Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors

Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors - [2017] VSC 29 - VSC 2017 case summary — Zoe

[28]

The approach that is to be adopted in determining whether the ultimate fact, of which there is no direct evidence, can be inferred from other established facts, has been examined in a number of recent cases which re-state principles as to which there was little controversy before us. The principal debate before us centred on whether her Honour's analysis of the evidence was in accordance with the accepted approach. Thus, for example, in Chamberlain v. The Queen (No.2) Gibbs CJ and Mason J said:

"In a case depending on circumstantial evidence, the jury should not reject one circumstance because, considered alone, no inference of guilt can be drawn from it" and "that the jury should decide whether they accept the evidence of a particular fact, not by considering the evidence directly relating to that fact in isolation, but in light of the whole evidence, and that they can draw an inference of guilt from a combination of facts, none of which viewed alone would support that inference."

And in Shepherd v The Queen Dawson J, who delivered the principal judgment, after referring to Chamberlain (No. 2) said:

"Circumstantial evidence is evidence of a basic fact or facts from which the jury is asked to infer a further fact or facts. It is traditionally contrasted with direct or testimonial evidence, which is the evidence of a person who witnessed the event sought to be proved. The inference which the jury may actually be asked to make in a case turning upon circumstantial evidence may simply be that of the guilt of the accused. However, in most, if not all, cases, that ultimate inference must be drawn from some intermediate factual conclusion, whether identified expressly or not. Proof of an intermediate fact will depend upon the evidence, usually a body of individual items of evidence, and it may itself be a matter of inference. More than one intermediate fact may be identifiable; indeed the number will depend to some extent upon how minutely the elements of the crime in question are dissected, bearing in mind that the ultimate burden which lies upon the prosecution is the proof of those elements. For example, with most crimes it is a necessary fact that the accused was present when the crime was committed. But it may be possible for a jury to conclude that the accused was guilty as a matter of inference beyond reasonable doubt from evidence of opportunity, capacity and motive without expressly identifying the intermediate fact that the accused was present when the crime was committed."

A little later, his Honour said that "evidence may have a cumulative effect" and that it is incumbent upon the arbiter of fact "to consider all the facts together at the conclusion of the case".

Although the observations made by the High Court in Chamberlain (No. 2) and Shepherd were expressed in the context of criminal proceedings, the principles also have application in civil cases. Indeed, Tadgell JA explained in Longmuir that, both in the civil and criminal law context, the evidence in question must be evaluated as a whole and that the object of the exercise in a case such as the present, where direct proof of the disposition contended for is not available, is to ascertain "whether the evidence paints a picture to be derived from an accumulation of detail. The overall effect of the detailed picture can sometimes be best appreciated by standing back and viewing it from a distance, making an informed, considered, qualitative appreciation of the whole. The overall effect of the detail is not necessarily the same as the sum total of the individual details." Thus, it seems plain enough that, when a court is asked to infer a fact from various items of indirect evidence, it must consider the combined or cumulative effect of the evidence. This Court in Longmuir concluded that the trial judge had erred because he considered each item of circumstantial evidence in isolation from the other material and sought to determine whether the ultimate fact could be inferred from each such item of evidence. In that case, the respondent's house was damaged in a fire that was deliberately lit and there was a large body of circumstantial evidence which pointed to the respondent having set the property alight. The trial judge found for the respondent notwithstanding the evidence that implicated him in the lighting of the fire, his Honour reasoning that there was a possibility that someone else had set fire to the respondent's residence. In upholding the appeal on the basis that the judge had erred in the manner in which he assessed the evidence, the President observed:

"[H]is Honour deprived himself of the opportunity of assessing the full impact of [the] evidentiary facts by engaging in a false process of reasoning. Rather than considering what inferences flowed from the combination of evidentiary facts which were not in contest, the learned judge appears to have treated each of the individual evidentiary facts as if it were the ultimate factum probandum; in the sense that unless, when analysed, it was capable by itself of supporting the inference that the respondent was responsible for lighting the fire, it should be discarded without regard to the support which such fact might have received from the other facts."

