Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors

REAL PROPERTY - Section 42 of the Transfer of Land Act 1958 (Vic) - Whether proprietary relief available - Meaning of 'fraud' in s 42 considered - Fraud under s 42 found - Indefeasibility of title not established - Constructive trusts to be declared.

TRUSTS - Duties of trustee - Whether fiduciaries breached duties - Possessing the power to do something enables a power to be exercised by a trustee - Existence of power does not of itself legitimise the exercise of that power if done improperly - Breach of trust arising from entry into an asset sale and distribution programme of trust assets - Whether persons in breach entitled to fair and reasonable remuneration for management services irrespective of breaches of duty by claimant parties - Duties of appointer under a trust in exercising power of appointment - Breach of duty in appointment of new trustee - Appointment of new trustee invalid and should be set aside - Considerations as to sources of the power of the Court to remove a trustee and appoint a new trustee - Principles as to whether to remove a trustee and appoint a new trustee - Expedient for an independent trustee of the relevant trust to be appointed.

1 This proceeding arises from the management of property investments in Australia undertaken by the Hoh family, or parts of the Hoh family, over a period of some nine years, between 2001 and 2010.

2 Of particular importance to this part of the proceeding is the sale of two properties, being those located at:

(a) 440A Hampton Street, Hampton (known as 'Lot 202'); and

(b) 530 Keilor Melton Road, Sydenham (known as the 'Sydenham Property').

3 The trial of the proceeding has been conducted pursuant to a 'sequential trial' model described and ordered in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 1).[1]

4 The first tranche of questions were determined in the reasons for judgment provided in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 3) (the 'First Tranche Reasons').[2]

5 These are the reasons for the determination of the second tranche questions (the 'Second Tranche Reasons') in the trial.

6 An executive summary of the findings made in these Second Tranche Reasons appears at the foot of this judgment.

7 I adopt a similar approach to that taken in relation to the hearing and determination of the first tranche questions in the trial.[3]

8 In order to assist in the reading of these Second Tranche Reasons the structure of the Hoh family, which has been outlined previously,[4] is referred to and repeated.

9 The Hoh Family was headed by Hoh Ying Chye ('Hoh Senior') who was married to Madam Yow Mui ('Madam Yow'). They are both now deceased. They had seven children.

10 The seven children of Hoh Senior and Madam Yow were:

(1) Robert Hoh Kiang Chan ('Robert'), who passed away on 24 December 2007;

(3) Maureen Yuet Ming Oborn (nee Hoh) ('Maureen', also nicknamed 'Binky');

(5) George Hoh Kiang Po ('George') (the 'Third Plaintiff');

(6) Frank Hoh Kiang Ngan ('Frank') (the 'First Defendant'); and

11 Frank married Pooi Yoke Lim Hoh ('Pooi', also nicknamed 'Kit'), the Second Defendant. They had two children, Lynn Yook Lien Hon ('Lynn') and Ian Han Lok Hoh ('Ian'), whom are the Third and Fourth Defendants respectively. In late 1987, Frank, his wife and their children migrated to Australia.

12 Disagreement and disputes have divided the family into opposing factions that can be represented as follows:

13 With the assistance of the parties, the following fundamental issues in the proceeding were identified as the First Tranche Questions for determination:

(1) In or about April 2001, or at any other and what time, was the alleged Joint Investment Agreement (the 'JI Agreement') formed between George, Frank and Robert Hoh to undertake property investment in Victoria through the vehicle of Ying Mui Pty Ltd, and if so:

(a) what were the terms of the JI Agreement?

(b) was property investment in Victoria subsequently undertaken by George, Frank and Robert Hoh pursuant to the JI Agreement?

(2) If not, in and after April 2001, was any or all property investment in Victoria undertaken by the Hoh family:

(a) for and on behalf of the family company, SYM; and/or

(b) pursuant the alleged benevolent purpose; and/or

(c) paid for by capital advanced by SYM, and not by loan funds;

(d) and if so, should any and what assets be held wholly or partly on a resulting and/or a constructive trust for SYM?

(3) Did Lumarkye, in receiving the Sydenham Property and Lot 202 from Ying Mui, knowingly receive trust property? If so, is Lumarkye a constructive trustee with respect to the Sydenham Property and Lot 202 or is required to pay compensation to Ying Mui?

14 The trial of the First Tranche Questions was ordered to ensure the efficient and timely resolution of issues in the proceeding consistent with the Civil Procedure Act 2010 (Vic).

15 The trial of the First Tranche questions was heard on 22-25 August 2016, 1 September 2016, 5-7 September 2016, and 24-28 October 2016.

16 On 8 February 2017, judgment in respect of the First Tranche Questions was handed down and published in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 3).[5]

17 The answers to the First Tranche Questions found by the Court are:

In answer to the question: In or about April 2001, or at any other and what time, was the alleged Joint Investment Agreement (the 'JI Agreement') formed between George, Frank and Robert Hoh to undertake property investment in Victoria through the vehicle of Ying Mui Pty Ltd?

The answer is: No legally binding agreement came into existence. However, an arrangement or understanding for a joint endeavour arose and operated between Frank, Robert (later Han) and George between October 2001 and early 2010 for investment in property in Australia.[6]

In answer to the question: What were the terms [of the arrangement or understanding]?

The answer is: The arrangement or understanding was governed by the trust deeds of the three trusts and the control of the trusts was governed by the trustees of the trusts, namely by the Ying Mui, Amore and Olrey companies, managed in accordance with the applicable company constitutions and the corporations law.[7]

In answer to the question: Was property investment in Victoria subsequently undertaken by George, Frank and Robert Hoh pursuant to the JI Agreement?

The answer is: No. The property investment was undertaken pursuant to a joint endeavour under the arrangement or understanding described.[8]

In answer to the First Tranche Questions 2 in and after April 2001, was any or all property investment in Victoria undertaken by the Hoh family:

(a) for and on behalf of the family company, SYM; and/or

(b) pursuant the alleged benevolent purpose; and/or

(c) paid for by capital advanced by SYM, and not by loan funds;

(d) and if so, should any and what assets be held wholly or partly on a resulting and/or a constructive trust for SYM?[9]

The answer to each of the above questions (a) to (d) inclusive is: No in each case.[10]

In answer to the First Tranche Question 3: Did Lumarkye, in receiving the Sydenham Property and Lot 202 from Ying Mui, knowingly receive trust property? The answer is: Yes.[11]

In answer to the First Tranche Question 3: Is Lumarkye a constructive trustee with respect to the Sydenham Property and Lot 202 or is it required to pay compensation to Ying Mui? The answer is that the Court is presently unable to answer this question in the light of the submissions that have been made.[12]

It is a matter of note that, although the two properties comprised real estate which was, in all likelihood, subject to the Torrens system of land registration in Victoria, no defence of indefeasibility of title was either pleaded by Lumarkye or contended for in submissions. In Farah Constructions, the High Court held that the recipient of the real estate there in question had obtained indefeasible title to the properties transferred upon registration under the Torrens system. For this reason, it was held that the recipients could not be liable for knowing receipt, even if they had received the properties with notice of the breach of fiduciary duty. With some exceptions, indefeasibility of title protects registered proprietors from adverse claims to land in the absence of actual fraud on their part or on the part of their agents. The breach of fiduciary duty on the part of the fiduciary in Farah Constructions even if it had occurred, was held not to be of such an order that it could be described as 'actual fraud'. For this reason, the recipients, who became the registered proprietors of the properties in question, could not be guilty of fraud, even if they had received the properties with actual knowledge of the fiduciary's breach.[13]

However, no such case was pleaded or at this point pressed in submissions.[14]

The Court will need to hear further from the parties as to whether any and what amendment to the pleadings and further submissions should be entertained before determining this part of the First Tranche Question 3.[15]

Developments following delivery of the First Tranche Reasons

18 The Plaintiffs contended that, in order to address the prejudice they claim they will suffer, in addition to the appropriate orders as to costs, two further groups of orders ought to be made, namely they be permitted to file and serve:

(a) In response to the observations of the Court at paragraphs [575]-[578] of the First Tranche Reasons, the Sixth Defendant, Lumarkye, made an application to amend its defences and file an Amended Defence to the Consolidated Statement of Claim.

(i) Reply in the terms of their draft Reply to Defence of Sixth Defendant, which relevantly pleads:

a. an admission that the two properties were registered under the Transfer of Land Act 1958 (Vic) (the 'TLA') with Lumarkye as the registered proprietor; and

b. that the title of Lumarkye was defeasible by reason of a fraud and by reason that Ying Mui has an in personam claim against Lumarkye, which are both particularised.

(b) an amended pleading in the terms of its draft Amended Consolidated Statement of Claim which relevantly pleads four new groups of claims and consequential amendments, being:

(i) alternative claims for relief being an account of profits and equitable rescission;

(ii) the proposed joinder of Dominic Low as a party;

(iii) amendments in relation to the Joint Investment Agreement (the 'JI Agreement') to conform with the findings made by the Court in answer to the First Tranche Question 1; and

(iv) claims that Lynn Ho acted as agent of Lumarkye and Dominic Low in relation to the two properties transferred to it as pleaded in the draft by paragraphs [315A], [342A], [323A], [349A], [335A] and [362A].

19 Lumarkye and the First to Fifth Defendants did not oppose the application of the Plaintiffs to file and serve their proposed draft Reply to Defence of Sixth Defendant. However, Lumarkye did oppose the application of the Plaintiffs to file and serve their draft Amended Consolidated Statement of Claim insofar as it pleaded the amendments listed in sub-paragraphs (b)(i), (ii) and (iv) above. The First to Fifth Defendants opposed all of the amendments listed above.

21 On 6 March 2017, the Court published its determination in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 4).[16]

22 The determination of the Court on that occasion can be summarised as follows:

(a) Lumarkye was granted leave to file the Amended Defence to the Consolidated Statement of Claim;

(b) the Plaintiffs were granted leave to file and serve a Reply in the terms of their draft Reply to the Defence of the Sixth Defendant;

(c) the Plaintiffs were permitted to plead alternative relief by way of an account of profits and equitable rescission;

(d) the application of the Plaintiffs to join Dominic as a party and make consequential amendments to their Consolidated Statement of Claim was refused;

(e) the Plaintiffs were not permitted to amend their Consolidated Statement of Claim to achieve conformity with the findings of the Court made in relation to the JI Agreement; and

(f) the Plaintiffs were granted leave to amend their Consolidated Statement of Claim to please agency allegations in relation to Lynn, Lumarkye and Dominic.

23 On 24 April 2017, having considered the submissions of the relevant parties, I prepared reasons in relation to the exercise of the Court's discretion to correct an error in a judgment. See: Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 5) (Slip Rule) (the 'Slip Rule Reasons').[17]

24 The Slip Rule Reasons are here set out:[18]

1. The trial has been conducted pursuant to a 'sequential trial' model described and ordered in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 1).
2. In paragraph 574 of the judgment in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 3) (the 'Judgment') the Court answered the first tranche question 3(a) ('Did Lumarkye in receiving the Sydenham Property and Lot 202 from Ying Mui knowingly receive trust property?') with the word 'No'. Paragraph 574 of the Judgment read as follows:

In answer to the First Tranche Question 3: Did Lumarkye, in receiving the Sydenham Property and Lot 202 from Ying Mui, knowingly receive trust property? The answer is: No.

1. This was a mistake. The use of the word 'No' in its context was plainly inconsistent with the reasoning in the Judgment. Any suggestion to the contrary, as maintained by Lumarkye, is rejected.
2. Further, in a subsequent ruling, Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 4) the Court expressly stated that the Plaintiffs had succeeded in their knowing receipt claim against Lumarkye. This very clearly reflected the intention of the Court to use of the word 'Yes', and not 'No', in answer to question 3(a).
3. Rule 36.07 of the Supreme Court (General Civil Procedure) Rules 2015, known as the 'Slip Rule', provides:

The Court may at any time correct a clerical mistake in a judgment or an order or an error arising in a judgment or an order from any accidental slip or omission.

1. The error which occurred in this case was an error arising in a judgment from an accidental slip, which the Court has a discretion to correct.
2. It would not be in the interests of justice to permit the error to remain in the Judgment uncorrected.
3. The answer to the first tranche question 3(a) should have been expressed as 'Yes', and paragraph 574 of the Judgment will be amended accordingly.
4. It is directed that the answer to the first tranche question 3(a) in paragraph 574 of the Judgment be amended to 'Yes'.

10 The costs of this application shall be costs in the cause.

25 On 27 April 2017 I made an order under the 'slip rule' in chambers arising from the Slip Rule Reasons.

Lumarkye contentions in relation to answer to First Tranche Question 3(a)

26 Lumarkye accepts that the Court has on 27 April 2017, applying its power under the 'slip rule', altered its negative answer to question 3(a) of the First Tranche Questions to the affirmative, and in doing so made a finding of 'knowing receipt' against Lumarkye. Lumarkye correctly notes that the Court has yet to determine the remaining First Tranche Questions 3(b) and (c), concerning what (if any) relief ought be granted against Lumarkye by the Court, having reserved the answers to those questions for further submissions and determination.

27 Lumarkye nevertheless submits that the Court should still not grant the relief sought by the plaintiffs against Lumarkye, or any other relief under this head.

28 Lumarkye contends that notwithstanding the Court's affirmative answer to First Tranche Question 3(a), it is not correct to say that the Court has found that Lumarkye 'received properties that were trust property being misapplied or transferred pursuant to breach of fiduciary duty or trust'.

29 Lumarkye supports this proposition with the submission that the Court appears to have:

confused which trust properties which were acquired by Lumarkye, and acted on the incorrect assumption that Lumarkye acquired trust properties in circumstances where the proceeds of sale were illegitimately paid to Lokit Pty Ltd ('Lokit') and used to create a legal fighting fund.

30 It contends that Lumarkye did not acquire Lot 201 at Hampton Street, which was a property the proceeds of which were used to pay to Lokit and put into a legal fighting fund. Rather, Lumarkye acquired the Sydenham Property and Lot 202. Those properties were purchased by Lumarkye at slightly above full market value, and the proceeds were used entirely for the repayment of properly incurred trust debts which were due to be repaid to the ANZ bank in any event in about December 2011 when the then commercial bill facilities expired.

31 In these circumstances, Lumarkye submits that where there has been no breach of trust specifically found in relation to the transactions in which Lumarkye purchased properties from the Plaintiffs in late 2011, it is not appropriate to permit the Plaintiffs to 'trace' the properties or award relief against Lumarkye in respect of its acquisition of either of them, even in circumstances where the Court has found that Lumarkye had (though Lynn and Frank Hoh) the requisite level of knowledge to justify a 'knowing receipt' claim under the principles in Barnes v Addy[19] and answered the First Tranche Question 3(a) in the affirmative.

32 While the trust funds may well have been depleted by the sale of other properties and the use of the proceeds to pay to Lokit and set up a 'legal fighting fund', that is not the case with either of the transactions involving Lumarkye.

33 Lumarkye further submits that in those circumstances, it would not be appropriate for the Court:

(a) to order Lumarkye to pay equitable compensation to the plaintiffs as they have not suffered any loss as a result of its acquisition of the Sydenham Property or Lot 202; nor

(b) to find that it holds either property on constructive trust for the plaintiffs, where the trustee, the beneficiaries and the trust property have not suffered any detriment or diminution as a result of any transaction involving Lumarkye.

34 It contended that this is so even if (as the Court has found) Lynn Hoh was the 'controlling mind' of Lumarkye in relation to those transactions,[20] and it has 'knowingly received' the two properties as a result.

35 Lumarkye further submitted that if there was no breach of trust involved in the specific sales of the two properties to Lumarkye, it should not be found liable in respect of those transactions even though it received the two properties by purchasing them in late 2011 and was fixed with Lynn Hoh's knowledge and intentions when it did so.

36 It was put in the alternative, that even though the Court has found that Lumarkye 'knowingly received' properties alienated by a trustee as the result of a breach of trust, the remedies sought by the Plaintiffs are, like all equitable remedies, discretionary,[21] and should only be ordered where it is fair and equitable to do so.

37 In this case it was submitted that the Court should not exercise its discretion to grant those remedies against Lumarkye in circumstances where the trust and its beneficiaries suffered no detriment as a result of the breach of trust. This is so, it is contended, because it is not disputed that Lumarkye paid above market value for them, and the funds were properly used by the trustee to repay trust debts that had been legitimately incurred for trust purposes (to finance the acquisition of real property for the trust) and had to be repaid in any event.

38 As a result, it was put, it does not 'offend against conscience' for Lumarkye to retain the properties it paid for and Lumarkye should not have to pay compensation to Ying Mui or any of the other Plaintiffs when no loss or detriment was suffered by any of the claimants. To order otherwise would give Ying Mui an unfair windfall by granting to it compensation or constructive trust relief in relation to two properties, particularly when they were sold for above market value in 2011, where the proceeds were used to repay legitimately incurred trust debts, with the result that Ying Mui was relieved of the financial burden of having to borrow further funds to repay those trust debts and pay interest on the further borrowings.

Plaintiffs' contentions in relation to answer to First Tranche Question 3(a)

39 The Plaintiffs submitted that the contentions of Lumarkye in relation to the Court's answer to First Tranche Question 3(a) amounts to an attempt to re-argue the finding made by the Court that it was in breach of trust in relation to the sales of the two properties to it in 2011.

40 The Plaintiffs also take issue with the contention of Lumarkye to the effect that that there is no breach of trust finding in sales to Lumarkye.

41 The Plaintiffs point to the three separate written judgments which say otherwise. In the First Tranche Reasons, the Court held that 'the two properties were trust property being misapplied or transferred pursuant to a breach of fiduciary duty or trust'.[22] This was a finding in relation to there being a breach of trust in sales to Lumarkye. Further, in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 4), the Court again held that:

the present owner of the Sydenham property and Lot 202, Lumarkye, received those properties from Ying Mui where it took a transfer of those properties in circumstances which constituted knowing receipt within the second limb of Barnes v Addy.[23]

In Slip Rule Reasons, following the dispute regarding the proper answer to First Tranche Question 3(a), the Court held that 'the Plaintiffs had succeeded in their knowing receipt claim'.[24]

Conclusion in relation to answer to First Tranche Question 3(a)

42 It is not open to Lumarkye to now maintain before this Court that there was no breach of trust finding in sales to Lumarkye. The Court has determined that the Sydenham Property and Lot 202 were disposed of by Frank and Ian in breach of duty.

