he said expressly that he was the person who, on behalf of Gold Stone, had the dealings with MVLC and MVDA that gave rise to the debt which was claimed. Mr Cai continued to deny the truth of that proposition, claiming that he made the affidavit because Ms Lin asked him to do so (T436.28-33). Ultimately, Mr Cai accepted that the affidavit was a true statement (T436.43-45).
   2. Second, as I explain in detail below, after Gold Stone received the proceeds of the settlement with the liquidators of MVLC and MVDA in November 2017, Mr Cai paid a large amount of those funds to himself (T493.35-510.16). He did so having signed the settlement agreement, and being aware that the funds received were trust monies and were the only monies that were recovered from the three loans (T490.40-491.7). Mr Cai was aware that he should not have dealt with the funds without the consent of the plaintiffs (T493.16-33). Mr Cai conceded on a number of occasions that he knew that there was no proper basis for the withdrawal of those funds. He then brazenly told the plaintiffs' representative that it was Ms Lin who had taken all the money (T510.18-511.2). Mr Cai's conduct was dishonest.
   3. Third, Mr Cai denied having read the Fund Constitution, but then found himself in the awkward position of being forced to accept as a result that he was wilfully blind to his obligations as trustee (T456.34-40). However, after a break in his cross-examination over the King's Birthday long weekend, Mr Cai admitted that he had had a copy of the Fund Constitution which Ms Lin gave him after he signed it, that he read it and that Ms Lin had explained some of it to him (T469.39-471.15). He also accepted, after having thought about his evidence over the long weekend, that he read cl 20.4 dealing with the trustee's powers of investment, and that he understood that the trustee could only invest in loans secured by mortgages (T472.12-20).
3. Later in his reasons, the primary judge made further findings in respect of Mr Cai, as follows:
   1. On 23 June 2015, Gold Stone as trustee of the Fund sent a creditor's statutory demand for payment of a debt to MVLC in the amount of $7,853,367.40, signed by Mr Cai as director (CB9/3898-9). The affidavit accompanying the statutory demand was made by Mr Cai and stated in para 2 (CB9/3900):

I am the person who, on behalf of the Gold Stone Capital, had the dealings with the debtor company that gave rise to the debt and I have inspected the business records of Gold Stone Capital Pty Ltd in relation to the debtor company's account with Gold Stone Capital Pty Ltd.

Mr Cai ultimately accepted in his cross-examination that that statement was true (T436.43-45), in contradiction of his earlier denials (which were expressed with great confidence and absolute certainty) that he had not had any dealings with MVLC or MVDA in relation to these loans (T435.12-29, 436.28-32). There is an element of exaggeration in the statement quoted above from Mr Cai's affidavit accompanying the statutory demand, in that Mr Darmali also had extensive dealings with MVLC on behalf of Gold Stone, and Ms Lin was also centrally and directly involved in these dealings. I have referred above to the evidence given by Ms Lin in NSW Supreme Court proceedings in her affidavit dated 27 November 2015 that she was the person who discussed and negotiated the three loans with Mr Fong. However, Mr Cai was also directly involved as a central participant in Gold Stone entering into and performing the three loan agreements.

1. His Honour also found at J [213], set out at paragraph 92 above, that Mr Fong told Mr Cai during their negotiations and discussions that he did not own either of the two Manly properties which were referred to as the "Mortgaged Property" in the schedule to the first MVDA loan agreement.
2. In addition to his findings that Mr Cai executed each of the three loan agreements and executed transfers of trust money from Macquarie Bank that enabled funds to be advanced under the MVLC loan agreement and the first MVDA loan agreement (J [112], [121] and [217]), his Honour also made the findings in J [218], set out at paragraph 98 above - namely, that Mr Cai:

(a) read cl 20.4 of the Fund Constitution and understood that Gold Stone as trustee could only invest in loans secured by mortgages;

(b) plainly knew the terms of the three loan agreements, including the purported security referred to in the schedule to each of them;

(c) as a licensed real estate agent knew what a mortgage was;

(d) understood that strata plans had to be registered; and

(e) was a participant in the conversation with Mr Fong in which Mr Fong said that he did not own either of the two Manly properties referred to as the Mortgaged Property in the first MVDA loan agreement, and was trying to borrow funds to buy those properties.

1. His Honour also made the findings in J [220], set out at paragraph 98 above, including that:

(a) he did not accept Mr Cai's denial that he knew that the MVLC loan agreement was not secured by mortgage over real property in Australia; and

(b) Mr Cai had actual knowledge that the three loan agreements were not secured by mortgages over real property, and that they were not authorised by the Fund Constitution.

1. In his amended reply and cross-appeal submissions at [16], Mr Cai sought to make something of that fact that the primary judge accepted his evidence in other respects (including at J [73]; [162]; [181]; [184], [188], [189], [212] and [213]), and contended that such acceptance serves to make "glaringly improbable" his Honour's finding that Mr Cai was directly involved and a central participant in Gold Stone's breaches of trust. I do not accept that submission. There was more than ample evidence to support the conclusion that Mr Cai was also a central participant in the making and performing of the three loans. And there is nothing glaringly improbable in the finding that Ms Lin, Mr Darmali and Mr Cai were each central participants in Gold Stone's breaches of trust. The fact that the primary judge did not reject as dishonest all of Mr Cai's evidence is, rather, indicative of the care that he took in evaluating the whole of his evidence.
2. Mr Cai even sought to contend that the primary judge erred in relying on the affidavit he swore in support of a statutory demand made on 23 June 2015 on behalf of Gold Stone against MVLC in the sum of over $7.853 million. He submitted that his sworn statement that he was "the person who, on behalf of ... Gold Stone Capital, had the dealings with [MVLC] that gave rise to the debt" needed to be read in light of the fact that the affidavit was a "standard form" document. See J [158] set out at paragraph 257 above. The submission about it was put as follows on appeal (at [18]):

[T]his Court would be slow to place any weight on Mr Cai's apparent admissions in cross examination that he signed the affidavit accompanying a statutory demand because its content was true. The transcript at T436.16-T438.10 (C733-735) suggests that Mr Cai did not understand the propositions put to him in cross examination. Indeed, Mr Cai first answered that he signed the affidavit as "Louise Lin asked me to sign it" (T436.32-33) (C733), which is consistent with both his affidavit evidence and the subsequent cross-examination at T437.18-28 (C734). The contents of the statutory demand affidavit were not merely exaggerated (J[158] A486), they were incompatible with the primary judge's findings summarised above (particularly those at J[213] A506 and J[224] A509) and consistent with Mr Cai's evidence that he relied on Ms Lin in relation to Gold Stone's entry into the loans.

1. I do not accept that submission. The statutory demand is no doubt defective, because MVLC did not owe Gold Stone $7.853 million - that is more likely the total of the three loans plus interest. But the fact remains that Mr Cai did say on his oath that he was the person who, on behalf of Gold Stone, had relevant dealings with MVLC that gave rise to a debt of that amount. It follows that the primary judge did not err in having regard to it as evidence of Mr Cai's involvement in Gold Stone and of his actual knowledge of the facts giving rise to the breaches of trust.
2. His Honour gave detailed reasons for his conclusion that Mr Cai was dishonest in many significant respects and that, contrary to his sworn evidence, he did know all of the various matters described above, and thus, despite his denials, he did knowingly induce Gold Stone's breaches of trust and knowingly assist in a dishonest and fraudulent design by way of the three loan agreements.
3. It is neither here nor there that the primary judge did not refer in terms to bits of evidence given by Mr Cai to the effect that: (i) he relied upon the advice and assurances given by his then-wife, including that she had undertaken due diligence, and (ii) "he believed, in part because of [her] assurances and his own understanding, that the loans were, or were to be, secured by mortgage". His Honour quite plainly did not believe him. So it was not necessary for him to trawl through every skerrick of evidence that Mr Cai gave. In my view, it is abundantly clear from his Honour's findings and the reasons given for them that the fact-finding process did not miscarry.
4. For those reasons, in my view, ground 3 in Mr Cai's appeal should fail.

Mr Cai's appeal - Ground 8 (knowledge of misappropriation breaches of trust relating to the repayment of loans to GDI)

1. Ground 8 of Mr Cai's amended notice of appeal states as follows:

The primary judge erred in concluding (at J [248]) that the appellant had actual knowledge of the breaches of trust.

1. The primary judge made the following findings at J [248]:

The amount of $300,000 paid on 21 July 2016 is claimed against Ms Lin, whereas the other repayments of GDI's loan are claimed only against Mr Cai. Both Ms Lin and Mr Cai had actual knowledge of the essential matters which went to make up the breaches of trust, and of the matters which obliged Gold Stone to pay more than $6 million in restoration of, and compensation to, the Fund. They obviously knew that Gold Stone had not made such restoration or compensation to the Fund. As Leeming JA said in Pittmore Pty Ltd v Chan at [195], it is not necessary for third parties involved in the breach of trust to know that the matters amounted to a breach of trust, and I do not find that Ms Lin or Mr Cai was aware of the clear accounts rule or of its effect in the present case. However, that is irrelevant to their liability, which is founded on their actual knowledge of the relevant facts, not their knowledge of the law pertaining to a trustee's right of indemnity. Accordingly, both Ms Lin and Mr Cai are liable for the amounts claimed against them by the plaintiffs on the ground that they knowingly induced or procured the breaches of trust in making those repayments to GDI in circumstances where the Fund had not been restored or compensated for the losses caused to it by Gold Stone. They are liable to pay the respective amounts plus interest as to 50% to each of the plaintiffs.

(Emphasis added.)