Reference should also be made to the observation of Buchanan JA (with whom Phillips CJ and Charles JA agreed) in R v Huisman & Shiells that "the distinction between the evidence founding a chain of sequential reasoning and an accumulation of circumstances from which a fact may be inferred was explained metaphorically in Wigmore on Evidence, vol. 9 para. 2487, as the distinction between links in a chain and strands in a cable. See Shepherd v R" and in R v Ng the Court of Appeal held: "It is the very essence of a circumstantial case that the items of evidence should not be examined in isolation, but must be considered in their totality."

[59]

My late father, Hoh Ying Chye ("my father"), and my late mother, Yow Mui ("my mother"), had seven children ... [including] Robert, born in 1930, who passed away on 24 December 2007, ... whose only son is Hoh Han Keyet ... Maureen, born in 1933, Derek Hoh Kiang Howe ("Derek"), born in 1935 ... George, born in 1943 ... Frank ... born in 1944; and Richard Hoh Kiang Seong ("Richard"), born in 1946 ...

My father was a very determined and very strict man. He was very strong willed. ...

My father had an English education and spoke English. When I was young my father was a maths teacher. He was a teacher for about 35 years before his retirement from teaching when I was in my teens. Even while he was a teacher my father had other interests, which he always took very seriously. When he did something, he (to my observation) did it well. One of those interests was to collect stamps which he thought were of value. He did it as an investment as well as a hobby and established the Malaysian Stamp Company. As children we would help by cutting out the stamps from envelopes and washing them. From time to time, stamp collectors (including some from the UK) came to visit him in Malaysia. Stamp trading was a good source of income for my father, which income he used to educate his children in the UK and, to a lesser extent, in Australia. My father often said he had a strong belief in education. Robert, Maureen and Derek were educated in the UK, while Richard and I were educated in Australia. George initially went to the UK to study but did not graduate and later studied computer science in the ANU. I assisted him to settle in Australia.

For as long as I can remember my father was in the pawnshop business. He was involved, together with his cousins, in establishing the family run pawnshops in 1947.

My mother, a Malaysian-Chinese, was a devoted housewife. She came from a large family of 11 siblings. Family and family values were to my observation very important to my mother and my father. This was instilled in me from a very young age. My father was the son of a Chinese immigrant. Living in a foreign country, where all we had in terms of a support was family, my parents were very supportive of their wider family. For example, my father's brother was shot and killed during the Japanese occupation of what was then Malaya. His brother had three boys and two girls. My father took in and raised three of my cousins, Fook Yoong, Foong Yoong, and for a short period, Kiang Ming.

[60]

The broader Hoh family business was and is primarily run through the company called SYM. SYM is a Malaysian company founded and incorporated by my father on 26 September 1968. My father gave his children shares in SYM. SYM's ownership structure was and is as follows:

(a) In or around 1979 my mother and the children (excluding Linda, who had already passed away) each held 250,000 shares in SYM. Han, being the first and eldest grandson, held 100,000 shares, and the rest of my father's grandchildren each held 50,000 shares. To the best of my knowledge, my father retained no shares in SYM in his own name.

(b) In 1980 Maureen was required by my father to give up 150,000 of her 250,000 SYM shares following a dispute with my father. Those shares were transferred to my mother, Richard and me, who each received 50,000 shares.

I subsequently transferred 50,000 shares to my son, Ian, while my mother and Richard each transferred 50,000 shares to his two children, Leonard and Samantha.

(c) Thereafter, broadly speaking, the shares in SYM have been roughly equally divided five ways between the respective families of my father's five, with Maureen holding a smaller number of shares.

