Plaza Carpark Pty Ltd v Chor Shing Ma

BETWEEN: PLAZA CARPARK PTY LTD (ACN 075 613 526) IN ITS OWN CAPACITY AND AS TRUSTEE OF THE PLAZA HOTEL CAR PARK UNIT TRUST

KAM TAI (AUST) PTY LTD AS TRUSTEE OF THE KAM TAI FAMILY TRUST NO.3

AUSTRALIAN SUN WAH PTY LTD AS TRUSTEE OF THE MH YIP SETTLEMENT NO.2

AUSTRALIAN SUN WAH PTY LTD AS TRUSTEE OF THE Y K NGAN SETTLEMENT NO.2

JU-JEN PTY LTD AS TRUSTEE OF THE FENG LIN CHENG FAMILY TRUST

BRIGHT (AUST) PTY LTD AS TRUSTEE OF THE SO PUI HIU TRUST NO.2

AUSTRALIA SUN WAH PTY LTD AS TRUSTEE OF THE WONG SUN WEN SETTLEMENT NO.3

YUNG YUAN CO PTY LTD AS TRUSTEE OF THE HUANG FAMILY SETTLEMENT NO.2

1. The applicants within 14 days prepare and submit to the respondents draft orders to give effect to the reasons for judgment in this matter, and if it is agreed that the draft orders do give effect to them that the parties by their solicitors so signify so that orders may be made accordingly. 2. In the event that the parties are not agreed upon the terms of orders to give effect to these reasons, there be liberty to any party to apply on short notice to make submissions on the appropriate orders. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

BETWEEN: PLAZA CARPARK PTY LTD (ACN 075 613 526) IN ITS OWN CAPACITY AND AS TRUSTEE OF THE PLAZA HOTEL CAR PARK UNIT TRUST

