LM Investment Management Ltd (receiver apptd) (in liq) v Drake & Ors [2019] QSC 281

The application of an analogy with equitable compensation reaches the same conclusion; as explained above, reparative compensation for a breach of fiduciary duty of this type should involve a negative "but for" criterion. Although Giles JA warned against the application of equitable analogies to s 1317H, it is hard to see why analogies cannot be drawn with the approach to causation taken to breaches of near-identical duties in equity. As I have explained, the meaning of causation is intimately connected with the character of the duty breached. Section 1317H provides remedies for provisions, many of which concern breaches of duties owed by directors. Those duties were historically recognised only in the Court of Chancery. Perhaps for this reason, Lee AJA observed in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) that it 'may be thought that the words 'as a result of' or 'resulted from' imported the test applied in equity for linking a breach of duty in equity to loss or damage suffered."[88] (footnotes omitted)

[149] It is necessary to identify with some precision and to analyse with some care the plaintiff's case that its alleged loss resulted from the alleged contraventions.

[150] The hypothetical or counter-factual scenarios alleged by the plaintiff in the statement of claim are as follows:

"45AA Had the first to sixth defendants complied with their duties...

(a) LMIM as RE of the FMIF would have entered into the Deed of Release, the Deed of Release and settlement and the Gujurat Contract on the terms provided therein;

(b) LMIM as trustee of the MPF would have entered into the Deed of Release and the Deed of Settlement and Release on the terms provided therein;

(c) The Deed Poll would not have been entered into;

(d) The first to sixth defendants would not have split the proceeds of settlement at the proceedings;

(e) The settlement payment would not have been made to LMIM as trustee of the MPF;

(f) All proceeds of the settlement of the proceedings would have been paid to LMIM as RE of the FMIF.

45AB In the alternative... , in respect of the breach of [the duty of care and diligence to members] had the first to sixth defendants complied with their duty..."

(a) LMIM as RE of the FMIF would have entered into the Deed of Release, the deed and release and settlement of the Gujurat Contract on the terms provided therein;

(b) LMIM as trustee of the MPF would have entered into the Deed of Release and the Deed of Settlement and Release on the terms provided therein;

(c) The Deed Poll would not have been entered into;

(d) The first to sixth defendants would have caused LMIM as trustee of the MPF to be reimbursed for the contribution it made to the funding of the proceedings together with interest at a commercial rate upon that amount;

(e) otherwise the proceeds of the settlement of the proceedings would have been paid to LMIM as RE of the FMIF."

[151] The plaintiff alleges and submits that had the defendants not contravened their duties the defendants would have caused LMIM to enter into the same settlement transaction that was entered into by the three contracts, but there would have been no division of the settlement proceeds so that all of them would have been received by PTAL as custodian for the FMIF. That is, the defendants would have caused LMIM to enter into the Deed of Release and the Deed of Settlement and Release (including payment by LMIM of $1.3 million to Coalfields) but not to decide to divide the settlement proceeds in any amount for the benefit of the MPF. The plaintiff submits the defendants would have done so because that was the only realistic opportunity to recover money in relation to the FMIF-Bellpac loan made by PTAL as custodian of the FMIF. The plaintiff submits the defendants had the power (presumably meaning through LMIM as trustee of the MPF) to grant releases in respect of the MPF-Bellpac loan made by LMIM as trustee of the MPF.[89]

[152] In support of this conclusion, the plaintiff submits that had the defendants complied with their duties, they would have acted in a way which promoted and advanced the position of the FMIF over all other persons, including LMIM as trustee of the MPF. The plaintiff submits that had the defendants so acted, they would have faced the prospect of a claim by a new trustee or members of the MPF for breach of trust, but that cl 18.1(b)(ii) of the Constitution of the MPF would have excluded that liability. Under that clause, LMIM was not liable for any loss or damage arising out of a matter because in respect of the matter it acted "as required by law". Lastly, the plaintiff submits that its case does not rely on there being a breach of trust by LMIM as trustee of the MPF, but concerns the conduct of the defendants as directors and their duties to members of the FMIF.

[153] It will be observed that the plaintiff's case on causation under s 1317H is primarily based on a positive duty of the defendants to act in the postulated hypothetical or counterfactual way, including that they were required to act to expose LMIM as trustee of the MPF to a claim for breach of trust by deliberately giving full priority to the interests of the members of the FMIF.

Causation under the first scenario - all the settlement proceeds

[157] Accordingly, the question of causation in fact resolves, first, to whether it should be inferred that the defendants as directors of the LMIM as trustee of the MPF would have caused LMIM to enter into the Deed of Release and Deed of Settlement and Release if all of the settlement proceeds were to be paid to PTAL as custodian for LMIM as responsible entity for the FMIF. The plaintiff does not shrink from the submission that the defendants would have done so cognisant of the fact that to do so would or might have been a breach of LMIM's duty as trustee of the MPF.

[158] The plaintiff's first scenario involves acceptance by LMIM as trustee of the MPF of nothing in return for its releases under the Deed of Release and Deed of Settlement and Release and agreement to pay Coalfields $1.3 million, which makes the factual conclusion that LMIM would have entered into the transaction as trustee of the MPF on that basis prima facie unlikely.

[159] But there is more to it than that. The plaintiff's first scenario assumes two further facts. First, that there was no understanding of the type alleged by the defendants that in funding the proceedings, LMIM as trustee of the MPF was to receive a share of the proceeds. Second, that LMIM as trustee of the MPF had been funding the proceedings as second mortgagee under the mortgages. Let those assumptions be accepted for the purpose of analysis.

[160] From those assumed facts, it follows that in negotiating for and considering the proposed terms of the settlement, LMIM as trustee of the MPF, by the defendants, would have been aware that if the settlement proceeded, it would receive nothing. Second, they would have been aware that in funding the proceedings in the past, LMIM as trustee of the MPF had thrown good money after bad. Third, they would have been aware that in continuing to fund the solicitors and other expenses of progressing the settlement negotiations to a conclusion, on the terms of the Deed of Release, the Deed of Settlement and Release and the Gujurat contract, LMIM as trustee of the MPF was obtaining no benefit and was acting solely to assist LMIM as responsible entity of the FMIF. Fourth, they would have been aware that LMIM as trustee of the MPF had a duty to act in the best interests of the MPF and that it would be a breach of trust to use or to have used the trust funds of the MPF solely to benefit LMIM as responsible entity of the FMIF. Fifth, the defendants would have been aware that without LMIM as trustee of the MPF's agreement to the Deed of Release and Deed of Settlement and Release, including payment by LMIM to Coalfields of $1.3 million, the settlement overall would not proceed.

"The following clauses apply to the extent permitted by law:

(a) The Manager is not liable for any loss or damage to any person (including any Member) arising out of any matter unless, in respect of that matter, it acted both:

(i) otherwise than in accordance with this Constitution and its duties; and

(ii) without a belief held in good faith that it was acting in accordance with its Constitution or its duties.