My father's requirement was that only the men in the family could be directors of SYM, and that they would control the company. When I finished my studies in Australia and returned to Malaysia I spoke with my father about the SYM ownership structure. My father told me that he intended that the future generations of the family would be provided for, regardless of their gender, but that his sons should have control of SYM. I considered that the same intention could be achieved under a fairer and more tax efficient structure. After discussing this with my father he changed SYM's share structure, to make two classes of shares, being ordinary shares and "non-director" shares.[6] The male family member had ordinary shares that made them eligible to be directors but, other than my mother, the female family members' shares did not entire the shareholder to be a director of SYM. The Hoh family companies also became entitled to hold "non-director" shares. All shares carried the same voting rights.

...

[61]

Shortly after the end of World War II, my father started the pawnbroking business in a family style "partnership" with two of his cousins, Ho Patt (born in 1909) and Hoh Chiap (born in 1911) (collectively, the "Pawnshop Owners"). There was no formal documentation to reflect the arrangements between them.

In around 1947, the Pawnshop Owners established the Choong Teck Pawnshop and Choong Fatt Pawnshop. ...

My father often referred to the Pawnshops as a "poor person's bank" because they operated in effect as an informal bank, offering loans to the public on the security of chattels where the banks were not interested in lending.

In addition to the profits generated by the Pawnshops' business, which the Pawnshop Owners (i.e. our partners) divided among themselves, the Pawnshop Owners also profited from interest income from funds "deposited" with the Pawnshops in the following manner:

(a) From time to time, when the Pawnshops required working capital, the Pawnshop Owners who had sufficient funds at the time would advance loans (which were often referred to as "deposits", likened to deposits with a bank), to the Pawnshops.

(b) the Pawnshop Owners did not necessarily advance loans to the Pawnshops in equal shares, but rather, whoever had sufficient "spare" funds at the time would advance the loans required.

(c) At various times, the Pawnshops also took deposits from third parties (i.e. people other than the Pawnshop Owners). These people were primarily relatives and friends of the Pawnshop Owners). However, these third parties received a lower interest rate on their loans than the Pawnshop Owners and their immediate families did on their loans.

The Pawnshop Owners were assisted in the day-to-day operations of the Pawnshops by a distant relative, Ho Tee Chai who was an employee and earned a wage. He was not entitled to preferential interest rates on funds deposited with the Pawnshops.

In 1968 my father incorporated SYM and transferred his interest in the Pawnshops into SYM.

Between 1969 and the early 1970s the other Pawnshop Owners cease to be involved in the Pawnshop business and received full repayment of their loans (with interest) to the Pawnshops. Thereafter, my father become the sole owner of the Pawnshops.

At around that time Ho Tee Chai reached an agreement with my father and became a part-owner of the Choong Teck and Choong Fatt Pawnshops. Pursuant to the agreement Ho Tee Chai became entitled to 3% of the Pawnshops' profits.

Over the years Ho Tee Chai and his family have gradually increased their shareholdings in the Pawnshops.

[63]

Since the 1970s, at my father's direction, all six of his surviving children were appointed as directors of SYM. Maureen later resigned as a director in 1980 following a dispute with my father. Although my father was not a formal director of SYM, he remained the directing mind of SYM and solely in charge of running its business, with the assistance of SYM's staff.

My understanding is that my father set up SYM as his "living will". He often said to me that SYM was intended to be his legacy for future generations of the broader Hoh family (the "Benevolent Purpose"). I discuss the Benevolent Purpose further below, but in short, the income generated from SYM's business and investments was to be used to provide financial assistance and support to members of the broader Hoh family.

My father did not make any particular effort to groom any of his children to take over SYM's business. My father saw to it that we received a university education overseas. After that, he said he expected that we pursue own careers, which we did. None of us were therefore heavily involved in SYM's business when my father was alive and well, even though his sons were directors in name. We would, however, occasionally provide some assistance to SYM's business on a temporary basis upon my father's request.