KAM TAI (AUST) PTY LTD AS TRUSTEE OF THE KAM TAI FAMILY TRUST NO.3

AUSTRALIAN SUN WAH PTY LTD AS TRUSTEE OF THE MH YIP SETTLEMENT NO.2

AUSTRALIAN SUN WAH PTY LTD AS TRUSTEE OF THE Y K NGAN SETTLEMENT NO.2

JU-JEN PTY LTD AS TRUSTEE OF THE FENG LIN CHENG FAMILY TRUST

BRIGHT (AUST) PTY LTD AS TRUSTEE OF THE SO PUI HIU TRUST NO.2

AUSTRALIA SUN WAH PTY LTD AS TRUSTEE OF THE WONG SUN WEN SETTLEMENT NO.3

YUNG YUAN CO PTY LTD AS TRUSTEE OF THE HUANG FAMILY SETTLEMENT NO.2

THE FACTS 1 By the completion of the evidence, much of the significant factual background to this proceeding was not in dispute. The following represents my findings in those matters. In the circumstances, it is only necessary to address in detail the contentious issues. 2 On 20 September 1996, Sino Global Business Services Pty Ltd (Sino Global) contracted to buy the multi-story car park and land at 14-18 Solomon Street, Adelaide (the car park) for $3.7m (the contract). The car park was leased to KC Park Safe (SA) Pty Ltd (KC Park Safe) until 31 July 1998, at a then gross annual rental of $515,168. The contract was subject to KC Park Safe agreeing to extend the lease term to "a 15 + 5 + 5 year term". The deposit on signing of the contract was $100,000. 3 Sino Global is a company of which the directors and shareholders are Victor Chor Shing Ma (Mr Ma) and Vivian Shuet Yee Ma (Mrs Ma). It operates in the field of business services, including property management. It is also trustee of the Ma Shuet Kwan Settlement (the Ma Trust). It is common ground that, at times material to this action, Sino Global was a corporate vehicle effectively operated by Mr Ma. He is and has been for many years a certified practising accountant, and is also a registered migration agent. 4 Plaza Carpark Pty Ltd (Plaza Carpark) was registered on 13 September 1996, apparently as a shelf company. On about 8 October 1996, Mr Ma acquired the shares in Plaza Car Park and became its sole director and its secretary. Plaza Carpark was to acquire the car park under the contract as the nominee of Sino Global. 5 The contract was settled on 1 November 1996. 6 In the period September to October 1996, Mr Ma arranged for a range of persons or entities to invest in the car park. He was a promoter of the investment. The investment structure was quite straightforward. Plaza Carpark became the trustee of the Plaza Hotel Car Park Unit Trust (the Plaza UT), under a Deed of Trust of about 14 October 1996 (but dated 13 September 1996). Mr Ma applied for, and was issued, one unit in the Plaza UT for a nominal consideration. There is not said to be anything sinister about those steps. They were prefatory to the implementation of the investment opportunity. 7 Subsequently, units were issued to the investors as follows: · Kam Tai (Aust) Pty Ltd, controlled by Kam Chi Yan (Mr Kam), as trustee for the Kam Tai Family Trust No 3 (502,000 units); · Australia Sun Wah Pty Ltd, controlled by Ip Wai Ching (Mrs Ip), as trustee for the MH Yip Settlement No 2 (502,000 units); · Australia Sun Wah Pty Ltd, controlled by Chan Yat Choi (Mr Chan), as trustee for the Y K Ngan Settlement No 2 (502,000 units); · Ju-Jen Pty Ltd, controlled by Cheng Feng Lin (Mrs Cheng), as trustee for the Feng Lin Cheng Family Trust (502,000 units); · Bright (Aust) Pty Ltd, controlled by Li Chun Yeung (Mr Li), as trustee for the So Pui Hiu Trust No 2 (502,000 units); · Australia Sun Wah Pty Ltd, controlled by Cheung Fuk Lam (Mr Cheung), as trustee for the Wong Sun Wen Settlement No 3 (502,000 units); and · Yung Yuan Co Pty Ltd, controlled by Huang Yung (Mr Huang) and by Huang Wu Man Chu (Mrs Huang), as trustees for the Huang Family Settlement No 2 (1,004,000 units). It is convenient to call the seven persons or their respective entities procured by or through Mr Ma Collectively "the investors". In addition, Mr Ma arranged for 502,000 limits to be issued to Sino Global. As Yung Yuan Co Pty Ltd took a double issue of units, in effect there were nine lots of units issued in the Plaza UT. 8 It was generally understood by the investors that Mr Ma or one of his entities would take up one of the lots of units in the Plaza UT. 9 Also, nine shares were issued (or transferred) in Plaza Carpark to Mr Chan, Mrs Cheng, Mr Cheung, Mr Huang, Mrs Huang, Mrs Ip, Mr Kam, Mr Li and Mr Ma (the shareholders). 10 The investment in the car park was to be funded by the payments for the nine lots of units in the Plaza UT. Each lot was to be paid for by funds from the investors of $350,000 each and by further funds borrowed from a bank of $900,000 (representing a borrowing of $100,000 per unit holder). Although the investors were told that they would each be borrowing $100,000, in fact the full amount was borrowed by Plaza Carpark, and its balance sheet then showed each of them as a debtor to the extent of $100,000. Nothing turns on that. 11 Hence, each of the investors paid $450,000 for each lot of units in the Plaza UT and for a share in Plaza Carpark. 12 As noted, Mr Ma was one of the persons either directly or through a corporate entity to become a shareholder of Plaza Carpark and a unit holder in the Plaza UT. However, he did not pay, or cause Sino Global to pay, $350,000 for that lot of units. In large measure, the present dispute arises from the circumstances in which that occurred. 13 The investors claim that Mr Ma acted in breach of fiduciary duties owed to them in two respects in relation to the acquisition of the car park. They relate firstly to how Mr Ma or Sino Global came to pay for its units in the Plaza UT and for its share in Plaza Carpark, and secondly about certain commissions paid at settlement when Plaza Carpark required the car park under the contract. 14 As noted, Plaza Carpark was to borrow $900,000 to finance $100,000 for each of the investors' and Sino Global's units. However, instead of Plaza Carpark borrowing $900,000, unknown to the investors, it borrowed $1,600,000 of which $700,000 (the undisclosed borrowing) was applied by Mr Ma for his own purposes, namely to fund his $350,000 payment for units in the Plaza UT and to pay $350,000 to him for personal purposes. 15 Secondly, Mr Ma on behalf of Plaza Carpark authorised and directed the payment of $100,000 (specified to the investors as part of the purchase price for the car park) in two payments after settlement as $70,000 to Unilink Enterprises Ltd (Unilink) and as $30,000 to APH Consultants Pty Ltd (APH) (the undisclosed commissions). 16 It is convenient to note further steps taken by Mr Ma both before and after the settlement of the contract. 