In any case the liability of the Manager in relation to the Scheme is limited to the Scheme Property, from which the Manager is entitled to be, and is in fact, indemnified.

(b) In particular, the Manager is not liable for any loss or damage to any person arising out of any matter where, in respect of that matter:

(i) it relied in good faith on the services of or information or advice from, or purporting to be from, any person appointed by the Manager;

(iii) it relied in good faith upon any signature, marking or documents."

[163] There may be a difficulty with the construction of cl 18.1(b)(ii). Because cl 18.1(b) opens with the words "In particular", the provisions of that paragraph may be construed as operating only where the conditions of cl 18.1(a) are satisfied. By cl 18.1(a)(ii), cl 18.1(a) does not apply if LMIM acted without a belief held in good faith that it was acting in accordance with its duties (to the MPF). The facts of which the defendants would have been aware, as previously discussed, would make it difficult to satisfy that condition, particularly an awareness that, in effect, the funds of LMIM as trustee of the MPF were being wasted in progressing the settlement.

[164] However, that difficulty may be put to one side. Even if cl 18.1(b)(ii) is construed as operating independently, so that LMIM as trustee of the FMIF is not liable for any loss or damage arising out of a matter where in respect of that matter it acted as required by law, the question remains whether that relief from liability would have been engaged in the circumstances of the case. In my view, it would not. A trustee of a trust is not "required by law" to act in breach of trust because it is subject to an inconsistent duty, imposed by statute,[90] to act in the best interests of the members of a management investment scheme or to observe a duty of care and diligence to members of a managed investment scheme.[91]

[165] Once that conclusion is reached, the question remains whether LMIM as trustee of the MPF would have entered into the Deed of Release and the Deed of Settlement and Release on the footing that all the settlement proceeds would go to PTAL as custodian for LMIM as responsible entity of the FMIF, as discussed above.

[166] In my view, there is no sufficient basis for finding, as a matter of inference and fact that the defendants, or a sufficient number of them, would have agreed to a resolution or decision as the board of directors of LMIM as trustee of the FMIF to do so, or that hypothetical directors acting reasonably, would have done so.

[167] The plaintiff did not allege that this is a case where the damage suffered as a result of the contravention constituted by the breaches of duty alleged was the loss of a valuable commercial opportunity[92] for PTAL as custodian for the FMIF to receive all of the settlement proceeds. Accordingly, it is unnecessary to consider any question of that kind.

Causation under the second scenario - all the settlement proceeds except the amount funded from the MPF with interest

[168] The second scenario alleged in paragraph 45AB of the statement of claim posits that the plaintiff as responsible entity for the FMIF suffered damage measured by the difference between the amount received by and credited to LMIM as trustee of the MPF and the amount that LMIM as trustee of the MPF contributed to fund the proceedings together with interest at a commercial rate. This damage is alleged to have resulted from the contravention of the defendants' breaches of the duty of care and diligence to members.

[169] Again, there was no direct evidence of what the defendants would have done had they not decided as directors of LMIM as responsible entity of the FMIF to credit the higher amount of 35 percent of the settlement proceeds to LMIM as trustee of the MPF. Accordingly, again, the question is whether it should be inferred that LMIM as trustee of the MPF would have entered into the Deed of Release and Deed of Settlement and Release on the basis of the lower amount being received by and credited to LMIM as trustee of the MPF.

[170] As with the first scenario, it is necessary to identify the facts on which the hypothetical decision would have turned with some precision. It is not entirely clear whether the plaintiff, on the second scenario, alleges that there was no understanding of the type alleged by the directors. However, let it be assumed that it does and that there was no such understanding. Second, let it also be assumed that the defendants were aware that LMIM as trustee of the MPF had been funding the proceedings on the footing that it was doing so as second mortgagee. Third, let it be assumed that the defendants were aware that the terms of the proposed settlement would not result in LMIM as trustee of the MPF receiving any amount as second mortgagee. Fourth, let it be assumed that the defendants were aware that it would be a breach of the duty of care and diligence to members of LMIM as responsible entity of the FMIF to agree to pay an amount calculated by reference to the expected return of a litigation funder who agrees to provide funding in advance of the prosecution of litigation of the kind involved in the proceedings.

[171] If those are the relevant facts, in my view, it may be a reasonable inference that the defendants as directors of LMIM as trustee of the MPF would have agreed to enter into the Deed of Release and Deed of Settlement and Release in order to permit the settlement to proceed on the second scenario. Whether or not to do so would be a commercial decision to be made by LMIM as trustee of the MPF. In making such a decision as trustee, LMIM might have sought judicial advice, but courts are reluctant sometimes to give such advice upon a commercial decision.

Funding proceedings against Gujurat as second mortgagee

[178] As mentioned, the plaintiff alleges that LMIM as trustee of the MPF funded the proceedings against Gujurat as second mortgagee. Whether that is the correct factual characterisation depends on a number of underlying circumstances and facts.

[179] In April 2009, when the proceedings by and against Gujurat started, PTAL as custodian for the FMIF and lender to Bellpac was first mortgagee of the Bellpac land under a registered real property mortgage and first chargee of Bellpac's assets and undertaking under an equitable fixed and floating charge. LMIM as trustee of the MPF and lender to Bellpac was second mortgagee of the Bellpac land under a real property mortgage and second chargee of Bellpac's assets and undertaking under an equitable fixed and floating charge. In addition to their rights otherwise, inter se, a deed of priority regulated the rights of PTAL as first mortgagee and first chargee on the one hand and LMIM as second mortgagee and second chargee on the other.

[180] Bellpac was in default under both the first mortgage and charge and the second mortgage and charge. PTAL as custodian for LMIM as responsible entity of the FMIF and LMIM as trustee of the MPF had issued notices of exercise of power of sale under the real property mortgages.

[181] What were LMIM's rights as trustee of the MPF in relation to the secured property? As second mortgagee of the Bellpac land, LMIM was prima facie entitled to sell the Bellpac land. However, it could sell only subject to the first mortgage. Theoretically, LMIM as trustee of the MPF could have appointed a receiver to Bellpac, but the receivers and managers already appointed by PTAL as custodian for LMIM as responsible entity of the FMIF would take possession in priority.

[182] An infirmity in the value of LMIM's security rights as second mortgagee and second chargee was that Gujurat held a coal mining lease over the Bellpac land, or part of it, that entitled Gujurat to possession of the Bellpac land until surrender or expiry of the lease.

[183] However, LMIM as trustee of the MPF had no clear interest in Bellpac's claim and no interest in PTAL's claim. Whilst prima facie it was an expense "reasonably incurred"[94] for LMIM as trustee of the MPF to incur the costs of its claims in the Gujurat proceedings and to defend the cross-claims made against it, so as to increase or preserve its securities as second mortgagee and second chargee, it was not, , an expense reasonably incurred for it to incur the costs of PTAL as custodian for the FMIF to bring or defend similar claims or the costs of Bellpac, by its receivers and managers appointed by PTAL, where LMIM as trustee of the MPF would receive no particular benefit in doing so.