In 1986, when my father was 84 years old and had suffered a series of strokes, George began to increase his involvement in SYM. At or around this time I was preparing to migrate with my family to Australia and did so in December 1987. At the time only three of the sons (being Robert, Derek and George) were living in Malaysia and, of the three, George was the only one who did not have children).

...

My parents always placed great importance on family gatherings. While my parents were alive and I was living in Malaysia with my family, we would have regular family dinners on Fridays. My family would also come together for important occasions like birthdays and festivals ... My father and mother, and my siblings and I, expected that all family members would attend these events.

As a young man, I wanted to get into business like my father. My father and I would talk about business generally and also about the family business, in particular. Similarly, family lunches and dinners invariably involved talking about the family business. I really enjoyed it and found business fascinating. Through these discussions, and family life generally, I came to understand the family business and my father's desires for it.

Before my father's death, whenever my siblings or I needed money, we asked father for a loan. ...

As mentioned above, my understanding is that my father set up SYM as his "living will" and that SYM was intended to be his legacy for future generations of the broader Hoh family. When he died, he had very little to give in his will. Instead, he had placed the substantial majority of his assets and wealth into SYM and prepared a document entitled "Final instructions and Supplement to My Will". I understand that, in this way, my father's will was effectively dealt with through SYM and the shares issued to his children, informed by his written wishes. ...

After my father's passing Robert and my mother said on many occasions (often at family meetings) that if a family member was in need financially, whether it be the result of a health problem, disability or some other cause, the family business would be there to support them.

[70]

FINAL INSTRUCTIONS AND SUPPLEMENT TO MY WILL

These are my last instructions to my children, grand-children and their descendants and it is my sincere wish that they will be faithfully carried out.

...

According to the Articles of Association of our family Company, under Clause No. 3 (amended on 1-1-1981) the membership shall be restricted to the natural male descendants, but any unmarried daughter of a member may be accepted and may hold shares as long as she lives. However if she married, she can still hold her shares and collect any dividends due to her. At her death, her shares must be transferred within six months as a present or gift to any one or more of the members of the Company as she wishes, or sell at a price not less than the par value of the shares.

...

The Assets of the Company consist of Immovable Properties including the three built-up blocks of Buildings - two at Pudu and one at Jalan Ipoh known as Bangunan Ying Mui ... Two blocks of three-storeyed buildings, each containing twelve flats will soon be erected on this land. All my grand-children and daughters-in-law will each be given a life-time lease on one flat the nominal rent of one ringgit a year and pay the annual Government charges of Assessment and Quit rent. These five lots are not to be sold under any circumstance. Beside these lots, there other immovable properties shares and cash deposits in Pawnshops.

The Penthouse in Jalan Badak at Pudu is to be offered for occupation free of rent, assessment, water and electricity supply to my eldest son. If he does not accept, then it is to be offered to the other sons in order of seniority and thereafter to my grandsons with the following conditions:-

...

(d) On Chinese New Year Eve he will prepare at the Company's expense a Reunion Dinner to all members of the family who are all expected to attend. Twice a year on Chinese New Year and "Ching Ming" all members must meet in the Penthouse at an appointed time in the morning and gather at the Ancestral Memorial to pay respect to our Ancestors and ask for their blessings and guidance.

...

After deducting all expenses, income tax etc. the net income of each year will be distributed as follows: A dividend of 10% is to be paid to all the shareholders according to the number of shares held by each person. If your mother survives me, each shareholder will contribute to her 5% or one-half of the dividend for her own use. A sum equivalent to about 1% of the total gross dividend will be paid to each of the 5 Directors as Directors' fees (Each son will appoint a Director). The final balance will be retained by the Company as Reserve Fund for future developments and purchase of shares of other companies. If the Company is not in debt a suitable sum may be kept aside to be used as charitable donations as the Company will think fit. ...