43 The Plaintiffs' allegations against Lumarkye are based on the first limb of Barnes v Addy,[25] that is to say it received trust property (namely the two properties) with knowledge of Frank and Ian's alleged breaches of fiduciary duty which they owed to Ying Mui as its directors. In other words, the Plaintiffs claim that Lumarkye received the two properties with notice of the trusts.

44 In the First Tranche Reasons, it was found that Lynn should be treated as the controlling mind of Lumarkye.[26] It was further found that Lynn had actual knowledge of the critical matters.[27]

45 As previously noted, the Court answered First Tranche Question 3 affirmatively.

46 By operation of the 'knowing receipt' principle of Barnes v Addy, Lumarkye is therefore exposed to the claims for relief maintained by the Plaintiffs for the consequences.

47 As to the relief, if any, which should be ordered against Lumarkye, this should await the next phase of the hearing, and it is directed to be heard and determined at this time.

48 In relation to the alleged 'error' made by the Court, if there be any error in its First Tranche Reasons in this respect, it is not open to this Court to correct it.

49 In any event, the alleged 'error', if it was made, is of no moment. It was made in obiter dicta in relation the Plaintiff's claims against Lumarkye.

50 Findings were made in the First Tranche Reasons as to the breaches of duty on the part of Frank[28] and Ian[29] in relation to the Sydenham Property and Lot 202. Added to this 'is the conduct of both Frank and Ian arising from payments to Lokit (the "Lokit Payments")'.[30]

51 This section of the First Tranche Reasons contained the alleged 'error' made by the Court. However, this section was merely additional to the findings against Frank and Ian which had already been made. Further, it was directed to making the finding at that '[t]he breach of duty in relation to the Lokit Payments is also established'.[31] It was not directed to making any finding in relation to the breaches of duty found on the part of Frank and Ian in disposing of the Sydenham Property and Lot 202.

52 The breach of duty in relation to the Lokit Payments[32] related to the issue that, by authorising the sale of the Sydenham Property and Lot 202, Frank and Ian converted assets of the Ying Mui Trust into cash, which was deposited with Lokit.

53 No specific relief is sought by the Plaintiffs in relation to any such transaction.

54 Accordingly, for present purposes, paragraphs [525]-[533] (inclusive) of the First Tranche Reasons may be disregarded.

55 The parties devoted considerable effort in drafting the Second Tranche Questions.

Claims arising from any breach of No Conflict Rule by Frank

1. Did Frank owe a fiduciary duty to the other Joint Investors not to pursue his interests in conflict with the interests of the Joint Investors (the No Conflict Rule)?;
2. Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the Ying Mui Trust? If so, should Frank's purported appointment be set aside?
3. Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the AT? If so, should Frank's purported appointment be set aside?
4. From July 2010, did Frank, with the knowledge and approval of Pooi, Lynn and Ian, decide to:

(a) Procure the sale by Ying Mui of certain of Ying Mui's property assets;

(b) Distribute the proceeds of sale of those assets to himself, his family or to entities controlled by him or his immediate family or at their direction, or in any event, to the exclusion of George, Han and Maureen; and

(c) Otherwise transfer the assets of Ying Mui and Amore to entities controlled by him or his immediate family or at their direction, or in any event to the exclusion of George, Han and Maureen (the Asset Sale and Distribution Decision)?

1. Did Frank breach the No Conflict Rule in entering into the Impugned YM Agreements? If so, should the Impugned YM Agreements be set aside?

Impugned YM & Amore Payments, Agreements & Invoices

1. Did Frank breach any fiduciary or statutory duties to Ying Mui or Amore by arranging, authorising or facilitating the Impugned YM & Amore Payments? If so, are any of the pleaded equitable defences established and/or should Frank be relieved from liability pursuant to s 1318 Corporations Act?
2. Did Lynn breach any fiduciary or statutory duties to Ying Mui by executing the Impugned YM Agreement? If so, should Lynn be relieved from liability pursuant to s 1318 Corporations Act? Are Frank or Pooi liable for knowingly assisting, or being involved in, any breaches?
3. Did Pooi breach any fiduciary or statutory duties to Amore by executing the Impugned Amore Agreement? If so, should Pooi be relieved from liability pursuant to s 1318 Corporations Act? Are Frank or Lynn liable for knowingly assisting, or being involved in, those breaches?
4. Did Frank, Lynn, Pooi or Ian breach any fiduciary or statutory duties to Ying Mui or Amore by voting in favour of resolutions that Ying Mui and Amore be authorised to pay the Impugned YM & Amore Invoices? If so, should any of them be relieved from liability pursuant to s 1318 Corporations Act?
5. In receiving the Impugned YM & Amore Payments, whether pursuant to the Impugned YM & Amore Invoices or otherwise, did Lokit or Lynn knowingly receive trust property? If so, are Lokit or Lynn:

(a) liable as constructive trustees with respect to the YM & Amore Payments; or

(b) liable to pay compensation to Ying Mui and Amore?

1. Was Frank and/or Lokit entitled to fair and reasonable remuneration in respect of the services they provided to Ying Mui and Lokit? (quantum to be determined later)

Sale of the Docklands Property, Unit 10 and Lot 201

1. Did Frank, Lynn, Pooi and/or Ian breach any fiduciary or statutory duties to Ying Mui by arranging, authorising and facilitating the sale of the Docklands Property, Unit 10, or Lot 201 to third parties? If so, should any of them be relieved from liability pursuant to s 1318 Corporations Act?

1. 14 Did Ying Mui and/or Frosthollow act in breach of trust by making the 2011, 2012, 2013 & 2014 Distribution Payments? If so, did Frank, Lynn or Ian knowingly assist those breaches of trust?
2. In receiving the 2011, 2012 & 2013 Distribution Payments, did Lokit knowingly receive trust property? If so, is Lokit:

(a) liable as a constructive trustee with respect to the 2011, 2012 & 2013 Distribution Payments; or

(b) liable to pay compensation to Ying Mui?

Appointment of Frosthollow & Impugned Agreements

1. What duties did Frank owe as appointor of the Ying Mui and Amore Trusts and did he breach those duties by removing Ying Mui and Amore and appointing Frosthollow as trustee of those trusts? If so, is the appointment of Frosthollow as trustee of the Ying Mui and Amore trusts invalid or liable to be set aside?
2. Did Frosthollow and Olrey act in breach of trust by executing the Impugned Frosthollow and Olrey Agreements? If so, did Frank or Lynn knowingly assist those breaches of trust?

1. Is it expedient for the Court to remove Frosthollow as trustee of the Ying Mui and Amore Trusts and/or Olrey as trustee of the FRG Investments Trust and appoint independent trustees, Ying Mui or Amore as trustee of those trusts?

1. Is Ying Mui entitled to an indemnity out of the assets of the Ying Mui Trust in respect of the First Loan and Second Loan?

1. Is proprietary relief available against Lumarkye in light of s 42 of the Transfer of Land Act 1958 (Vic) (with the terms of such proprietary relief to be determined at the quantum stage of the proceeding).

23 If no to 22, is the First Plaintiff entitled to relief against Lumarkye:

23.1 by way of equitable compensation or alternatively an account of profits (with the quantum of any such compensation or the amount of any account to be determined at the hearing of the quantum stage of the proceeding)?

23.2 alternatively to 23.1, is the Plaintiff entitled to equitable relief against Lumarkye in the form of rescission and ancillary relief thereto including an order that Lumarkye transfer Lot 202 and the Sydenham properties to Ying Mui?

57 At trial, three other proposed questions were abandoned and not pursued. These were:

Question 13: Did Frank breach any fiduciary or statutory duties to Ying Mui by arranging, authorising or facilitating the 2011 Distribution Payments? If so, should Frank be relieved from liability pursuant to s 1318 Corporations Act?

Question 20: Was there a Unit 7 Sale Agreement? If so, did Frank breach the Unit 7 Sale Agreement by purchasing Unit 7 for $300,000? Is this claim statute-barred or are the pleaded equitable defences to this claim otherwise established?

Question 21: Did Frank breach any fiduciary or statutory duties to Ying Mui by arranging, authorising or facilitating the Unit 7 Sale? If there is a breach, is the claim statute-barred or are the pleaded equitable defences to this claim otherwise established and/or should Frank be relieved from liability pursuant to s 1318 of the Corporations Act.

58 The Fifth Defendant by Counterclaim, Sharikat Ying Mui SDN BHD (SYM), made two submissions in this part of the proceeding.

59 First, SYM rejected the plaintiffs' characterisation of the management and control of SYM, to the effect that as a result of resolutions passed on 3 September 2012, control of the management of SYM was vested with Frank, Lynn and other Hoh family members aligned with them in the ongoing family dispute with George, Han and Maureen, and that the 2014 Distribution Payments were only made to SYM after George and Han had been removed from positions of power within SYM and had been replaced by members of the Hoh family aligned with Frank.

60 SYM notes that various members of the extended Hoh family are current directors and shareholders of SYM. Specifically, the current directors of SYM are:

(f) Gloria Hoh, as alternate director to Leonard Hoh;

(g) Cordelia Hoh, as alternate director to Jonathan Hoh;

(h) Richard Hoh, as alternate director to Frank Hoh; and

61 Second, SYM contended that the distributions to SYM from the Ying Mui Trust and Amore Trust in the financial year ended 30 June 2014 have not been paid. No payments have been made to SYM from any of the trusts the subject of these proceedings.

62 These submissions of SYM are accepted as a correct statement of the facts.

63 I will proceed by addressing each of the Second Tranche Questions which remain for determination in turn.

Claims arising from any breach of No Conflict Rule by Frank

Did Frank owe a fiduciary duty to the other Joint Investors not to pursue his interests in conflict with the interests of the Joint Investors (the 'No Conflict Rule')?

64 In its First Tranche Reasons, the Court distilled the relevant principles concerning the fiduciary and statutory duties owed by a director to his or her company.[34] The directors of Ying Mui and Amore plainly owed fiduciary and statutory duties to the relevant trustee companies.

65 However, in this section of the First Tranche Reasons, the Court was dealing with fiduciary and statutory duties owed by directors of trustee companies. These duties are owed to the trustee company as a separate legal entity and not to that company's shareholders or creditors. In this context, the relevant duties said by the Plaintiffs to have been breached by Frank and Ian were those duties owed in their capacity as directors of the trustee company, Ying Mui (and Amore), to which the relevant duties were owed. It was Ying Mui (and Amore) that had standing to bring claims for breach of these duties.

66 However, that is not to say that Frank could not owe fiduciary duties to the other joint investors in the property investment scheme, namely George and Robert (and later Han) (the 'Joint Investors') arising separately from his relationship directly with those investors. He clearly could.

67 The central fiduciary duty contention of the Plaintiffs under question 1 was that Frank owed a fiduciary duty to the other Joint Investors not to pursue interests in conflict with those of the other Joint Investors.

68 It was submitted that the alleged fiduciary duty arose from a relationship in which Frank, the only of the three brothers resident in Australia, and the only of the three brothers who was a director of Ying Mui and Amore, undertook to act for the benefit of the three brothers by identifying and making property investments in Australia. The foundation of that relationship was said to be the common understanding of the three brothers as to the purpose of those investments and the mutual trust and confidence the three brothers reposed in one another in relation to the undertaking.

First to Fifth Defendants' fiduciary duty contention

69 The central fiduciary duty contention advanced by the First to Fifth Defendants was that the Plaintiffs, in seeking to advance a case as to the source of the alleged fiduciary duty founded upon the common understanding described above, were seeking to advance a case outside the pleaded joint investment agreement (the 'JI Agreement').

70 The First to Fifth Defendants did not otherwise engage with the Plaintiffs' fiduciary duty contention in their submissions.

Contentions of the Seventh Defendant (Frosthollow)

71 The seventh defendant (Frosthollow) only took an active part in the following issues in relation to the following Second Tranche issues:

(a) the claim by the Plaintiffs that Frosthollow indemnify the first plaintiff (Ying Mui) for the alleged loans made by the third plaintiff (George), Robert Hoh (Robert) and the fifth defendant (Lokit) (the indemnity claim); and

(b) the claim by the Plaintiffs that distributions made by Frosthollow to beneficiaries in 2012, 2013 and 2014 were made in breach of trust (the distribution claim).

Plaintiffs' pleaded case as to fiduciary duty

72 The Plaintiffs relied upon the following paragraphs of their Third Further Amended Statement of Claim dated 17 March 2017 (the 'TFASC') and submitted that the source of the fiduciary duty relied upon in their submissions was in fact pleaded. The paragraphs of the TFASC relied upon were:

44(c)

44. There were terms of the Joint Investment Agreement, inter alia, that:

...

(c) Frank would:

(i) be principally responsible for proposing joint investments in Australia;

(ii) facilitate the acquisition by Ying Mui, for the benefit of the Joint Investors, of the agreed investments; and

(iii) manage the joint investments on a day to day basis for the benefit of the Joint Investors (the Management Power);

...

45

45. By reason of:

(a) the terms and effect of the Joint Investment Agreement;

(b) the other Joint Investors reposing trust and confidence in Frank by granting him the Management Power;

(c) Frank's acceptance of the Management Power;

(d) the nature of the Management Power which:

(i) gave Frank the ability to affect the interests of the Joint Investors; and

(ii) required Frank to act for and on behalf of the Joint Investors in the exercise of that power;

(e) the fact that Frank was the only joint investor that was:

(i) resident in Australia; and

(ii) a director of Ying Mui; and

the fact that the funds referred to in paragraph 70 below were transferred at Frank's request and were in his effective control once they were transferred -

Frank owed a fiduciary duty to the other Joint Investors not to pursue his interests in conflict with the interests of the Joint Investors (the No Conflict Rule).

First to Fifth Defendants' pleaded case as to fiduciary duty

73 The First to Fifth Defendants' Defence to Third Further Amended Statement of Claim and Counterclaim dated 22 March 2017 relevantly pleaded as follows in paragraphs [43]-[45]:

43

43 As to paragraph 43 Frank:

(a) says that:

(i) the Hoh family, through Ying Mui, Amore and Olrey, has made various investments in Australia in the circumstances set out below;

(ii) Hoh Ying Chye (father) died on 21 April 1988;

(iii) at all relevant times, father intended and the members of the Hoh family understood that the assets and investments of the principal Hoh family company in Malaysia, Sharikat Ying Mui Sdn Bhd (Company No 8046-A) (SYM) the fifth defendant by counterclaim, would be acquired and managed for the benefit of the Hoh family with the intent that income generated from its assets would be used where possible to support or supplement current and future members of the Hoh family in times of financial difficulty or need (benevolent purpose);

(iv) at all relevant times from at least 1988, father's children - Robert, Frank, Maureen, George, Derek Hoh and Richard Hoh - understood, accepted and acted consistently with the benevolent purpose;

(v) at all relevant time from at least 2000, some of father's children - Frank, Robert, George and Maureen - understood, accepted and acted consistently with the benevolent purpose in respect of Hoh family investments in Australia, by investing funds of SYM derived from SYM's business activities in Malaysia in Australia through Ying Mui, Amore and later Olrey for the benefit of SYM and thereby for the benefit of all members of the Hoh family having a direct or indirect interest in SYM;

(vi) the benevolent purpose was not intended to be and is not legally enforceable;

(vii) SYM has issued proceedings in Malaysia against certain members of the Hoh family in which it assets, inter alia, ownership of certain funds including SYM's funds invested in Australia the subject of this proceeding.

(b) refers to the matters alleged at paragraphs 1 and 5 above;

(c) otherwise denies the allegations.

Particulars of the benevolent purpose and father's children's understanding, acceptance and actions consistent with the benevolent purpose are set out in Schedules A and B respectively.

44. As to paragraph 44 Frank:

(a) refers to the matters alleged at paragraph 43 above;

(b) says that at all times from around 2000, Ying Mui, Amore and later Olrey operated in the following way:

(i) Frank, being the SYM director who resided in Australia, established and managed the operations of Ying Mui, Amore and Olrey on a day to day basis;

(ii) Frank requested funds from SYM through George and on occasion Robert, being the SYM directors residing in Malaysia, from time to time;

(iii) George would arrange for funds to be remitted from Malaysia using SYM's monies held in pawnshop and other accounts when requested by Frank and when available;

(iv) Ying Mui's and Amore's bank borrowings were secured by personal guarantees provided by Frank and Pooi without which the investments by Ying Mui, Amore and Olrey could not have occurred;

(v) Frank notified and updated George of Ying Mui's, Amore's and Olrey's investments with SYM's funds from time to time as a matter of courtesy and similarly updated family members who were present at family meetings;

(vi) no approval was sought or needed from George and/or other members of the Hoh family prior to Ying Mui, Amore and/or Olrey making or seeling investments;

(vii) investments by Ying Mui, Amore and Olrey were held by each company in their respective capacities as trustees of the Ying Mui Trust, the AT and FRGIT because the discretionary trust was the structure best suited to promoting the Australian investment activities conducted with SYM's funds and the benevolent purpose and protecting beneficiaries;

(viii) Ying Mui, Amore and Olrey invested in property in accordance with an investment strategy devised by Frank (Hoh business model);

(ix) through the Hoh business model, the investments made by Ying Mui, Amore and Olrey in the relevant period resulted in substantial returns on investments.

As to sub-paragraph 44(b)(viii) above, refer to Schedule C.

As to sub-paragraph 44(b)(ix) above, refer to Schedule D.

(c) otherwise denies the allegations.

45. As to paragraph 45 Frank:

(a) refers to the matters alleged at paragraphs 43 and 44 above;

(b) otherwise denies the allegations.

Whether Plaintiffs' claimed fiduciary duty within case as pleaded

74 I am satisfied that the Plaintiffs' claims as to the existence of the fiduciary duty fell within the case as pleaded by them in paragraphs [44]-[45] of the TFASC.