17 On 11 October 1996, Mr Ma procured Plaza Carpark as trustee of the Plaza UT to resolve that any member of the investment syndicate may use the equity in the car park as security to borrow from a financial institution to fund subscriptions for units in the Plaza UT and/or for other purposes such person required. There is no evidence to suggest that that resolution was conveyed to any of the investors. 18 On 28 October 1996, Mr Ma on behalf of Plaza Carpark formally applied to the Commonwealth Bank of Australia (the bank) for loan facilities of $1,600,000. Mr Ma on that day provided a personal guarantee for the company's liability of that sum. The application was approved by 31 October 1996. At settlement, on 1 November 2006 the full approved sum of $1,600,000 was paid to Plaza Carpark. It is the alleged misapplication of $700,000 of that sum which is largely the foundation for these proceedings. At settlement, the purchase price of $3.7 million (as routinely adjusted) was paid from the funds held by Plaza Carpark as trustee of the Plaza UT. Its funds came from the contributions of the investors of $350,000 each, plus the bank borrowing. The undisclosed commissions were also paid. The settlement statement recorded the payment of the undisclosed commissions. 19 Thus, the units issued to Sino Global as arranged by Mr Ma were paid for by $350,000 of the undisclosed borrowing (and one-ninth of the disclosed borrowing of $900,000). Subsequently, the balance of the undisclosed borrowing of $350,000 was paid by Plaza Carpark to or at the direction of Mr Ma for his own purposes. 20 On 28 October 1996, following settlement on the contract for the car park, Mr Ma resigned as a director of Plaza Carpark and Mr Cheng, Mrs Ip, Mr Cheung, Mr Huang, Mr Li, Mrs Cheng, Mrs Huang and Mr Kam were appointed as its directors. The shares in Plaza Carpark and the units in the Plaza UT were then issued as set out above. (For the sake of completeness, I note that the ASIC records reveal that: Mr Chan ceased to be a director on 25 November 1998, and Mr Li, Mr Kam, Mr Huang, Mr Cheung, Mr Cheng ceased to be directors on 5 June 2001; that Mr Ma was appointed as a director again on 25 November 1998 (about the time of the increased borrowing referred to in [23] below); then on 30 May 2008 Mr Chan, Mr Cheung, Mr Huang and Mr Li were re-appointed as directors; on 21 October 2008, Mr Kam was re-appointed as a director; and finally Mr Ma ceased to be a director on 1 December 2008. There is no evidence of any resolution of the shareholders of Plaza Carpark to effect those changes. 21 Mr Ma remained as secretary of Plaza Carpark until 1 December 2008. 22 As a further step in implementation of the investment scheme, on about 24 October 1996, Plaza Carpark entered into a Management Agreement with Sino Global to operate and manage the car park. There is no suggestion that that was not on proper commercial terms. That agreement was dated 1 November 1996. 23 On about 23 November 1998, Mr Ma applied to the bank on behalf of Plaza Carpark to refinance its fixed rate advance from $1,600,000 to $1,715,000. He had ceased to be a director by that time. That application was approved on 26 November 1998. It was made without any resolution of the directors, and without consultation with any of the investors. The additional funds of $115,000 were largely taken up by an early repayment fee, as the price of securing a significantly lower fixed rate of interest. It is not suggested that that was inappropriate. However, there is a degree of coincidence between the borrowing of those additional funds and the brief re-appointment of Mr Ma as a director of Plaza Carpark. It is clear he dealt with the CBA in relation to that additional borrowing. 24 Between November 1996 to about November 2008, Sino Global managed the car park under the direction of Mr Ma. It collected the operator's rental, paid expenses, took its management fee of 3% of rental receipts in accordance with the Management Agreement, and prepared the year end financial statements and income tax returns of Plaza Carpark and of the Plaza UT. Mr Ma also prepared the personal income tax returns of some of the directors. 25 There is a dispute about whether Mr Ma provided copies of the annual financial statements of Plaza Carpark to any of the investors. They each denied it. I accept their denials. There is a significant difference between the amount of the loan to the bank as shown consistently on the monthly reconciliation statements ($900,000) provided to the investors, and the loan shown as non-current in the balance sheet ($1,600,000 or $1,715,000) in the annual financial statements. I was impressed with the attention to detail of Mr Li, and with his evidence generally. It is an indication of his attention to detail that, when he first procured and saw a copy of the instrument of transfer of the car park dated 1 November 1996, he picked up on two things: that the common seal of Plaza Carpark was supported by the signature of Mr Ma as the sole director, and that the purchase price was shown as $3,700,000. He picked up on the first of those things because he had been made a director of Plaza Carpark on 1 November 1996 (as arranged by Mr Ma) and he did not see how Mr Ma could sign the transfer as the director, and on the second of them because he understood from what he had been told by Mr Ma the purchase price was $3,800,000. 26 The significance to Mr Li of Mr Ma apparently signing the transfer as sole director, when he was not - or should not have been - is not of moment to the present proceeding. The explanation is probably that the transfer was signed a few days beforehand, with the date left blank, so that the date of transfer would be added to tie to the date of settlement; that is not uncommon in such circumstances. I also accept that the investors had been told that the purchase price for the car park was $3,800,000 when it was in fact $3,700,000. The extra $100,000 was in respect of the undisclosed commission. I address that issue in more detail below. 27 The point is that, as all the investors understood that the purchase of the car park was to be funded by payment of nine lots of units at $350,000 each and borrowings equating to $100,000 for each of the nine lots of units (a total of $900,000 bank borrowings) any financial statement which showed bank borrowings of $1,600,000 (and later $1,715,000) rather than $900,000, would have attracted the attention and concern of the investors. Mr Li would have been one investor who would have noticed and been concerned about such a discrepancy. As it happened, his concern in 1998 about the terms of the transfer led him to consult certain other investors and ultimately to arrange some meetings between the investors and/or the directors of Plaza Carpark. 