A sum of money for each of my grand-children has been paid into the pawnshops as fixed deposits bearing interest at 1.2% per month compounded monthly. These deposits are to be provide her or University Education to the grand-children who may withdraw the money when he or she is admitted into a University and needs the money. If the child is unable to obtain admission into a University or does not require the money, he or she may withdraw the cash when he or she attains the age of not less than twenty-five (25) years. If the pawnshops are not operating the cash will be withdrawn and deposited in the Banks in the name of the Company who will hold the cash and accounts in trust for the children.

It is my deepest and dearest wish that my children and descendants will continue to love and help each other when I am gone. Take heed of the old saying "Harmony within the Family promotes prosperity". The way to achieve such harmony as taught by ancient sages is to cultivate the virtues of filial piety and brotherly love.

It has been our good fortune to be born and bred in this Country which has a great future. This is our home and country and we must be loyal and patriotic and defend it as best we can when necessity requires us to do so. ...

The ethical teachings of Ancient China are well worth mentioning here and should be passed on to future generations. Our ancient sage said that one must first of all cultivate himself by character building and then regulate his family. ...

[605]

The pivotal attribute of fiduciary relationships was described by Mason J in Hospital Products as being the undertaking or agreement by the fiduciary to act for or on behalf of or in the interests of another person in the exercise of power or discretion which will affect in a legal or practical sense the interests of that other person. The duty of a company director to act in good faith in the best interests of the company stems from the fiduciary character of the relationship between the director and the company. The duty is now statutory as well as fiduciary. It underpins the duty of directors to consult the interests of the company and its interests alone in deciding whether payments should be made to other companies. The directors must give real and actual consideration to the interests of the company. This consideration must be more than a mere token, and must actually occur.

The scope of the duties of directors where a company acts as a corporate trustee has considerable importance, as companies in Australia frequently assume that capacity, and the resulting responsibilities.

...

I agree with the statement by Robson J [see above] of the duties of a director of a company that acts as a corporate trustee. In circumstances where a company is a corporate trustee, a director acting in the best interests of the company as a whole must act in good faith to ensure that the company administers the trust in accordance with the trust deed having regard to the rights and interests of the beneficiaries of the trust. The best interests of the company as a corporate trustee are to act properly in accordance with the trust deed in managing the business of the trust and in dealing with the assets and liabilities of the trust. A director of a corporate trustee must act in good faith to ensure that the company complies with its obligations as a trustee, and properly discharges the duties imposed on it by the trust deed and by trust law generally. It is not in the best interests of the company for it to act in breach of its duties of a trustee, for the company has assumed the responsibilities of that office and must see to it that they are fulfilled.

The obligation of a director of a corporate trustee is the same whether the trust is a unit trust or a discretionary trust viz. to act in good faith to ensure that the company acts properly in accordance with the trust deed in administering the business, assets and liabilities of the trust. Although in the case of a discretionary trust, a member does not have any present entitlement to the trust assets, the member does have standing to compel the proper administration by the corporate trustee of the trust. This is not disputed. The director should act in good faith to ensure that there is no cause for legitimate complaint by a beneficiary about the administration of a trust for which the company is responsible.

[611]

In the work by Austin, Ford and Ramsay, Company Directors, Principles of Law and Corporate Governance, LexisNexis, Sydney, 2005, the authors identify five closely related rules administered by equity and which have an application to conflicts of interest on the part of company directors and senior officers. They can overlap extensively with one another. The five rules are:

(a) the conflict of interest rule: the director or officer must not, in any matter falling within the scope of his or her office, have an interest that conflicts or may possibly conflict with his or her duty to the company, except with the company's fully informed consent;

(b) the conflict of duties rule: the director or officer must not, in any matter falling within the scope of his or her office, have an inconsistent engagement with a third party except with the company's fully informed consent;

(c) the misappropriation rule: the director or officer must not misappropriate the company's property for their own, or for a third party's benefit;

(d) the profit rule: the director or officer must not misuse his or her position for personal or a third party's possible advantage, except with the company's fully informed consent and, therefore, he or she must account to the company for any gain which they make in connection with the fiduciary office;

(e) the business opportunity rule: the director or officer (at least if engaged full time in the service of the company) must not divert any profit making opportunity in the same line of business as the company's present or prospective business, to himself or herself or to some other person, except with the company's fully informed consent.