75 The case as pleaded by the Plaintiffs relied in part on the alleged JI Agreement. The Court made the following findings as to the JI Agreement in the First Tranche Reasons:[35]

Although I am satisfied that Frank, and George and Robert (and later Han), as a matter of practice, adopted a procedure of consultation in relation to the acquisition of investment properties in Australia between October 2001 and early 2010, I am not satisfied that the arrangement and the conduct evidenced a binding agreement in the nature of an enforceable contract between the three brothers, Frank, Robert and George (and later Han).

Although there was some conduct consistent with what are alleged to be the terms of the JI Agreement, there is insufficient evidence to satisfy me that the initial participating parties, namely Frank, Robert and George, considered themselves bound by its terms.

Rather, the arrangement as to purchase, ownership and division of the proceeds of sale of the various properties was governed by the trust deed of the three trusts and the sale control of the trusts was governed by the trustees of the trusts, namely the Ying Mui, Amore and Olrey companies, managed in accordance with the applicable company constitutions and the corporations law.

The three brothers were content to have these structures govern their relationship in law and in equity in relation to investments in property in Australia.

Frank, as the local representative in Australia for himself and his two brothers, Robert and George, assumed the primary role of sourcing properties for property investment. The arrangement as to the buying and management of the various properties adopted a practice of consultation between the three brothers from time to time.

Beyond this structure, the following factors point to there being no intention to enter into any agreement that would be enforceable at law between them of the character of a binding contract:

(a) At least one of the companies of the arrangement evidenced by the Malaysian Investment Conversations were never acted upon or enforced, namely that Frank would be paid a management salary, which was open to be proposed by him, but which in fact was never proposed. This remained the position until well after 2001, when Frank fell into dispute with George and unilaterally, and without any proposal and without any prior consultation, claimed a lump sum for monies for 'salary' he said was due to him and proceeded to pay himself the sum he claimed from trust funds;

(b) The arrangement was made between three brothers, who made investments of property in Australia for a considerable period, between October 2001 and early 2010, without any apparent intention to document their arrangements any further than the trust and corporate structures they had put in place; and

(c) The arrangement as to the buying and management of the various properties adopted a practice of consultation between the three brothers from time to time, where the practice was founded on a common understanding, but was not intended to be legally enforceable between them. [footnote omitted]

76 On the basis of those reasons, the Court made the following findings as First Tranche Question 1:[36]

In answer to the question: In or about April 2001, or at any other and what time, was the alleged Joint Investment Agreement (the 'JI Agreement') formed between George, Frank and Robert Hoh to undertake property investment in Victoria through the vehicle of Ying Mui Pty Ltd?

The answer is: No legally binding agreement came into existence. However, an arrangement or understanding for a joint endeavour arose and operated between Frank, Robert (later Han) and George between October 2001 and early 2010 for investment in property in Australia.

In answer to the question: What were the terms [of the arrangement or understanding]?

The answer is: The arrangement or understanding was governed by the trust deeds of the three trusts and the control of the trusts was governed by the trustees of the trusts, namely by the Ying Mui, Amore and Olrey companies, managed in accordance with the applicable company constitutions and the corporations law.

In answer to the question: Was property investment in Victoria subsequently undertaken by George, Frank and Robert Hoh pursuant to the JI Agreement?

The answer is: No. The property investment was undertaken to a joint endeavour under the arrangement or understanding described.

77 However, paragraph [45] of the TFASC did not found the existence of the claimed fiduciary duty entirely upon the alleged JI Agreement as a legally binding agreement as if it was the sole source of the alleged fiduciary duty.

78 First, the alleged fiduciary duty was not pleaded by the Plaintiffs as an express or implied term of the JI Agreement.

79 Second, although the 'management power' was alleged to be a term of the JI Agreement, it was Frank's acceptance of that power and the nature of the power which he accepted which was relied upon in significant part to found the fiduciary duty relied upon by the Plaintiffs.

80 Third, factors beyond the terms of the JI Agreement were relied upon to provide the foundation for the existence of the fiduciary duty alleged, namely that:

(b) funds were transferred at Frank's request and were in his effective control once transferred.

81 Finally, the First to Fifth Defendants joined issue with the existence of the alleged fiduciary duty on a basis which went beyond a plea confined to a refutation that the JI Agreement was a binding contract. They proceeded to allege a particular set of relationships between the parties relied upon in support of the denial of the alleged fiduciary duty.

Legal principles as to fiduciary duty outside a contract

82 The First to Fifth Defendants did not make any submissions as to the legal principles giving rise to the existence of a fiduciary duty outside a contract which controverted or qualified the essence of the submissions relied upon by the Plaintiffs, which I accept in full.

83 As was observed by Mason J (as his Honour then was) in Hospital Products Ltd v United States Surgical Corporation,[37] under a fiduciary relationship:

[T]he fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. ...[38]

84 Further, the categories of fiduciary relationships are not closed and the fact that a particular relationship 'does not fit within any clearly established category of fiduciary relationships is not necessarily a barrier to fiduciary duties being imposed'.[39]

85 Of importance to this case is that a relationship between parties can give rise to fiduciary obligations even if there is no binding contractual arrangement between them.[40]

86 Whether or not a fiduciary relationship arises will depend upon the particular facts found in each case. It has been held that 'the existence and scope of fiduciary obligations must always be assessed in the particular context in which they are claimed to arise'.[41] The key question is whether the relationship 'is founded on "mutual trust and confidence" in a relevant sense'.[42] It is also 'well settled that a person may be a fiduciary in some activities but not in others'.[43]

87 A relationship arising from a joint undertaking or activity carried out through a variety of structures such as a company, a trust, an agency or joint ownership may give rise to a fiduciary relationship.

88 In commenting upon the nature of a 'joint venture', a commercial relationship which has often been held to give rise to fiduciary obligations, three members of the High Court in United Dominions Corp Ltd v Brian Pty Ltd, explained that:

The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots' law, "adventure") will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.[44]

89 Further, Dawson J characterised a joint venture as 'an association of persons who engage in a common undertaking for profit'.[45]

90 The High Court has also held that fiduciary duties may be owed between joint venturers and that:

a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled.[46]

91 The First to Fifth Defendants did not make any submissions as to the application of the facts to the legal principles relied upon by the Plaintiffs, which again I accept in full.

92 The mere fact that the relationship between Frank, Robert (later Han) and George was akin to a joint venture 'is not enough to give rise to fiduciary obligations'.[47] For a fiduciary duties to be imposed, the 'necessary confidence' will need to be 'reposed by the participants in one another'.[48]

93 In this case, I am satisfied that the necessary confidence did exist between the Joint Investors, such as to give rise to a fiduciary relationship between them.

94 The Court found in the First Tranche Reasons that:

an arrangement or understanding for a joint endeavour arose and operated between Frank, Robert (later Han) and George between October 2001 and early 2010 for investment in property in Australia.[49]

95 The Court further found that the arrangement continued:

for a considerable period ... without any apparent intention to document their arrangements' and in circumstances where the three brothers 'adopted a practice of consultation' which was 'founded on a common understanding.[50]

96 At the commencement of the relationship, George corresponded by letter to Robert on 18 November 1999 with respect to the investments to be made by Frank in Australia, writing that 'we should trust and support him in his choice of investment and his decisions'.

97 The evidence discloses that this was the foundation of the relationship between the Joint Investors. A common understanding arose between the three brothers based on mutual trust and confidence reposed in one another.

98 As a practical element of the relationship, Frank, being the only one of the three brothers resident in Australia, and the only one of the three brothers who was a director of Ying Mui and Amore, undertook to act for the benefit of the three brothers, by identifying and making property investments in Australia.

99 The relationship, as I have found it to be, was further evidenced by the manner in which the three brothers generally conducted their investments in Australia. In particular, the following practices are referred to:

(i) From October 2001 - early 2010, Frank identified, and discussed with George, a range of potential property investments in Australia;

(ii) George then discussed those property investments with Robert;

(iii) Frank sought the approval of George and Robert before making the property investments for the benefit of Frank, Robert and George; and

(iv) George and Robert then arranged to remit funds, under the control of Frank, Robert and George, 'as loans from themselves to the Ying Mui Trust, the Amore Trust and the FRG Investments Trust' for investment in Australia.

100 Applying the important facts as found to the case law, I determine that Frank, in identifying, making and managing property investments in Australia for the benefit of the three brothers as the Joint Investors, had the power and discretion to affect the interests of George and Robert 'in a legal or practical sense'.[51] In the absence of any legally binding agreement being in place, and in circumstances where Frank was the only of the three brothers who was a director of Ying Mui and Amore, Frank had 'a special opportunity to exercise the power or discretion to the detriment of' the other brothers,[52] as it was Frank alone who could control how the funds remitted by George and Robert were invested and how the properties held by Ying Mui, Amore and Olrey were managed.

101 An important fiduciary duty of a person who owes the duty is not to pursue his or her interests in conflict with those to whom the duty is owed (the 'No Conflict Rule').

102 For these reasons, I conclude that Frank owed to the Joint Investors a fiduciary duty not to pursue his interests in conflict with those of the Joint Investors.

Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the Ying Mui Trust? If so, should Frank's purported appointment be set aside?

103 The basic uncontested facts relevant to this question which I accept are:

(a) The trust deeds provided for the appointment of Frank as appointor, and all three of the relevant trust deeds were in a common form;

(b) George admitted that he received a copy of the YM Trust Deed at the latest by April 2003;

(c) After George and Robert learned of the existence of the trusts, George obtained a face to face explanation of the YM Trust Deed from the solicitor who prepared the trust deeds in July 2003 and he received a letter from that solicitor advising how a discretionary trust worked dated 15 July 2003;

(d) Robert was a senior lawyer by profession. However, the evidence does not disclose that George was specifically appraised, or understood the role, of an appointor under the trusts;

(e) Neither George nor Robert ever complained about the trust structure or identity of the appointor of any of the three trusts until 2011.

104 I am satisfied that Frank did not breach the No Conflict Rule by simply purporting to appoint himself to the office of appointor of the Ying Mui Trust.

105 The exercise of the power of appointment to appoint a new trustee per se did not change the trust or the duties of the trustee or its directors. The former and the new trustees remained under precisely the same duties to administer the trust according to the trust deed.

106 It follows that Frank's appointment as appointer of Ying Mui Trust should not be set aside.

Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the AT? If so, should Frank's purported appointment be set aside?

107 For the reasons set out in relation to the Ying Mui Trust above, I am satisfied that Frank did not breach the No Conflict Rule by simply purporting to appoint himself to the office of appointor of the Amore Trust.

108 It follows that his appointment as appointer of Amore Trust should not be set aside.

From July 2010, did Frank, with the knowledge and approval of Pooi, Lynn and Ian, decide to:

(a) Procure the sale by Ying Mui of certain of Ying Mui's property assets;

(b) Distribute the proceeds of sale of those assets to himself, his family or to entities controlled by him or his immediate family or at their direction, or in any event, to the exclusion of George, Han and Maureen; and

(c) Otherwise transfer the assets of Ying Mui and Amore to entities controlled by him or his immediate family or at their direction, or in any event to the exclusion of George, Han and Maureen (the Asset Sale and Distribution Decision)?

109 The Court has not to date made any specific finding that there was an 'Asset Sale and Sale Distribution Decision' as described in this question.

110 However, the Court did find in First Tranche Reasons that 'Frank determined to sell off as much as possible of the assets held by the Ying Mui Trust'[53] to:

(a) 'reduce their exposure under personal guarantees they had given to the bank';[54]

(b) create a 'fighting fund' to be used in defence of expected litigation;[55]

(c) obtain his management fee which had not been agreed;[56]

(d) facilitate the 2012, 2013 and 2014 distributions which were funded by the capital gains realised from the asset sales authorised by Frank, Pooi, Lynn and Ian.[57]

111 Accordingly, the Court has found there was a property sales programme initiated by Frank and driven to serve his personal purposes from July 2010.

112 I further find that this property sales programme was undertaken with the knowledge and approval of Pooi, Lynn and Ian. It involved the following principal elements and followed a decision taken to effect the following things (the 'Asset Sale and Distribution Decision'):

(a) procuring the sale by Ying Mui of certain of Ying Mui's property assets;

(b) distributing the proceeds of sale of those assets to himself, his family or to entities controlled by him or his immediate family or at their direction, or in any event, to the exclusion of George, Han and Maureen; and

(c) otherwise transferring the assets of Ying Mui and Amore to entities controlled by Frank or his immediate family or at their direction, or in any event to the exclusion of George, Han and Maureen.

Did Frank breach the No Conflict Rule in entering into the Impugned YM and Amore Agreements? If so, should the Impugned YM and Amore Agreements be set aside?

113 By way of background to the answering of this question, the following facts are found:

(a) On 30 August 2010, Ying Mui paid $300,000 into a home loan account in the name of Lynn (the 'First Lokit Payment'). Frank admitted that he caused Ying Mui to make this payment. The evidence of Lynn was that she was not aware that she had received a payment of $300,000 until 'years later'. However, the Court found that it had 'difficultly accepting the evidence of Lynn' and that her explanation 'is improbable';

(b) On 1 November 2010, Ying Mui paid $100,000 to Lokit (the 'Second Lokit Payment'). Frank admitted that he caused Ying Mui to make this payment;

(c) On 28 June 2011, Ying Mui paid $150,000 to Lokit (the 'Third Lokit Payment'). Frank admitted that he caused Ying Mui to make this payment and that Ying Mui could not have done so if it had not sold the Docklands Property and Unit 10 of the Hampton Street Property;

(d) On 29 June 2011, Frank, Lynn and Ian voted in favour of a resolution that 100 percent of the net income for the Ying Mui Trust be distributed to Lokit. Frank confirmed that the motivation for this resolution was to retrospectively authorise the First, Second and Third Lokit Payments, which had been made without any agreement or invoice. Lynn also admitted in her witness statement that she 'formed the view that they should be treated as interim distributions'. However, in cross-examination Lynn sought to deny this position, saying that it has not 'enter[ed] our minds at that time'. An additional $883,753 was subsequently paid out of the Ying Mui Trust to Lokit in accordance with this resolution.

(e) On 15 August 2011, Ying Mui paid $715,932.27 to Lokit (the 'Fourth Lokit Payment') and Amore paid $13,365.35 to Lokit. These were payments of invoices issued pursuant to 'Management Fee Agreements' which stated 'THIS AGREEMENT is made the 15th day of February 2010' (the 'Impugned YM & Amore Agreements'). Those agreements were signed by Frank, as a party in his own right, Lynn, in her capacity as a director of Ying Mui and Lokit, and Pooi, in her capacity as a director of Amore and Lokit. In fact, the evidence establishes that these agreements had been executed in mid-2011 but Lynn had backdated the agreements to try to provide some basis for the First, Second and Third Lokit Payments, saying in her oral evidence:

I might have had in my mind that the payments made by my father could have been management - was in relation to the management fee. So in my mind this agreement had to be executed prior to those dates and I chose that date because that was a date when all parties who signed the agreement were together.

(f) In this respect, the Court determined that:[58]

Lynn backdated the agreements in an endeavour to provide some basis for the making [of the] first three Lokit Payments earlier described.

The Court also rejected the evidence of Lynn that there was a prior agreement as to management fees.[59]

(g) The management fees were retrospectively calculated for the period 2002 to 2010 at 8 per cent of all rental and sale proceeds on properties held by the Ying Mui Trust and the Amore Trust, even though Frank had also 'retained real estate agents to lease' many and to sell all those properties and had paid them commission, leasing and management fees to do so. Pooi gave evidence that she signed those agreements 'without knowing the details' of the agreements because she trusted that Frank was acting to 'protect ourselves'.

(h) On the same day that the invoices were issued, being 1 August 2011, Frank, Lynn and Ian, in their capacity as directors of Ying Mui, and Frank, Pooi and Lynn, in their capacity as directors of Amore, voted in favour of resolutions that Ying Mui and Amore be authorised to pay the invoices. Frank also backdated a resolution of the board of Amore, to try and justify, after the fact, the earlier payment of management fees.

(i) The Court characterised this conduct as 'an attempt to justify, after the fact, the earlier payment of management fees'.[60] The Court further determined in relation to the payment of management fees to Frank that he 'did not propose any management fee [to his other brothers] but rather acted unilaterally to claim what he considered he should be paid'.[61]

114 I find that the Impugned YM & Amore Agreements constituted an attempt by Frank, with the assistance of Pooi and Lynn, to provide a retrospective 'paper justification' for the First, Second and Third Lokit Payments, which had already been misappropriated by Frank and to provide a justification to make further payments, on 15 August 2011, of $715,932.72 to Lokit from Ying Mui and of $13,365.35 from Amore to Lokit.

115 It is further found that Frank acted in self-interest in executing the Impugned YM & Amore Agreements. The Impugned YM & Amore Agreements were born of an attempt to legitimise the First, Second and Third Lokit Payments.

116 Further, the Impugned YM & Amore Agreements suffered from an additional vice in that they purported to impose on Ying Mui and Amore an obligation to pay 'management fees' of 8 per cent on the sale (and rental) proceeds received in respect of the remaining properties held by the Ying Mui Trust and the Amore Trust, which Frank was trying to sell off as part of the asset sale process which he had initiated.

117 The Court has already determined that 'Frank calculated that it would not have been possible for him to obtain the consent of George to payment of a management fee'.[62] Likewise, there is no evidence that Frank sought the consent of either Han or Robert to payment of a management fee, and it may be inferred that he did not seek such consent because he believed it would not be forthcoming.

118 For these reasons, I find that, in executing the Impugned YM & Amore Agreements, Frank breached the No Conflict Rule. His conduct in executing the Impugned YM & Amore Agreements behind the backs of George and Han in pursuit of his self-interest, constituted a breach of the fiduciary duty he owed to George and Han not to pursue his interests in conflict with those of George and Robert (later Han).

119 It was not in the interests of George or Han, or in the interests of Ying Mui and Amore, for Ying Mui and Amore to pay substantial management fees to Lokit when there was no pre-existing obligation to do so.

120 For these reasons, the Impugned YM & Amore Agreements should be set aside, as having been executed by Frank in breach of the No Conflict Rule.

Impugned Ying Mui & Amore Payments, Agreements & Invoices

Did Frank breach any fiduciary or statutory duties to Ying Mui or Amore by arranging, authorising or facilitating the Impugned YM & Amore Payments?