28 That finding is consistent with the information Mr Ma routinely provided to the investors following the settlement. 29 Shortly after the settlement, Mr Ma or Sino Global provided to some of the investors, a sheet with Chinese writing but (Arabic) English numerals called "Itemised Schedule". It showed the price or cost of the car park as $3,800,000 and did not reveal the undisclosed commissions. For the purpose of that document, the undisclosed commission was "rolled into" the price as stated. It showed the source of the funds for the purchase as $3,150,000 cash from shareholders and borrowings from the bank of $950,000. (It is unclear how that precise figure came to be specified; no point was made about the extra $50,000). It did not reveal that Mr Ma had not put in cash towards his share of the units. It did not reveal the undisclosed borrowing. 30 Having received the benefit of the $700,000 undisclosed borrowing, Mr Ma routinely paid the interest on that portion of the borrowing by Plaza Carpark from time to time. He also gave to the bank a personal guarantee in respect of the full amount of the borrowing. From the perspective of Plaza Carpark, the undisclosed loan of $700,000 to Mr Ma or Sino Global was unsecured. They also had the benefit of an interest rate which reflected the security given by Plaza Carpark to the bank of the car park itself. 31 Sino Global also provided to the investors a Rent Reconciliation report monthly from November 1996. It detailed the rent received and other income and the expenses. The net income was distributed between the unit holders pro rata, subject to a small reserve being retained for incidental capital expenditure. That document disclosed the management fee of Sino Global. It also disclosed the interest on borrowing. That was described as follows: "Interest of $900,000 @ ….". Clearly the undisclosed borrowing was not included. Nor was the interest on the undisclosed borrowing. As noted, Mr Ma appears to have paid to Plaza Carpark or directly to the bank interest at the rate charged by the bank from time to time on the undisclosed borrowing. Those documents also did not record the revenue received by Plaza Carpark from Mr Ma for the interest payable on the undisclosed borrowing. 32 The full annual financial accounts of Plaza Carpark and of the Plaza UT for each year did record the full borrowing, including the undisclosed borrowing, and an "unsecured Loan" of $70,000. They also included as income the interest paid by Mr Ma in respect of the undisclosed borrowing. As I have noted, there is no cogent evidence that those accounts were provided to the investors, and it was not suggested on behalf of Mr Ma or Sino Global that they were presented to the investors in a way which satisfied the disclosure obligations of Mr Ma. 33 On 24 October 2008, the investors and shareholders decided to sell the car park. It is not clear whether their thinking at that time was sufficiently advanced to the point of deciding to sell the car park itself, or the shares in Plaza Carpark. Nothing turns on that. 34 On 10 November 2008, the investors and directors resolved to remove Mr Ma as a director of Plaza Carpark (it is not clear that he was then a director) and as its secretary. 35 Subsequently, they commenced these proceedings. 36 During his evidence, Mr Ma produced a reconciliation of the bank statements for the full loan from the bank, and the other records. It is fair to record that, apart from the benefits he received from the undisclosed borrowing (as I have found and to a degree he accepted) and the non-disclosure of that borrowing and those benefits, Mr Ma conscientiously attempted to reliably and fully account to the investors for the management of Plaza Carpark and the Plaza UT. I accept that, from time to time, he lent monies to Plaza Carpark when the interest and other outgoings exceeded the funds available in the operating account. He properly tried to minimise the interest liability by renegotiating the fixed rate loan as interest rates reduced. He routinely and reliably paid the interest on the undisclosed borrowing. The reconciliation shows the interest debited by the bank, the Sino Global share of net revenue as distributed to each of the investors and the funds deposited by Mr Ma. The figures roughly balance each year, although Mr Ma appears to have paid a little in excess of his real liability by the end of almost every financial year. 37 Mr Ma claims to have overpaid, during the full period, the sum of $24,210. That was the only remaining part of the cross-claim, which started out as a claim by Mr Ma that his removal as a director in November 2008 constituted oppression of him as a shareholder of Plaza Carpark, and that the removal of Sino Global as manager of the car park in October 2008 was in breach of the management agreement and also was oppressive of Mr Ma, and finally by Sino Global for distributions since November 2008 as a unit holder in the Plaza UT. 38 There was one dispute about admissible evidence. Mr Ma and Sino Global sought to rely on evidence from the Chairman of the Real Estate Institute of South Australia, Commercial and Industrial Committee about syndication of property investments, often through a coordinator such as an accountant who acquires the investment asset and manages it for an annual fee. He asserts that the promoter always gets a reward for spotting and then consummating the investment opportunity. His evidence was primarily to support the contention that the relief granted for breach of Mr Ma's fiduciary duty to the investors should not include a declaration that Sino Global holds its Plaza UT units on a constructive trust as that would not be an appropriate order in all the circumstances, but also to support the validity of the undisclosed commissions. I do not consider that his evidence is of any real utility to resolution of the issues in this case. What he says is, no doubt, accurate. However, he did not suggest that the promoter's benefits were not necessarily disclosed to potential investors. The principal issue in this case is the consequences of Mr Ma's failure to do so. He says nothing about what constitutes a "spotter" or how a "spotter's fee" becomes properly payable, so his evidence does not assist in justifying in this case the undisclosed commissions. As his evidence describing what often happens in practice is arguably relevant, I have decided to receive it. In the result it did not really help in my decision for the reasons discussed below.