Alleged breaches of the duty of care and diligence

[188] The plaintiff made an unwieldy number of allegations of contravention of the duty of care and diligence to members by the defendants in the statement of claim and did not ultimately make submissions in support of all of them, but did not abandon or apply to delete any of them either, except for the allegation that LMIM as trustee for the MPF was not a necessary party for the settlement transaction under the three contracts to proceed.

[189] Accordingly, it is appropriate to group the many allegations for the purposes of identification and analysis. This was done by the third and fourth defendants' submissions and the other defendants conformed to that framework.

[190] Summarising, the plaintiff alleges that the defendants:

• (a) failed to adequately read or consider the content of the Allens advice;
• (b) failed to have proper regard or give adequate consideration to the fact that:
  • (i) PTAL sold the property to Gujurat as a mortgagee exercising power of sale;
  • (ii) the FMIF had priority; and
  • (iii) the MPF could not have prevented the sale of the property to Gujurat under the Gujurat Contract by refusing to provide a release of the MPF Mortgage over the property;
• (c) failed to have proper regard or to give adequate consideration to whether there was no necessity for the FMIF to reach agreement with the MPF about sharing the proceeds because:
  • (i) LMIM as trustee for the MPF was not a party to the Deed of Release or the Gujurat contract;
• (ii) there was no binding agreement; and
  • (iii) the agreement of LMIM as trustee of the MPF was not required in order for PTAL as custodian for the FMIF to perform the obligations under the Deed of Release and the Gujurat Contract;

(d) failed to have proper regard or give adequate consideration to the fact that:

• (i) LMIM as trustee of the MPF was a subsequent mortgagee and a subsequent charge holder over the assets of Bellpac;
• (ii) LMIM as trustee of the MPF had originally funded the Proceedings as registered mortgagee with second priority under the Deed of Priority and was drawing down the funding against the MPF Bellpac loan; and

"In our opinion, the proposed split of 65% to FMIF and 35% to MPF is fair and reasonable having regard to comparable arm's length transactions."

[196] The Allens advice was obtained on 28 March 2011. The question asked of Allens was stated in the advice as follows:

"You have asked us whether it is legally acceptable for the RE to split the litigation proceeds between FMIF and MPF on the basis of the opinion provided by WMS Chartered Accountants, given that the RE is in a position of conflict (in its capacity as responsible entity for FMIF and in its capacity as trustee for MPF)."

"We consider that it is legally acceptable for the RE to split the litigation proceeds between FMIF and MPF on the basis of the opinion provided by WMS Chartered Accountants, despite the RE being in a position of conflict, subject to the following matters..."

[198] The qualifications to the Allens advice were as follows:

"(a) We assume that in its capacity as responsible entity of the FMIF, the RE [LMIM] has considered all feasible options for the recovery of the loan advanced by FMIF to Bellpac, and is satisfied that the terms of the proposed settlement are in the best interests of FMIF members (see paragraphs 25, 27, 53 and 56 below).

(b) We assume that in its capacity as trustee of the MPF, the RE has considered all feasible options for the recovery of the loan advanced by MPF to Bellpac, and is satisfied that the terms of the proposed settlement are in the best interests of MPF members (see paragraphs 35 and 37 below.)

(c) We assume that the decision by the RE in respect of the split will not be made in order to benefit the RE (or any of its associates) personally, for example, by ensuring that the effect of splitting the proceeds in a certain way results in the RE receiving more fees or some other benefit that would not have occurred had the split been done in a different way (see paragraphs 28 and 38 below).

(d) The directors must be satisfied that the proposed split of settlement proceeds and associated releases of securities by the RE would be reasonable in the circumstances if the RE as responsible entity of the FMIF and the RE as trustee of the MPF were dealing at arm's length. The WMS Chartered Accountants report makes it clear that "there is significant reliable data from comparable transactions between parties dealing at arm's length to positively conclude a fair and reasonable split of the litigation proceeds to FMIF and MPF". Consequently, the conclusion in the WMS Chartered Accountants report will be an important factor in the RE's decision in respect of the split of the litigation proceeds. However, the RE should not rely solely on the report. The directors of the RE must make "their own independent assessment of the relevant matters, and the advice from WMS Chartered Accountants does not replace "careful judgement by the directors". They should also consider the relevant factors referred to by ASIC In CP 142. See paragraphs 46 to 50 below.

(e) The RE should ensure that it complies with any procedures in the FMIF compliance plan (or with any other procedures it has in place) in respect of conflicts of interest (see paragraphs 54 and 57 below).

(f) We assume that the RE has not made any representations to the members in the FMIF or the MPF which are inconsistent with the proposal to split the litigation proceeds in the manner outlined in the report of WMS Chartered Accountants.

(g) The directors of the RE must comply with their general law and statutory duties under the Corporations Act (see paragraphs 61 to 65 below). We are not aware of any reason why agreeing to split the litigation proceeds between FMIF and MPF on the basis of the opinion provided by WMS Chartered Accountants would raise any issues in this regard (assuming the matters in paragraphs (a) to (f) above are confirmed)."

[199] The second defendant and sixth defendant, who were more closely involved in the Gujurat proceedings than the other defendants, did read and consider the WMS report and the Allens advice. The third and fourth defendants were less involved. The third defendant relied on those who were more involved, including Mr Monaghan. The fourth defendant regarded both WMS and Allens as well-known competent and independent firms. His memory is that his understanding was that the advices were favourable to the proposed division of the settlement proceeds. In my view, it should be found that the defendants as directors did exercise independent judgment in considering the Allens advice.

[200] Another set of allegations is that had the defendants adequately considered the Allens advice they would have concluded that it did not justify the proposed division of the settlement proceeds.

[201] The plaintiff particularises, and relies upon, three grounds or areas for the allegation that the defendants failed to consider the content of the Allens advice, viz:

(a) the alleged failure to identify the matters pleaded in paragraph 30H of the statement of claim;

(b) the absence of any reference in the Deed Poll to the Allens advice, LMIM's Conflicts Management Policy or ss 601FC and 601FD of the CA; and

(c) that the draft Deed Poll was circulated by Mr Monaghan and Ms Kingston to the defendants on or about 10 June 2011, ahead of its execution on 14 June 2011 (the implication being that the Deed Poll was only considered in a perfunctory way).

[202] As to the last of those grounds or areas, a number of the directors referred to a meeting at LMIM's boardroom on 14 June 2011, when Mr Monaghan went over the Gujurat proceedings, the proposed settlement and the terms of the Deed Poll. Again, not surprisingly given the interval of time that passed, not all of the defendants recalled the meeting or its detail, but I find that the meeting occurred and that the defendants gave consideration at the meeting to whether they should enter into the Deed Poll on the terms of the proposed division of the settlement proceeds.