121 A convenient summary of many of the relevant principles is contained in Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd.[63]

122 As a director of Ying Mui and Amore, Frank owed Ying Mui fiduciary duties to:

(b) not improperly use his position to obtain a benefit for himself or somebody else.

123 Further, pursuant to the Corporations Act 2001 (Cth) Frank was required to:

(a) exercise his powers and discharge his duties in good faith in the best interests of Ying Mui and Amore (s181(1)(a));

(b) exercise his powers and discharge his duties for a proper purpose (s181(1)(b));

(c) not improperly use his position or information gained by reason of his position to gain an advantage for himself or someone else (s 182(1)(a)); and

(d) not improperly use his position or information gained by reason of his position to cause detriment to Ying Mui and Amore (ss 182(1)(b) and 183(1)(b)).

Content of the duties of a director - Duty to exercise power for a proper purpose

124 A director will breach this duty if they exercise their powers for a 'collateral' purpose[64] or 'for any purpose foreign to the power'.[65] The test of impropriety is objective, although the director's state of mind might be relevant.[66]

125 In the well-known decision of Permanent Building Society (in liq) v Wheeler,[67] Ipp J (Malcolm CJ and Seaman J agreeing) summarised the relevant principles regarding the exercise of powers for an improper purpose in the following terms:

Fiduciary powers and duties of directors may be exercised only for the purpose for which they were conferred and not for any collateral, or improper purpose.

It must be shown that the substantial purpose of directors was improper or collateral to their duties as directors of the company. The issue is not whether a management decision was good or bad; it is whether the directors acted in breach of their fiduciary duties ...

The court must determine whether but for the improper or collateral purpose the directors would have performed the act impugned.

126 A director will breach this duty if they cause payments to be made 'where there was no apparently legitimate basis for making them' other than self-interest.[68] A director will also breach this duty by 'causing a company to enter into an agreement which confers unreasonable personal benefits on a director...'.[69]

127 Of particular relevance to this case is the example where a director will contravene this duty if he or she causes a company to pay commission and management fees in circumstances where the director is not entitled to such payments.[70] Similarly, it has been held that where a director arranges for payments to be made to himself or herself without the authority of the company and in circumstances where those payments were not 'approved by any proper corporate process within the company', this has been held to constitute a relevant breach of duty.[71] It will also constitute an improper use of position for a director to vote 'on a resolution at a board meeting when they have a conflict of interest and when the purpose of the resolution is to advantage the director'.[72]

Content of the duties of a Director - Duty to act in good faith in the best interests of the company

128 A director must 'act bona fide in what he or she believes is in the best interests of the company as a whole'.[73] In circumstances where the company involved 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'.[74]

129 In this respect, the 'fiduciary duty owed by a director to a company is somewhat expanded when the company is a trustee company'.[75] This is because a director of a corporate trustee will be required to have regard to 'the legitimate interest of the beneficiaries'.[76] If a director effects 'transactions to benefit himself and his family members while having little or no regard to the fact that [the company] was the trustee of a trust', they will act in breach of this duty.[77] A director will also breach this duty by implementing 'improvident arrangements' pursuant to which 'substantial payments' are made to the director or their immediate family.[78]

130 Observance of this duty 'entails a requirement that directors consider the separate interests of the company'[79] and:

give real and actual consideration to the interests of the company. The degree of consideration that must be given will depend on the individual circumstances. But the consideration must be more than a mere token: it must actually occur.[80]

131 The determination as to whether this duty has been carried out, unlike the duty to avoid conflicts of interest, is 'largely (though by no means entirely)' a subjective assessment rather than an objective one.[81] It is a 'factual question that focuses on the state of mind of the directors'.[82] In seeking to ascertain the state of mind of a director, the Court:

is entitled to look at the surrounding circumstances and other materials that genuinely throw light upon the directors' state of mind so as to show whether they were honestly acting in discharge of their powers in the interests of the company and the real purpose primarily motivating their actions.[83]

That said, the Court 'may intervene if the decision is such that no reasonable board of directors could think the decision to be in the interests of the company'.[84]

132 It has been observed by the learned authors in Ford's Principles of Corporations Law that:[85]

Examples of failure to pay proper regard to the company's separate interests frequently arise in cases about the affairs of small proprietary companies. Controlling shareholders of such companies sometimes treat the company as if its assets are the same as assets they hold in their own names. They may improperly try to cause the company to incur obligations so that it is in a position to provide personal benefits to directors or shareholders. Directors have a duty to use company resources only for the benefit of the company.[86]

133 A director will breach this duty where they facilitate 'the distribution of funds' from a trust to benefit themselves and their family 'as though the trust fund was his to do with as he pleased'.[87]

134 It was the case of the Plaintiffs that Frank breached all of the fiduciary and statutory duties he owed to Ying Mui and Amore in arranging, authorising and facilitating the First, Second, Third and Fourth Lokit Payments (the 'Impugned YM Payments'), and also the payment of $13,365.35 to Lokit on 15 August 2011 (the 'Impugned Amore Payment').

135 The First to Fifth Defendants submitted that a number of factors pointed to Frank (and other directors) not being in breach of any fiduciary or statutory duties owed to Ying Mui and Amore.

136 First, it was submitted that the trustee in case had power to pay Frank remuneration.

137 Next it was submitted that there was shareholder and beneficiary consent to Frank being paid 'reasonable remuneration'. In this respect, reliance was placed upon Frank's evidence in relation to the management fee agreements, in particular evidence about a number of family meetings where the issue of management fees was discussed. Minutes of these meetings were prepared and circulated at the next meeting.

138 It was contended that in both the meeting held on 30 December 2001 and the meeting held on 10 April 2002, properly construed, the minutes show that Robert, George, Frank and Maureen agreed in relation to Ying Mui that Frank would be paid a reasonable allowance or salary to manage Ying Mui and its projects. At this time, Robert, George, Frank and Maureen were the shareholders of Ying Mui and Ying Mui was the sole shareholder of Amore. In addition, they constituted a good representation of the 'non-Frank Hoh beneficiaries' of each trust. It was submitted that each of these persons participated in and made decisions in connection with Ying Mui and later Amore as documented in the minutes.

139 The minutes of the meeting held on 30 December 2001 state that 'George also suggested that FH [Frank] should be paid a reasonable allowance/salary'.

140 The minutes of the meeting held on 10 April 2002 state that:

It was agreed that Frank should be paid a reasonable allowance/salary to manage YMA and it project. It is up to FH [Frank] to make a suggestion. RH [Robert] remarked that his developments in London pays a project management fee of between 10% to 15% of the cost of the project.

It was submitted that the reference to Frank making a suggestion did not undermine the agreement reached that he should be paid a reasonable allowance or salary. Properly construed, it was contended that the agreement to pay a reasonable allowance or salary was not conditional on Frank making a suggestion, and there was never any change from the position of the shareholders of Ying Mui that Frank be paid a reasonable allowance or salary. In reliance on these discussions Frank performed years of work creating investments and managing the investments and affairs of the trusts.

141 It was further submitted that the minutes accurately recorded what was discussed and agreed by the shareholders and corporate owners of Ying Mui and Amore. They were said to be highly probative and should be preferred over any oral evidence from George. The minutes also tell against any suggestion that Frank and Lokit were to provide their services on a gratuitous or voluntary basis.

142 On this basis it was further submitted that the Court should find that there was an informed agreement or assent from the shareholders - George, Robert (now Han), Maureen and Frank, who between them represented a significant proportion of the specified beneficiaries of the trusts - that Frank would be paid a reasonable allowance to manage Ying Mui and Amore, consistent with the minutes and also consistent with equitable principles. The Court should not accept any evidence from George which is inconsistent with these minutes.

143 The amount of the impugned payments represented reasonable remuneration to Frank and Lokit given the period over which he provided the services, the nature and extent of the services he provided, the skill and effort in identifying the properties to be acquired and, critically, the large personal risks he and Pooi took in providing personal guarantees for the benefit of Ying Mui and Amore.[88]

144 The First to Fifth Defendants contended that the shareholders of Ying Mui and Amore, and representatives of a significant component of the classes of beneficiaries of the Ying Mui Trust and the Amore Trust, therefore gave informed assent or consent to Frank receiving reasonable remuneration and therefore gave their assent to the impugned payments. This assent, it was said, properly addressed any conflict or improper purpose that Frank may have had in giving himself these fees.

145 Third and relatedly, it was submitted that Frank and Pooi entered into guarantees and indemnities in favour of Ying Mui and Amore which directly benefitted those trustee companies by enabling them to raise bank funding using in part security provided by Frank and Pooi without any corresponding benefit to Frank and Pooi and in circumstances where there was no legal obligation or requirement for them to enter into any guarantees. These personal guarantees involved a large personal exposure and risk to Frank and Pooi. Frank would not have entered into them without control over the investments. This control was lost when George and Han assumed control of Ying Mui and Amore in 2011 and 2012, respectively.

146 Fourth, it was submitted that the management fee agreements were entered into between Ying Mui, Amore and Lokit in respect of services provided by Frank and Lokit. It is not alleged that these agreements were shams or that Frank did not actually provide the services set out in the agreements. There is an issue as to the timing of the entry into these agreements. However, if the management fee agreements were validly entered into, they provided a valid legal basis to pay management fees to Lokit.

147 Fifth, the First to Fifth Defendants pointed out that there is no suggestion that Frank sought to justify these payments on a basis other than management fees. The Court's findings make plain that Frank was claiming monies for management fees consistent with Lynn's evidence that Frank paid this money on account of his management fees.

148 Sixth, it was submitted that Frank actually provided the services for which he was entitled to be remunerated. It is accepted that that Frank undertook and provided the services set out in his evidence, upon which he was not challenged. Frank set out in detail in his evidence the steps he took to acquire each property investment and the management activities he undertook in relation to each. None of the work and steps he took to acquire the properties and to manage them was the subject of challenge. The work he undertook over a long period, which were specifically referred to in evidence, included:

(a) identifying, researching, and purchasing new investments;

(b) sourcing funds and negotiating bank loans;

(c) managing relationships with the banks;

(d) entering into personal guarantees for the benefit of the trusts;

(e) meeting accountants, including managing any audits;

(f) managing sales and proposed sales of properties;

(g) arranging insurance and utilities;

(h) managing the leasing of retail properties, including managing and dealing with tenants;

(i) managing the books and records of the trust; and

(j) managing the rent roll.

149 It was further submitted that Frank provided services to the trustee companies over a long period time for the benefit of the beneficiaries of the Ying Mui Trust and the Amore Trust and without any prior remuneration. Without the time and effort expended in researching potential properties and new investments and in purchasing and managing the properties that the trustees ultimately purchased, the trustees would not have had the quality investment property portfolio that they had nor the benefit of the appreciation in value of this portfolio. There is no significant overlap in any of the services provided by Frank and Lokit with any estate agent that was engaged by Ying Mui or Amore.

150 The Court did find that '[i]nvoices which were raised on 1 August 2011 demonstrate that management fees purportedly payable to Frank were retrospectively calculated for the period 2002 to 2010 at 8 per cent of all rental and sale proceeds on residential properties' and that 'this [was] made in spite of Frank having retained real estate agents to lease the properties and having paid leasing and managing fees for them to do so'. However, the evidence discloses that the only real estate agents engaged by Ying Mui or Amore were those required to sell each property for a commission and that leasing agents were engaged only in relation to Hampton Street, Docklands, Knox and the Wantirna South Property. There is no other finding which undermines the services that Frank actually provided and performed for the benefit of the trusts.

151 Seventh, the management fees were disclosed in the accounts of Amore provided to the solicitors for George, Maureen and Han in July 2012.

152 In this regard, the First to Fifth Defendants noted that the Plaintiffs placed reliance on the change of treatment in the books of Ying Mui and that classifications were changed. However, it was submitted that the change of treatment in accounting entries could not be said to involve a breach of fiduciary or statutory duty particularly if accounting advice was sought about this treatment. Lynn gave evidence as to why this occurred and the advice she sought. This was submitted to be a proper exercise of the directors' duties.

153 Finally, it was submitted that Ying Mui and Amore as corporate trustees had the power to enter into the relevant management fee agreements and make the relevant payments.

154 For these reasons, the First to Fifth Defendants submitted that the Court should find that Frank did not breach any statutory or fiduciary duty in causing the impugned payments to be made.

155 I am satisfied that Frank breached his duty to Ying Mui and Amore by arranging, authorising and facilitating the Impugned YM & Amore Payments. In doing so, Frank failed to:

(a) exercise his relevant powers for a proper purpose; and

(b) act in good faith in the best interests of the relevant companies.

Failure to exercise powers for a proper purpose

156 I am satisfied that Frank caused Ying Mui and Amore to pay management fees to him in circumstances where he was not entitled to such payments. This was so because he arranged for payments to be made to himself or at his direction without the authority of either company in circumstances where those payments were not approved by any proper corporate process within either company.

157 Frank did not reach any agreement with Robert, George or Han regarding 'management fees'. Indeed, the Court has found that 'Frank did not propose any management fee but rather acted unilaterally to claim what he considered he should be paid'.[89]

158 Although there is evidence of the meetings held on:

(a) 30 December 2001 where the minutes record that 'George also suggested that FH [Frank] should be paid a reasonable allowance/salary'; and

(b) 10 April 2002 where the minutes record that 'It was agreed that Frank should be paid a reasonable allowance/salary to manage YMA and it[s] project. It is up to FH [Frank] to make a suggestion'

Frank at no stage ever made any suggestion to Robert (or later Han), George and Maureen as to what a reasonable allowance or salary to manage the investment projects ought to be or ever suggested the basis of any such payment. Nor did Frank pay himself anything claimed to be in the nature of an allowance or a salary until about 2012.

159 In cross-examination, George gave the following evidence when taken to the minutes of the meetings:

Then underneath that it's recorded, "George also suggested Frank should be paid a reasonable allowance/salary"? --- Yes.

And you did in fact make that suggestion didn't you? --- Pardon?

You did in fact make that suggestion? --- I didn't?

You did make the suggestion? --- I did make.

Yes. And Frank did not, so far as you're aware, pay himself anything in the nature of an allowance or a salary until about 2012? ---Yes.

Thank you. The second heading is accounts, and it's stated that Frank presented details of various investments by Ying Mui and a cost estimate for the Hampton Road project, and it was agreed he'd be paid be a reasonable allowance/salary to manage Ying Mui and its project, "It's up to Frank to make a suggestion. Robert remarked his developments in London pay a project management fee of 10 to 15 per cent." Can His Honour take it that had Frank suggested he be paid 10 to 15 per cent of the costs of all of Ying Mui's investments, that would have been agreed to? --- Would I have agreed if Frank suggested?

Yes? --- No, I wouldn't have agreed.

All right. Would Robert have agreed in your view? --- I wouldn't know that.

Sorry? --- I can't answer for Robert.

Well, he's suggesting a fee in that range for project management isn't he? --- Yes, you know, that's what he paid in London. But I don't know whether he would agree.

I see? --- I have no idea.

160 Frank was cross-examined about management fees, during which he said:

Well you didn't communicate this intention to George or Han did you? --- The intention was very clearly minuted in - if my memory is correct I know at least one but two minutes in 2002 or 3. The intention was stated very clearly that I be paid a management fee or salary. In fact George is the one who pushed this issue. He is the one who said I should take a fee for work done, that's the position.

I - on the other hand You Honour I could not tell them because I was fighting them. They would stop me. If I told them they would stop me straight away. ... For ten years I said it's for the family, I don't mind, I forego. But you didn't mind until you'd fallen out with George and Han, and then you took what fee that you felt you deserved? --- I got to take it before they come in and then I get nothing.

161 From the evidence I draw the following conclusions:

(a) On 10 April 2002 it was George who suggested that Frank should be paid a reasonable allowance/salary (the 'management fee');

(b) No agreement was reached as to the amount of the management fee or the basis upon which it should be calculated. It was left up to Frank to suggest a fee and a fee structure, which would be subject to the agreement of the other parties (George, Robert (later Han) and Maureen). For example, George would not have agreed to Frank being paid 10 to 15 per cent of the costs of all of Ying Mui's investments;

(c) Frank at no stage ever suggested a management fee for the consideration of the other parties. Never did he make any suggestion to Robert (or later Han), George or Maureen as to what a reasonable allowance/salary to manage the investment projects ought to be nor did he ever suggest the basis of any such payment. Accordingly, the other parties were never in a position to, nor did they ever, give their consent to any management fee being payable to Frank;

(d) Given the lapse of time since the 30 December 2001 and 10 April 2002 meetings, Frank, in saying that 'I said it's for the family, I don't mind, I forego', unilaterally postponed offering a proposal to the others as to the level of the management fee and seeking their agreement as to the calculation of the fee and its amount;

(e) In either case, given the fact that Frank had never suggested or proposed the level of any management fee payable to himself for the consideration of the others, and none had ever been agreed to by the others, an entitlement to payment of a management fee could only be created if the basis for calculation or the amount of the payment was specifically agreed to by all of the other parties, George, Han and Maureen, which never in fact occurred;

(f) At no time in the preceding nine years had any management fees been paid by Ying Mui or Amore to Frank, Lokit or Lynn. Frank did not pay himself anything claimed to be in the nature of an allowance or a salary or management fee until about 2012;

(g) When he did pay himself monies which he claimed to be management fees, Frank did not communicate his intention to make such a claim to the other parties (George, Han (in place of Robert) and Maureen) and did not seek their agreement to it. He did not communicate this intention because he knew the others would not agree because he had fallen into dispute with them.

Failure to act in good faith in the best interests of the company and improper purpose

162 In causing Ying Mui and Amore to pay what were claimed to be management fees to him or at his direction I am satisfied that Frank breached his duty to the corporate trustees Ying Mui and Amore by his failure to have regard to the legitimate interests of the beneficiaries. He did this by effecting transactions to benefit himself and members of his family while having little or no regard to the fact that Ying Mui and Amore were both trustees of a trust.