1. The focus of ground 8 is the primary judge's finding that Mr Cai was not aware of the clear accounts rule. Mr Cai submitted that the primary judge erred in concluding that Mr Cai had the requisite knowledge that the payments made to GDI were in breach of trust in circumstances where: (i) GDI was a creditor of the Fund and the payments made to GDI out of the Fund were by way of repayment of amounts loaned by GDI to the Fund; and (ii) Mr Cai did not know that the clear accounts rule precluded those payments being made to GDI by Gold Stone out of the Fund until Gold Stone had restored or compensated the Fund for the breaches of trust in the amount of approximately $6 million.
2. In Pittmore v Chan, Leeming JA (with whom Bell P and Brereton JA agreed) considered whether there is an element of "dishonesty" in the test applicable to a person who induces or procures a breach of trust. His Honour doubted that "dishonesty" is the right word to describe the test of liability of a person who procures or induces a breach of trust or fiduciary duty (at 99 [176]) and concluded that the weight of authority has focused on the need to establish knowledge on the part of the third party of the breach of trust or fiduciary duty (at 101 [185]). His Honour noted the five categories of knowledge referred to in Baden, and the High Court's conclusion in Farah Constructions that each of the first four Baden categories (actual knowledge; wilfully shutting one's eyes to the obvious; wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; and knowledge of circumstances which would indicate the facts to an honest and reasonable man) are sufficient to satisfy the knowledge requirement for knowing assistance (at 102 [191]-[192]). His Honour concluded (at 102 [192]):

... Consistently with equity's regard for conscience and the reasoning in Farah Constructions, the same is true for a third party who procures or induces a breach of trust or fiduciary obligation. It is sufficient if the inducer or procurer of a breach of trust or fiduciary duty knew of the facts which, to a reasonable person, would indicate a breach of trust or fiduciary duty. That accords with what Brereton J said in Mitreski at [165] reproduced above.

(Emphasis added.)

1. As also observed by Leeming JA in Pittmore v Chan (at 103 [195]), that conclusion sits harmoniously with other areas of ancillary liability such as the statutory provisions regulating ancillary criminal liability considered in Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 and those regulating ancillary liability under the Trade Practices Act 1974 (Cth) (now named the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act)) considered in Yorke v Lucas (1985) 158 CLR 661. The High Court recently rejected an argument that knowing involvement in a breach of the statutory prohibition of unconscionable conduct in the Australian Consumer Law (being Sch 2 to the Competition and Consumer Act) requires knowledge that the conduct has the legal characterisation of being unconscionable: see Productivity Partners Pty Ltd (t/as Captain Cook College) v Australian Competition and Consumer Commission [2024] HCA 27; (2024) 419 ALR 30 at 37 [12], 54-55 [82]-[84] (Gageler CJ and Jagot J), 70-72 [148]-[154] (Gordon J), 96-98 [267]-[272] (Edelman J), 109 [308] (Steward J), 120 [352] and 123-124 [361]-[365] (Beech-Jones J).
2. Mr Cai did not submit that Leeming JA's analysis of the knowledge requirement for procuring or inducing a breach of trust involved error. Mr Cai's argument was that the knowledge requirement was not satisfied in the circumstances of this case because Mr Cai was not aware of the clear accounts rule and therefore did not know that the payments made to GDI from the Fund involved a breach of trust.
3. In my view, the primary judge was correct to conclude that Mr Cai knew of the facts which, to a reasonable person, would indicate a breach of trust by causing Gold Stone to make the payments to GDI before Gold Stone fully restored the Fund. His Honour found that Mr Cai had actual knowledge of the essential matters which went to make up the antecedent breaches of trust (by making the loans to MVDA and MVLC), and of the matters which obliged Gold Stone to pay more than $6 million in restoration of, and compensation to, the Fund. His Honour also found that Mr Cai knew that Gold Stone had not made such restoration or compensation to the Fund. Mr Cai executed the deed of settlement with the liquidator of MVLC on behalf of Gold Stone, pursuant to which the net sum of $395,504.40 was paid to the Fund in settlement of Gold Stone's claims against MVLC, and therefore Mr Cai knew that those monies were trust monies. By causing Gold Stone to pay some of those trust monies to GDI (and thereby purporting to exercise a right of indemnity out of the trust funds), Mr Cai procured Gold Stone to engage in a breach of trust by failing to restore the Fund before exercising its right of indemnity. Mr Cai was aware of the relevant facts which, to a reasonable person, would indicate a breach of trust. The fact that Mr Cai was unaware of the applicable legal principle (namely, the clear accounts rule) does not absolve him of liability. The moral foundation for the clear accounts rule should be taken to be apparent to an ordinary person. As observed by the High Court in Farah Constructions (at 163-164 [177]), the morally obtuse cannot escape liability by failing to recognise an impropriety that would have been apparent to an ordinary person.
4. For those reasons, in my view, ground 8 in Mr Cai's appeal should fail.

1. It follows that I would dismiss the Lin and Cai appeals, with costs. As it was unnecessary to address the cross-appeal, I consider that each party should bear their own costs of the cross-appeal.

1. The primary judge found (J [55]) that Mr Wu was "a reliable and credible witness, who gave clear and direct answers to the best of his ability to the questions put to him in cross-examination", and he dismissed (J [311]) all of the claims brought by Ms Chu and Mr Xu against him.
2. Nonetheless, the primary judge ordered that Ms Chu and Mr Xu pay only 20% of Mr Wu's costs of the proceeding below (J2 [7]).
3. His Honour was not persuaded that costs should follow the event. In his ex tempore reasons, he reasoned as follows:
   1. In relation to ... the fifth defendant (Mr Wu), [he was] successful only on a limitation question which occupied relatively little time. ... [He] would also have been liable for substantial amounts to the plaintiffs but for the limitation question. The limitation question was a clearly severable issue.
   2. In my view, the appropriate order is that the plaintiffs pay 20 per cent of the costs of ... [the] fifth defendant[], reflecting the relative amount of time which is likely to have been spent by their legal representatives on that particular issue compared to the other issues, and bearing in mind also the fact that the ... fifth defendant[] ultimately succeeded on that issue.
   3. I note that Hall J reached the same conclusion in comparable circumstances in Artistic Builders Pty Limited v Nash [2011] NSWSC 350. The fifth defendant sought to distinguish that case on the basis of the prolonged factual investigation into the circumstances concerning breach of duty in that case, compared to, what he submitted, was a relatively short exercise in the present case of establishing liability. I note that there is a difference in terms of the amount of time having been spent in establishing the factual allegations concerning breach of duty, but in the present case, the fifth defendant would have saved a very substantial amount of preparation time and court time if the breach of duty had been conceded and the fifth defendant simply maintained the limitation point.

...

1. [Mr Wu] seeks indemnity costs from such time as it appeared that [he] was not involved in the conduct of the transactions engaged in by Gold Stone, which are the subject of the proceedings. I reject that submission. Mr Wu's non-involvement and apathy towards the company's affairs were the fundamental reason for his breach of director's duties. Accordingly, establishing by way of pleadings and correspondence that Mr Wu was not involved and appeared to have engaged in a degree of apathy, although not as extreme as was ultimately revealed in cross-examination, does not indicate that the plaintiffs' claim against him was unreasonable. On the contrary, that was the very basis for the merit in the plaintiffs' allegations that Mr Wu had breached his duties.

1. In summary therefore, the primary judge reasoned that Mr Wu should only recover 20% of his costs because:

(a) he only avoided liability because of the limitation question;

(b) the limitation question was a severable issue;

(c) relatively little time would have been spent by Mr Wu's legal representatives in establishing the limitation period defence; and

(d) Mr Wu "would have saved a very substantial amount of preparation time and court time if the breach of duty had been conceded and [he] simply maintained the limitation point".

1. Senior counsel for Mr Wu, Mr Bedrossian, relied on an undated document headed "draft notice of appeal". No objection was taken to him doing so. Leave will be granted accordingly.
2. Mr Bedrossian volunteered that the document contained a surfeit of grounds, but the gist of the case he made was that leave to appeal should be granted and the appeal allowed, because the primary judge arrived at a determination that was unreasonable and plainly unjust, mistook the facts, failed to take into account relevant and material considerations and acted upon wrong principles. Once any one of those grounds is made good, an appeal court is required to substitute its own discretion. See, by way of example only, Norwest Refrigeration Services Pty Ltd v Baine Dawes (WA) Pty Ltd [1984] HCA 59; (1984) 157 CLR 149 at 176 (Brennan J).
3. It is not clear from his reasons what principles his Honour had in mind to guide the exercise of his discretion, but in my respectful view, his discretion did miscarry in awarding Mr Wu a meagre 20% of his costs, for the following reasons.
4. His Honour was mistaken in saying that Mr Wu was only successful on the limitation question.
5. Mr Wu in fact succeeded on many of the claims against him which were not the subject of any limitation plea, including in respect of his defences denying allegations that he had:

(a) responsibility for management of the Fund, including because he was a signatory to the bank accounts and had executed transaction documents (3FASOC [14A]);

(b) executed the Fund Constitution (3FASOC [26A]);

(c) signed the first and second MVDA loan agreements (3FASOC [93], [100]);

(d) operated the Fund in breach of s 601ED(5) of the Corporations Act (3FASOC [143]);

(e) breached his statutory and general law duties owed to Gold Stone by making the first and second MVDA loans (3FASOC [163]-[169]);

(f) been in breach of duty by failing to cause Gold Stone to bring other claims within the applicable statutory limitation periods (3FASOC [179]-[183]); and

(g) breached a "direct diligence duty" (3FASOC [184]-[191]).