"referred at [16](e) to LMIM's compliance plan, which contained the terms pleaded at paragraph 30G above, but did not state how the obligations imposed by sections 601FC(1) and 601FD(1) could be reconciled with the statement at [35] of the Allens Advice that LMIM must act in the best interests of the members of the MPF when making any decision regarding the split of the Settlement proceeds."

[212] In substance, this complaint is the same as the third complaint and does not require further discussion, except to observe that the duty of a responsible entity to act in the best interests of the members of a registered scheme is not, per se, irreconcilably inconsistent with a power of the responsible entity to enter into a commercial compromise where the responsible entity may owe a conflicting fiduciary obligation to act in the best interests of the beneficiaries of another trust, depending upon the circumstances.

[213] The fifth complaint is that the Allens advice:

"stated at [57] that LMIM would need to ensure that it followed any procedures or policies it has established in accordance with section 912A(1)(aa) of the Act for managing conflicts of interest, but did not state how the proposed proceeds split could be reconciled with the matters pleaded at paragraph 30G [of the statement of claim]."

[214] However, there is no allegation that LMIM did not follow a procedure or policy it had established in accordance with s 912(1)(aa) of the CA. Paragraph 30G alleges that LMIM's conflicts management policy provided that the duties under ss 601FC(1) and 601FD(1) override any conflicting duty of a director under Part 2D.1 of the CA. The Allens advice was not concerned with a conflict of those duties and did not misstate the effect of them. The plaintiff does not allege how any of the defendants breached their duty of care and diligence to members in relation to the alleged failure of the Allens advice to explain how the division of the proceeds could be reconciled with the priority to be given to the duties to the members of the FMIF.

[215] The sixth complaint is that the Allens advice:

"stated at [63] that the effect of section 601FD(2) of the Act may have been to impose fiduciary duties on LMIM to act in the best interests of members of the FMIF, but did not identify what those duties would be or that such duties would include a duty of undivided loyalty."

[216] This is an extraordinary allegation, first, because it charges the defendants with contravention of the duty of care and diligence to members for failing to identify an alleged deficiency in legal advice as to the possible effect of s 601FD(2) in relation to fiduciary duties. No basis was identified for a contention that the defendants who were not lawyers should have done so. Second, it is deficient even as a pure criticism of the legal advice, in my view. A failure to identify what the possible fiduciary duties might be could only be relevant if it was relevant to the matter of the advice. Any other discussion would have been irrelevant. The suggested failure to identify a fiduciary duty "of undivided loyalty" would not have assisted in the consideration of the particular questions for advice raised on the facts of the case as instructed to Allens. The thrust of paragraph [63] of the Allens advice was to warn as to the possible width of the statutory duties imposed under s 601FD(1) of the Act, by reason of the priority given to those duties under s 601FD(2). It was not necessary for Allens to go further, in my view.

[217] The seventh complaint is that the Allens advice:

"did not, when properly construed, reach an opinion that the proposed transaction was 'legally acceptable'."

[218] Paragraph 16 of the Allens advice concluded that it was:

"legally acceptable for the RE to split the litigation proceeds between FMIF and MPF on the basis of the opinion provided by WMS Chartered Accountants, despite the RE being in a position of conflict".

[219] Whatever is connoted by the seventh complaint is imported by the words "when properly construed". Whatever those words might be intended to mean, no question of construction of paragraph 16 is raised, in my view, so it is unnecessary to consider them further.

[220] In my view, none of the seven complaints made in paragraph 30H of the statement of claim is a matter that the defendants failed to identify in contravention of the duty of care and diligence to members.

[221] By the reply, the plaintiff alleges that LMIM's instructions to Allens for the Allens advice were deficient in the respects alleged in paragraph 30C of the statement of claim. However, except for the subject of paragraph 30C(d)(iii), any issue as to the deficiency in their instructions would be a false issue as the alleged deficient instructions are not alleged to have given rise to a contravention by the defendants of the duty of care and diligence to members.

[222] The exception in paragraph 30C(d)(iii) is that the instructions:

"did not state that there was no binding express prior arrangement for the MPF to be paid any amount if the amount recovered in the litigation did not cover the whole of the debt owing to the FMIF."

[223] However, as previously discussed, the Allens advice stated:

"The FMIF and the MPF did not enter into any formal agreement to split the proceeds recovered by the litigation despite it being the understanding of the RE's directors that it was appropriate for MPF's contribution to be recognised by providing MPF with a share of any proceeds recovered by the litigation."

[224] I am unable to comprehend the gravamen of the plaintiff's complaint on this allegation, except to the extent that there may be a difference of meaning between the expressions "no binding express prior arrangement" and "no formal agreement... despite it being the understanding...". I do not think that, in context, any difference of meaning is conveyed by the Allens advice. Whatever the content of the express instructions, it does not appear that the Allens advice was based on a false assumption that there was any binding agreement made prior to the advice under which it was a term that LMIM as trustee of the MPF was entitled to a split of the settlement proceeds.

[225] Accordingly, in my view, the defendants did not breach the duty of care and diligence to members in failing to consider that Allens were not given an instruction that there was no binding express agreement.

[226] As previously stated, the plaintiff alleges, in addition to and apart from the alleged deficiencies in the Allens advice and the instructions given to Allens, that the defendants ought not to have concluded that the WMS report or the Allens advice justified the payment of any part of the settlement proceeds for the benefit of the MPF.

[227] There is no basis for saying that the WMS report and the Allens advice did not support the conclusion that the proposed ratio of 65:35 was fair and reasonable, if the directors were satisfied that the proposed settlement with Gujurat and the other parties was in the best interests of the members and beneficiaries of both funds.

[228] Repeating, the WMS report concluded that:

"In our opinion, the proposed split of 65% to FMIF and 35% to MPF is fair and reasonable having regard to comparable arm's length transactions."

"We consider that it is legally acceptable for the RE to split the litigation proceeds between FMIF and MPF on the basis of the opinion provided by WMS Chartered Accountants, despite the RE being in a position of conflict ..."

[230] Based on the assumptions contained in them, the report and advice were unambiguously supportive of the proposed division of the settlement proceeds.

[231] The plaintiff alleges that the defendants contravened the duty of care and diligence to members in failing to have proper regard to or to give adequate consideration to the fact that PTAL sold the property to Gujurat as mortgagee exercising power of sale, and that PTAL as first mortgagee for the benefit of the FMIF had priority over LMIM as second mortgagee. Another similar allegation is that the defendants failed to have proper regard to the circumstances that LMIM as trustee of the MPF was a subsequent mortgagee and a subsequent charge holder over the assets of Bellpac and that LMIM as trustee of the MPF had originally funded the Gujurat proceedings as registered mortgagee with second priority under the Deed of Priority and was drawing down the funding against the MPF-Bellpac loan.

[232] The sale by PTAL as mortgagee was of the Bellpac land. The purchase price of the land comprised only $10 million of the total amount of $45.5 million paid by Gujurat under the three contracts under which the Gujurat proceedings were settled.