163 The Impugned YM & Amore Payments were intended to and did result in significant financial benefits to Frank, as a 50 per cent shareholder in Lokit, Pooi, as the other 50 per cent shareholder in Lokit, and Lynn, as the recipient of the First Lokit Payment. Indeed, as stated by Frank in cross examination, Frank accepted that the First, Second and Third Lokit Payments 'benefited Lokit and [himself]'[90] and 'harmed Ying Mui didn't it, because Ying Mui lost $550,000'[91] and that as a result 'Lokit and Lynn ... were $550,000 better off' and 'Ying Mui was $550,000 worse off'.[92]

164 Further, it is clear that Frank failed to act in good faith in the interests of Ying Mui and Amore in procuring the Impugned YM & Amore Payments.

165 I am satisfied that the motivation for Frank procuring Ying Mui and Amore to make those payments was self-interest. Frank wanted to ensure that he received a substantial cash payment, and exercised his powers to this end. As he said in his cross-examination, 'I got to take it before they come in and then I get nothing'.[93]

When I saw that they were coming, or thought they were coming to take over control of Ying Mui in Australia, I just took the funds that were available in Ying Mui's bank account, as quick as I could ...[94]

167 When Frank was challenged as to the motivation for these payments, he admitted he was acting in self-interest, at the expense of Ying Mui and Amore:

You chose didn't you to advantage your company, Lokit and yourself personally at the expense of Ying Mui, didn't you?---As you have said in the last sentences, yes. [95]

168 The evidence when considered as a whole discloses that Frank procured the payments out of self-interest, to ensure that he was paid what was claimed to be his entitlement, not because he considered it was in the interests of Ying Mui or Amore to make those payments. Indeed, the evidence is that Frank did not give any consideration at all to the legitimate interests of Ying Mui and Amore and the beneficiaries of the Ying Mui Trust and the Amore Trust in procuring the Impugned Ying Mui & Amore Payments.

169 Further, it was not in the best interests of Ying Mui and Amore, as trustees of the Ying Mui Trust and the Amore Trust, to make substantial payments out of those trusts to Lokit and Lynn, and to the detriment of the beneficiaries of those trusts, in the absence of any legal obligation to do so. Frank admitted that no management agreements were in place at the time that the First, Second and Third Lokit Payments were made.[96] In this respect, Frank further admitted that he 'took the money in haste without all the details, without dotting the Is and crossing the Ts'[97] and that '[t]he agreement was not done then we do it and - we had to fix up, clean up'.[98] Similarly, the evidence of Lynn was that 'the payment of the management fees, without any previous record of the fees being due, any written agreement that the fees should be paid or an invoice being issued, was a problem'.[99]

170 Further, the Court has already determined that 'Lynn backdated the agreements in an endeavour to provide some basis for the making [of the] first three Lokit Payments earlier described'[100] and further that Frank 'backdated a resolution of the board of Amore' in an 'attempt to justify, after the fact, the earlier payment of management fees'.[101]

171 Finally, there were significant irregularities in the recording of the impugned payments in the books of account which point to the payment of monies for an improper purpose. The following evidence supports this finding:

(a) When Frank discussed the First, Second and Third Lokit Payments (totalling $550,000) with Lynn, they apparently decided that they 'could not be treated, after the fact, as payments of management fees. Rather, they should be treated as interim distributions to Lokit';[102]

(b) Having made this decision, Frank then procured Ying Mui to make the Fourth Lokit Payment (of $715,392.27) and the Impugned Amore Payment (of $13,365.35), purportedly pursuant to management fee agreements then executed with Ying Mui and Amore.[103] This points to a 'double payment' having been made in circumstances where, having procured Ying Mui to make payments to Lokit and Lynn totalling $550,000, in purported satisfaction of outstanding 'management fees', Frank, upon deciding that those payments could not be justified on that basis, then procured Ying Mui and Amore to make further payments to Lokit totalling $728,757.62 on the same basis. Although Frank and Lynn sought to retrospectively classify the First, Second and Third Lokit Payments as 'interim distributions', the fact is that Lokit was effectively paid twice in respect of the same purported services. This is an example of a director 'causing a company to enter into an agreement which confers unreasonable personal benefits on a director';[104]

(c) Frank has sought to justify the First, Second and Third Lokit Payments on the basis that he an asked accounting firm, Aston Ryan Malcolm, to calculate his fees based on 8 per cent of rental income and sales.[105] I find this to be implausible. Aston Ryan Malcolm later advised that 'the earlier payments could not be treated, after the fact, as payments of management fees'.[106] Frank did not call anybody from Aston Ryan Malcolm to clarify the position;

(d) The Ying Mui balance sheet for September 2010 reveals that, contrary to Frank's evidence, the First Lokit Payment was not recorded as the payment of management fees, but rather, was recorded as a repayment of (part of) the loan owing to Lokit which Frank denied existed. Upon Ying Mui making that payment of $300,000 to Lokit/Lynn, the loan recorded as owing to Lokit in Ying Mui's balance sheet reduced from $435,000 to $153,000, whereas the loans owing to George and Han remained at $453,000; and

(e) The fact that Frank and Lynn sought to retrospectively reclassify the First, Second and Third Lokit Payments as 'interim distributions' provides strong evidence that they were made for an improper purpose at the time, namely the monies were paid without the authority of the company and in circumstances where those payments were not approved by any proper corporate process within the company.

Are any of the pleaded equitable defences established and/or should Frank be relieved from liability pursuant to s 1318 Corporations Act 2001 (Cth)?

172 Frank has pleaded the following defences to the allegation that by arranging, authorising or facilitating the Impugned YM & Amore Payments, he breached fiduciary or statutory duties to Ying Mui or Amore:

(a) there was fully informed consent to the Impugned YM and Amore Payments;

(b) Ying Mui and Amore waived their rights and/or released Frank; and

(c) Frank acted honesty and having regard to all the circumstances of the case, he ought fairly be excused for any breach of duty pursuant to s 1318 of the Corporations Act 2001 (Cth).

173 The shareholders of Ying Mui were, at the time of the Impugned YM Payments, and remain, Lokit, George and Han.[107] The shareholders of Amore were, at the time of the Impugned Amore Payment, and remain, George's company Beaustate, Pooi and Ying Mui.

174 However, the Impugned YM and Amore Payments were intentionally concealed, by Frank, from George and Han. The evidence of Frank in this respect was clear. As he noted in cross-examination, he 'could not tell them because [he] was fighting with them. They would stop [him]. If [he] told them [he] would stop me straight away'.[108]

175 Further, the First, Second and Third Lokit Payments were not even disclosed by Frank to his fellow directors, Lynn, Pooi and Ian, at the time Frank took the money. There could not be fully informed consent in these circumstances.

176 The Court has already determined that 'the informed consent of the company Ying Mui was not forthcoming' in relation to the asset sale process generally.[109]

178 Waiver is an intentional act done with knowledge whereby a person abandons a right by acting in a manner inconsistent with that right.[110]

179 I take it that the right alleged to have been abandoned in this case was the right of George Han and Maureen to take any steps to stop Frank, whether by instituting proceedings or otherwise, from arranging, authorising or facilitating the Impugned YM & Amore Payments.

180 However, as I have found, the Impugned YM and Amore Payments were intentionally concealed, by Frank, from George and Han. They had no knowledge of the payments.

181 Waiver fails because there was no intentional act done with knowledge on the part of George and Han.

182 Further, the only pleaded basis for the alleged waiver is that Ying Mui and Amore executed the Impugned YM & Amore Agreements in February 2010 and that the payment of management fees by Amore (not Ying Mui) was disclosed in accounts provided to the solicitors for George and Han in 2012.

183 However, the Impugned YM & Amore Agreements were not in fact executed in February 2010, but in the middle of 2011 and backdated after the fact to justify payments already made, and in circumstances where Frank was acting in breach of his fiduciary and statutory duties.

184 Further, I do not accept that disclosure of management fees in the accounts of Amore in July 2012 could, without more, provide any basis for an allegation that Amore, let alone Ying Mui, waived any of its rights by abandonment. George and Han commenced proceeding S CI 6147 of 2012 in October 2012, and Ying Mui and Amore commenced proceeding S CI 6485 of 2014 in December 2014.

Section 1318 of the Corporations Act

185 Section 1318(1) of the Corporations Act confers a power on the Court to grant relief from liability in any civil proceeding if:

... it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach. [111]

186 The principles applicable to s 1318 were recently discussed by Robson J in ASIC v Flugge (No 2).[112] As his Honour identified - drawing on the observations of Gzell J in ASIC v MacDonald (No 12) ('MacDonald')[113] - a finding in respect of whether a person acts 'honestly' for the purposes of the section involves undertaking a three stage inquiry:

Gzell J held in ASIC v MacDonald (No 12) that a person acts honestly, for the purposes of s 1317S(2) or s 1318(1), if that person's conduct is without moral turpitude in the sense that it is without deceit or conscious impropriety, without intent to gain improper benefit or advantage and without carelessness or imprudence at a level that negates the performance of the duty in question ... the court will determine the matter on the evidence

...

If a finding of honesty is made, a broad range of matters are relevant to whether an applicant for relief 'ought fairly to be excused' and also to whether to exercise the discretion to grant relief. The authorities set out a broad range of factors, many of which were set out by Austin J in Vines v ASIC. This can be seen as a 'value judgment rather than an exercise in discretion'.

As was said in ASIC v APCH, the Court is bound to consider all of the circumstances of the case when determining whether the defendant ought fairly to be excused and whether to exercise the discretion; ...[114]

187 Accordingly, the starting point for the inquiry is whether Frank acted 'honestly' within the meaning of the section.

188 The First to Fifth Defendants contended that Frank honestly believed that he was entitled to receive those payments for services he had provided consistent with the earlier minutes where the relevant Hoh family members agreed to him being paid a reasonable salary. Further, there is no dispute that Frank provided the services he sought payment for (save for the letting services). Even though Frank did not propose a precise figure for his management fees or any basis for the calculation of those fees, it was nevertheless contended that the evidence discloses that Frank based his amounts on reasonable and objective benchmarks including what Robert had said was a reasonable and comparable amount. In these circumstances, it was submitted that Frank should be relieved from any liability pursuant to s 1318 of the Corporations Act.

189 However, based on the facts earlier found, I am satisfied that Frank acted with moral turpitude of the kind described by Gzell J in the cited passage from Macdonald.

190 In particular, the Court has already determined in the First Tranche Reasons, that '[a]ll of the asset sales, distributions and payments described above were concealed from George, Han and Maureen'[115] and that Frank exercised various powers during the asset sale scheme 'for the improper purpose of obtaining substantial and direct personal benefits'.[116] In the face of these findings, it cannot be said that Frank acted honestly in the sense described in MacDonald.

191 Given the element of dishonesty which I have found, and the circumstances of the commission of the acts of dishonesty, and considering all of the circumstances of the case, in my opinion, Frank ought not be fairly to be excused under s 1318 of the Corporations Act and the discretion to grant relief in his favour under this provision fails.

192 There will be no relief granted to Frank under s 1318.

Did Lynn breach any fiduciary or statutory duties to Ying Mui by executing the Impugned YM Agreement?

193 Lynn executed the Impugned YM Agreement on behalf of Ying Mui. At the very same time, she executed the Impugned Amore Agreement on behalf of Lokit. Accordingly, Lynn simultaneously bound Ying Mui to an obligation to pay, and conferred upon Lokit the right to receive, 'management fees' of 8 per cent on the sale (and rental) proceeds received in respect of the remaining properties held by the Ying Mui Trust and the Amore Trust.

194 The Plaintiffs allege that Lynn breached her duties as a director of Ying Mui by executing the Impugned YM Agreement in circumstances where she had a conflict of interest, and in circumstances where the agreement conferred no benefit on Ying Mui and was entered into to realise cash from sales of Ying Mui's assets.

195 On this basis, it was submitted by the Plaintiffs that Lynn acted in breach of all of the fiduciary and statutory duties she owed to Ying Mui.

196 For the same reasons advanced by the First to Fifth Defendants in answer to Question 6 above, it was contended that Lynn did not breach any fiduciary or statutory duties to Ying Mui by executing the Impugned YM Agreement.

197 It was submitted by the First to Fifth Defendants that the informed consent given by the shareholders of Ying Mui and Amore extended to entering into any agreements or invoices necessary to document the reasonable remuneration to Frank and Lokit.

198 Reference was made to Lynn's evidence given in cross-examination that there was a verbal agreement concerning management fees payable to Frank and that the execution of the management fee agreements put it properly.

199 Reference was made to Lynn's evidence that she sought to correct anomalies in the trust accounts to properly reflect and record the management fees that she believed and was told by Frank that he was entitled to.

200 As to the other matters relied on by the First to Fifth Defendants, the minutes earlier referred to dated 30 December 2001 and 10 April 2002 disclose a general agreement by the shareholders to provide reasonable remuneration to Frank and there is no real overlap between the services provided to real estate agents engaged by Ying Mui and the broad nature of services provided by Frank over a long period.

201 It was submitted that in these circumstances, Lynn did not breach her fiduciary or statutory duties in executing the Impugned YM Agreement.

(a) Lynn was in a position of conflict, insofar as she was a director of both corporate entities executing the Impugned YM Agreement, namely Ying Mui and Lokit;

(b) Lynn was also in a position of conflict, insofar as the effect of the Impugned YM Agreement was to confer a contractual entitlement to receive 'management fees' on Lokit, in circumstances where all of the shares in Lokit were owned by Frank and Pooi, namely, her father and mother. The effect of the Impugned YM Agreement was to directly confer a benefit on her parents;

(c) Not only did the Impugned YM Agreement confer financial benefits on Lokit, a company owned by Frank and Pooi and of which she was a director, but the Impugned YM Agreement also conferred a benefit directly on her father Frank. Clause 1 of the Impugned YM Agreement provided that:

so long as Frank Hoh has any Guarantee and/or Indemnity outstanding for the performance of Ying Mui or the Trust, Frank Hoh must not be removed as a director of Ying Mui. This obligation is to override any provision to the contrary in the Constitution of Ying Mui or the terms of the Trust.

By this means, Lynn sought to override, by way of a contractual agreement, both the constitution of Ying Mui and the terms of the Ying Mui Trust, for the benefit of her father;

(d) Lynn improperly used her position, as a director of Ying Mui, to obtain a benefit or profit for Lokit and Frank, and thereby cause a detriment to Ying Mui. Lokit gained the benefit of a contractual entitlement to 'management fee' payments from Ying Mui, Lokit profited upon receipt of those payments, Frank gained the benefit of a contractual right to remain entrenched as a director of Ying Mui, and Ying Mui gained nothing but a contractual liability to make the purported management fee payments to Lokit;

(e) Lynn executed the Impugned YM Agreement for an improper purpose, namely, to justify, after the fact, the entitlement of Lokit to substantial cash payments which Frank had unilaterally taken from Ying Mui. The written evidence of Lynn was that 'the payment of the management fees, without any previous record of the fees being due, any written agreement that the fees should be paid or an invoice being issued, was a problem'. She confirmed in her oral evidence at trial that the agreement to pay management fees to her father was backdated:

I might have had in my mind that the payments made by my father could have been management - was in relation to the management fee. So in my mind this agreement had to be executed prior to those dates and I chose that date because that was a date when all parties who signed the agreement were together. [117]

When pressed on this explanation, she admitted that she executed and backdated the agreement 'because I felt that there need to be an agreement'.[118]

The Court determined that 'Lynn backdated the agreements in an endeavour to provide some basis for the making [of the] first three Lokit Payments earlier described'.[119] This was not a proper purpose;

(f) No evidence was given by Lynn that she at any stage considered the separate interests of the company or the rights and interests of the beneficiaries of the trust when executing the Impugned YM Agreement. Her concern was to provide a justification in paper for the substantial sums appropriated by Frank. The failure of Lynn to give any, let alone 'real and actual' consideration to the interests of the company, constituted a failure to act in good faith in the best interests of Ying Mui;

(g) It was not in the best interests of Ying Mui, for Lynn to contractually bind it to an obligation to pay substantial 'management fees' to Lokit, in circumstances where:

(i) Frank had previously been remunerated for his services;

(ii) Frank had not reached any agreement with Robert, George or Han regarding 'management fees';

(iii) at no time in the preceding nine years had any management fees been paid by Ying Mui to Frank or Lokit;

(iv) the Impugned YM Agreement was intended to provide a justification for payments made to Frank in respect of services dating back to 2002; and

(v) the Impugned YM Agreement imposed a contractual obligation on Ying Mui to pay 'management fees' in respect of properties which Ying Mui and Amore had also retained real estate agents to lease and to sell, and had paid real estate agents commissions and leasing and management fees for providing these services.

203 In these circumstances, I find that Lynn breached fiduciary duties and statutory duties owed to Ying Mui by executing the Impugned YM Agreement. She did so by failing to:

(a) exercise her relevant powers for a proper purpose; and

(b) act in good faith in the best interests of the company.

If so, should Lynn be relieved from liability pursuant to s 1318 Corporations Act?

204 The First to Fifth Defendants contended that if the Court finds that was a relevant breach of duty on the part of Lynn, she ought to be excused under s 1318 of the Corporations Act in relation to any such breach.

205 The case law on s 1318 has already been dealt with in relation to Frank.

206 They submitted that Lynn acted honestly and ought fairly to be excused from any contravention in executing the Impugned YM Agreement in all the circumstances.

207 In this regard, it was submitted that she honestly believed that her father Frank was entitled to the management fees and she sought to document these fees properly in Ying Mui's financial records. She sought accounting advice on this issue.

208 However, I find that Lynn should not be relieved from liability pursuant to s 1318 of the Act. Her conduct cannot be described as being without moral turpitude in the sense that it was without conscious impropriety without carelessness or imprudence.

209 Lynn sought, in the witness box to provide an alternative justification for the Impugned YM Agreement, namely, that 'there was a verbal understanding and agreement made' in 2010.[120] This evidence was inconsistent with her sworn written evidence and was rejected by the Court in the following finding made in the First Tranche Reasons:

I reject the explanation given by Lynn in cross-examination which suggested that there was prior agreement as to management fees payable to Frank in 2010, and I do not believe her evidence when she suggested this was the case.[121]

210 In the light of the adverse findings made against Lynn found in answer to Question 7(1) above, Lynn cannot be said to have 'acted honestly' within the meaning of s 1318 of the Act in executing the Impugned YM Agreement.