1. As to (a) and (c), his Honour accepted Mr Wu's case that none of the three loan agreements bore his genuine signature and his evidence in relation to the documents which he said were not signed by him (J [56]-[57]). His Honour made no finding that Mr Wu was a participant in any relevant decisions on behalf of the Fund or any dealings with the Fund's assets.
2. As to (b) and (d), the primary judge found that Mr Wu had not signed the Fund Constitution (J [57]) and had not "operated the scheme so as to fall within s 601ED(5)", such that he was not liable for any contravention of that provision (J [268]).
3. As to (e), Mr Wu denied being liable for such breaches because he did not cause the loans to be made (amended defence dated 11 April 2024 [61]-[67]), which defence the primary judge accepted (J [55]-[57]).
4. As to (f), Mr Wu denied being in breach of such duty, including because he had ceased to be a director of Gold Stone by no later than 19 March 2018, which was more than two years before the expiry of any relevant limitation period (amended defence [75]-[78]), and no part of the claim made by Ms Chu and Mr Xu was upheld by the primary judge.
5. As to (g), no breach of any such duty was found.
6. Ms Chu and Mr Xu also alleged (as an alternative claim) that Mr Wu had breached his statutory and general law duties owed to Gold Stone by failing to prevent the loans being made (3FASOC [169A]-[169C]). Mr Wu denied that claim (amended defence [68A]-[68C]) and pleaded that any such causes of action arose upon the making of the relevant loans or upon the advance of funds under those loans (i.e. in May 2014 and August 2014), all of which events occurred more than six years before the commencement of the proceedings. The primary judge concluded that Mr Wu had breached his duties (J [299]-[310]) but dismissed the claims because they had been brought "well outside the applicable limitation periods" (J [311]).
7. It follows that the primary judge wrongly concluded that Mr Wu was successful only on a limitation question. He was successful on a raft of allegations pleaded against him, and which remained part of the case made by Ms Chu and Mr Xu until the end.
8. The primary judge also erred in reasoning that Mr Wu "would have saved a very substantial amount of preparation time and court time if the breach of duty had been conceded and [he] simply maintained the limitation point".
9. The time taken by Mr Wu's counsel at trial in defending the allegations against him was modest. Mr Wu's opening oral submissions occupied 16 pages of transcript; there was no cross-examination by his counsel of any of the witnesses called by Ms Chu or Mr Xu; his counsel's cross-examination of Mr Cai and Mr Darmali occupied 13 and 11 pages of transcript, respectively; and closing oral submissions occupied 16 pages of transcript. (The cross-examination of Mr Wu (and Ms Holt, Mr Wu's other witness) was also minimal.)
10. And as Vandongen J said to junior counsel for Ms Chu and Mr Xu in the course of oral submissions, it must also be true that whatever preparation and court time was spent in Mr Wu defending the claims brought against him by his clients would have been saved if the proceedings - which, as the primary judge observed, were well out of time - had not been brought in the first place. As Vandongen J asked rhetorically:

[W]hat's sauce for the goose is sauce for the gander, isn't it? So if Mr Wu could have saved a substantial amount of preparation time and court time by conceding the breach of duty and dealing with the limitation period, if you commenced well outside the applicable limitation period, wouldn't the same reasoning apply in reverse?

1. The primary judge also suggested that comparable circumstances existed in Artistic Builders Pty Limited v Nash [2011] NSWSC 350, where Hall J ordered that the first to fourth defendants were entitled to 20% of their costs on the basis that their liability had been established but their limitation defence had succeeded.
2. But the facts in that case were distinguishable from those here, including because the relevant defendants in Artistic Builders were deprived of 80% of their costs on the basis that the non-limitations issues in respect of which they failed (namely, breach and causation) "occupied most of the hearing time, perhaps even 80%". See Artistic Builders at [67]. Here, Mr Wu was successful overall and on the overwhelming majority of issues that he contested. And his defence in respect of those issues occupied a tiny fraction of the trial as a whole.
3. The result in Artistic Builders was unremarkable. But, in any event, as Lee J said in Abbott v Zoetis Australia Pty Ltd (No 2) [2019] FCA 462 at [2], care must be taken to avoid reading judgments on fact specific interlocutory issues of practice and procedure as if they were determinative of precepts and principles of general application.
4. In my view, the errors made by the primary judge which I have identified are material, with the result that his Honour's exercise of the discretion to award costs miscarried. The exercise of that discretion must therefore be revisited.
5. In my view, the preferable approach to the question of Mr Wu's costs in this case is the one usually taken - that is, costs should follow the event. As in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; (2015) 90 ALJR 270 at 271 [6] (French CJ, Kiefel, Nettle and Gordon JJ), "[t]his is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined" and "[t]here are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like".

1. For those reasons, I would grant Mr Wu leave to appeal, allow his appeal, and order that Ms Chu and Mr Xu pay his costs of the proceeding below and of the appeal.

I certify that the preceding three hundred (300) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.

1. In respect of each of the appeals, I agree with the reasons of O'Callaghan J and the orders proposed by his Honour for the disposition of the appeals and the cross-appeal. I write separately to express additional reasons why ground 4 of the appeals brought by Ms Lin and Mr Cai, two of the directors of the trustee company Gold Stone Capital Pty Ltd (Gold Stone), should be rejected. In doing so, I gratefully adopt all that has been written by O'Callaghan J about the relevant events.
2. By ground 4, Ms Lin and Mr Cai (whom I will refer to as the appellants) contended that the primary judge erred (at J [211]) in reasoning that a director, acting as such, can knowingly procure or be knowingly involved in a breach of trust by a company of which that person is a director. They contended that the primary judge ought to have found that this cause of action is unavailable against a director "acting as such".
3. Directors of a trustee company are not themselves trustees and, therefore, are not personally subject to the duties of trustees (which are imposed on the trustee company): Wilson v Lord Bury [1880] UKLawRpKQB 63; [1880] 5 QBD 518. Nevertheless, non-trustees may incur accessorial liability for breaches of trust by the trustee, including by knowingly inducing or procuring a trustee to commit a breach of trust or by knowingly assisting a trustee in a dishonest and fraudulent design of the trustee (the so-called second limb of Barnes v Addy [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244 (Barnes v Addy)). The two forms of accessorial liability for breaches of trust were confirmed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, where the Court noted (at [161]) that, before Barnes v Addy, there was a line of cases in which it was accepted that a third party might be treated as a participant in a breach of trust where the third party had knowingly induced or procured breaches of duty by a trustee where the trustee had acted with no improper purpose, including the decisions of Lord Langdale MR in Fyler v Fyler [1841] EngR 463; (1841) 3 Beav 550 at 561-562, 567-568; [1841] EngR 463; 49 ER 216 at 221, 223-224, of the Irish Court of Chancery in Alleyne v Darcy (1854) 4 I Ch R 199 at 209, and of Sir John Romilly MR in Eaves v Hickson [1861] EngR 831; (1861) 30 Beav 136; 54 ER 840. The requisite elements of such accessorial liability include conduct that satisfies the requirement of procuring or inducing the breach or assisting the dishonest and fraudulent design, and a sufficient degree of knowledge of the facts and circumstances that disclose the breach of trust or dishonest and fraudulent design.
4. Unlike liability under the second limb of Barnes v Addy, liability for knowingly inducing or procuring a breach of duty by a trustee does not require the breach of trust to be of a sufficient level of gravity to answer the description of dishonest and fraudulent: Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609 (Hasler) at [77] (Leeming JA, Barrett and Gleeson JJA agreeing). Indeed, the trustee's breach of duty may be innocent: Sino Iron Pty Ltd v Palmer (No 3) [2015] QSC 94; [2015] 2 Qd R 574 at 598 (Jackson J). Liability attaches where the third party's conduct can be characterised as intentionally procuring or inducing the breach of trust, and the third party has knowledge of the facts and circumstances which, to a reasonable person, would indicate a breach of trust: Pittmore Pty Ltd v Chan [2020] NSWCA 344; (2020) 104 NSWLR 62 (Pittmore) at [192] (Leeming JA, Bell P and Brereton JA agreeing). In Hasler at [81], Leeming JA referred to the following explanation for the imposition of liability in these circumstances given by Professor Gummow (W Gummow, "Knowing assistance" (2013) 87 Australian Law Journal 311 at 319):

The better view of all species of accessorial or participatory liability is that they are not based upon inflexible formulae, nor are they parasitic upon pre-existing property rights. Rather, the liability is 'fault based', in the sense of responding to what in the eye of a court of equity is unconscientious conduct. The participation of the third party may be presented by a range of circumstances; they may include activity as participant, inducer or procurer.

1. There is no doubt about the application of the foregoing principles to persons who act as agents of the trustee. As long ago as 1844, Lord Langdale MR said "it cannot be disputed, that if the agent of a trustee, whether a corporate body or not, knowing that a breach of trust is being committed, interferes and assists in that breach of trust, he is personally answerable": A-G v Corporation of Leicester [1844] EngR 270; (1844) 7 Beav 176 at 179; [1844] EngR 270; 49 ER 1031 at 1032. That was one of a line of cases in which agents of trustees have been found liable for procuring or assisting in breaches of trust, including Wilson v Moore [1834] EngR 607; (1834) 1 My & K 337 at 353-354; [1834] EngR 607; 39 ER 709, Fyler v Fyler [1841] EngR 463; (1841) 3 Beav 550; 49 ER 216, and Lee v Sankey [1873] UKLawRpEq 6; (1873) LR 15 Eq 204 at 211. It is not apparent why any distinction should be drawn between the position of an agent of the trustee and that of a director of a trustee company. In Australian Securities Commission v AS Nominees Ltd [1995] FCA 1663; (1995) 62 FCR 504, Finn J did not recognise any such distinction, expressing the view that the directors of trustee companies are peculiarly vulnerable to liability for acts which constitute breaches of trust or of fiduciary duty on their company's part (at 522); and that this is so for the reason that it will often be the director's own conduct which causes the company to commit a breach of trust (at 523).
2. In their submissions advanced in support of appeal ground 4, the appellants nevertheless sought to differentiate the position of a director of a trustee company from the position of other agents of a trustee company. They did so primarily on the basis of the decisions of Said v Butt [1920] 3 KB 497 (Said v Butt) and O'Brien v Dawson [1942] HCA 8; (1944) 66 CLR 18 (O'Brien v Dawson). Both cases involved claims for inducing or procuring a breach of contract, and concerned the question whether a director of a company can incur liability for knowingly inducing a breach of contract by the company. The principle by which liability is imposed for inducing a breach of contract was stated by Erle J in Lumley v Gye [1853] EngR 15; (1853) 2 E & B 216 at 232; [1853] EngR 15; 118 ER 749 as follows:

It is clear that the procurement of the violation of a right is a cause of action in all instances where the violation is an actionable wrong ... he who procures the wrong is a joint wrongdoer, and may be sued, either alone or jointly with the agent, in the appropriate action for the wrong complained of.