[233] I have previously discussed that it is an incomplete analysis to describe LMIM as funding the Gujurat proceedings as trustee of the MPF, because it fails to deal with the facts that PTAL and Bellpac, by the PTAL appointed receivers and managers, were plaintiffs and defendants in the Gujurat proceedings.

[234] These questions are relevant to whether there was a contravention of the duty of care and diligence to members by the defendants and also to whether the alleged contravention caused the members of the FMIF to suffer any loss.

[235] As previously stated, the plaintiff did not allege or attempt to prove or submit that Gujurat would have entered into some other series of contracts to settle the Gujurat proceedings apart from the three contracts that were made. The point is significant, on the facts, because Gujurat did not agree to pay the whole of the amounts payable under the three contracts as the purchase price of the Bellpac land under the Gujurat contract.

[236] Accordingly, whether the defendants ought to have attempted to have achieved that result, and contravened the duty of care and diligence to members in not doing so, must be considered in the light of the prospect whether Gujurat would have been prepared to do so and the prospect of whether LMIM as trustee of the MPF could have agreed properly to release Gujurat and the other parties to the Gujurat proceedings and to pay Coalfields $1.3 million.

"(m) the Settlement Proposals would be reasonable in the circumstances if LM as RE of the FMIF and LM as Trustee of the MPF were dealing at arm's length - the Directors have come to this conclusion on the basis of their own experience and previous dealings in relation to comparable transactions as well as the WMS Report. The proposed Proceeds Split is similar to that which would prevail in the open market for similar transactions between unrelated parties and is not extraordinary or excessively generous - in giving consideration to this issue, the Directors considered the litigation funding practices in the open market."

[242] That is, the defendants were of the opinion that there was an analogy to be made between the facts of this case and an arm's length dealing between a litigant and a litigation funder. It is not in dispute that the division of the proceeds would have been reasonable if that were the case. That is not the thrust of the plaintiff's case on this point. The thrust is that there was no proper basis for the analogy between a commercial litigation funder and LMIM as funder of the Gujurat proceedings.

[243] It is apparent from what I have previously said that I do not consider it accurate to characterise LMIM's position as simply funding the Gujurat proceedings as second mortgagee. It was doing so, in part, for the benefit of Bellpac and for the benefit of PTAL. And its own claims were not those of a second mortagee as such.

[244] However, it would be equally inaccurate and imprecise to draw a direct analogy between LMIM's position as funder of the Gujurat proceedings and that of a commercial litigation funder. LMIM was not just funding the litigation for the benefit of the members of the FMIF for a commercial share of the litigation proceeds payable to PTAL as custodian of the FMIF. Nor was it doing so for Bellpac, by the PTAL appointed receivers and managers, for the benefit of the FMIF. It was bringing its own claim for damages, as well, and was interested in the outcome of the proceedings by PTAL and Bellpac because it was the second mortgagee of the Bellpac land and second chargee of Bellpac's property.

[245] The analogy between the position of LMIM as trustee of the MPF as funder of the Gujurat proceedings and a commercial litigation funder with no prior interest in the subject matter of the litigation is not a close analogy, in my view. Once that point in the analysis is reached, this allegation identifies itself as the strongest allegation of a possible contravention of the duty of care and diligence to members by the defendants.

[246] That is because the measure of the division of the settlement proceeds was made at least in part by reference to the proportionate amounts that might have been appropriate in an arm's length dealing between a commercial litigation funder and a litigant. If the analogy is not a close one, the justification of the apportionment that was made may be weakened.

[247] The precise question, at this point, is whether in those circumstances the evidence justifies the conclusion that the defendants contravened their duty of care and diligence to members in reaching the conclusion that the ratio 65:35 was appropriate.

"In [e]ffect MPF's role was not dissimilar to a litigation funder."

[251] WMS continued its analysis by referring to two particular litigation funders, although noting that the terms of litigation funding are typically established on a case by case basis. The rates identified were for "normal" ranges of between 20 or 30 percent and 45 percent.

[252] WMS concluded that:

"In our opinion, there is significant reliable data from comparable transactions between parties dealing at arm's length to positively conclude a fair and reasonable split of the litigation proceeds to FMIF and MPF. Accordingly, a range of MPF's entitlement between 30% to 40% would appear reasonable given the complexities in the matter and the fact it appears to be close to settling pre trial."

"(d) The directors must be satisfied that the proposed split of settlement proceeds and associated releases of securities by the RE would be reasonable in the circumstances if the RE as responsible entity of the FMIF and the RE as trustee of the MPF were dealing at arm's length. The WMS Chartered Accountants report makes it clear that 'there is significant reliable data from comparable transactions between parties dealing at arm's length to positively conclude a fair and reasonable split of the litigation proceeds to FMIF and MPF'. Consequently, the conclusion in the WMS Chartered Accountants report will be an important factor in the RE's decision in respect of the split of the litigation proceeds. However, the RE should not rely solely on the report. The directors of the RE must make 'their own independent assessment' of the relevant matters, and the advice from WMS Chartered Accountants does not replace 'careful judgement by the directors'. They should also consider the relevant matters referred to by ASIC in CP 142..."[96]

[254] However, Allens' advice as to the division of the proceeds was not based solely on the analogy between LMIM as the funder of the Gujurat proceedings and an arm's length commercial litigation funder. According to the Allens advice, it was also based, inter alia, upon the understanding of the directors that it was appropriate for MPF's contribution to be recognised by providing MPF with a share of any proceeds recovered by the litigation.

[255] The statement of claim alleges in paragraph 30C(d)(iii) that there was no binding express prior arrangement that LMIM as trustee of the MPF would be paid any amount if the amount that LMIM as responsible entity of the FMIF recovered did not cover the whole of the amount owing by Bellpac to it. So stated, the allegation elides the legal relationships whereby PTAL was the relevant party to the Gujurat proceedings and was the lender to Bellpac and first mortgagee and charge of Bellpac's property. But the meaning is clear enough.

[256] The statement of claim does not allege that the defendants did not have the understanding alleged in the defence, as a ground of the alleged contraventions of the duty of care and diligence. However, the defendants allege they had the understanding that it was appropriate for MPF's contribution to be recognised by providing MPF with a share of any proceeds recovered by the litigation in the defences and the plaintiff denies the understanding in the replies on the ground that the defendants had an expectation that the MPF-Bellpac loan would be repaid in part and possibly in full if LMIM and PTAL were successful in the Gujurat proceedings.

[257] The defendants rely upon the terms of the WMS report, the Allens advice based on the instructions of LMIM and the Deed Poll signed by the directors as contemporaneous documents supporting the existence of the understanding.

[258] Second, the defendants rely on the affidavit and oral evidence of the defendants as all supporting the existence of the understanding.

[259] Against that evidence, the plaintiff relies on a number of facts as contrary to the understanding. First, the plaintiff points to the lack of contemporaneous documents supporting or referring to the understanding, before the time when instructions were given to WMS for the WMS report.