211 Accordingly, given the element of dishonesty which I have found, and the circumstances of the commission of the acts of dishonesty, and considering all of the circumstances of the case, in my opinion, Lynn too ought not be fairly to be excused under s 1318 Corporations Act and the discretion to grant relief in her favour under this provision fails, even if the discretion is enlivened.

212 For these reasons, the s 1318 defence in respect of Lynn fails.

Are Frank or Pooi liable for knowingly assisting, or being involved in, any breaches?

Frank, Pooi, Lynn and Ian acted in concert to implement the asset sale process, which was a dishonest and fraudulent design, intended to covertly misappropriate the assets of the Ying Mui Trust and the Amore Trust for the benefit of Frank and his immediate family to the exclusion of George, Han and Maureen.

214 The First to Fifth Defendants submitted that this amounts to an unpleaded new case which should not be permitted to be advanced in submissions.

215 The Plaintiffs however, submitted that this case was squarely pleaded in the Third Further Amended Statement of Claim at [198]-[204] and the allegations of dishonest and fraudulent design are pleaded in paragraphs [2] and [3] of the Plaintiffs' Reply dated 20 March 2017. These pleadings are set out below:

Third Further Amended Statement of Claim - paragraphs [198]-[204]

Wrongful conduct of Frank

198. Frank

1. Requested that Lynn execute the Impugned YM Agreement on behalf of Ying Mui;
2. Requested that Pooi execute the Impugned YM Agreement on behalf of Lokit;

1. Arranged for the Impugned YM Agreement to be prepared and given to Lynn for execution by her on behalf of Ying Mui;

d) Executed the Impugned YM Agreement on his own behalf;

1. Knew that Lynn had the conflict of interest as alleged in paragraph 193 hereof; and
2. Knew that Ying Mui obtained no commercial benefit from entering into the Impugned YM Agreement.

The requests occurred at or shortly prior to the signing of the Impugned YM Agreement, otherwise Ying Mui is unable to provide further particular because the matters are solely within the knowledge of the Defendants. The knowledge is actual and arises from the fact that Frank knew:

i. The position held by Lynn;

1. That he had not been remunerated by Ying Mui (save for the transfer of Unit 7);

iii. Of the Asset Sales and Distribution Decision; and

1. Payments made pursuant to the Impugned YM Agreement would deplete Ying Mui's funds and increase Lokit's funds.

1. By reason of the matters referred to in paragraph 198 (or any of them), Frank:

1. Knowingly assisted, counselled or procured, Lynn's breaches of fiduciary duty as aforesaid; and
2. Was a person involved within the meaning of section 79 of the Act, in Lynn's contraventions of the Act.

1. Further or alternatively, Frank should have, but did not, obtain the informed consent of the Joint Investors before entering into the Impugned YM Agreement.
2. By entering into the Impugned YM Agreement, Frank breached the No Conflict Rule.
3. By reason of the breach in paragraph 201, the Impugned YM Agreement is liable to be set aside.

Wrongful conduct of Pooi

203 Pooi:

1. Was requested by Frank to execute the Impugned YM Agreement on behalf of Lokit;
2. Executed the Impugned YM Agreement on behalf of Lokit with Ying Mui;

1. Knew that Lynn had the conflict of interest as alleged in paragraph 193 hereof; and

1. Knew that Ying Mui, [sic] obtained no commercial benefit from entering into the Impugned YM Agreement.

The particulars to paragraph 198 are referred to and repeated save that the reference to Frank's knowledge should read as if they refer to Pooi.

1. By reason of the matters referred to in paragraph 203 (or any of them), Pooi:

1. Knowingly assisted, counselled or procured, Lynn's breaches of fiduciary duty as aforesaid; and
2. Was a person involved within the meaning of section 79 of the Act, in Lynn's contraventions of the Act.

Plaintiffs' Reply to Defence of Sixth Defendant dated 20 March 2017 - paragraphs [2]-[3]

2 As to paragraph 321:

1. They admit that at all relevant times the Sydenham Property and its title was land subject to and registered under the TLA, being all the land described by certificate of title volume 6233, folio 510;
2. They admit that upon and from the registration of the Sydenham Transfer to Lumarkye on or about 9 December 2011, Lumarkye became the registered proprietor of the Sydenham property pursuant to the TLA;

c) They otherwise deny the allegations set out therein;

1. They say that the title acquired by Lumarkye to the Sydenham Property was defeasible, because Lumarkye acquired such title by reason of, with knowledge of, and as an instrument of, the fraud of Frank, Lynn and Ian (or any of them);
2. They say further that Ying Mui has an in personam claim against Lumarkye for knowing receipt, in circumstances where:
   1. The controlling mind and will of Lumarkye, and its agent in respect of its acquisition of the Sydenham Property, was Lynn;
   2. Lynn colluded with Frank, and Ian to perpetrate the aforesaid fraud on Ying Mui and was a primary wrongdoer in orchestrating that fraud;
   3. In the premises, Lumarkye had imputed knowledge of, and was an accessory to: (a) the breach by Frank and Ian of the fiduciary duties they owed to Ying Mui in disposing of the Sydenham Property and (b) the aforesaid fraud committed by Frank, Lynn and Ian; and
   4. Lumarkye received the Sydenham Property as the nominee of Dominic, whose agent in respect of the acquisition of the Sydenham Property was Lynn;

Such that Ying Mui is entitled to all of the relief sought in the Third Further Amended Statement of Claim.

1. The fraud of Frank, Lynn and Ian constituted the collusive and colourable sale of the Sydenham Property to Lumarkye, with the dishonest intention of implementing the Asset Sale and Distribution Decision, the effect of which was to:

1. Procure the sale by Ying Mui of certain of Ying Mui's property assets; 2. Distribute the proceeds of sale of those assets to Frank, his family or to entities controlled by him or his immediate family or at their direction, or in any event, to the exclusion of George, Han and Maureen; and

1. Otherwise transfer the assets of Ying Mui and Amore specifically the Sydenham Property to entities controlled by him or his immediate family or at their direction, or in any event to the exclusion of George, Han and Maureen (specifically in the case of the Sydenham Property to Lumarkye);
2. The Plaintiffs refer to an repeat the particulars to paragraphs 132, 314 and 323 of the Third Further Amended Statement of Claim in respect of the making and implementation of the Asset Sale and Distribution Decision and the dishonest and collusive conduct of Frank, Lynn and Ian;
3. The Plaintiffs refer to and repeat paragraphs 196 to 239 of their closing submissions concerning the First Tranche Questions dated 10 October 2016 in respect of the making and implementation of the Asset Sale and Distribution Decision and the dishonest and collusive conduct of Frank, Lynn and Ian;
4. The Plaintiffs rely upon the findings of this Honourable Court in Ying Mui Pty Ltd & Ors v Frank Kiang Ngan Hoh & Ors (No 3) [2017] VSC 29 at [448]-[494] and [512]-[519] as to the implementation of the Asset Sale and Distribution Decision;
5. The implementation by Frank, Lynn and Ian of the Asset Sale and Distribution Decision was conduct constituting moral turpitude, particularly in circumstances where:

1. That conduct was, at the time, concealed from George, Han and Maureen, with Frank admitting that: "I could not tell them because I was fighting with them. They would stop me. If I told them they would stop me straight away." (Frank at T586.29-31. See also: T588.17-18, T589.8-10, T608.13, T626.29-31, T630.23-28, T634.25-26, T635.2-14, T774.17-24); 2. That conduct was, after the event, further concealed by a letter dated 12 October 2011 from Frank, Lynn and Ian, which this Honourable Court held to be 'patently false and misleading; and 'deliberately so' (Ying Mui Pty Ltd & Ors v Frank Kiang Ngan Hoh & Ors (No 3) [2017] VSC 29 at [478]) and which Ian agreed to be 'quite misleading' (Ian at T935.11-21), and which falsely stated that: 'it is our present intention to cause YM, in its capacity as trustee, to sell the Trust's assets, for distribution among the beneficiaries' when in fact many such assets had already been sold (CB8/07058-9); and

1. That conduct was undertaken to (i) generate cash to be distributed to Lokit to be used in defence of anticipated litigation - 'I need the money for the fighting fund' (Frank at T635.11-12. See also: T626.26-30, T632.1-6 and T635.11-17, (b) generate cash to be paid as a 'management fee' to Lokit to the benefit of Frank, Pooi, Lynn and Ian - 'I wanted to get my management fee and my fighting fund. So I said don't sit on it, move on it, because they are coming' (Frank at T634.6-10); and (c) to benefit Frank and Pooi by reducing their exposure under personal bank guarantees (Frank at T624.18-20).
2. Lumarkye had knowledge of the aforesaid fraudulent, collusive and dishonest conduct by reason of the fact that the guiding mind and will and agent of Lumarkye was Lynn, who had actual knowledge of, and was a key participant in, that conduct. In this respect, Lumarkye refers to and repeats the particulars to paragraphs 323A of the Third Further Amended Statement of Claim;
3. That Lumarkye was used by Frank, Lynn and Ian as an instrument of fraud is established by the following matters:

1. The conduct of Lynn in suggesting to Dominic, and thereafter others, that the Sydenham Property would be a good investment (Dominic at T422.25-28); 2. The fact that the Sydenham Property was to be purchased through Lumarkye for, inter alia, the benefit of the family of Lynn (Dominic at T427.12-13; see also: Documents 4 and 18 referred to in the further witness outline of You Keun Hoo (Vgene); Dominic at T430.8-10; CB7/06582; CB7/06703);

1. The fact that it was Lynn, and not the directors of Lumarkye, who was responsible for arranging the acquisition of the Sydenham Property through Lumarkye, including by: (a) ensuring that it facilitated their 'investment objectives' (Dominic at T428.29-31); (b) being 'hands on' in putting the buying group together (Dominic at 435.3-6; T444.22-28); and (c) putting the trusts structure together, though which Lumarkye (and thereby Lynn) acquired an interest in the Sydenham Property (Dominic at T424.13-18);

1. The fact that Lynn, and not the directors of Lumarkye, determined the purchase price of Lot 202, as recorded in her email of 11 May 2011: 'I am thinking to pay around $1.8m for it. If it goes higher than that, I probably won't buy it.' (CB7/06582); 2. The fact that it was Lynn, a director of Ying Mui and the daughter of Frank and sister of Ian, who represented Lumarkye in its negotiations with Ying Mui regarding the acquisition of the Sydenham Property and Lot 202 (Dominic at T437.20-22; T444.29-30 and T456.12-14); 3. The fact that it was Lynn, and not the directors of Lumarkye, who prepared all corporate documents of Lumarkye concerning its acquisition of the Sydenham Property and Lot 202 (Dominic at T418.14-19 and T457.7-9); 4. The fact that Lynn arranged, and Frank and Pooi agreed to provide, personal guarantees of the loan provided by the ANZ to Dominic in respect of the Sydenham Property (CB8/07057; Dominic at T438.2-7); 5. The fact that it was Lynn, and not Dominic, who paid $486,500 to Lumarkye's bank account 013-225 2784-29171 to fund the acquisition of the Sydenham Property, and that Lynn had acquired those funds in the manner set out in the particulars to paragraphs 323 of the Third Further Amended Statement of Claim, the effect of which was that 50% of the purchase price of the Sydenham Property was paid for by funds transferred from Ying Mui to Lokit, Lokit to Lynn, and then Lynn to Lumarkye; 6. The failure of any of Frank, Lynn, Pooi, Ian or Dominic to disclose the matters set out in the preceding particular in any of their witness outlines or witnesses statements filed in this proceeding; and 7. The failure of both Dominic and Vgene to play any active role in the acquisition by Lumarkye of the Sydenham Property

1. The Plaintiffs refer to an repeat the particulars to paragraph 323A of the Third Further Amended Statement of Claim.

1. The Plaintiffs refer to and repeat the particulars to sub-paragraph 2(d) set out immediately above.

1. The Plaintiffs refer to and repeat paragraphs 315A and 322 of the Third Further Amended Statement of Claim and the particulars thereto.

1. They admit that at all relevant times Lot 202 and its title was land subject to and registered under the TLA, being all the land described by certificate of title volume 10802, folio 573;
2. They admit that upon and from the registration of the Lot 202 Transfer to Lumarkye on or about 28 December 2011, Lumarkye became the registered proprietor of Lot 202 pursuant to the TLA;

c) They otherwise deny the allegations set out therein;

1. They say that the title acquired by Lumarkye to Lot 202 was defeasible, because Lumarkye acquired such title by reason of, with knowledge of, and as an instrument of, the fraud of Frank, Lynn and Ian; and
2. They say further that Ying Mui has an in personam claim against Lumarkye for knowing receipt, in circumstances where:
   1. The controlling mind and will of Lumarkye, and its agent in respect of its acquisition of Lot 202, was Lynn;
   2. Lynn colluded with Frank, and Ian to perpetrate the aforesaid fraud on Ying Mui and was a primary wrongdoer in orchestrating that fraud;
   3. In the premises, Lumarkye had imputed knowledge of, and was an accessory to: (a) the breach by Frank and Ian of the fiduciary duties they owed to Ying Mui in disposing of Lot 202, and (b) the aforesaid fraud committed by Frank, Lynn and Ian; and
   4. Lumarkye received Lot 202 as the nominee of Dominic, whose agent in respect of the acquisition of Lot 202 was Lynn;

such that Ying Mui is entitled to all of the relief sought in the Third Further Amended Statement of Claim.

1. The Plaintiffs refer to and repeat the particulars to sub-paragraph 2(d) above, which apply mutatis mutandis in respect of Lot 202.
2. The Plaintiffs rely further on the fact that 50% of the deposit paid by Lumarkye for Lot 202 was paid with funds provided by Lokit (Dominic at T445.15-18), after Lynn asked Frank whether he would 'extend a loan to my husband' (Lynn at T789.28-29).

1. The Plaintiffs refer to and repeat the particulars to paragraph 349A of the Third Further Amended Statement of Claim.

1. The Plaintiffs refer to and repeat the particulars to sub-paragraph 3(d) set out immediately above.

1. The Plaintiffs refer to and repeat paragraphs 342A and 348 of the Third Further Amended Statement of Claims and the particulars thereto.

216 What is pleaded in the Third Further Amended Statement of Claim at [198]-[204] was that by reason of the matters pleaded, Frank and Pooi are personally liable in respect of Lynn's breaches because in each case they:

(a) Knowingly assisted, counselled or procured, Lynn's breaches of fiduciary duty; and

(b) Was a person involved within the meaning of s 79 of the Act, in Lynn's contraventions of the Act.

217 What is further pleaded in the Third Further Amended Statement of Claim at [201] was that by entering into the Impugned YM Agreement, Frank personally breached the No Conflict Rule.

218 However, no allegation is made in the Third Further Amended Statement of Claim at [198]-[204] involving Ian.

219 Further, no allegation is made in the Third Further Amended Statement of Claim at [198]-[204] involving a general allegation that Frank, Pooi, Lynn and Ian acted in concert to implement the asset sale process, which was a dishonest and fraudulent design, intended to covertly misappropriate the assets of the Ying Mui Trust and the Amore Trust, for the benefit of Frank and his immediate family, and to the exclusion of George, Han and Maureen.

220 Nor are these allegations made anywhere else in the Third Further Amended Statement of Claim upon which the parties went to trial and called their evidence.

221 Although allegations are made in the Third Further Amended Statement of Claim directed to Frank, Pooi, Lynn and Ian that from about 2010 onwards they participated in the Asset Sale and Distribution Decision in paragraph [132], and in paragraph [240B] it is alleged that Frank, Lynn and/or Ian procured Ying Mui to make the 2011 Distribution Payments to give effect to the Asset Sale and Distribution Decision, these allegations fall short of alleging any fraudulent design, intended to covertly misappropriate the assets of the Ying Mui Trust and the Amore Trust.

222 The specific allegation of fraud as maintained in the Plaintiffs' submissions are not specifically pleaded, when the obligation in pleading fraud is to do so specifically.

223 As to the Plaintiffs' Reply to Defence of Sixth Defendant dated 20 March 2017, paragraphs [2]-[3], the filing of this Reply was permitted by the Court following the successful application by the Sixth Defendant, Lumarkye, to plead indefeasibility of its title to the Sydenham Property and Lot 202.

224 The Plaintiffs were permitted to file a Reply in response to the indefeasibility of title allegations advanced by the Sixth Defendant in relation to the Sydenham Property and Lot 202.

225 Accordingly, the Reply pleads fraud on the part of Frank, Lynn and Ian, but not on the part of Pooi, and does so for the specific purpose of mounting an in personam case in fraud with the object of defeating Lumarkye's claim to indefeasibility of title in respect of the Sydenham Property and Lot 202.

226 The Plaintiffs' Reply is confined as a pleading to these matters, and is directed only to the pleading of Lumarkye. It is not a pleading directed to the First to Fifth Defendants, although of course they may be heard on the issues.

227 Nor is the pleading in the Reply capable of supporting a general allegation that Frank, Pooi, Lynn and Ian acted in concert to implement the asset sale process, which was a dishonest and fraudulent design, intended to covertly misappropriate the assets of Ying Mui Trust and the Amore Trust, for the benefit of Frank and his immediate family, and to the exclusion of George, Han and Maureen, and which is capable of providing a basis for a finding or personal liability against Frank, Pooi, Lynn and Ian, or any of them.

228 By reason of the matters not being pleaded by the Plaintiffs, I will make no findings on the allegations as framed by the Plaintiffs in their submissions in relation to Question 7(3), namely that:

Frank, Pooi, Lynn and Ian acted in concert to implement the asset sale process, which was a dishonest and fraudulent design, intended to covertly misappropriate the assets of the Ying Mui Trust and the Amore Trust for the benefit of Frank and his immediate family and to the exclusion of George, Han and Maureen.

It is not a question which arises on the pleadings.

Did Pooi breach any fiduciary or statutory duties to Amore by executing the Impugned Amore Agreement?

229 The Plaintiffs allege that Pooi breached her duties as a director of Amore by executing the Impugned Amore Agreement in circumstances where she had a conflict of interest, and in circumstances where the agreement conferred no benefits on Amore and was entered into to realise cash from sales of Amore's assets.