...

A convenient starting point for any discussion about conflicts of interest is the time-honoured dictum of Lord Herschell in Bray v Ford [1896] AC 44, 51-2 (Bray):

It is an inflexible rule of a Court of Equity that a person in a fiduciary position is not; unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded on principles of morality. I regard it rather as based on the consideration that human nature being what it is, there is danger, in such circumstances, of the person holding the fiduciary position being swayed by interest rather than duty, and thus prejudicing those he is bound to protect. It has, therefore, been deemed expedient to lay down this positive rule.

This passage was quoted with approval by Gaudron and McHugh JJ in Breen v Williams (1996) 186 CLR 71, 108; 138 ALR 259, 285; 43 ALD 481, 504; [1996] HCA 57 (Breen). Their Honours went on to say that the law of fiduciary duty rests "not so much on morality or conscience as on the acceptance of the implications of the biblical injunction that 'no man can serve two masters' [Matthew 6:24]".

There is authority for the proposition that the conflict of interest rule and the profit rule may be two themes within a single fundamental principle, rather than two separate doctrines. The objective of the principle is to preclude the fiduciary from being swayed by considerations of personal interest (the first theme) and from actually misusing his or her position for personal advantage (the second theme): Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 198-9; [1984] HCA 36; 53 ALR 417, 432-4 (Chan) (Deane J). The tendency to regard the profit rule as little more than a corollary of the conflict rule was criticised in Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, 103; [1984] HCA 64; 55 ALR 417, 459; [1984] HCA 64; 4 IPR 291, 334 (Hospital Products) where Mason J said:

And a recognition of its shortcomings induced Sir Frederick Jordan in his Chapters on Equity, 6th ed. (1947), p 115, to describe the conflict rule as a 'counsel of prudence' rather than a rule of equity. Accordingly, the fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interest and those of the person whom he is bound to protect: Aberdeen Railway Co v Blaikie Brothers [(1854) 1 Macq 461, 471].

In Chan at CLR 198- 9; ALR 432 Deane J also cited Sir Frederick Jordan's observations. This necessitates some comment. What Sir Frederick said is this:

It has often been said that the person who occupies a fiduciary position ought to avoid placing himself in a position in which his duty and his interest, or two different fiduciary duties, conflict. This is rather a counsel of prudence than a rule of equity; the rule being that a fiduciary must not take advantage of such a conflict if it arises.

The statements in Bray (accepted in Breen) and in Lewin on Trusts that a fiduciary must not "put himself" or "place himself" in a position of conflict has to be seen in the light of Mason J's formulation in Hospital Products. It is the promotion of the personal interest that equity finds abhorrent.

The basis for liability

Generally speaking, liability arises not from the mere existence of a conflict of interest but from the pursuit of personal interest by, for example, actually entering into a transaction in which the relevant conflict exists, or the actual receipt of personal benefit in circumstances of such conflict: Gemstone Corporation of Australia Ltd v Grasso [1993] SASC 4211; (1994) 62 SASR 239, 255 (Gemstone Corporation); R v Fitzsimmons (1997) 23 ACSR 355, 357-9. The mischief is not so much being in a position of conflict but rather in pursuing that conflict.

[626]

The courts have developed a pragmatic, common sense approach to the scope of the conflict of interest rule by requiring a real sensible possibility of conflict before finding that a conflict of interest exists. In Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46, 124; [1966] UKHL 2; [1966] 3 All ER 721, 756 Lord Upjohn said:

In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you can imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict.