1. Neither Said v Butt nor O'Brien v Dawson concerned the question that arises in this proceeding: whether a director of a trustee company, whose conduct is the conduct of the trustee company that involves a breach of trust, can be liable for knowingly procuring or inducing the breach of trust. Despite that, the appellants sought to elevate the decisions in Said v Butt and O'Brien v Dawson into a general principle that a director of a company, acting in his or her capacity as such and whose conduct is the wrongful conduct of the company, cannot incur personal liability for the wrongful conduct. Not only is such a broad principle not supported by either Said v Butt or O'Brien v Dawson, it is inconsistent with long-standing lines of authority that define a range of circumstances in which a director may incur personal liability for conduct undertaken as a director, concurrently or jointly with the company or as an accessory to the company's liability.
2. In Said v Butt, McCardie J expressed the obiter view (at 506) that where a servant, acting bona fide within the scope of their authority, procures or causes a breach of a contract between their employer and a third person, the servant does not thereby become liable to an action in tort at the suit of the person whose contract has thereby been broken. The foregoing statement was subject to two significant qualifications. First, the statement was expressly confined to liability for inducing a breach of contract. His Honour stated that the conclusion did not apply more broadly to accessorial liability for knowingly procuring or inducing the commission of tortious wrongs such as trespass to property or nuisance. Secondly, the statement was confined to circumstances in which the servant was acting bona fide within the scope of their authority.
3. O'Brien v Dawson similarly raised the question whether a director of a company, who procures or causes a breach of a contract between the company and a third person, can incur liability in tort for inducing a breach of contract. Williams and Rich JJ concluded that there were no enforceable contracts of the type alleged by the plaintiff, Mr O'Brien, and, accordingly, no breach of contract. Each of Starke and McTiernan JJ concluded that there were enforceable contracts and that the company which was party to the contracts had breached them. However, their Honours concluded that the directors of the company, who made the relevant decisions that constituted the breach of the contracts, were not liable for procuring the breaches (Starke J at 32 and McTiernan J at 34). Their Honours' reasons in that regard are expressly confined to the question of the liability of a director of a company for inducing a breach of contract by the company, and do not apply more broadly to liability for knowingly procuring or inducing the commission of tortious wrongs (let alone a breach of trust by a trustee company).
4. The appellants' contention gains some support from obiter statements made by Leeming JA in Pittmore. While the views of Leeming JA are entitled to great respect, the views expressed by his Honour in Pittmore were not only obiter but equivocal. The views were also expressed in a context of an alleged breach of fiduciary duties where the duties arose from a joint venture between the parties which had a contractual foundation. Leeming JA stated that he had a reservation with respect to the correctness of the proposition that a director of a company, acting as such, is capable of procuring or inducing a breach of trust or fiduciary duty by the company (at [153]). The reason for the reservation was that, in his Honour's view, the proposition sits ill with the position of inducing a breach of contract (as per Said v Butt and O'Brien v Dawson) and the foundation of the fiduciary relationship in Pittmore was contractual (at [162]). Despite expressing that reservation, his Honour acknowledged (at [168]) the statement of Finn J in AS Nominees referred to above, and recognised an argument favouring a distinction between the two forms of ancillary liability in equity (breach of fiduciary duty) and at common law (breach of contract). His Honour continued (at [169]):
   1. ... The essence of a fiduciary relationship is to act in the best interests of another, as opposed to tort and contract where the parties are taken to be independent and equal actors concerned primarily with their own self-interest: see Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 at [40] and Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31 at [71], in both cases approving statements by McLachlin J (in Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 543 and Norberg v Wynrib [1992] 2 SCR 226 at 272). Conceivably the character of the fiduciary relationship might result in a broader approach to ancillary liability than would be the case at common law for inducing breach of contract.
5. With great respect to his Honour, I do not share Leeming JA's reservation with respect to the correctness of the proposition that a director of a trustee company, acting as such, is capable of procuring or inducing a breach of trust by the company. In my view, there is no support in the authorities for extending the principle stated in Said v Butt and O'Brien v Dawson beyond the circumstance of a director being knowingly involved in the company's breach of contract. Indeed, even in that context the principle can be seen to be limited to circumstances in which the director is acting bona fide in the performance of his or her duties as a director. Further, there is no logical basis for differentiating the position of an agent of a trustee and the position of a director of a trustee company.
6. The question whether a director of a company may incur personal liability for conduct undertaken as a director that constitutes wrongful conduct by the company arises in many different circumstances, and includes liability incurred concurrently or jointly with the company and liability incurred as an accessory to the company's wrongful conduct. It is difficult, if not impossible, to state any overarching principle that guides the determination of a director's personal liability for acts performed on behalf of the company that involve wrongful conduct by the company. However, it can be confidently stated that a director of a company is not immune from personal liability for his or her conduct merely because the conduct constitutes wrongful conduct of the company for which the company incurs liability. That can be demonstrated by the following survey of long-standing authorities.
7. Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 (Hamilton v Whitehead) concerned a contravention of s 169 of the Companies (Western Australia) Code which prohibited, in certain circumstances, the public offer or issue of 'prescribed interests' in a company, and s 38(1) of the Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code which imposed accessorial liability upon a "person who aids, abets, counsels or procures, or by act or omission is in any way directly or indirectly knowingly concerned in or party to, the commission of an offence against any relevant Code". The relevant company was charged and convicted of contraventions of s 169, and the managing director of the company, Mr Whitehead, whose acts were the wrongful acts of the company, was charged as an accessory under s 38(1). The High Court (Mason CJ, Wilson and Toohey JJ) affirmed that Mr Whitehead was liable as an accessory. The Court stated (at 127-128, citations omitted, emphasis added):

There can be no doubt, on the facts of the present case, that the respondent [Mr Whitehead], in placing the advertisement and in dealing with those who replied to it, was the company. He was its managing director and his mind was the mind of the company. The company therefore was liable as a principal for the breaches of s. 169 of the Code. The liability was direct, not vicarious.

It is against this background that the liability of the respondent falls to be considered. As we have said, the applicant relies upon s. 38(1) of the Interpretation Code, the terms of which have been set out. Since the respondent was the actor in the conduct constituting the offences and had knowledge of all the material circumstances, it must follow, according to the applicant, that the respondent was "knowingly concerned" in the commission of the offences committed by the company.

In our opinion, the submission is plainly right. Counsel for the respondent sought to gain some comfort from the words of Dixon J. in Mallan v. Lee. But, as we have sought to explain, the inversion of which his Honour spoke has no application here. The company is not vicariously liable for the actions of the respondent. The company is the principal offender and the respondent is charged as an accessory. Franklyn J. [the trial judge] thought that it was "wrong and oppressive" to prosecute the respondent for the identical acts and decisions as were relied on as the acts of the company. There is nothing conceptually wrong in such a course since "it is a logical consequence of the decision in Salomon's Case that one person may function in dual capacities": Lee v. Lees Air Farming Ltd. In Reg. v. Goodall, Bray C.J. discussed what his Honour described as: "some sort of metaphysical bifurcation or duplication of one act by one man so that it is in law both the act of the company and the separate act of himself as an individual" and expressed his conclusion as follows: "my view is that the logical consequence of Salomons Case ... is that the company, being a legal entity apart from its members, is also a legal person apart from the legal personality of the individual controller of the company, and that he in his personal capacity can aid and abet what the company speaking through his mouth or acting through his hand may have done." We agree with this view.

1. In the course of their reasons in Hamilton v Whitehead, the High Court contrasted the circumstances in Mallan v Lee [1949] HCA 48; (1949) 80 CLR 198, explaining (at 126, citations omitted):

In Mallan v. Lee, a complaint was laid in a court of summary jurisdiction against a limited company and Mallan, its public officer. The company was charged with having contravened s. 230 of the Income Tax Assessment Act 1936 (Cth) in that Mallan, as its public officer, had knowingly and wilfully understated, in the company's income tax return, the amount of the company's income for the relevant year. Mallan was charged on the basis that he was directly knowingly concerned in the commission of the offence of the company and reference was made to s. 5 of the Crimes Act. Section 230(1) of the Income Tax Assessment Act provided:

"Any person who, or any company on whose behalf the public officer, or a director, servant or agent of the company, in any return knowingly and wilfully understates the amount of any income or makes any misstatement affecting the liability of any person to tax or the amount of tax shall be guilty of an offence."

The Court held that the complaint against Mallan wrongly relied on s. 5 of the Crimes Act for the reason that s. 230 made him directly liable as a principal for the offence of knowing and wilful understatement of the amount of any income in a return. The offence of the company consisted only in its vicarious responsibility for the act of Mallan undertaken on its behalf. After construing the section in this way, Dixon J. continued:

"On the interpretation I have given to s. 230(1), for more than one reason s. 5 of the Crimes Act cannot apply to a public officer so as to make him an accessory to the offence of the company. In the first place, the public officer's act on behalf of the company making it an offender ipso facto amounts to a substantive offence on his part under s. 230(1). In the second place, the sub-section makes him the actor, the principal, for whose guilty conduct the company is responsible vicariously. It would be an inversion of the conceptions on which the degrees of offending are founded to make the person actually committing the forbidden acts an accessory to the offence consisting in the vicarious responsibility for his acts."

1. The High Court in Hamilton v Whitehead also referred (at 129) to certain statements made by the plurality (Mason ACJ, Wilson, Deane and Dawson JJ) in Yorke v Lucas (1985) 158 CLR 661 which expressed doubt that a director of a company, whose acts were the acts of the company that constituted a contravention of s 52 of the Trade Practices Act 1974 (Cth), could incur liability as an accessory within the meaning of ss 75B and 82 of that Act, relying on the reasoning of Dixon J in Mallan v Lee. The High Court in Hamilton v Whitehead observed (at 129-130):

It would seem to us, with respect, that this reservation, made no doubt out of an abundance of caution, was unnecessary. The provisions of the Trade Practices Act, like the Code in the present case but unlike s. 230 of the Income Tax Assessment Act, were such that the alleged accessory was indeed a true accessory since the offence committed by the company was not the consequence of a vicarious liability for the actions of its servants carried out on its behalf. It was the consequence of actions undertaken directly by it, that is to say by a person who was the embodiment of the company.