THE ISSUES 39 By the close of the evidence, the position of Mr Ma and Sino Global had been refined beyond that expressed in the pleadings and in their opening, and the issues required to be addressed had become more confined. 40 It is common ground that Mr Ma was a promoter of the investment in the car park, and thus was in a fiduciary relationship with the investors at least up to 1 November 1996 when the purchase of the car park by Plaza Carpark was effected. It also became common ground that Sino Global, as an entity controlled by and used by Mr Ma in the way described above in relation to the purchase of the car park was a knowing recipient of the benefits of any breach by Mr Ma of the fiduciary duties he owed to the investors. 41 It is also common ground that, in breach of his fiduciary duties, Mr Ma did not disclose to the investors the full details of the undisclosed borrowing from the bank, or the full details of the facts that Mr Ma proposed to apply, and did apply, the undisclosed borrowing to his personal purposes, namely to apply $350,000 to the purchase of units in the Plaza UT and to apply $350,000 for other personal purposes, including apparently repayment of certain personal debts. There was some disputed evidence about whether he had disclosed that information to any of the investors or shareholders, but it is not necessary to make any findings on those matters in the light of acknowledgments made on behalf of Mr Ma and Sino Global. They accepted that the investors and the shareholders did not have sufficient information to have given their fully informed consent to the undisclosed borrowing or to Mr Ma's application of it for his personal purposes. In brief, in respect of the undisclosed borrowing, Mr Ma accepted that he was in breach of the fiduciary duties he owed to the investors by securing the undisclosed borrowing and by applying it to his personal purposes. 42 The focus on the closing submission was the nature of the remedies to which the investors or the shareholders may be entitled in respect of that breach. In addition, the question as to whether the undisclosed commissions gave rise to any entitlement to a remedy, and if so the nature of that remedy, remained live. 43 The investors ultimately claimed the following relief: 1. in relation to that part of the undisclosed borrowing used by Mr Ma to pay for units in the Plaza UT: (a) a declaration that Sino Global held those units in trust for the investors pro rata; (b) an order that the dividends declared in favour of, and paid to, Sino Global by Plaza Carpark as trustee for the Plaza UT since 1996 be paid to the investors pro rata, as equitable compensation, subject to a "just allowance" in favour of Sino Global or Mr Ma. 2. in relation to that part of the undisclosed borrowing otherwise used by Mr Ma for his personal purposes, apparently including to repay certain personal liabilities: (a) an order for repayment to Plaza Carpark of the sum of $350,000, to be held as trust for the Plaza UT (and in turn for the investors); (b) an order for payment of compensation for the benefit obtained by Mr Ma on the basis that he would have saved the difference between the interest rate payable on the liabilities he discharged, that is a rate payable on unsecured personal borrowings, and the interest rate payable on that part of the undisclosed borrowing by virtue of it having been secured by the car park (noting that Mr Ma has to the present time paid to Plaza Carpark an amount equal to the interest it incurred on that part of the unsecured borrowing, so it has not itself been out of pocket for the interest on that borrowing); and 3. in relation to the undisclosed commissions: (a) an order for repayment of Plaza Carpark of the sum of $100,000, to be held as trustee for the Plaza UT (and in turn for the investors); (b) an order for payment of interest on the sum of $100,000 compounded and payable at the bank rates applicable from time to time since 1 November 1996; The investors contended that the undisclosed commission did not represent an amount payable for procuring by negotiation a reduced price for the car park; nor was it a "spotter's fee" or fee payable for the opportunity to acquire the car park, so they say, it was not an expense properly agreed to by Mr Ma on behalf of Plaza Carpark. 44 In closing submissions on behalf of Mr Ma and Sino Global, they assert a number of disputed factual matters. By reason of the acknowledgments referred to, I do not need to address them all. 45 I record that they assert that the investors "were told something" of what Mr Ma was proposing for his investment in the car park but have forgotten nearly all that they were told. However, it is clear that they were not given every detail about the investment, nor all the details about Mr Ma's investment and borrowing arrangements. They were not fully informed about Mr Ma's arrangements with Plaza Carpark. Mr Ma and Sino Global cannot show that what (they say) was told to three of the investors was told to all the investors. They cannot show that the information in the full end of year financial accounts given (they say) to two or three of the investors was given to all the investors. As the breach of fiduciary duty is acknowledged, there is no need to make specific findings on any disputed factual matters which arise from their position on those matters. 46 Mr Ma and Sino Global contended, however, that · there was no failure to disclose information which had any consequence to Plaza Carpark, as it acquired the car park and "got all it wanted"; · there has been no loss occasioned by Plaza Carpark or by the investors because, although there was increased borrowing by Plaza Carpark by the undisclosed borrowing, the debt has not been called in and the security has not been enforced; if the car park is sold, that part of the undisclosed borrowing used to acquire the units of Sino Global would be repaid from the proceeds of sale; · there has been no lost opportunity for the investors, nor any adverse consequence to them by the non-disclosure by Mr Ma, because they had no opportunity to do other than to accept the terms he proposed (as he would otherwise have made the offer to someone else). Hence, they contend, the claimed remedy of a constructive trust is "unsuitable to the wrongdoing" in all the circumstances. They have offered to repay the undisclosed borrowing of $700,000 (subject to credit for an amount of $11,200 said to have been repaid), but claim that no further relief should be granted. The repayment of the undisclosed loan would enable Sino Global to retain its one-ninth share in the car park or the proceeds of sale of the car park.