This passage was cited with approval by the Privy Council in Queensland Mines Ltd v Hudson [1911] ArgusLawRp 95; (1978) 18 ALR 1, 3; 3 ACLR 176, 177. The force of Lord Upjohn's remarks (with subtle variations of terminology) has been recognised in a succession of Australian authorities, for example:

(a) Chan v Zacharia ("a conflict ... or significant possibility of such conflict" per Deane J at CLR 198; ALR 432);

(b) Hospital Products ("a conflict or real or substantial possibility of conflict" per Mason J at 103);

(c) Green and Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 ("in which, in a real and sensible way, his duty may possibly conflict with his interest" per Burt CJ at 5);

(d) Clay v Clay (1999) 20 WAR 427; [1999] WASCA 8; Clay v Clay (2001) 202 CLR 410; 178 ALR 193; [2001] HCA 9, [56] ("sensible, real or substantial possibility of conflict"); and

(e) Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1; [2003] SASC 318 ("a conflict or a real or substantial possibility of a conflict" per Debelle J at [24]).

The test for ascertaining a possible conflict is objective. It is not necessary to establish fraud, dishonesty or bad faith: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, 137; [1942] UKHL 1; [1942] 1 All ER 378, 381. In order to assess whether or not there is a real or substantial possibility of conflict the court must adopt the position of the reasonable person looking at the relevant facts and circumstances of the particular case. Nonetheless, in the case of a company, a director may act with a personal interest even though the director has not freed his or her mind of that personal interest when so acting, provided that his personal interest was not the actuating motive. Rather, the actuating motive must be some bona fide concern for the benefit of the company as a whole or for fairness as between members: ASIC v Adler [735] per Santow J.

[630]

The last point I want to raise in this review of general legal principles concerning conflicts of interest relates to the phrase "personal interests". I think it is common ground that the phrase is not confined to pecuniary interests. It extends to non-pecuniary and indirect interests. In Baker v Palm Bay Island Resort Pty Ltd (No 2) [1970] Qd R 210, 221-2, WB Campbell J said that the interest must be direct and certain and not contingent or remote. As a matter of principle I cannot see why it needs to be director of a contractual nature. It would be appropriate to adapt the test for a possible conflict ("real and substantial") and apply it to the identification of the interest. Mason J in Hospital Products excluded the ground of relief "when the interest of the fiduciary is remote or insubstantial". Some care needs to be taken to ensure the word "substantial" is not seen purely in quantitative terms relative to, for example, the subject matter of the transaction to which the impugned conduct relates.

This approach accords with the statement by Judge Learned Hand in Phelan v Middle States Oil Corporation [1954] USCA2 295; (1955) 220 F 2d 593, 602, indicating that the doctrine is applied with regard to the particular circumstances. His Honour went on to say that the rule does not apply when the putative interest, though in itself strong enough to be an inducement, is too remote, or when, though not too remote, it was too feeble an inducement to be a determining motive. These comments were cited with approval by the Mason J in Hospital Products at CLR 104; ALR 459- 60; IPR 334-5 and by McHugh, Gummow, Hayne and Callinan JJ in Pilmer at [79].

...

One way of ascertaining whether the interest of the fiduciary is remote or insubstantial is to ask whether the interest is such that a reasonable person would think there was a real or substantial possibility of the fiduciary being swayed by it. In this way, tests for the identification of the "interest" and for the "possibility of a conflict" would be applied bearing in mind a similar rationale.

[858]

Participants

It was your wife Lynn who identified the Malaysian extended family members as being persons who might potentially be interested in the acquisition of the two properties?---Yes. She did, Your Honour.

So the sequence of events is that Lynn has made you aware of the fact that lot 202 and Sydenham were available for sale. That's so, is it not?---Yes. She did, Your Honour.

Lynn then identified that some extended family members, based in Malaysia, may be willing to join in the acquisition of the two properties with you and Lynn. That's fair', isn't it?---Yes. That's fair, Your Honour.