1. A different question arose in Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553. In that case, the High Court confirmed that employees of a company who engaged in misleading and deceptive conduct in the course of their employment may incur personal liability for contravening the prohibition against misleading and deceptive conduct in s 9(1) of the Fair Trading Act 1999 (Vic), notwithstanding that they had been acting in the trade or commerce of the company and not of themselves. In other words, the employees were directly liable under s 9(1), and not liable merely as accessories. Relevantly for present purposes, the High Court (at [40]) referred with approval to the statement of Lord Rodger of Earlsferry in Standard Chartered Bank v Pakistan National Shipping Corporation [No 2] [2002] UKHL 43; [2003] 1 AC 959 (Standard Chartered Bank) at 973-974 that, in the world of tort, the status of an individual as an employee does not divest that person of personal liability for wrongful acts committed while an employee. The High Court concluded that there was no good reason for treating the text of s 9(1) any differently. Standard Chartered Bank concerned an action in tort against a managing director of a company (Mr Mehra) for fraudulent misrepresentation. Mr Mehra argued that he could not be liable because he made the fraudulent misrepresentations in his capacity as managing director of the company (Oakprime). Lord Hoffmann observed (at 968) that the fact that, by the law of agency, the conduct and knowledge of Mr Mehra is attributed to Oakprime (and would be relevant in an action against Oakprime) does not detract from the fact that they were the conduct and knowledge of Mr Mehra for which he was personally liable. Lord Rodger of Earlsferry stated (at 973-974, emphasis added):

36 ... The company is a separate entity, distinct from the directors, employees and shareholders. The law has rightly insisted that the distinction should be duly observed: Lee v Lee's Air Farming Ltd [1961] AC 12. In particular the company does not act as the agent of the directors and, in general, they do not incur personal liability for the acts of the company or its employees: Rainham Chemical Works Ltd v Belvedere Fish Guano Co Ltd [1921] 2 AC 465, 488, per Lord Parmoor. Directors may, however, be personally liable if they directed or procured the commission of a wrongful act. The exact scope of this type of liability has been discussed in a line of cases. Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1, 14, per Atkin LJ and C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317 may serve as examples.

...

39 At the heart of the Court of Appeal's decision is the view that, because Mr Mehra was a director of Oakprime and acted as such when cheating Standard Chartered, his acts must be regarded solely as the acts of Oakprime and he should have no personal civil liability for them. As Mr Cherryman acknowledged, no man could escape the clutches of the criminal law by the simple device of showing that he had carried out his frauds in his capacity as a director of a company and in circumstances where his acts were to be attributed to the company: Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. In R v ICR Haulage Ltd [1944] KB 551, 559, for example, both the managing director and, through him, the haulage company were convicted of conspiracy to defraud. His acts "were the acts of the company and the fraud of that person was the fraud of the company". In the world of tort, however, all was said to be more happily arranged for the fraudster. He could use the device of acting as a director to escape any liability to his victims: they were to be regarded not as his victims but just as the victims of the company's fraud. His fraud might be the fraud of the company but, somehow or other, it was not his own fraud.

40 My Lords, the maxim culpa tenet suos auctores may not be the end, but it is the beginning of wisdom in these matters. Where someone commits a tortious act, he at least will be liable for the consequences; whether others are liable also depends on the circumstances. ... His status as a director when he executed the fraud cannot invest him with immunity.

1. It is well established that infringement of a trade mark or copyright is tortious and the common law principles as to the liability of joint tortfeasors are applicable. As such, a director of a company may be liable as a joint tortfeasor for infringement by the company. Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1 (Performing Right Society) concerned alleged copyright infringement by a company and its managing director in authorising musical works to be performed. Atkin LJ observed that "[p]rima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done" (at 14). The principles to be applied in determining whether a director of a company has become a joint tortfeasor with the company in the context of an infringement of intellectual property rights were discussed in Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 (Keller) (which concerned the infringement of a registered design) and JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20; 329 ALR 625 (JR Consulting) (which concerned infringement of copyright). The two judgments reveal that the applicable principles may not be entirely settled. Nevertheless, after a detailed survey of the authorities, the Full Court in JR Consulting, concluded (at [350]-[351], emphasis in original):

350 We suspect that there is ultimately not a great deal of difference between these lines of authority as the director must be shown to have directed or procured the tort and the conduct must, clearly enough, go beyond causing the company to take a commercial or business course of action or directing the company's decision-making where both steps are the good faith and reasonable expression of the discharge of the duties and obligations of the director, as a director. The additional component required is a "close personal involvement" in the infringing conduct of the company and inevitably the quality or degree of that closeness will require careful examination on a case by case basis. That examination might show engagement by the director of the kind or at the threshold described by Finkelstein J in Root Quality at [146] (as earlier discussed) which would undoubtedly establish personal liability in the director or a less stringent degree of closeness (perhaps described as "reckless indifference" to the company's unlawful civil wrong causing harm), yet sufficiently close to demonstrate conduct of the director going beyond simply guiding or directing a commercial course and engaging in (perhaps vigorously) decision-making within the company as a director.

351 Ultimately, the question, on the facts, is what was the conduct of the director said to go beyond the proper role of director so as to descend into the realm of "close personal involvement"?

1. The applicable principles in determining whether a director has become a joint tortfeasor in the context of trade mark infringement were recently considered by the United Kingdom Supreme Court in Lifestyle Equities CV v Ahmed [2024] UKSC 17; [2025] AC 1 (Lifestyles Equities). Lord Leggatt JSC delivered judgment on behalf of the Court. His Lordship commenced with the foundational principle that infringements of trade marks (and other intellectual property rights) are regarded as torts, and the principles by which, under the common law, a person may be held jointly liable with another person for a tort are applied to infringements of statutory intellectual property rights (at [27]). With respect to the principles by which a person may incur liability for procuring or assisting a tortious act, his Lordship concluded (at [135]):

135 To summarise, there is a general principle of the common law that a person who knowingly procures another person to commit an actionable wrong will be jointly liable with that other person for the wrong committed. The liability of the procurer is an accessory liability. Where the primary wrong is a breach of contract, this accessory liability takes the form of a distinct tort. Where the primary wrong is a tort, however, there is no need to posit a separate tort of procuring another person to commit a tort. Where the general principle applies, the procurer is made jointly liable for the tort committed by the primary wrongdoer.

136 There is a further, distinct principle of accessory liability by which a person who assists another to commit a tort is made jointly liable for the tort committed by that person if the assistance is more than trivial and is given pursuant to a common design between the parties. On the facts of a particular case both principles may be engaged. But on the present state of the law assistance which falls short of procuring the primary wrongdoer to commit the tort cannot lead to liability unless it is given pursuant to a common design.

137 Although procuring a tort and assisting another to commit a tort pursuant to a common design are distinct bases for imposing accessory liability, they must operate consistently with each other and such that the law of accessory liability in tort is coherent. Considerations of principle, authority and analogy with principles of accessory liability in other areas of private law all support the conclusion that knowledge of the essential features of the tort is necessary to justify imposing joint liability on someone who has not actually committed the tort. This is so even where, as in the case of infringement of intellectual property rights, the tort does not itself require such knowledge. As Paul Davies says in his excellent book on Accessory Liability (2015) p 211: "Strict liability might suffice for the primary tort but should not be sufficient for accessory liability."

1. As to the position of a director of a company who is involved in the commission of a wrongful act by the company, Lord Legatt JSC stated (at [33]) that there is no general principle of English law - whether of company law, the law of agency or the law of tort - which exempts a director, acting in that capacity, from ordinary principles of tort liability. His Lordship observed (at [35]) that rules of attribution, by which acts of individuals are attributed to a company, do not operate in reverse to cause acts attributed to the company to be treated as if they were not acts of the individual who did those acts. It does not follow that, because an act done by a director or other individual is treated as the company's act for which the company can be held liable, the director is immunised from liability.
2. In the course of his reasons, Lord Leggatt JSC considered the principle stated in Said v Butt and concluded that there was good reason for limiting the principle to inducing a breach of contract, explaining (at [54]):

I think that the rule stated in Said v Butt is sound and that there is a good reason to distinguish between an agent who procures a breach of contract by the principal and an agent who commits or procures the commission of such torts as those mentioned by McCardie J in the passage quoted at para 49 above. Essentially, it is the reason suggested by the Singapore Court of Appeal in Arthaputra for limiting the principle to breach of contract. I would explain it in this way. When parties make a contract, unless the contract is personal in nature, the general rule is that a party may employ agents to carry out its obligations. When the contracting party is a company, that is of course the only possible means of performance. If a company breaks a contract, that must be because one or more agents of the company have caused the breach. When an agent, acting as such, makes a contract, the normal understanding is that the agent assumes no liability towards the other contracting party. Only the principal does. Similarly, the normal understanding is that, if the agent causes the principal to break the contract, only the principal will incur liability to the other contracting party, and not the agent. This is, I think, a general norm or social understanding which the law should and does reflect.

1. As can be seen from the foregoing statement, the principle in Said v Butt is not based on any form of immunity that is afforded to directors of a company for intentionally procuring the company to undertake wrongful conduct. The principle is based on the nature of the wrongful conduct, being a breach of contract. In that respect, no distinction is drawn between a director of a company and any other agent of the company.
2. There is no support in the authorities, and no reason in principle, to treat a director differently from any other agent of a trustee company when considering whether the conduct and knowledge of the director or agent involves the knowing procurement or inducement of a breach of trust. If the director intentionally causes the trustee company to engage in conduct in breach of trust, and has knowledge of the facts and circumstances which, to a reasonable person, would indicate a breach of trust, the director will incur liability for knowingly procuring or inducing the breach of trust. The findings of fact made by the primary judge, which are also set out in the reasons of O'Callaghan J, overwhelmingly support the primary judge's conclusion that the appellants knowingly induced or procured the breaches of trust by Gold Stone.
3. I would also dismiss ground 4 for those additional reasons.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.