230 For the same reasons advanced by the First to Fifth Defendants in answer to Question 6 above, it was contended that Pooi did not breach any fiduciary or statutory duties to Amore by executing the Impugned Amore Agreement.

231 The First to Fifth Defendants rely on the matters set out under the claim concerning Frank above. It was contended that the informed assent or consent given by the shareholders of Ying Mui and Amore who also represented a significant proportion of the classes of beneficiaries of the Ying Mui Trust and the Amore Trust extended to entering into any agreements or invoices necessary to document the reasonable remuneration to Frank and Lokit.

232 It was further contended that Pooi reasonably relied on, and trusted Frank, in relation to the payment of management fees to Frank. The division of responsibility is a relevant circumstance under directors' liability. Frank had general control over the management of the relevant trusts.

233 It was submitted that in these circumstances, Pooi did not breach her fiduciary or statutory duties in executing the Impugned Amore Agreement.

234 The First to Fifth Defendants further submitted that Pooi reasonably relied on, and trusted Frank, in relation to the payment of management fees to Frank. The division of responsibility is a relevant circumstance under directors' liability. Frank had general control over the management of the relevant trusts.

235 It is submitted that in these circumstances, Pooi did not breach her fiduciary or statutory duties in executing the Impugned Amore Agreement.

236 However, am satisfied that Pooi breached the fiduciary and statutory duties she owed to Amore by executing the Impugned Amore Agreement.

237 As to the submission of the First to Fifth Defendants that there was informed assent or consent given by the shareholders of Ying Mui and Amore, who also represented a significant proportion of the classes of beneficiaries of the Ying Mui Trust and the Amore Trust, which extended to entering into any agreements or invoices necessary to document the reasonable remuneration to Frank and Lokit. For the reasons already canvassed, that there was no such informed assent or consent, I reject this submission.

238 As to the submission of the First to Fifth Defendants that Pooi reasonably relied on, and trusted Frank, in relation to the payment of management fees to Frank where there was a division of responsibility which is a relevant circumstance under directors' liability, I find that although Frank had general control over the management of the relevant trusts, which I take into account as a relevant factor, nevertheless in her position as a director of Amore, for the reasons set out below, Pooi did breach her fiduciary or statutory duties in executing the Impugned Amore Agreement.

239 As to the alleged breach of fiduciary and statutory duties on the part of Pooi, I make the following findings.

240 Pooi was a director of both corporate entities executing the Impugned Amore Agreement. This placed her in a position of conflict. It bound Amore to an obligation to pay Lokit the payments which were characterised by the Frank aligned parties as management fees. Lokit was a company part owned by Pooi. Amore was a family company in which Pooi owned 50 percent of the issued share capital. The Impugned Amore Agreement therefore directly benefited Pooi.

241 The Impugned Amore Agreement also directly benefitted Pooi's husband Frank. Clause 1 of the Impugned Amore Agreement provided that:

so long as Frank Hoh has any Guarantee and/or Indemnity outstanding for the performance of Ying Mui or the Trust, Frank Hoh must not be removed as a director of Amore. This obligation is to override any provision to the contrary in the Constitution of Amore or the terms of the Trust.

By this means Pooi sought to override, by way of a contractual agreement, both the constitution of Amore and the terms of the Amore Trust, for the benefit of her husband Frank.

242 Further, Pooi improperly used her position, as a director of Amore, to obtain a benefit or profit for Lokit, herself and her husband Frank, and thereby cause a detriment to Amore. When cross-examined, Pooi gave the following evidence:

You would agree with me taking the Amore agreement on p.6414 as an example, that it was plainly in your interests that Amore be required to pay an eight per cent fee to Lokit in respect of all rental proceeds? That's clause 2?

---Yeah.

Because the effect of that clause would be to oblige Amore to make payments to a company of which you were a director and shareholder?---Yes.[122]

243 Pooi also confirmed that the reason why she agreed to Clause 1 of the Impugned Amore Agreement, which purported to entrench Frank's position as a director of Amore, was motivated her self-interest to protect herself and her husband Frank in relation to the guarantees which Frank and Pooi had provided:

You agreed to this clause because of your concern regarding the guarantees that you and Frank had given? In other words it was consistent with your desire to protect your position in relation to the guarantees you had provided? ---Yes.[123]

244 Further, I find that Pooi executed the Impugned Amore Agreement without giving any consideration to whether the Impugned Amore Agreement was in the best interests of Amore or the beneficiaries of the AT. There was no evidence that she gave the matter any consideration at all. Indeed, the evidence was to the contrary. Pooi admitted in cross-examination that at the time she signed the Impugned Amore Agreement she did not know the details of the agreement. She did not undertake any investigations as to whether an 8 per cent management would be reasonable, and this was so even though she was aware that Frank had engaged real estate agents to manage the properties in the AT and expected that Amore had paid those agents commission.

245 Finally, the evidence does not establish that it was in the best interests of Amore, for Pooi to contractually bind it to an obligation to pay 'management fees' to Lokit.

246 For these reasons, I find that Pooi acted in breach of fiduciary and statutory duty to Amore by executing the Impugned Amore Agreement.

If so, should Pooi be relieved from liability pursuant to s 1318 Corporations Act?

247 The First to Fifth Defendants rely on s 1318 of the Corporations Act to seek relief from liability in relation to the breaches of statutory duties on the part of Pooi.

248 It was submitted that Pooi acted honestly and ought fairly to be excused in executing the Impugned Amore Agreement in the circumstances set out above. She was said to have acted without moral turpitude as she reasonably relied on, and trusted Frank, in relation to the payment of management fees to him. Further, it was put that whilst the Court has found that there was no benevolent purpose, Pooi's actions showed concern for the entire Hoh family including her provision of personal guarantees which could only be to the benefit of the trusts, not to her. Any contravention was honest, and she ought fairly to be excused for it.

249 The question for the Court is whether Pooi acted in the relevant sense without 'moral turpitude' or with 'carelessness or imprudence'.[124]

250 I do not accept that Pooi acted without moral turpitude. She was a director of Amore and owed to it a duty to act without carelessness or imprudence.

251 I find that without knowing the details of the agreement, Pooi well understood the general nature of the transaction comprised in the Impugned Amore Agreement, and made her own decision in relation to it. Not only did Pooi admit that, because of the dispute between Frank and George, she 'wanted to sell off as many of the properties'[125] as possible in order to obtain 'a pool of money used to fund your [her] defence of anticipated litigation',[126] but she also admitted that she executed the Impugned Amore Agreement to 'protect [her] position in relation to the guarantees'.[127]

252 Although Pooi sought to justify much of her conduct by reference to the 'benevolent purpose',[128] the Court has found that this was a 'a self-serving personal interpretation of the facts'.[129]

253 I find that Pooi acted with carelessness and imprudence in executing the Impugned Amore Agreement and ought not be excused under s 1318 of the Act.

Are Frank or Lynn liable for knowingly assisting, or being involved in, those breaches [on the part of Pooi]?

254 Section 79 Corporations Act provides in relation to accessorial liability:[130]

Involvement in contraventions

A person is involved in a contravention if, and only if, the person:

(a) has aided, abetted, counselled or procured the contravention; or

(b) has induced, whether by threats or promises or otherwise, the contravention; or

(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d) has conspired with others to effect the contravention.

255 The use of the disjunctive 'or' between each subparagraph of s 79 makes plain that each subparagraph is a separate and distinct form of involvement for the purposes of that section.

256 The plaintiff must prove each of the essential elements of each limb of s 79 of the Corporations Act relied on. Further, it is necessary that the plaintiff plead the material facts sufficient to make out each of those essential elements in respect of each limb of s 79 relied on as against each defendant.[131]

257 The elements of the causes of action defined by s 79 of the Corporations Act variously involve actual knowledge, intention and/or purpose.

259 I find that Frank and Lynn initiated the scheme pursuant to which the Impugned YM and Amore Agreements were executed. They acted in concert in preparing, backdating, and executing the Impugned YM and Amore Agreements. They had actual and 'practical involvement in the contravening conduct'[132] and actual knowledge of the material facts which comprised contraventions of s 79(a) and (c) of the Act.

260 They aided, abetted, counselled and procured Pooi's breaches of fiduciary and statutory duty within the meaning of s 79(a) and were, by their conduct, both directly and indirectly, knowingly concerned in and parties to the contraventions within the meaning of s 79(c).

261 Frank and Lynn are therefore to be held liable for knowingly assisting, and being involved within the meaning of s 79 of the Act in Pooi's breaches of fiduciary and statutory duty in executing the Impugned Amore Agreement on behalf of Amore.

Did Frank, Lynn, Pooi or Ian breach any fiduciary or statutory duties to Ying Mui or Amore by voting in favour of resolutions that Ying Mui and Amore be authorised to pay the Impugned YM & Amore Invoices?

262 The Plaintiffs allege that Frank, Lynn, Pooi and Ian breached their fiduciary and statutory duties by voting in favour of resolutions authorising Ying Mui and Amore to pay for the Impugned YM and Amore Invoices.

263 For the same reasons advanced by the First to Fifth Defendants in answer to Question 6 above, it was contended by them that neither Frank, Lynn, Pooi or Ian breached any fiduciary or statutory duties to Ying Mui or Amore by voting in favour of resolutions that Ying Mui and Amore be authorised to pay the Impugned YM & Amore Invoices.

264 However, I find that Frank, Lynn, Pooi and Ian did breach their fiduciary and statutory duties by voting in favour of resolutions authorising Ying Mui and Amore to pay for the Impugned YM and Amore Invoices.

265 The following items of conduct are found which result in this conclusion.

266 Having put in place the Impugned YM & Amore Agreements, to justify the First, Second and Third Lokit Payments, Frank and Lynn apparently decided that they 'could not be treated, after the fact, as payments of management fees. Rather, they should be treated as interim distributions to Lokit'.[133] Accordingly, Lynn 'prepared' further invoices from Lokit to Ying Mui and Amore pursuant to the Impugned YM & Amore Agreements.[134]

267 On the same day that the invoices were issued, 1 August 2011, Frank, Lynn and Ian, in their capacity as directors of Ying Mui, and Frank, Pooi and Lynn, in their capacity as directors of Amore, voted in favour of resolutions that Ying Mui and Amore be authorised to pay the invoices, resulting in the Forth Lokit Payment and Impugned Amore Payment, which totaled a further $728,757.62 in cash being paid out to Lokit.

268 By this means, Frank, Pooi, Lynn and Ian authorised Ying Mui and Amore to make substantial cash payments to Lokit, a company in which they were all directors, and which was wholly owned by Frank and Pooi, pursuant to the terms of the Impugned YM & Amore Agreements, which had themselves been executed in breach of fiduciary duty.

269 Frank and Pooi, as owners of all of the shares in and directors of Lokit, were conflicted. Both Frank and Pooi stood to personally benefit from the payment of the invoices issued by Lokit, and Lynn and Ian acted to enable this to occur.

270 Further, Frank, Pooi, Lynn and Ian authorised the invoices to be paid in circumstances where:

(a) The invoice issued by Lokit to Ying Mui identified the total amount due as $715,932.27 and revealed that this sum had been calculated by reference to rental and sales proceeds received by Ying Mui throughout the period 2002 until 2010;

(b) The Invoice issued by Lokit to Amore identified the total amount due as $13,365.35 and revealed that this sum had been calculated by reference to rental proceeds received by Amore throughout the period 2004 until 2010;

(c) At no time between 2002 and 2010 had any management fees been paid by Ying Mui or Amore to Frank or to Lokit;

(d) The invoices required Ying Mui and Amore to the pay management fees to Lokit in respect of properties which Ying Mui and Amore had also 'retained real estate agents to lease' many and sell all of those properties and had paid them commission, leasing and management fees for doing so;

(e) Frank had never discussed a potential 8 per cent management fee on sale or rental proceeds with George, Han and Maureen;

(f) The 'management fee' payments were concealed from George, Han and Maureen.

271 I find that this conduct, when considered as a whole, gives rise to a breach of the fiduciary and statutory duties owed by Frank, Pooi, Lynn and Ian to Ying Mui and Amore.

272 Frank and Lynn initiated the scheme pursuant to which the Impugned YM and Amore Agreements were executed, invoices issued, and board resolutions passed.

273 As far Pooi is concerned, I repeat the findings made above in relation to her conduct under Question 8.

274 Further, I find on the evidence that Pooi, in voting in favour of the payment of the invoice issued by Lokit to Amore, did not give any consideration to whether the payment of that invoice would be in the bests interests of Amore. So much was made clear by her in cross-examination[135]

275 Rather, I am satisfied that Pooi simply authorised payments that were to her own personal benefit:

And therefore you authorised payments [that] were directly to your own personal benefit didn't you?---My own personal benefit?

Yes?---Yeah, to the company.

Yes, of which you're a 50 per cent shareholder?---Yes, I guess.[136]

276 As to Ian, I find that he simply exercised his powers as a director of Ying Mui at the request of Frank, and did so without any regard to the interests of Ying Mui or the beneficiaries of the Ying Mui Trust. The following extract from the cross examination of Ian at trial is revealing:

It didn't raise any concerns for you - - -?---No, no.- - - that an invoice was being issued for a nine year period?---No.

And is that because you simply approved what Frank proposed?---Yes, exactly.

And were you aware of how these fees were calculated?---No.

You didn't ask Frank at the time?---No.

When you were asked to authorise a resolution for the payment of $715,000 you did so without any understanding of the basis upon which those fees were calculated?---Yeah.

You didn't bring any independent consideration to whether that was an appropriate payment for Ying Mui to make?---No.

Or whether it was in the best interests of Ying Mui to pay $715,000 to Lokit?---No.

And you're aware, aren't you, that Lokit is a company of which Frank is a director - - -?---Yes.

- - - and shareholder?---Yes.

And that your mother is a director and shareholder of?---Yes.

And that you are a director of?---Yes.

And that your sister Lynne is a director of?---Yes.

And despite being presented with an invoice for $715,000 for payments dating back over a nine year period to a company of which you're a director, you gave no consideration whatsoever to whether it was in the interests of Ying Mui to pay that amount?---No.

You simply voted in favour of the resolution?---Yes.[137]

277 This evidence compels a finding that Ian acted in breach of the fiduciary duties he owed to Ying Mui in authorising the payment of the invoice prepared by Lynn and presented by Lokit to Ying Mui for 'management fees' totalling $715,932.27.

If so, should any of them [Frank, Lynn, Pooi or Ian] be relieved from liability pursuant to s 1318 Corporations Act?

278 The First to Fifth Defendants submitted that if the Court finds that there was a relevant breach of duty, they rely on s 1318 Corporations Act in relation to the statutory duties.

279 It was submitted that each of the directors acted honestly and ought fairly to be excused in voting in favour of the relevant resolutions. There was no 'scheme' or conduct undertaken 'in concert'. The directors of Ying Mui and Amore acted honestly to pay Frank and Lokit for services he in fact provided to the trusts over a long period time for which he received no prior remuneration.

280 However, in the circumstances as I have found them, there was relevant dishonesty in the conduct of Frank, Pooi, Lynn and Ian, and in any event, if the discretion was to be enlivened, I am not satisfied that there is any proper basis to excuse any of Frank, Pooi, Lynn or Ian from liability under s 1318 of the Corporations Act.

In receiving the Impugned YM & Amore Payments, whether pursuant to the Impugned YM & Amore Invoices or otherwise, did Lokit or Lynn knowingly receive trust property?

281 The Plaintiffs allege that Lokit and Lynn, in receiving funds sourced from Ying Mui and Amore, knowingly received trust property and therefore are liable as constructive trustees or otherwise liable to pay equitable compensation.

282 The Court set out the relevant Barnes v Addy principles for knowing receipt at [410]-[434] of the First Tranche Reasons.

283 In order to make out this allegation, it is accepted that the Plaintiffs must establish that Lokit or Lynn received trust property with knowledge that it was trust property being misapplied or transferred pursuant to a breach of fiduciary duty or trust. Tus if the principal breach of duty claims fails, there can be no knowing receipt.

284 The relevant knowledge must actual knowledge of breach of duty, or a wilful withholding of inquiries, or knowledge of circumstances that would indicate the breach of duty to an honest and reasonable person.

285 The Court of the First Tranche Reasons also addressed whether knowledge of facts also required an appreciation of the legal consequences of the known facts:[138]

"Actual knowledge" on the part of a third party recipient of trust property has been misapplied or transferred pursuant to a breach of fiduciary duty or trust may be considered to be a relatively rare occurrence if it incorporates an element of knowledge of the legal consequences of the known facts. On balance, however, I determine that it does. In this circumstance, liability is only likely to arise where a court can be satisfied that the recipient not only had knowledge of the essential facts, but also had at least an appreciation of the legal consequences of those facts which point to a breach of fiduciary duty or trust. In practice, this is likely to occur only where the recipient has a working knowledge of the law relating to breach of fiduciary duty, breach of duty, and fraud, or obtains appropriate legal advice as to the application of this sometimes complex area of the law to the known essential facts.

For this reason, the second to fourth means of establishing the requisite knowledge defined in Baden in most cases, are more likely to be engaged and operate to give the doctrine meaningful work to do.

286 The First to Fifth Defendants relied on Lynn's evidence that she was unaware of the funds being paid into her bank account. She adhered to this evidence despite being repeatedly pressed on this issue in cross-examination.[139] They submitted that a claim against Lynn cannot succeed.

287 They further submitted that the receipt of funds by Lokit is explained by the evidence concerning payment of management fees, earlier referred to. They submitted that the Plaintiffs cannot establish that Lokit knowingly received trust property and is consequently unable to be liable as constructive trustees or otherwise.

288 In final submissions, the Plaintiffs did not press their claims under this head against Lynn.

289 However, the Plaintiffs did press a case against Lokit that it is liable for knowingly receiving each of the Impugned YM and Amore Payments.

290 I am satisfied that Lokit is indeed liable for knowingly receiving each of the Impugned YM and Amore Payments, and for the reasons which follow.