[260] Second, the plaintiff relies on the absence of any reference to the understanding in a document entitled "ASIC Benchmark Disclosure Update for Investors" dated 2 September 2010. The defendants who gave evidence either did not recall reading the document (the third and fourth defendants) or were not asked about it (the second and sixth defendants). The plaintiff's apparent purpose in relying upon the document is that its terms are inconsistent with existence of the understanding. Although the understanding is not referred to in the document, I am not sure that its terms are inconsistent with the existence of the understanding. In any event, as at 2 September 2010, the terms of the proposed settlement of the Gujurat proceedings were not known.

"Have we documented an agreement between MIF and MPF... if not I think we should formalise as soon as practicable".

[263] On 30 August 2010, Mr Tickner wrote to Mr Monaghan asking:

"Can we amend any agreement we have in place for MPF to assist with litigation costs on Bellpac to also cover Statutory Charges...".

[264] The plaintiff also relied on other forensic points in support of its contention that there was no understanding, including that if there was an understanding it would have been documented, that it was illogical for LMIM as responsible entity for the FMIF to "enter in to an arrangement" to pay an unspecified amount for LMIM as trustee for the MPF to fund legal costs when LMIM as the trustee of the MPF was a substantial debtor of PTAL as custodian of the FMIF for a group of assigned loans, that the understanding was an unlikely commercial arrangement, that there was no evidence that the defendants informed the auditors of the understanding or explained it to Deutsche Bank as lender to the FMIF and that the amounts of the funds provided for the Gujurat proceedings were treated by LMIM as trustee of the FMIF as further advances or amounts payable on the MPF-Bellpac loan account. In assessing the relevant documents and the defendants' evidence, I have not overlooked these points.

[265] The matters relied on by the plaintiff are not enough, in my view, to reject the defendants' evidence as to the existence of the understanding. I acknowledge that some of their evidence on the point was vague. Also, it is not to be ignored that the understanding is evidence of the states of mind of the defendants that it is in their interests to give and difficult to contradict. It is quite possible that the defendants believed that they had the understanding at the time when they gave evidence but that their beliefs are mistaken and the product of reconstruction.[97] Further, the absence of two relevant witnesses should not go unnoticed. The first defendant did not give evidence. The plaintiff submits it should be inferred that his evidence would not have assisted his case.[98] Second, Mr Monaghan, who was closely involved in the Gujurat proceedings as a lawyer advising LMIM was not called by any of the parties to give evidence. However, no inference is more readily drawn against the defendants because of that, because the plaintiff might have called Mr Monaghan.[99]

[266] Even so, after all, it is not inherently unlikely that the defendants expected that LMIM as trustee for the MPF would be acknowledged in any settlement for almost entirely funding the Gujurat proceedings. And it must not be forgotten that the plaintiff's claim was not raised until a number of years after the events in question, so it is not surprising that the defendants' recollections are vague. It is the contrary that would be surprising, in the absence of detailed contemporaneous notes.

"Based on the background section of our report, we note the following pertinent points:

• The matter became very complicated and the litigation was highly complex and the prospects uncertain. In our opinion, litigation by its nature is difficult to predict with absolute certainty.
• FMIF was in the position of being unable to provide additional funding, and of being unable to satisfy any adverse costs orders that might have been made against LM.
• The burden of funding the litigation fell largely on MPF.

The funding in the litigation by FMIF and MPF is summarised at Table 2 above being $1,638,438 by MPF and $161,471 by FMIF. As noted above, this does not include the $1.3M to another party Coalfields, to secure the withdrawal of certain caveats.

In our opinion, based on the information provided and our discussions with Monaghan Lawyers a commercial decision was undertaken by MPF to fund the litigation to attempt to preserve the capital entitlements under the loan documents. In [e]ffect MPF's role was not dissimilar to a litigation funder."

[272] Although, in my view, the analogy with an arm's length litigation funder was not particularly strong, the clear import of the WMS report was that it was an appropriate comparison and their conclusion was that LMIM's role was not dissimilar. That conclusion constituted independent expert advice and was reasoned. Other analogies might have been considered. For example, creditors who fund a liquidator to bring proceedings to recover the property of the company for the benefit of the unsecured creditors may receive more than a refund of the contributed costs by way of distribution, in contravention of the parri passu and priority principles that otherwise apply in a company liquidation.[100]

[273] Looking at the question of the fairness and reasonableness of the proposed division of the settlement proceeds as a matter of first principle, it is apparent that both the WMS report and the Allens advice considered that it was relevant to assess it as if it were an arm's length commercial transaction. In my view, that was the correct approach. The analogy made between LMIM as trustee of the MPF as funder of the Gujurat proceedings for the benefit of, inter alia, PTAL as custodian of the FMIF and Bellpac and a commercial litigation funder was part of that approach. But there were other matters.

[274] One was that the Gujurat proceedings would not have been carried on by PTAL and the Bellpac receivers and managers appointed by PTAL without the funding provided by LMIM as trustee of the MPF. That funding included that LMIM gave security for costs of the proceeding by PTAL and Bellpac, as well as paying the costs of their own lawyers. Second, the Gujurat proceedings could not be settled on the terms of the proposed Gujurat contract, Deed of Settlement and Release and Deed of Release without LMIM's releases as provided for, in particular, in the Deed of Release. Third, the Gujurat proceedings could not be settled on the terms of the proposed Gujurat contract, Deed of Settlement and Release and Deed of Release without LMIM paying $1.3 million to Coalfields at or before settlement. Fourth, the defendants had the understanding that LMIM as trustee of the MPF would receive a share of any proceeds from the Gujurat litigation.

[275] In my view, it was prudent for LMIM to obtain external independent professional accounting advice as to whether and to what extent the proposed division of the settlement proceeds was fair and reasonable in an arm's length dealing. Looked at objectively, to do so followed some of the principles underlying similar models for assessment of a related party transaction or the process of obtaining an independent expert's report to assist in making a decision upon voting for or against a scheme of arrangement. Prima facie, generally speaking, it is reasonable for the directors of a corporation to obtain and act on external independent professional accounting and legal advice as to whether a transaction is fair and reasonable to assist in the consideration of whether it is in the best interests of the company and its shareholders and whether the directors duties of care and skill are discharged, although there has been controversy at times in the case law as to the extent to which directors in performing their functions may rely on information provided by delegates or advisors. Trustees, too, are authorised to do so, generally speaking. Of course, neither directors nor trustees are thereby absolved from the obligation to independently consider and make the relevant decisions in exercising their powers of management or investment, according to any statutory or general law duty of care and diligence to members that applies.