...

And she also sought to interest some other friends of yours in joining you in acquiring the investment didn't she? You recall that?---Ah, yes, she tried to, um, I mean as I explained before, we couldn't afford the property by yourselves, so we had to go through a process of finding other investors, Your Honour.

...

And similarly she was also communicating with the Malaysian distant relatives, that was s' wasn't it?---Excuse me. Ah, yes, she was communicating with the Malaysian investors Your Honour.

...

Yes, because Lynn was co-ordinating the acquisition investment group wasn't she?---Um, yes she was co-ordinating with um Vgene and her siblings, yes Your Honour.

...

Yes. All right, and Lynn was attaching some proposed structures for the two property investments that our families will be making together, do you see that?---Ah yes I do see that Your Honour.

...

Is that again because it was your wife that was hands on in relation to putting this buying group together?---Ah yes she was definitely hands on Your Honour.

Legal structure

Not only was it your wife Lynn who identified the extended family members who may be willing to participate in the acquisition of the two properties; it was also Lynn who put together the trust structure by which the properties were to be acquired wasn't it?---Yes. She did put together the structure, Your Honour.

...

It was Lynn that did indeed coordinate the execution of the documents didn't she? Not you?---Yes, Lynn coordinated documents, not me.

...

Now similarly in relation to the establishment of the Woolshed Unit Trust, Lynn was involved wasn't she, in instructing solicitors to prepare the relevant trust documents? That was so wasn't it?---Yes, I believe so Your Honour.

You weren't involved were you?---No, it's not something that I get involved in Your Honour.

Negotiation of the sale contracts

It was Lynn that presumably engaged in that negotiation on behalf of the purchasing group with the vendor?---Yes, it appears so Your Honour.

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In relation to the contracts they reflected arrangements that had been negotiated on Lumarkye's behalf by Lynn, that's so is it not?---Yes, of course. Lynn is in a better position with her occupation to do that, but I just add through discussion with me and instruction from me.

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I suggest that Lynn had full authority on behalf of Lumarkye to arrange those sales contracts, that's so isn't it?---Yeah, per my instructions to do so.

Structuring and arranging finance

That's an email that Lynn sent to Kevin Sait from the ANZ Bank providing information to Mr Sait in connection with your loan application. Do you see that?---Yes, I do see that Your Honour.

Lynn also copied your father-in-law Frank in on this email? ---Yes, I can see Frank's name on the email, yeah.

Lynn offered to Kevin Sait that Frank and Kit, which is your mother-in-law, also known as Pooi, would guarantee the loan to you and provided apartment 7 as collateral for the loan?---Yes, I see that Your Honour.

That was a matter that Lynn arranged was it not?---Appears so, Your Honour, yes.

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I suggest to you that the finance arrangements were all negotiated by the bank by Lynn?---I - I wouldn't - I wouldn't say that there was a furious amount of negotiation for the loan. Lynn kept me updated on the status of the financing and the settlement.

Instructing accountants and solicitors

The board minutes that you were asked to sign from time to time they were all produced by Lynn as well weren't they?---Yes, the board minutes were produced by Lynn and in consultation with our accountants. The details are pretty rudimentary.

Lynn would just get you to sign documents wouldn't'' she?---She'd ask me to review and sign the documents Your Honour.

Co-ordination of Australian property sales

You knew, didn't you, that your wife Lynn was co-ordinating the sales of those properties. Did you know that?---Yes. I did, and I knew that she was co-ordinating the sale of probably all the properties.

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General management of the two sales

Because she was really running the whole acquisition process on behalf of you and her wasn't she?---Um, I would say she was facilitating our investment objectives.

She was much more hands on than you wasn't she?---Ah, yes, she was much more hands on as that's what she does for a living, Your Honour.

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At a glance

Court

Decision date

Before

Source

Judgment (1048 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (29)