CONSIDERATION 47 The starting point for the position of Mr Ma and Sino Global is unexceptionable. It is based upon the following observation in Warman International Limited v Dwyer (1995) 182 CLR 544 (Warman)at 559: It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts. See also Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 (Hospital Products) per Mason J at 108 and per Deane J at 124-125. 48 However, in this matter, I do not agree that it follows that the particular circumstances do not mean that a constructive trust should not be imposed over Mr Ma's shareholding in Plaza Carpark or the units in the Plaza UT held by Sino Global. The contrary is the case. 49 In Hospital Products, Gibbs CJ said at 67: A person who occupies a fiduciary position may not use that position to gain a profit or advantage for himself, nor may he obtain a benefit by entering into a transaction in conflict with his fiduciary duty, without the informed consent of the person to whom he owes the duty. 50 It is also uncontroversial now that that rule applies whether or not the person in the position of a fiduciary acted fraudulently or with good intent, or acted knowingly in breach of that rule or in ignorance of it: Phipps v Boardman [1967] 2 AC 46; Chan v Zacharia (1984) 154 CLR 178. Thus in Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378, Lord Russell of Killowen said at 386: The rule of equity which insists on those, who by fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff … or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made. The profiteer, however honest and well-intentioned, cannot escape the risk of being called upon to account. 51 In the case of the $350,000 applied to the subscription for units in the Plaza UT, I find that Mr Ma would not have been able to finance the undisclosed borrowing including for the subscription for those units but for using the asset, namely the car park, as security for it. The resolution passed on 11 October 1996 by Plaza Carpark was procured at the instigation of Mr Ma as its sole director. That resolution, and what it might enable, was not brought to the attention of the investors. It did not expressly anticipate the borrowing by Plaza Carpark from the bank, as distinct from borrowing by a subscriber for units in the Plaza UT from another lender supported by the security of the car park. However, it reveals an awareness of the potential to borrow at least part of the undisclosed borrowing on the security of the car park. Mr Ma acknowledged that he could not have procured those funds otherwise. He also accepted that he did not have the resources to meet certain other personal liabilities except supported by that security. 52 In the case of the $350,000 applied to the payment of Mr Ma's personal liabilities, the application of the principles referred to clearly leads to the view that he should repay that sum to Plaza Carpark. It will then hold that sum as part of its assets in trust for the unit holders in the Plaza UT. Mr Ma acquired that benefit by breach of his duty as a fiduciary and must account for it. He does not now dispute that obligation. 53 Mr Ma and Sino Global placed considerable reliance on Warman in resisting any declaration that the share in Plaza Carpark and the units in the Plaza UT are held on a constructive trust for the investors (as unit holders and shareholders respectively). 54 In that case, an Australian company (the employer) was (inter alia) the agent for the distribution in Australia of gearboxes manufactured in Italy. It declined the manufacturer's proposal to manufacture the gear boxes in Australia under a joint venture. Its manager, whilst still employed, then dealt with the manufacturer regarding that proposal. He agreed with the manufacturer to set up a new company jointly owned equally by him and his wife of the one part and the manufacturer of the other. He then resigned from his employment. The manufacturer terminated the agency. The new company was established and it took over the agency, and entered into the proposed joint venture agreement. 55 The manager was found to have acted in breach of the fiduciary relationship between himself and his employer. The nature of the remedy was contentious. Ultimately, the High Court ordered that the employer was entitled to an account of profits made by the new company in its first two years of operation, being net profits before tax less an allowance for the expenses, skill, expertise, resources and effort contributed by its former manager. There was no issue before the High Court as to whether any part of the goodwill of the new business was held on constructive trust for the employer: see at 555. The issues were whether it was entitled to an account of profits, and if so upon what basis. 56 The Court (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) considered at 557 ff the nature of the liability of a fiduciary to account. That liability, their Honours said at 557, does not depend upon detriment to the person to whom the duty was owed but exists if (relevantly) the benefit was obtained by reason of the fiduciary position or by taking advantage of an opportunity or knowledge derived from the fiduciary position. They reinforced the stringent rule that the fiduciary cannot profit from the trust in breach of duty. At 558, their Honours said: What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty. 57 Mr Ma and Sino Global sought to contend, on the basis of that decision, firstly that no constructive trust should be found in their share and units and secondly that, in accounting for their profits, "just allowances" should be made for the effort and skill or Mr Ma in procuring the opportunity to invest in the car park and then for sustaining it. They point to the fact that the investment opportunity only arose through Mr Ma, including him arranging for the borrowing, and that he could have obtained other investors if they did not agree to the arrangement including them financing him into the investment and also lending him a further $350,000 (had it been explained to them). They note that Plaza Carpark has operated profitably, providing good returns and that no opportunity was diverted or lost by Mr Ma's conduct, nor any loss in fact suffered by the investors. Through Sino Global he managed the car park investment well. They point to the absence of evidence (except from Ms Chan) that any investor would have declined to participate had Mr Ma disclosed what he planned, and to the apparent lack of interest of the investors in the detailed financial position of Plaza Carpark. Other matters are noted at [46] above. Hence, they contend, a "fair and balanced" result would not include the imposition of a constructive trust on Sino Global's units in the Plaza UT because it would be disproportionate to do so. 58 They maintain that the open offer which they put by letter of 8 October 2009, on the third day of the hearing, reflects a fair and balanced outcome in all the circumstances. That offer was that the car park be sold and the profits be distributed to all the unit holders (including Sino Global) pro rata, or alternatively that the investors purchase Sino Global's units in the Plaza UT and Mr Ma's share in Plaza Carpark for $800,000. That figure is reached by the following calculation: Value of carpark (based on August 2008 bank valuation) $8,500,000 Less cost $4,450,000 Less 2.5% (marketing commission) $ 212,500 $4,827,500 One-ninth share of profit $ 470,833 Plus purchase price of Sino Global's units $ 356,000 $ 826,833 (say) $ 800,000 59 Mr Ma would also repay the balance of the undisclosed borrowing of $350,000 to the bank to reduce the bank indebtedness, leaving the investors in the same position they would have been in had Mr Ma not engaged in the undisclosed borrowing. In the short term, by repaying the $350,000 used for meeting his personal debts, Mr Ma would be in the same position as the other investors but for the increased indebtedness of Plaza Carpark to the bank by reason of it having funded Mr Ma's acquiring the units in the Plaza UT in the name of Sino Global. 60 The detail of how those figures are justified is not entirely clear. Allowing for some marketing cost, they assume a net realisable value of the car park at present of about $8,300,000 so a one-ninth share would be about $920,000. They appear to assume the present full borrowing from the bank (other than $350,000 of the undisclosed borrowing used by Mr Ma for personal purposes) would be repaid by Plaza Carpark. Hence, the proposal appears to assume that Mr Ma will retain, or retain the benefit of, that part of the undisclosed borrowing which was used to subscribe for units in Plaza UT. The reason for the difference between one-ninth of designated cost and the designated purchase price of the units is not clear; it is about $140,000. In the view I have reached on the principal issue, it is not necessary to take those queries further. 61 If either of Mr Ma's proposals is accepted, he is prepared to set off the income to which he claims to be entitled as a unit holder in Plaza UT since November 2008 to satisfy the costs of the investors, and to meet his own costs. 