"189 Reliance on information or advice provided by others

(a) a director relies on information, or professional or expert advice, given or prepared by:

(i) an employee of the corporation whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned; or

(ii) a professional adviser or expert in relation to matters that the director believes on reasonable grounds to be within the person's professional or expert competence; or

(iii) another director or officer in relation to matters within the director's or officer's authority; or

(iv) a committee of directors on which the director did not serve in relation to matters within the committee's authority; and

(ii) after making an independent assessment of the information or advice, having regard to the director's knowledge of the corporation and the complexity of the structure and operations of the corporation; and

(c) the reasonableness of the director's reliance on the information or advice arises in proceedings brought to determine whether a director has performed a duty under this Part or an equivalent general law duty;

the director's reliance on the information or advice is taken to be reasonable unless the contrary is proved."

[277] Where it applies, s 189 has the effect that the director's reliance on the advice is taken to be reasonable, unless the contrary is proved. None of the parties referred to s 189 or made any submissions as to whether it applies in relation to the duty of care and diligence to members of a director as an officer under s 601FD(1)(b) of the CA. Whether or not s 189 applies, in my view, does not affect the answer to whether the defendants' reliance on the WMS report and the Allens advice was reasonable on the facts of this case. In my view, it was.

[278] Both WMS and Allens were professional advisers. The defendants believed that their opinions and advices were within their relevant fields of professional competence. The defendants' reliance on those opinions and advices was made in good faith. The defendants made their own assessments of the opinions and advice in varying degrees.

[279] The sixth defendant instructed WMS with Mr Monaghan. After the second defendant received the WMS report as to the proposed division of the proceeds in the 65:35 ratio, she instructed Mr Monaghan to obtain legal advice as well, which resulted in the Allens advice. She informed the other directors she had done so. When Mr Monaghan obtained and provided the Allens advice to the second defendant, he included a summary of it, saying there was a lot to wade through but the conclusion was that the transaction was ok. The summary was sent on to the fourth defendant and the sixth defendant. The second defendant read the Allens advice. She forwarded it to LMIM's auditor. Neither the auditor nor Mr Monaghan raised any concern as to the sufficiency of the Allens advice or the WMS report. The third defendant did not have any significant role in relation to the Gujurat proceedings. She relied on the directors who did, being the sixth defendant and second defendant. She was aware of WMS' opinion as to the 65:35 ratio and of the summary given by Mr Monaghan of the Allens advice at the meeting on 14 June 2011. She believed the proposed division of the proceeds was in the interests of the members of both the FMIF and the MPF. The fourth defendant relied on his fellow directors and Mr Monaghan. He could not recall whether he read the Allens advice. He knew when he signed the Deed Poll that both the WMS report and the Allens advice had been obtained. He believed WMS and Allens to be well, known, independent and competent firms. His understanding was that their opinions and advices were favourable to the proposed division of the settlement proceeds. The sixth defendant reviewed the WMS report and the Allens advice and concluded that the proposed division of the proceeds was legally acceptable.

[283] It follows, in my view, that the plaintiff has not established a contravention of the duty of care and diligence to members by any of the defendants.

[284] Having regard to my earlier findings as to the operation of the duty to act in the members' best interests and the failure of the plaintiff to prove that any contravention of that duty caused the damage of the loss of all the settlement proceeds not being received by the FMIF, it follows that the plaintiff's claim must be dismissed.

[285] Because of those conclusions, it has been unnecessary to consider other questions that were disputed between the parties, in particular whether, even if there was some contravention of either the duty to act in the members' best interests or the duty of care and diligence to members, the defendants or some of them should be excused from liability under s 1317S of the CA.

[286] In the circumstances of this case, it is not appropriate to make further findings on those questions, because the discretionary power to grant relief under s 1317S must be exercised in relation to "a liability to which the person would otherwise be subject". It would be necessary to identify the precise factual basis of the particular liability before any meaningful consideration could be given to the potential operation of s 1317S. The absence of the relevant factual findings, because I have not found that the defendants or any of them are liable, makes it inappropriate, in my view, to consider the application of s 1317S in a hypothetical way.

[287] Finally, in these reasons I have not dealt with every point that was advanced in the written submissions of the parties. Those submissions were voluminous. To have dealt with every argument or point would have increased the length of these reasons by many, many pages. Instead, I have focussed on the facts and arguments that are necessary to decide the case, in my view. That does not mean I have not given close attention to the other points that were advanced both in writing and orally.

[1] Managed Investments Act 1998 (Cth).

[2] Corporate Law Economic Reform Program Act 1999 (Cth), Schedule 1.

[4] Corporations Act 2001 (Cth), s 9 definition "responsible entity", s 601EA, s 601FA and s 601FB.

[5] Corporations Act 2001 (Cth), s 601EB.

[6] Corporations Act 2001 (Cth), s 9 definition "managed investment scheme" and Chapter 5C.

[7] Corporations Act 2001 (Cth), s 439C(c), although the fifth defendant is named as a party, the proceeding against him has not been prosecuted by the plaintiff

[8] Corporations Act 2001 (Cth), s 601ND(1).

[9] Corporations Act 2001 (Cth), s 601NF(2).

[10] Corporations Act 2001 (Cth), s 9 definition "scheme property".

[11] Corporations Act 2001 (Cth), 601FC(2).

[12] Managed Investments Act 1998 (Cth).

[13] Corporate Law Economic Reform Program Act 1999 (Cth), Schedule 1.

[14] [1993] ALRC 65.

[16] Corporate Law Economic Reform Program Proposals for Reform: Paper No 3 entitled "Directors' Duties and Corporate Governance: Facilitating innovation and protecting investors", p 19.

[17] Corporate Law Economic Reform Program Proposals for Reform: Paper No 3 entitled "Directors' Duties and Corporate Governance: Facilitating innovation and protecting investors", p 49.

[18] Companies Act 1993 (NZ), s 131(1).

[19] Canada Business Corporations Act 1975, s 122(1)(a).

[20] Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 (Cth), 11 [4.2] and 17-18 [6.2]-[6.7].

[21] See also the Explanatory Memorandum to the Managed Investments Bill 1998 (Cth), 15-17 [8.8]-[8.22].

[22] The same structure was followed for s 601FC(1).

[23] Young v Murphy [1996] 1 VR 279.

[24] [2018] HCA 63; (2018) 362 ALR 286.

[25] [2018] HCA 63; (2018) 362 ALR 286, 303 [70].

[26] [2014] NSWSC 1251

[27] [2014] NSWSC 1251, 45-46 [189].

[28] Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998, 27 [6.7].

[29] Finn, Fiduciary Obligations, 1977, 252 [580].

[30] Finn, Fiduciary Obligations, 1977, 252-253 [581].

[31] [1917] 2 Ch 71.

[32] [1917] 2 Ch 71, 81.

[35] L Smith, "Prescriptive Fiduciary Duties"[2018] UQLawJl 27; , (2018) 37 UQLJ 261.

[36] Corporations Act 2001 (Cth), s 601FB(1).

[37] Corporations Act 2001 (Cth), s 601FC(1)(c).

[38] Corporations Act 2001 (Cth), s 601FB(1).

[39] Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 289.

[40] As formulated in Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656, 671.