1. I agree with O'Callaghan J that Ms Lin's appeal and Mr Cai's appeal must both be dismissed and that the orders he proposes should be made. I also agree with his Honour's reasons in respect of Ms Lin's grounds 1, 2, 6 and 7, and Mr Cai's grounds 1, 2, 5, 6, and 8.
2. I agree that ground 4 in Ms Lin's appeal and grounds 3, 4, 9 and 12 in Mr Cai's appeal should be dismissed. However, I wish to separately state my reasons for reaching those conclusions. I will also explain why I am of the view that ground 3 in Ms Lin's appeal should be dismissed, although I will do so in short form as I am in the minority and, as O'Callaghan J has explained, the outcome of that ground of appeal has no effect on the outcome of Ms Lin's appeal.
3. I agree with O'Callaghan J, for the reasons he has expressed, that Mr Wu's appeal should be allowed, and that the orders he proposes in respect of that appeal should be made.
4. I am indebted to O'Callaghan J for his Honour's detailed description of the factual context in which these appeals were argued and for his clear elucidation of the many intertwined contentions made on behalf of Ms Lin, Mr Cai and Mr Wu in support of their grounds of appeal. I have adopted the various defined terms used by O'Callaghan J in his reasons and the short titles of cases used by both O'Callaghan J and O'Bryan J in their respective reasons. I am also grateful to O'Bryan J for his Honour's analysis of the authorities relating to the liabilities of directors of companies.
5. For the sake of convenience, I will first deal with Ms Lin's ground 3 and then Mr Cai's ground 3. I will then deal with Ms Lin's ground 4, together with Mr Cai's grounds 4, 9 and 12, as they raise the same issues.
6. Before turning to those grounds of appeal, it is important to emphasise that Ms Lin's grounds of appeal are focused on the primary judge's findings that Gold Stone made three loans that were not authorised by the Fund Constitution (ground 1) and, in respect of only one of the loans, that it was made for an improper purpose (ground 2). Further, Ms Lin contends that the primary judge erred in finding that she was personally liable in respect of all of the breaches of trust because she knowingly procured those breaches (grounds 3 and 4) and on the further basis that she had knowingly assisted in those breaches (grounds 6 and 7). However, Ms Lin has not challenged the primary judge's finding that Gold Stone committed breaches of trust by making three imprudent loans. This means that even if Ms Lin is successful on all of her other grounds, unless she is successful in her challenge (by ground 4 of her notice of appeal) to the primary judge's conclusion that she knowingly induced or immediately procured Gold Stone to make imprudent loans, her appeal cannot succeed.
7. Mr Cai is in a similar position. However, Mr Cai also challenges the primary judge's conclusion that he knowingly induced or immediately procured Gold Stone to make the three loans on the basis that his Honour gave inadequate reasons for reaching that conclusion (ground 3). Accordingly, for Mr Cai to succeed in his appeal against the orders made by the primary judge that are concerned with the three loans, at least one of ground 3 or ground 4 in his appeal must be allowed.
8. Mr Cai was also found to have knowingly induced or immediately procured two other categories of breaches of trust that were committed by Gold Stone. By ground 8, Mr Cai challenges only one category of those breaches of trust, which the primary judge found had been committed by Gold Stone by making various repayments to GDI from settlement funds that had been paid to Gold Stone by the liquidators of MVLC and MVDA (J [244]).
9. Grounds 9 and 12 raise the same issue that is raised by Mr Cai in the context of his ground 4, and that is raised by Ms Lin's ground 4. Ground 9 is specifically concerned with the category of breaches of trust constituted by Gold Stone's repayments to GDI. Ground 12 is concerned with the second category of breaches of trust, which relate to several payments that were made by Gold Stone from the settlement funds, and which the primary judge found amounted to misappropriations.

The primary judge erred at J[210] in finding that the Plaintiffs' allegations were not confined to conduct in Ms Lin's capacity as a director and ought to have found that [Ms] Lin negotiated the Loans on behalf of Gold Stone in her capacity as a director.

1. The relevant passage at J [210] about which Ms Lin complains is as follows:

In the present case, except in relation to Mr Cai, the question whether a director acting purely in his or her capacity as director as one of the organs of a company is capable of procuring or inducing a breach of trust is academic, in that the plaintiffs' allegations for this cause of action against Ms Lin and Mr Darmali in the Third Further Amended Statement of Claim are not confined to conduct by them merely in their alleged capacity as directors (see paras 16(e) and 19(d)). For completeness, I note that Ms Lin by her counsel conceded that she was a director within the extended meaning of para (b) of the definition of 'director' in s 9 of the [Corporations Act]. That definition covers a person who is not validly appointed as a director if (i) they act in the position of a director (commonly referred to as a de facto director), or (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes (commonly referred to as a shadow director).

1. For context, in the immediately preceding paragraphs the primary judge referred to the judgment of Leeming J in Pittmore v Chan, where the question of whether a director, in their capacity as a director, can procure or induce a breach of trust by the director's company was discussed.
2. A difficulty with the ground is that it wrongly asserts that the primary judge erred in finding that the plaintiffs' allegations that Ms Lin negotiated the Loans on behalf of Gold Stone were not confined to conduct that occurred in her capacity as a director.
3. At paragraph 158 of the 3FASOC, it was relevantly pleaded that Ms Lin 'negotiated the Loans on behalf of Gold Stone'. The particulars provided in connection with that plea referred to the particulars provided earlier in the 3FASOC at paragraph 19. Those particulars were provided in support of pleas that Ms Lin was an employee of Gold Stone and, in the alternative, that she was a person 'who had a relationship with Gold Stone'. Insofar as it was alleged that Ms Lin was an employee of, or that she was someone who had a relationship with, Gold Stone at paragraph 19(c) and 19(d) of the 3FASOC, respectively, it was pleaded that she was someone who, on behalf of Gold Stone, in its capacity as trustee of the Fund, had responsibilities for 'identifying and negotiating investments into which Gold Stone would invest the Fund's money'.
4. However, as O'Callaghan J has observed, the real purpose of this ground may have been to bring Ms Lin within the rule in Said v Butt, to provide a platform for the arguments raised in support of Ms Lin's ground 4. That this is so emerges from the contention that is made in ground 3 that the primary judge should have found that Ms Lin negotiated the Loans on behalf of Gold Stone in her capacity as a director.
5. The problem with ground 3 is that Ms Lin was never formally appointed as a director of Gold Stone. It is true that Ms Lin conceded at trial that she was a director under the extended definition in s 9 of the Corporations Act. However, while satisfaction of that statutory definition may have consequences for a person under that Act, the label of 'director' that is assigned by operation of that provision adds nothing of itself to the question of whether such a person will otherwise fall within the rule in Said v Butt.
6. Accordingly, I would dismiss ground 3 on that basis.
7. Whether the 'rule' in Said v Butt applies does not, in my view, depend on whether a person who is alleged to have induced a company to breach a contract with a third party was formally acting as a director of that company, or whether they happened to satisfy the definition of 'director' under the Corporations Act. The real question is whether that person was acting as an organ of the company such that their acts of inducement were the acts of the company. This was the underlying rationale for McCardie J's conclusion that if a servant acting bona fide within the scope of their authority procures or causes the breach of a contract between their employer and a third person, they are not liable for the tort of inducing a breach of contract. As his Honour said at 505:

But the servant who causes a breach of his master's contract with a third person seems to stand in a wholly different position. He is not a stranger. He is the alter ego of his master. His acts are in law the acts of his employer. In such a case it is the master himself, by his agent, breaking the contract he has made, and in my view an action against the agent under the Lumley v. Gye [(1853) [1853] EngR 15; 2 El & Bl 216; 118 ER 749] principle must therefore fail, just as it would fail if brought against the master himself for wrongfully procuring a breach of his own contract.

(Emphasis added.)

1. In this case, the primary judge found that Ms Lin played a 'very substantial role in directing the affairs of Gold Stone and the Fund' and that she was the 'driving force in the establishment and operation of the Fund' (J [212]). Significantly, his Honour accepted affidavit evidence Ms Lin had given in other proceedings in which she referred to Gold Stone as 'my company' and to the Fund as 'my mortgage fund' (J [212]). The primary judge also found that Ms Lin 'was the person on behalf of Gold Stone who carried out the discussions and negotiations with Mr Fong, including in relation to the three loan agreements' (J [213]). Based on those findings, Ms Lin was plainly a 'directing mind and will' of Gold Stone, and a relevant person whose acts were to be attributed to the company.
2. Accordingly, while I would dismiss ground 3, the primary judge's findings provide a sufficient basis to justify a conclusion that Ms Lin's acts of negotiating the three loans on behalf of Gold Stone were the acts of Gold Stone. However, this conclusion can only offer cold comfort to Ms Lin. That is because I am of the view that Ms Lin's ground 4 must be dismissed.

1. I agree with what O'Callaghan J has written about this ground. I only wish to add some further reasons for why I would also dismiss this ground.
2. It should be noted that although Mr Cai's ground 3 was expressed in general terms, consistently with Mr Cai's submissions, I have proceeded on the basis that the ground is concerned only with the breaches of trust found to have been committed by Gold Stone by making the three loans.
3. The content and level of detail required in reasons will vary, depending on the nature of the jurisdiction which a court is exercising and the particular matter the subject of the decision. However, 'the usual baseline for adequacy of reasons is that they "identify the principles of law applied by the judge and the main factual findings on which the judge relied"': Chief Commissioner of Police (Vic) v Crupi [2024] HCA 34; (2024) 98 ALJR 1131 at [19] (Gageler CJ, Edelman and Beech-Jones JJ).
4. As I have already noted, Mr Cai does not challenge the primary judge's finding that in making the three loans, Gold Stone committed breaches of trust because they were imprudent investments. Accordingly, before this ground can have any effect on the relief granted by the primary judge, Mr Cai must at least establish that his Honour's reasons for concluding that Mr Cai had the requisite knowledge, in the context of the claims of knowing inducement to make imprudent loans, were inadequate. If Mr Cai fails in that endeavour, then the finding that Mr Cai was liable based on that claim is sufficient in and of itself to justify the relief granted to Ms Chu and Mr Xu.
5. Even if I were to proceed on an assumption favourable to Mr Cai that aspects of the primary judge's reasons were inadequate, the difficulty for Mr Cai is that his Honour's reasons very clearly identify and explain his factual findings that lead to his conclusion that Mr Cai had the requisite knowledge in the context of the claims of knowing inducement to make imprudent loans. In that regard, the primary judge made the following findings about Mr Cai's knowledge of the facts that rendered the three loans imprudent at J [221]:

Mr Cai also knew of the facts which rendered the three loans recklessly imprudent investments. As I have said, he knew that the security for the loans was non-existent, and must have observed that the interest rates referred to in the three loan agreements were extraordinarily high, reflecting the very high risk involved in making the loans. He did not undertake any due diligence, and did not believe that anyone else on behalf of Gold Stone had done so.