62 In this matter, the claim of the investors is not seeking from Mr Ma and Sino Global an account of profits made by acquiring a business in breach of the fiduciary duty. It is for a declaration of trust in respect of the asset (the units in Plaza UT) acquired by funds obtained in breach of that duty. In circumstances such as those in Warman, where there was no claim before the High Court that the asset - the new business or its goodwill - be held in trust, it is clear that the accounting for profits gained in breach of a fiduciary duty should have regard to the role of the fiduciary in generating the profits of the business, whether by effort and skill or by the introduction of capital. The Court in that case at 561: [I]t may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. … The stringent rule requiring a fiduciary to account for profits should not be applied in a manner which makes it a vehicle for the unjust enrichment of the plaintiff. In such a case it may be appropriate to allow the fiduciary a portion of the profits depending on the circumstances. 63 In this matter, in any event, I do not consider that imposing a constructive trust on the units in the Plaza UT held by Sino Global would involve any unjust enrichment on the part of the investors or be unfair to Mr Ma and Sino Global. In managing Plaza Carpark as trustee for the Plaza UT, Mr Ma through Sino Global caused Plaza Carpark to enter into a management contract with Sino Global. It charged a fee for doing so. There is no suggestion its fee was not a commercial one. Nor is there any suggestion that it should be required to account for the fees so received. In procuring the opportunity for the investors to participate in the Plaza UT, Mr Ma certainly undertook some work. Such "spotter's fee" as might have been payable has - in circumstances which the evidence does not satisfactorily reveal (as discussed below) - been paid at settlement to "consultants" (as Mr Ma so described them in correspondence with the solicitor's arranging the settlement) as the undisclosed commissions. There is little evidence about the extent of Mr Ma's professional work in procuring the investment beyond that; nor is there evidence that excludes from consideration the benefit to him as a professional accountant the provision of such services to his clients so as to maintain their work and to procure new clients so as to get their work. 64 It is plain that he acquired the units in the Plaza UT in breach of his fiduciary duty. Had that breach been detected at that time, I do not think there could have been any real doubt that the Court would have determined that he held those units on a constructive trust for the investors. Since then, the management of the Plaza UT was undertaken by Sino Global apparently for a professional fee. The fact that those units have become more valuable over time does not, in my view, provide any reason now in all the circumstances not to grant similar relief. The units in Plaza UT were a benefit obtained by Mr Ma by reason of him taking advantage of an opportunity which he got in his position as a fiduciary and in breach of his duty as a fiduciary: see per Mason J in Hospital Products at 107. That benefit, in my view, should be held by him as a constructive trustee for the investors. It is the gain from the breach, and in the circumstances that gain should be held on a constructive trust; cf Paul A Davies (Australia) Pty Ltd (in liquidation) v Davies (1983) 1 NSWLR 441 per Moffit P at 444. See also per Heydon JA (as he then was) in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at 414. There is a clear and direct connection between the breach of duty and the asset held: see per Brennan CJ, Gaudron, McHugh and Gummow JJ in Maguire v Makaronis (1996) 188 CLR 449 at 468 (Maguire). 65 Mr Ma and Sino Global submitted that the Court should take account of the fact that the investors would not have had the opportunity to invest in the car park but for Mr Ma identifying and securing that opportunity, and have since then had a satisfactory income stream and will in due course have a substantial capital profit. It was said in Warman at 558, in a passage cited with approval in Maguire at 468-469, that the fact that the fiduciary acted in good faith and in the interests of the trust and that the opportunity to invest would not have been available but for the fiduciary's skill and knowledge, does not provide an answer to the claim for relief. And, for the reasons already given, I do not consider the circumstances are such that the claim for a constructive trust should be rejected or tempered in the same way by Mr Ma's work at the time of, or subsequent to, the investment opportunity. 66 As Mr Ma has apparently given to the bank a personal guarantee for the full extent of Plaza Carpark's indebtedness, in the circumstances it is appropriate that he be relieved of that guarantee upon him repaying that part of the undisclosed borrowing used for his personal purposes, either by the investors negotiating with the bank for the release of that guarantee or by them underwriting any call on that guarantee in an appropriate way. It is also appropriate that it be made clear that he not also be liable for that part of the undisclosed borrowing used to subscribe for those units. The investors did not, in their submissions, seek to maintain his liability for that part of the undisclosed borrowing as well as a constructive trust for their benefit over the units issued to Sino Global. That was an appropriate position to take. Had Mr Ma acquired those units with funds from his own resources (whether or not he borrowed the funds to do so), the constructive trust would have been declared subject to the investors repaying those funds. They have elected to seek the remedy of a constructive trust in the circumstances, obviously because the units have significantly appreciated in value. They would be unfairly enriched if they got that order without repaying any contribution by Mr Ma for their acquisition; on the other hand, in such a case, he would be unfairly punished: see Chan v Zacharia (1984) 154 CLR 178 at 204-205. Leaving that part of the undisclosed borrowing as a liability of Plaza Car Park is a short cut to ordering reimbursement to Mr Ma of what he paid for the units on the condition that he then repay it to the bank to reduce the indebtedness. He is being brought to account for the benefit he received by his breach of fiduciary duty. 67 As noted earlier in these reasons, Mr Ma and Sino Global acknowledged that any liability of Mr Ma for breach of his fiduciary duty would extend to Sino Global: Barnes v Addy (1874) LR 9 Ch App 244 at 251. 68 I also consider that it is appropriate in principle to order that the dividends declared in favour of, and paid to, Sino Global since 1996 also be accounted for and paid to Plaza Carpark, subject to some adjustment in favour of Sino Global or Mr Ma for the interest paid by them on the $350,000 used to acquire those units. Again, that adjustment should be made because, albeit in breach of his fiduciary duty, Mr Ma acquired the units in Plaza Carpark with borrowed funds, but had the funds been borrowed independently (and subject to ensuring he did not profit from his breach of duty), the constructive trust over the units issued to Sino Global would be on the condition that the (borrowed) funds applied to their issue would attract an appropriate allowance for their use whilst the units appreciated in value. An appropriate allowance in this instance is, in my view, the interest paid on that borrowing. 69 Mr Ma produced material from which, it was submitted, it was shown that he had overpaid the proportion which he should have paid of the interest and bank fees on the undisclosed borrowing. The picture is not particularly persuasive. One calculation suggests that in the period to September 2008 the total interest and fees on the borrowing of $1,600,000 (made up of the undisclosed borrowing of $700,000 and the $900,000 borrowed and on-lent to the shareholders and Mr Ma to finance the extra $100,000 cost of each block of units in the Plaza UT) totalled $1,642,925 of which Mr Ma's proportion is $718,780 (7/16). That document claims that Mr Ma had in fact paid $746,735, made up of Sino Global's distributions from the Plaza UT and personal funds deposited by Mr Ma, that is an excess of $27,955. Another document shows Mr Ma had paid $766,337 including the distributions to Sino Global to 30 June 2008 and made further payments in the subsequent period totalling $38,067. The settlement proposal by letter of 8 October 2009 does not claim any overpayment of that nature. 