[41] Gambotto v WCP Ltd [1995] HCA 12; (1995) 182 CLR 432, 443-444.

[42] [2018] HCA 63; (2018) 362 ALR 286.

[43] [2018] HCA 63; (2018) 362 ALR 286, 304 [71]-[72].

[44] (1883) 23 Ch D 654.

[45] For modern comparators, see Gambotto v WCP Ltd [1995] HCA 12; (1995) 182 CLR 432, 439-447 and ANZ Executors and Trustees Co Ltd v Qintex Australia Ltd (receivers and managers appointed) [1991] 2 Qd R 360, 368-370.

[46] (1883) 23 Ch D 654.

[47] [2016] FCA 1552; (2016) 340 ALR 75.

[48] [2016] FCA 1552; (2016) 340 ALR 75, [354].

[49] [1985] Ch 270, 286-287.

[50] Trusts Act 1973 (Qld), s 23(2)(a), introduced in 1999; cf Trustee Act 1925 (NSW), s 14B(2).

[51] Trusts Act 1973 (Qld), s 94(1).

[52] For example, Berger v Lysteron Pty Ltd [2012] VSC 95, [67]-[85]; Carmine v Ritchie [2012] NZHC 1514, [66]; Willett v Futcher [2004] QCA 30, [19] and re Burton [1994] FCA 1146; (1994) 126 ALR 557, 559-560.

[53] (2008) 2 Journal of Equity 245.

[54] (2008) 2 Journal of Equity 177.

[55] Heydon and Leeming, Jacobs' Law of Trusts in Australia, 8 ed, [1711].

[56] [1998] Ch 512.

[57] [1998] Ch 512, 533.

[58] Managed Investments Act 1998 (Cth).

[59] Corporate Law Economic Reform Program Act 1999 (Cth), Schedule 1.

[60] Corporations Law¸ s 232(2) and (4).

[61] Companies (Queensland) Code, s 229(2) and (4).

[62] Companies Act 1961 (Qld), s 124(1).

[64] For example, Companies (Queensland) Code, s 229(2).

[65] For example, Companies Act 1961 (Qld), s 124(1).

[66] [2016] FCA 1023; (2016) 336 ALR 209, 288-295 [413]-[445].

[67] Corporations Act 2001 (Cth), s 601FB(1).

[68] Corporations Act 2001 (Cth), s 601FB(2).

[69] [2018] HCA 63; (2018) 362 ALR 286, 303 [68].

[72] Australian Securities and Investments Commission v Avestra Asset Management Ltd (in liq) [2017] FCA 497; (2017) 348 ALR 525, [187]; Trilogy Funds Management Ltd v Sullivan (No 2) (2015) 331 ALR 185, 228-231 [199]-][210]; Allco Funds Management Ltd (receivers and managers appointed) (in liq) v Trust Company (RE Services) Limited [2014] NSWSC 1251, [189]; Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (receivers and managers appointed) (in liq)(controllers appointed) (No 3) [2013] FCA 1342, [532], [535]-[537]; Re Idylic Solutions Pty Ltd [2012] NSWSC 1276, [2456] and [2474].

[73] Australian Securities and Investments Commission v Mariner Corporation Ltd [2015] FCA 589; (2015) 241 FCR 502, [533]; Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291, [170], [191]; Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253, [307], [372], [434]-[435].

[74] Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1, [7192]; Australian Securities and Investments Commission v Vines [2005] NSWSC 738; (2005) 55 ACSR 617, [731], [1070]-[1077]; Vines v Australian Securities and Investments Commission [2007] NSWCA 75; (2007) 73 NSWLR 451, 452; Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373, [99], [101], [103].

[75] Avestra at [187]; Healey at [167]; Maxwell at [101] and [113]; Vines at [731].

[76] Grimaldi v Chameleon Mining NL (No. 2) [2012] FCAFC 6; (2012) 200 FCR 296, [625].

[77] Corporate Law Reform Act 1992 (Cth), s 17.

[78] (2003) 179 FLR 1.

[79] Adler v Australian Securities and Investments Commission (2003) 179 FLR 1, 156 [707]-[709].

[80] [2014] WASC 102; (2014) 48 WAR 1.

[81] [2014] WASC 102; (2014) 48 WAR 1, 85-86 [451]-[452].

[82] [1991] HCA 12; (1991) 171 CLR 506.

[83] [1991] HCA 12; (1991) 171 CLR 506, 515, 523, 525 and 531.

[84] Civil Liability Act 2003 (Qld), s11(1).

[85] [2014] WASC 102; (2014) 48 WAR 1.

[86] [2014] WASC 102; (2014) 48 WAR 1, 74-75 [393]-[394].

[87] Travel Compensation Fund v Tambree (t/as R Tambree & Associates) [2005] HCA 69; (2005) 224 CLR 627, [45].

[88] [2014] WASC 102; (2014) 48 WAR 1, [451]-[452].

[89] I observe that LMIM's rights and claims made against Gujurat were not for this MPF-Bellpac loan.

[90] Corporations Act 2001 (Cth), s 601FC(1)(c).

[91] Corporations Act 2001 (Cth), s 601FC(1)(b).

[92] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.

[93] Trusts Act 1973 (Qld), s 96.

[94] Trusts Act 1973 (Qld), s 72.

[95] Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317, 329 [34].

[96] The reference to CP142 is to ASIC Consultation Paper 142 dated October 2010.

[97] Compare Chappel v Hart (1998) 195 CLR 232, 272.

[98] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 308 and 321.

[99] Crossman v Sheahan [2016] NSWCA 200, [341]-[344].

[100] Corporations Act 2001 (Cth), s 564; Household Financial Services Pty Ltd v Chase Medical Centre Pty Ltd (in liq0 (1995) 18 ACSR 294, 296; Proficient Building Company Pty Ltd (2011) 87 ACSR 183, [16].

[101] Corporations Act 2001 (Cth), s 210, 219, 220 and 221. ASIC Regulatory Guide 111.

[102] Corporations Act 2001 (Cth), s 411(3)(b), Corporations Regulation, reg 5.1.01(1)(a)(ii) and Schedule 8 , para [8303] and ASIC Regulatory Guide 111

[103] Compare, for example AWA Ltd v Daniels trading as Deloitee Haskins & Sells (1992) 7 ACSR 759, 868 and 1015 and Daniels v Anderson (1995) 13 NSWLR 408; 16 ACSR 607, 665. The question is discussed more fully in an article by A Gibbs and J Webster, "Delegation and reliance by Australian company directors", (2015) 33 C&SLJ 297 and in Ford, Austin and Ramsay's Principles of Corporations Law, August 2019, [8.340.12]-[8.340.15].

[104] Trusts Act 1973 (Qld), s 54(1); Commissioner of Taxation v Bargwanna [2012] HCA 11; (2012) 244 CLR 655, 662, [11].

[105] Re VBN and Australian Prudential Regulation Authority and A Party Joined [2006] AATA 710; (2006) 92 ALD 259