1. Plainly, a finding that Mr Cai knew that the security for the loans was non-existent was a sufficient basis in and of itself to conclude that Mr Cai had the requisite knowledge to be liable for knowingly inducing or immediately procuring Gold Stone's breach of trust by making imprudent investments. Importantly, it is patently clear from the primary judge's reasons that this finding about Mr Cai's knowledge was based on some earlier findings of fact, namely:

(a) As a licensed real estate agent, Mr Cai knew what a mortgage was, understood that strata plans had to be registered, and had been involved in several off-the-plan sales: J [218].

(b) Mr Cai took part in a conversation with Mr Fong in which Mr Fong said that he did not own the properties that were referred to as the mortgaged property in the First MVDA Loan Agreement: J [218].

(c) In relation to the First MVDA Loan and the Second MVDA Loan, Mr Cai was aware that the purported security comprised non-existent properties: J [219].

(d) Mr Cai had 'actual knowledge that the three loan agreements were not secured by mortgages over real property': J [220].

1. In relation to the last finding, at J [220], the primary judge explained that he reached that conclusion having rejected Mr Cai's evidence to the contrary. Earlier in his Honour's reasons, the primary judge very clearly explained why he reached the view that Mr Cai was 'an unsatisfactory and unreliable witness who was determined to say whatever he perceived to be in his forensic interests': J [25].
2. The primary judge's reasons for concluding that Mr Cai had the requisite knowledge to be liable for knowingly inducing or immediately procuring Gold Stone's breach of trust by making imprudent investments were not inadequate.
3. Ground 3 must be dismissed.

Ms Lin's appeal - Ground 4; Mr Cai's appeal - Grounds 4, 9 and 12

1. By ground 4 in each of their appeals, Ms Lin and Mr Cai challenge the primary judge's findings that they knowingly procured three of the four breaches of trust that are referred to at [15] of the reasons of O'Callaghan J.
2. At trial, Ms Chu and Mr Xu relevantly alleged that Gold Stone committed four breaches of trust by 'making' three loans, in circumstances in which each of those loans were unauthorised by the Fund Constitution, were imprudent investments, or were made for improper purposes. Ms Lin was alleged to have knowingly procured each of those breaches of trust by '[negotiating] the Loans on behalf of Gold Stone': 3FASOC at paragraph 158. Mr Cai was alleged to have knowingly procured the breaches because he 'signed each of the MVLC Loan Agreement, the First MVDA Loan Agreement, and the Second MVDA Loan Agreement': 3FASOC at paragraph 159.
3. Neither Ms Lin or Mr Cai suggest that the primary judge did not find, or that he was in error in finding, that they did engage in the conduct relied on by Ms Chu and Mr Xu as constituting the acts of procurement. Ms Lin does not challenge the primary judge's finding that she had the knowledge required to otherwise justify a conclusion that she was a participant in the relevant breaches of trust found to have been committed by Gold Stone. Mr Cai does challenge that finding, but only on the basis that the primary judge failed to give adequate reasons for that finding (ground 3). As has been seen, I would dismiss that ground of appeal.
4. Further, having regard to what I have said in the context of Ms Lin's ground 3, and as Mr Cai was formally appointed as a director of Gold Stone, it may be accepted that when they engaged in such conduct, both Mr Cai and Ms Lin were acting as the controlling organs of Gold Stone.
5. It is against this factual background that Ms Lin and Mr Cai argue that because their relevant conduct was conduct that was carried out only in their capacity as a director (or organ) of Gold Stone, and not in their personal capacity, it was not open to the primary judge to conclude that they were liable for having knowingly procured the relevant breaches of trust.
6. Mr Cai presses the same argument in support of his grounds 9 and 12, which, as I have explained, relate to several other separate breaches of trust which concerned payments made by Gold Stone out of settlement funds paid by the liquidators of MVDA and MVLC. Once again, Mr Cai does not challenge the primary judge's findings that the payments were made, or that Mr Cai authorised each of the payments, or that he had the knowledge required to be liable as a participant in the breaches of trust when those payments were made. However, Mr Cai argues that when he authorised the payments he was acting, and only acting, in his capacity as a director of Gold Stone. On that basis, Mr Cai argues that the primary judge erred in finding that he was liable because he knowingly induced or immediately procured Gold Stone's breaches of trust.
7. By their grounds of appeal, Ms Lin and Mr Cai appear to make two separate although related contentions. The first is that, as a matter of general principle, a person cannot be liable as a participant in a breach of trust committed by a company, on the ground that the person knowingly induced or immediately procured the breach, where the alleged acts of inducement or procurement are carried out by that person while acting only in their capacity as a director of the company. It appears to be asserted that such conduct could only ever be an act of the company and therefore could not, at the same time, amount to an independent act of the director. In support of this contention, Ms Lin and Mr Cai rely on what was said by McCardie J in Said v Butt, and what was later separately said by Starke J and McTiernan J in O'Brien v Dawson.
8. The essential principle that has now emerged from Said v Butt and O'Brien v Dawson is that a director of a company, acting as such, will not incur tortious liability to a party to a contract with that company, for knowingly procuring or inducing the company to break the contract. This principle has been regularly applied in Australia: see, for example, Realtek Holdings Pty Ltd v Wetamast Pty Ltd [2019] NSWSC 1869 at [242]- [243], citing Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 at [17]- [29], Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980; (2000) 177 ALR 231 at [125]- [136], Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206; (2000) 18 ACLC 285 at [11]- [14] and Multinail Australia Pty Ltd v Pryda (Aust) Pty Ltd [2002] QSC 105 at [121]- [126].
9. Importantly, as the obiter reasons in each of Said v Butt and O'Brien v Dawson demonstrate, the underlying premise or rationale for this principle is that when a director of a company acts as such, their acts are the acts of the company, and that they are not at the same time the personal acts of the director. Earlier in these reasons at [341] I reproduced the passage from McCardie J's judgment in Said v Butt where this is made clear. The relevant passages from the separate reasons of Starke J and McTiernan J in O'Brien v Dawson are reproduced in the reasons of O'Callaghan J and need not be repeated here.
10. Ms Lin and Mr Cai submit that the underlying rationale for the rule in Said v Butt has been applied in other contexts, suggesting that it has broader application. Specifically, they rely on the following passage in Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88; (2023) 111 NSWLR 304 at [293], a case in which it was argued that a company's former chief financial officer and former treasurer were liable as accessories for the company's alleged negligence or misleading or deceptive conduct:

Thus, the liability of a director for procuring a tort of the company is a form of joint liability, the director and the company being joint tortfeasors. Where the director or officer is merely acting as a corporate organ in the ordinary way, no such liability arises, just as a director of a company is not liable for inducing a breach of contract by the company where the director is no more than the individual through whom the company acts. In order to incur liability as a joint tortfeasor, the director must be so personally involved in directing or procuring the tort as to "make it his or her own" tort, above and beyond reasonably and in good faith directing the company's decision-making as a director.

(Emphasis added, footnotes omitted.)

1. However, notwithstanding what was said in Anchorage, or in the decision of this Court in JR Consulting, upon which the New South Wales Court of Appeal placed considerable reliance, the underlying rationale for the rule in Said v Butt and in O'Brien v Dawson cannot be elevated to one of general application. To so hold would at least be inconsistent with the decision of the High Court in Hamilton v Whitehead.
2. The circumstances in Hamilton v Whitehead have been summarised by O'Bryan J. The facts of that case reveal that the acts comprising the conduct element of the offence alleged to have been committed by the company in question was physically carried out by its own managing director. In carrying out those acts, the director was the company. Therefore, the company was directly (not vicariously) liable. However, and importantly, it was in this context that the High Court said that there was nothing conceptually wrong with the company being liable as a principal offender while at the same time, and in respect of the same conduct, the managing director being liable as an accessory. The High Court evidently agreed with observations that were made in Lee v Lees Air Farming Ltd [1961] AC 12 at 26, that one person may function in dual capacities. Further, the High Court referred to what was said by Bray CJ in R v Goodall (1975) 11 SASR 94 at 101, that

the company, being a legal entity apart from its members, is also a legal person apart from the legal personality of the individual controller of the company, and that he in his personal capacity can aid and abet what the company speaking through his mouth or acting through his hand may have done.

(Emphasis added.)

1. The decision in Hamilton v Whitehead was referred to in a later decision of the High Court in Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553, with evident approval. In that case, employees of a company were alleged to have made misleading or deceptive statements to one of the company's clients. At first instance, judgment was given against the company, but the proceedings against the employees were dismissed because neither of them had engaged in trade or commerce on their own account as distinct from their roles as employees of the company. An appeal against the decision to dismiss the proceedings against the employees was allowed. That decision was affirmed on appeal to the High Court.
2. In the High Court it was argued that if company employees, officers or directors act only as the company, it is the company that engages in the relevant conduct, not the individuals. In that regard, the appellants attempted to gain support from what had been said in Hamilton v Whitehead. However, the Court found that the reasoning in Hamilton v Whitehead assisted the respondent, and not the appellants.
3. Ms Lin and Mr Cai make a second, and narrower (although related), contention. They argue that a principle that emerges from Said v Butt, and from O'Brien v Dawson, namely, that a director acting as such will not be liable for inducing the company of which they are a director to breach a contract with a third person, also applies to deny liability for such a director for the equitable wrong of knowing inducement or immediate procurement of a breach of trust. However, because the rule in Said v Butt (and in O'Brien v Dawson) has no direct application to that equitable wrong, and in the absence of any authority to that effect, Ms Lin and Mr Cai are driven to argue that the rule applies because the wrong is analogous with the tort of inducing a breach of contract. As Ms Lin put it in her written submissions in reply at paragraph 25:

The question for this Court is whether - having regard to the High Court's decision in O'Brien v Dawson ... and the position at law concerning a director's liability for inducing a breach of contract - equity must follow the law.