70 The evidence is not particularly persuasive. The calculations were made only during the hearing from bank statements and other financial statements and documents. There was no evidence of a ledger kept by Mr Ma which routinely recorded the receipts and payments in relation to the undisclosed borrowing, or in relation to the units in the Plaza UT. It was his responsibility to maintain such a record, as Sino Global was the manager of Plaza Carpark and Mr Ma actually prepared what financial records were made and retained. As I have found above, whether or not he was aware at the time that he was in breach of his fiduciary duties, he anticipated his subscription for units in the Plaza UT being funded by borrowing (whether personal or corporate) and being secured by the car park. His monthly reports to the investors clearly did not reveal that transaction. Any shortcoming in the records, and so any lack of confidence in the reliability of the claims he now puts forward, must rest with him. 71 I have reached the view that there should be no credit allowed to Mr Ma or Sino Global on the basis of the claimed overpayment. I am satisfied that Mr Ma, by applying the dividends received from the Plaza UT and by the addition of such supplementary funds as he considered were necessary, tried regularly to pay the interest and bank fees on the unsecured borrowing. He did not say that he tried to build any surplus, whether to reduce the undisclosed borrowing or otherwise, beyond making the payments for interest and bank fees. I do not consider that he did build up any such surplus. There is no such surplus shown either as a standing to his credit in the annual financial statements from time to time or shown as reducing the extent of his indebtedness. 72 However, the fact is that Mr Ma has paid the interest and other bank charges on the undisclosed borrowing, including that part of it applied to acquire units in the Plaza UT. The dividends received have apparently been sufficient to cover the interest and bank fees on that part of the borrowing. No attempt was made to allocate his appropriation of the dividends received and other payments made by him to the two different uses to which the undisclosed borrowing was applied. But there would be no element of unjust enrichment by him if he were to be given credit for those payments as part of the "just allowances". Sino Global will hold its units in the Plaza UT on trust for the investors. And, on the other hand, I do not think the investors will be disadvantaged by having been deprived of the additional dividend flow. I infer that, had Mr Ma not procured units in the Plaza UT, some other investor would have participated and received the dividends which were received by Sino Global. 73 Accordingly, I do not propose to order that Mr Ma or Sino Global should account to Plaza Carpark for the dividends declared in favour of, and paid to, Sino Global since 1996. Nor do I propose to make any order in favour of Mr Ma or Sino Global on the claimed basis that they have in fact paid more than the interest and bank fees payable on the undisclosed borrowing since 1996. 74 Finally, I note that apart from the undisclosed borrowing, Mr Ma or Sino Global in fact borrowed $100,000 (along with each of the other investors) to partly fund the issue of units in the Plaza UT. The interest on the total of $900,000 was routinely declared and brought to account in the monthly statements; issued when the monthly dividends were paid, and in the financial statements. It is still a debt due by Mr Ma to Plaza Carpark. As that borrowing was applied towards purchase of the units in the Plaza UT, and as those units of Sino Global are to be held in trust for the investors, any final orders should relieve Mr Ma of that indebtedness to Plaza Carpark. 75 It is clear that, by reason of having the benefit of the other part of the undisclosed borrowing, Mr Ma was able to secure funds to meet other liabilities which he could not otherwise have met and that he did so at a rate of interest less than he would otherwise have been able to secure an unsecured borrowing (on the assumption that he would otherwise have been able to make that borrowing elsewhere, or have had to pay interest to his other creditors on the basis of an unsecured loan) or on a borrowing secured by a charge over the units in the name of Sino Global. 76 In my judgment, Mr Ma should therefore also be required to pay interest to Plaza Carpark at a rate of interest (which I determine conservatively at 3%) above the rate of interest paid by Plaza Carpark on that part of the unsecured borrowing. There is no science in that figure. There was no direct evidence, for instance, as to the bank rate applicable to unsecured personal loans during the period. Indeed, it must be doubtful if an unsecured loan of that amount would have been made by the banks to Mr Ma, or to anyone else. It may have advanced that amount on some sort of charge over the units themselves. It is not desirable that there be further evidence to determine, for example, the bank overdraft rate from time to time assuming that was somehow secured by a charge over the units. Mr Ma breached his fiduciary duty by arranging that part of the unsecured borrowing, and then by taking and using it for his own purposes. Although he has to date paid Plaza Carpark for the interest and bank fees it has paid to the bank on that part of the unsecured borrowing, he should be required to pay interest to Plaza Carpark at the higher rate as a way of requiring him to account for the profit he made by being relieved of the indebtedness he met with that borrowing (as discussed in Finn, Fiduciary Objections at 112-114). See also Southern Cross Commodities Pty Ltd (In Liq) v Ewing (1998) 6 ACLC 647 at 660 (Ewing). That interest should be calculated on a compounding basis with half yearly rests: see Ewing at 667 per Legoe J and at 670 per von Doussa J. 77 I turn to consider the undisclosed commissions. 78 The issue, as counsel for Plaza Carpark put it, is whether the undisclosed commissions were payments made in the best interests of the Plaza UT or procured by Mr Ma in breach of his fiduciary duties to the Plaza UT. The answer to that question turns upon whether Mr Ma, through Plaza Carpark, exercised appropriate diligence and prudence in agreeing to make and procure those payments: Austin v Austin (1906) 3 CLR 516, having regard to what an ordinary prudent business person would do: Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504 at 516-517 and 522 per Finn J. 79 At first blush, the payment of a "spotter's fee" or a fee paid to an agent to negotiate a purchase price, or both, would not seem imprudent. Nor is there any evidence that the amount of the spotter's fee and the fee paid to negotiate the purchase price in this instance is itself excessive. 80 However, Mr Ma's evidence as to how and why the particular undisclosed commissions were paid is not entirely satisfactory. Initially, he said there was one consultant involved in the negotiations of the purchase of the car park. He was able to identify the opportunity for the investment through Mr Paul Ho of APH Consultants, and he asked Mr Ho to undertake the negotiations to secure the best price achievable. He agreed to pay Mr Ho a "success fee" of $100,000. Mr Ho's efforts led to the purchase price being reduced by some $400,000. In his cross-examination, he said that he did not deal with more than one consultant, and that the undisclosed commissions were paid in accordance with Mr Ho's direction to his company and the company Unilink based in Hong Kong. In fact, the evidence shows that by 8 October 1996, the payment to Unilink was directed to be paid, well before the settlement of the car park. How the timing of that direction came about was not satisfactorily explained. No evidence was adduced from Mr Ho. No receipt from him was produced. No written direction from him was produced. No record of any communications with Unilink was disclosed. Mr Ma had no knowledge of that company. 81 However, despite the forceful submission of counsel for Plaza Carpark, I do not think that Mr Ma went so far as to acknowledge in his evidence that the payment to Unilink was no part of the payment due to Mr Ho or was not paid at his direction. Despite the features of the evidence to which my attention was drawn, I am not satisfied that Mr Ho was not engaged as a consultant to Mr Ma and Plaza Carpark to negotiate the purchase of the car park, or that he was not entitled to a fee by agreement of $100,000, or that the fee in all the circumstances was improvident either at all or as to its amount. Nor am I satisfied that the manner in which the fee was paid was not in accordance with Mr Ho's direction. 82 Consequently, I do not conclude that the undisclosed commissions were paid by Plaza Carpark at Mr Ma's direction in breach of the fiduciary duty owed by Mr Ma. 83 The cross-claim was not, ultimately, pursued. It should be dismissed. 84 Mr Ma and Sino Global should pay to Plaza Carpark its costs of the proceeding, and its costs of the cross-claim. 85 As my reasons indicate that the orders to be made will be somewhat complex, I direct that Plaza Carpark prepare a draft order to give effect to my reasons for judgment, and submit it to the solicitors for Mr Ma and Sino Global within 14 days. In the event that the parties, through their solicitors, accept that the draft order gives effect to these reasons, they may so indicate and I will make the order in those terms. If they do not so agree, any party is given liberty to apply on short notice to relist the matter for submissions as to the terms of the appropriate orders. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.