1. Ms Lin and Mr Cai say that this court should apply the maxim, 'equity follows the law', by adopting the same reasoning used by King CJ in Coulthard v South Australia [1995] SASC 4927; (1995) 63 SASR 531, a case which concerned the question of whether the doctrine of vicarious liability should be applied to equitable liability for breach of confidence, by analogy. As Ward CJ in Eq (as her Honour then was) noted in Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58 at [1732], King CJ reasoned in Coulthard on the basis of; first, the analogy of the particular equitable wrong with a common law tort; second, the equitable maxim that equity follows the law; and third, that equity would act upon the conscience of the employer to accept responsibility for the employee's wrong.
2. It may be accepted that the tort of procuring a breach of contract and the equitable wrong of knowingly inducing or immediately procuring a breach of trust 'share rationales and fulfill similar functions in their respective areas of law': McHugh M, 'Directors' Liability for Inducing a Breach of Trust or Fiduciary Obligation' (2024) 140 LQR 223-249, 238. However, as the Hon William Gummow AC said in his paper, 'Knowing Assistance' (2013) 87 ALJ 311 at 318, '[t]he analogy with the tort of intentional interference with contractual relations should not be pressed too far'.
3. In my view, it is sufficient to note in that regard that the remedies that are available for inducing a breach of contract are significantly different, when compared to the remedies available for knowingly inducing a breach of trust. The remedy for the former is an award of damages. On the other hand, knowing inducement renders a person accountable as a constructive trustee (Farah Constructions at [161]), which may give rise to an award of equitable compensation, an account of profits, or proprietary remedies. Those differences reflect the fundamentally different characteristics of the respective wrongs, and the purposes they seek to achieve. Further, as Lord Nicholls said in Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4; [1995] 2 AC 378 at 386‑387:

Affording the beneficiary a remedy against the third party serves the dual purpose of making good the beneficiary's loss should the trustee lack financial means and imposing a liability which will discourage others from behaving in a similar fashion.

1. That observation has obvious force in circumstances in which there is a corporate trustee.
2. As the respondents point out in their written submissions at paragraph 106, McLachlin J in Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 543 (quoted with approval in Youyang Pty Limited v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at [40]) said:

The basis of the fiduciary obligation and the rationale for equitable compensation are distinct from the tort of negligence and contract. In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self-interest. Consequently the law seeks a balance between enforcing obligations by awarding compensation and preserving optimum freedom for those involved in the relationship in question, communal or otherwise. The essence of a fiduciary relationship, by contrast, is that one party pledges itself to act in the best interest of the other. The fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged.

1. Pausing to highlight the last sentence in the above passage taken from Canson Enterprises, I express my agreement with O'Callaghan J that equity would not follow the law so as to, in effect, provide an immunity to a person who knowingly procures a breach of trust by a company, by dint of the fact that the person's acts are also attributed to that company because they are one of its directors or organs acting as such. In my view, equity would act upon the conscience of a director (or other organ) of a corporate trustee to accept responsibility for having induced or immediately procured a breach of trust by that company.
2. In this context, it is important to appreciate that even before Barnes v Addy was decided, there had already been a line of cases (including Fyler v Fyler [1841] EngR 463; [1841] 49 ER 216; (1841) 3 Beav 550 at [561]- [562], [567]-[568]; Alleyne v Darcy (1854) 4 Ir Ch Rep 199 at 209 and Eaves v Hickson [1861] EngR 831; [1861] 54 ER 840; (1861) 30 Beav 136) where it was recognised that a third party might be liable in equity for knowingly inducing or immediately procuring a breach of trust (see Farah Constructions at [161]). As Ms McHugh points out at page 238 of her paper, to which I have already referred, this demonstrates that '[t]he inducing breach of trust claim evolved in Chancery to protect trust beneficiaries before the development of the [tort of inducing a breach of contract in] Lumley v Gye... [(1853) [1853] EngR 15; 2 El & Bl 216; [1853] 118 ER 749]' (Footnotes omitted, emphasis added).
3. It must also be noted that while the two 'limbs' of accessorial liability in Barnes v Addy are concerned with two other distinct bases on which a third party may be treated as a participant in a breach of trust, namely 'knowing receipt' and 'knowing assistance' (Farah Constructions at [163]), and although Lord Selborne LC's famous statement should not be read as a statutory enactment, it is nonetheless significant that the statement expressly contemplates that agents may be liable as a participant even if acting 'within their legal powers':

Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

(Emphasis added.)

1. Ms Lin and Mr Cai have not referred to any authority in which that statement has been qualified by the rule in Said v Butt, applied by analogy or otherwise. In fact, there are cases in which directors have been held liable as knowing assistants of breaches of trust committed by the companies of which they were a director: see, for example, Biala Pty Ltd v Mallina Holdings Ltd (No 4) (1993) 11 ACSR 785; (1993) 13 WAR 11 and NCR Australia v Credit Connection Pty Ltd [2004] NSWSC 1.
2. In the absence of any authority to support Ms Lin's and Mr Cai's contention, and having regard to equity's long-standing recognition of the wrong of inducing or immediately procuring a breach of trust, which, as I have already said, pre-dated both Lumley v Gye and Said v Butt, I am of the view that equity would not follow the law in these circumstances and apply the rule in Said v Butt, by analogy.
3. I agree with O'Bryan J that the obiter statements made by Leeming J in Pittmore must be afforded great respect. However, in light of what I have said, I do not think that there is any relevant inconsistency between the rule in Said v Butt applying in the context of the tort of inducing a breach of contract, and it not being a rule that is applied to the equitable wrong of inducing or procuring a breach of trust.
4. Ms Lin and Mr Cai submit that the decision of the Supreme Court of the United Kingdom in Lifestyle Equities supports their argument. They contend that in that case, the Supreme Court confirmed the continued application of the rule in Said v Butt and, further, held that it was a rule of more general application to relationships that are equivalent to contract and involve an assumption of responsibility. However, while the Supreme Court did conclude that the rule in Said v Butt is 'sound' (at [54]), it did not reach that conclusion on the basis of the rationale upon which McCardie J originally reached his decision.
5. At [50] of his Honour's judgment, Lord Leggatt (with whom the other members of the Court agreed), identified the reason given by McCardie J in Said v Butt for the rule that an agent or employee who procures their principal or employer to break a contract with a third person is not liable in damages to that person, in the following terms:

[I]f an employee or agent acting within the scope of their authority causes their principal to break a contract, then their act (on ordinary agency principles) is to be attributed to the principal. Thus, if the agent could be held liable in tort for inducing a breach of the contract, so too could the principal. Yet this would result in the principal being liable not only for breaking the contract but for inducing himself to break the contract, which would be nonsensical. Therefore, the agent in this situation cannot be liable for inducing the breach.

1. Lord Leggatt then went on to say that he considered that this reasoning was 'flawed' (at [52]), explaining that:

Contrary to what was said by McCardie J, an employee is not the 'alter ego' of their employer. As discussed above, the fact that the employee's acts 'are in law the acts of his employer' does not relieve the employee of liability if the act of the employee is tortious. That is the 'disattribution fallacy' discussed above. Thus, in my view, McCardie J's argument does not provide a valid reason for his conclusion that an employee or agent cannot be liable in damages for inducing a breach of contract by their employer or principal.

1. The reference in this passage to the 'disattribution fallacy' is a reference to a term used in various academic articles that were cited earlier in Lord Leggatt's judgment (at [35]) in which it was argued that 'it is fallacious to suppose that the attribution to B of an act done by A results in the dis-attribution of the act from A'.
2. Notwithstanding his conclusion that the reasoning in Said v Butt was flawed, Lord Leggatt did say that the rule in that case was sound. However, he provided a different justification for the rule, which did not rest on the rationale originally favoured by McCardie J. Adopting reasoning that emerged from PT Sandipala at [54]-[55] Lord Leggatt said:

I would explain it in this way. When parties make a contract, unless the contract is personal in nature, the general rule is that a party may employ agents to carry out its obligations. When the contracting party is a company, that is of course the only possible means of performance. If a company breaks a contract, that must be because one or more agents of the company have caused the breach. When an agent, acting as such, makes a contract, the normal understanding is that the agent assumes no liability towards the other contracting party. Only the principal does. Similarly, the normal understanding is that, if the agent causes the principal to break the contract, only the principal will incur liability to the other contracting party, and not the agent. This is, I think, a general norm or social understanding which the law should and does reflect.

It would be inconsistent with that understanding for the law of tort to make an agent who, acting within the scope of their authority, causes or procures a breach of contract by the principal liable to compensate the other contracting party for loss resulting from the breach. By the same token, to allow the injured party to recover damages from the agent would give them a free ride. That is because the same norm or understanding that, unless otherwise specifically agreed, only the contracting parties themselves will be liable in the event of a breach of the contract entails that, if a party wants a right of recourse against an agent of the other party, they must bargain for it.

(Emphasis added.)

1. This reasoning does not support Ms Lin's and Mr Cai's argument that the rule in Said v Butt should be applied by analogy to the equitable wrong of knowing procurement. In view of the long‑standing authority to which the High Court referred in Farah Constructions at [161], which, as I have explained, pre-dated both Lumley v Gye and Said v Butt, the 'normal understanding' would be that a director acting as such will assume liability for knowingly procuring a breach of trust by the company of which they are a director.
2. For these reasons, I would also dismiss Ms Lin's ground 4, as well as Mr Cai's grounds 4, 9 and 12.

I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Vandongen.