291 First, Lokit received all of the Impugned YM Payments, namely, the First, Second, Third and Fourth Lokit Payments and admitted that it did so,[140] as it did with the Impugned Amore Payment.[141] Although the evidence is that the First Lokit Payment was paid by Ying Mui into a bank account in the name of Lynn,[142] the Ying Mui balance sheet for September 2010 shows that the First Lokit Payment was recorded in the accounts of Ying Mui as a repayment of (part of) the loan owing to Lokit, and that upon Ying Mui making that payment of $300,000 to Lynn, the loan recorded as owing to Lokit in Ying Mui's balance sheet was reduced from $435,000 to $153,000. At the same time, the loans owing to George and Han remained at $453,000. The First Lokit Payment was therefore apparently made as between Ying Mui and Lokit as having been made to Lokit.

292 Second, each of the Impugned YM and Amore Payments was made in breach of fiduciary duty, for the reasons earlier found.

293 Third, Lokit had actual knowledge of the fact that each of the Impugned YM and Amore Payments were made in breach of fiduciary duty. Frank was a primary wrongdoer and also a director of Lokit at all relevant times. I am also satisfied that Lokit was an entity controlled by Frank.[143] Indeed the name 'Lokit' was derived from a reference to Ian and Pooi,[144] that Lokit was Frank's 'personal company',[145] and that the shareholders of Lokit at all relevant times were Frank and Pooi.[146] For these reasons, Frank was:

so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company.[147]

294 In circumstances where the Court has held that Frank 'acted unilaterally' in making the First, Second and Third Lokit Payments,[148] and where the evidence establishes that he was intimately involved in causing the Fourth Lokit Payment and the Impugned Amore Payment to be made, I am satisfied that Frank had sufficient knowledge of the contravening conduct such that, when properly imputed to Lokit, rendered Lokit liable as a knowing recipient.

(a) liable as constructive trustees with respect to the YM and Amore Payments; or

(b) liable to pay compensation to Ying Mui and Amore?

295 The Plaintiffs do not appear to press a claim against Lynn for knowing receipt of trust property and only pursue the claim against Lokit.

296 Consequent upon the findings made in relation to Question 10(1) Lokit, having knowingly received the Impugned YM and Amore Payments, is liable as a knowing recipient, and holds the Impugned YM and Amore Payments as a constructive trustee, on the principle that:

A person who receives property in her or his own capacity, knowing that its transfer is in breach of trust or, it seems clear, in breach of fiduciary duty, will be made a constructive trustee of that property.[149]

297 In addition, following any necessary election to be made by the Plaintiffs, Lokit is liable to pay equitable compensation to Ying Mui and Amore, plus interest,[150] with the result that both Ying Mui and Amore will hold such payments on trust for the benefit of the Ying Mui Trust and the Amore Trust.[151]

Was Frank and/or Lokit entitled to fair and reasonable remuneration in respect of the services they provided to Ying Mui and Lokit? (quantum to be determined later)

298 The question posed here is whether Frank and/or Lokit were entitled to fair and reasonable remuneration irrespective of the outcome of the breaches of duty addressed above.

299 The First to Fifth Defendants submit that the answer is yes and, further, the amounts paid by way of management fees represented a fair and reasonable remuneration for Frank's management services which included exposure to very significant potential personal liability under personal guarantees in the relevant period.

300 Further, Frank contends that the Impugned Ying Mui and Amore Payments constituted fair and reasonable remuneration for his management services.

301 On the other hand, the Plaintiffs say that Frank was not entitled to any such remuneration.

302 The Court has an inherent equitable jurisdiction to remunerate a trustee or a defaulting fiduciary a just allowance.

303 This includes an allowance for expenditure enabling a profit to be realised, the generation of profit from something done by the fiduciary, including time and energy and skill employed, taking on personal risks and bank security, and entrepreneurial efforts.

304 The blameworthiness of a fiduciary and its degree does not bar an award for a just allowance.

305 In Ford and Lee: The Law of Trusts the learned authors observe that:[152]

Two comments are usually made with respect to the giving of an allowance. One is that it is given only in exceptional circumstances; the other is that it should not be generous.

306 This passage was cited with approval in Grimaldi v Chameleon Mining NL (No 2).[153]

307 In Re Application of Sutherland,[154] Campbell J distilled general principles in relation remuneration of trustees. His Honour noted that there was an inherent equitable jurisdiction to allow a trustee remuneration, which extended to past work done. Relevantly, his Honour stated:[155]

The Court's inherent jurisdiction to allow remuneration to a trustee is wide (...) It extends to allow the Court to approve the retention of remuneration for future work done, as well as past work done: Nissen v Grunden [1912] HCA 35; (1912) 14 CLR 297 at 307-8; In re Keeler's Settlement Trusts [1981] 1 Ch 156 at 161-2; Re White; Tweedie v Attorney-General [2003] VSC 433; (2003 7 VR 219 at 233. It allows the court to authorise payment of remuneration at a higher rate than that originally allowed by the trust instrument (...) It extends to allowing remuneration to constructive trustees: Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46; In re Jarvis, decd: Edge v Jarvis [1958] 1 WLR 815 at 820. It extends to permit the Court to allow remuneration to a trustee for work he does in acting as director of a company in which the trust funds are invested: In re Keeler's Settlement Trusts [1981] 1 Ch 156 at 162. Whether the jurisdiction is actually exercised in any particular factual circumstances is, of course, a completely separate question to whether the jurisdiction exists.

308 In Phipps v Broadman,[156] Wilbeforce J held that although Boardman and Phipps had breached their duty of loyalty in becoming self-appointed agents representing the trust and therefore putting themselves in a conflict of interest, and were accordingly liable for profits earned, nevertheless they were held to be entitled to remuneration for services they had performed.

309 In the Court of Appeal, Lord Denning MR said:[157]

... Ought Boardman and Tom Phipps to be allowed remuneration for their work and skill in these negotiations? The plaintiff is ready to concede it, but in case the other beneficiaries are interested in the account, I think we should determine it on principle. This species of action is an action for restitution (...) The gist of it is that the defendant has unjustly enriched himself, and it is against conscience that he should be allowed to keep the money. The claim for repayment cannot, however, be allowed to extend further than the justice of the case demands. If the defendant has done valuable work in making the profit, then the court in its discretion may allow him a recompense. It depends on the circumstances.

310 In O' Sullivan v Management Agency and Music Ltd,[158] the Court of Appeal considered the issue of due allowance in making orders against certain fiduciaries. Fox LJ, after referring to the appeal to the House of Lords in Phipps v Boardman[159] said:

[that they] accept the existence of a power in the court to make an allowance to the fiduciary. And I think it is clearly necessary that such a power should exist. Substantial injustice may result without it. A hard and fast rule that the beneficiary can demand the whole profit without an allowance for the work without which it could have been created is unduly severe. Nor do I think that the principle is only applicable in cases where the conduct of the fiduciary cannot be criticised. I think that the justice of the individual case must be considered on the facts of that case. Accordingly, where there has been dishonesty or surreptitious dealing or other improper conduct then, as indicated by Lord Denning MR, it might be appropriate to refuse relief; but that will depend upon the circumstances.

Once it is accepted that the court can make an appropriate allowance to a fiduciary for his skill and labour I do not see why, in principle, it should not be able to give him some part of the profit of the venture if it was thought that justice as between the parties demanded that. To give the fiduciary any allowance for his skill and labour involves some reduction of the profits otherwise payable to the beneficiary. And the business reality may be that the profits could never have been earned at all, as between fully independent persons, except on a profit sharing basis. But be that as it may, it would be one thing to permit a substantial sharing of profits in a case such as Phipps v Boardman [1966] UKHL 2; [1967] 2 AC 46 where the conduct of the fiduciaries could not be criticised and quite another to permit it in a case such as the present, though fraud was not alleged, there was an abuse of personal trust and confidence. I am not satisfied that it would be proper to exclude Mr Mills and MAM companies from all reward for their efforts. I find it impossible to believe that they did not make a significant contribution to Mr O' Sullivan's success. It would be unjust to deny them a recompense for that. I would, therefore, be prepared as was done in Phipps v Boardman to authorise the payment (over and above out of pocket expenses) of an allowance for the skill and labour of the first five defendants in promoting the compositions and performances and managing the business affairs of Mr O' Sullivan, and that an inquiry (the terms of which would need to be considered with counsel) should be ordered for that purpose.

In my view this would achieve substantial justice between the parties because it would take account of the contribution made by the defendants to Mr O'Sullivan's success.

311 In Paul A Davies (Australia) Pty Ltd (in liq) v Davies,[160] the New South Wales Court of Appeal ordered just allowances in favour of the defendants in that case. Moffitt P said in this regard:[161]

[T]he contributions of the respondents by way of effort and expertise in procuring the original purchase, in running and improving the property after they entered possession and in securing the completion by it by the provision of mortgage finance on their personal covenant are matters proper to be brought to account as just allowances (...) [T]he respondents were not guilty of conscious wrongdoing. It is on this basis and for this reasons it is proper that there be provision made in any final accounting for just allowances. In a like case Lord Cohen considered that allowances in such circumstances should be assessed on a "liberal scale" (Phipps v Boardman [1966] UKHL 2; [1967] 2 AC 46] at 104).

The respondents are entitled to be treated as the managers of a profit-making enterprise of which they are also trustees; the matter has to be considered on the basis that they were applicants to the court for proper remuneration out of the trust property and income. The burden of establishing what is proper lies upon them.

312 The principles underpinning just allowances are reflected in what the High Court said in Warman International v Dwyer ('Warman Internaitonal'),[163] where it was observed:[164]

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 (...)

In the case of a business it 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. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources.

313 A comprehensive review of the relevant principles in relation to making just allowances for errant fiduciaries was undertaken in Harris v Digital Pulse Pty Ltd[165] concluding with a discussion of Warman International.

314 These general principles were recently discussed by the Victorian Court of Appeal in Edmonds v Donovan[166] in the context of a consideration as to the appropriate equitable relief to be granted arising from a breach of fiduciary duty. In particular, the Victorian Court of Appeal affirmed a decision at first instance that, given the circumstances of the case, an account of profits was not warranted and it was fair and equitable that the defendants share in profits realised from the pursuit of a business opportunity made in breach of fiduciary duty.[167]

315 The relevant principles were then conveniently summarised by Hargrave J in Robert Deutsch & Ors v Erwin Deutsch & Ors:[168]

(1) A defaulting fiduciary's liability to account for benefits received is not penal: "equity does not ... punish a fiduciary for misconduct by making him account for more than he actually received as a result of his breach of fiduciary duty".

(2) The remedy to be ordered for breach of fiduciary duty "must be fashioned to fit the nature of the case and the particular facts."

(3) The liability of a defaulting fiduciary to account for benefits received from the trust "should not be transformed into a vehicle for the unjust enrichment of the plaintiff".

(4) Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case.

(5) The assessment of the actual benefit derived by a defaulting beneficiary is an inexact one - "at best it can only result in some reasonable approximation of the profit for which the fiduciary must account". Accordingly, courts sometimes "short-circuit the apportionment enquiries by resort to the device of awarding 'just allowances' to the fiduciary ... for his or her own skill and exertion."

(6) The onus lies on the defaulting fiduciary to establish that it would be inequitable for the whole of the benefits received in breach of fiduciary duty to be disgorged.

(7) Just allowances are not made as a matter of course. Such allowances must be "practically just". In determining whether an allowance is practically just in the circumstances of a particular case, relevant considerations include whether the fiduciary has acted honestly or dishonestly and whether denial of an allowance would leave the trust unjustly enriched. In Phipps v Boardman, Lord Denning MR said:

The gist of it is that the defendant has unjustly enriched himself, and it is against conscience that he should be allowed to keep the money. The claim for repayment cannot, however, be allowed to extend further than the justice of the case demands. If the defendant has done valuable work in making the profit, then the Court in its discretion may allow him a recompense. It depends on the circumstances. If the agent has been guilty of any dishonesty or bad faith, or surreptitious dealing, he might not be allowed any remuneration or reward. But when, as in this case, the agents acted openly and above board, but mistakenly, then it would only be just that they should be allowed remuneration.

316 An allowance may be refused to a fiduciary who has acted dishonestly or in bad faith.[169] In Harris v Digital Pulse Pty Ltd,[170] Heydon JA explained that:[171]

[T]he onus on the defendant is to negate dishonesty or other grave forms of misconduct (...) [and] an absence of grave misconduct is a passport to an indulgence in favour of the defendant (...) [and] the onus of establishing that an allowance is called for is on the defendant.

317 The First to Fifth Defendants contended in relation to this issue that it would be inequitable and unjust for Frank and Lokit not to be found entitled to fair and reasonable remuneration for the labour, work and efforts applied by Frank in managing the trusts, and this is so irrespective of the outcome of any of the breaches of duty alleged by the Plaintiffs. Accordingly, it would be inequitable and unjust for Frank and Lokit to be ordered to effectively repay the amount of the impugned payments.

318 It was submitted that the profit generated for the trusts arose exclusively from the efforts of Frank in identifying, securing, managing and, in the case of Hampton Street, developing, properties. In doing so, and thereby making profitable investments for the trusts, Frank and Pooi exposed themselves and their personal assets to the risks associated with these investments by giving personal guarantees and mortgages over personal assets. Securities of this nature, or indeed any securities, were never provided by either George of Robert (or Han) in furtherance of or to advance the trust investments. Indeed, without the skill, diligence and the entrepreneurial efforts of Frank, the investments could not have been acquired and managed, and, in the case of Hampton Street, developed. This required not only personal exertion by Frank, but the payment by him of his own expenses in performing this work from his own pocket. Further, this activity occurred in circumstances where, by managing the trusts, it was contended that Frank lost the opportunity of earning income for himself and his immediate family.

319 It was contended that Robert, George and Maureen not only accepted, but also encouraged, Frank's efforts under the stated and minuted promise of an agreement for remuneration for doing so. This constituted an arrangement for remuneration on which they intended Frank would act upon, and which it was claimed, he did ultimately act upon.

320 No conduct on the part of Frank disentitles him from a just and fair allowance for his efforts.

321 It was submitted that, whilst Ying Mui and Amore were the relevant trustees until they were replaced by Frosthollow in 2011, Frank had managed the trust business since 2001.

322 It was further submitted that just allowance should be made in favour of Frank for providing his services over such an extended period, and in circumstances where:

(a) Ying Mui and Amore did not receive any remuneration or allowance for managing the trusts;

(b) It was claimed to have been agreed in late 2001 and 2002 by George, Robert and Maureen that Frank should be paid a reasonable salary for managing Ying Mui and its projects which by inference would include Amore and its projects. In other words, each of the three brothers the subject of the joint endeavour found by the Court agreed in Hoh family minutes that Frank should be paid a reasonable salary for managing Ying Mui;

(c) Frank effectively managed the Ying Mui and Amore trusts on his own for more than 10 years resulting in a large appreciating portfolio of assets worth many millions of dollars;

(d) Frank was given full authority by the shareholders of Ying Mui to operate and manage the trusts;

(e) Frank showed great skill and effort in researching, identifying and purchasing commercial and residential properties which grew to form part of the assets of the trusts and managing the trusts, with the result that the assets steadily increased in number;

(f) The considerable time Frank spent in managing the trusts deprived him of generating significant income for him and his immediate family;

(g) The value of the trust assets increased substantially over time with no asset ever sold at a loss;

(h) Frank (and Pooi) provided personal guarantees for the benefit of the relevant trusts and the beneficiaries to help secure bank funding over a long period of time which exposed them to risk and was personally to the detriment of Frank (and Pooi);

(i) There was no allegation of any wrongdoing on the part of Frank or any other director in the period between 2001 to mid-2010. Indeed, the cross-examination of Frank proceeded on the basis that Frank was very skilful in his property selections;

(j) There is no allegation of fraud or dishonest conduct against Frank or any of his family and the Court has made no findings of dishonesty or fraud against Frank. The findings are that he and Ian acted in breach of fiduciary and statutory duty by acting in conflict of interest and for an improper purpose; and

(k) The findings are that he and Ian acted in breach of fiduciary and statutory duty by acting in conflict of interest and for an improper purpose; and

(l) It would be inequitable and unjust for Frank and Lokit to effectively repay the amount of the impugned payments without rewarding Frank for his labour, work and efforts in managing the trusts.

323 It was put that the matters relied on by the Plaintiffs in their submissions do not establish that Frank engaged in grave misconduct or that he is otherwise not entitled to just allowance or reward for his skill and effort. It was submitted that the concealment of the sales and the finding of a misleading letter do not make Frank's contraventions dishonest or grave misconduct.

324 The Court has made no findings of dishonesty against Frank and the conduct in backdating agreements was not found to be dishonest.

325 It was submitted further that the fact that Frank spent money on litigation does not change the character of any contraventions. That may be a reason why the Court found there has been a breach of statutory and fiduciary duty but it does not make it grave or dishonest conduct.

326 It was further submitted that Frank had not been previously remunerated for all his services by reason of his purchase of Unit 7 Hampton. At best, this may be a factor in the assessment of the quantum of his remuneration, not whether he should be remunerated. The Plaintiffs implicitly accept that Frank's services went well beyond what he did at Hampton, which itself was considerable.

327 The First to Fifth Defendants contended that the Court's finding that the trusts were intended to benefit, inter alia, Frank, Robert and George and their immediate families is not a reason why Frank should not be remunerated for his work and services.

328 George and Robert (and later Han) have had no involvement or assisted in any of the work necessary to manage and operate the trusts.

329 In these circumstances, the First to Fifth Defendants submitted that the Court should exercise its inherent jurisdiction to remunerate Frank for the services he provided to the trusts, with the quantum of remuneration to be determined at a later point.

330 The Plaintiffs advanced four reasons why Frank should not be allowed any remuneration in respect of the services he provided to Ying Mui and Amore.

331 First, it was submitted that this is a case in which Frank acted in his own self-interest in bad faith and dishonestly. Indeed, the Plaintiffs contend that Frank acted fraudulently. The conduct of Frank stands in stark contrast to the conduct of the defaulting fiduciaries in Phipps v Boardman,[172] who 'acted openly and above board, but mistakenly'[173]. It follows, so the Plaintiffs contended, that this is a case where the Court should not, in the exercise of its equitable discretion, award any just allowance to Frank.

332 Second, Frank had previously been remunerated for his services by Ying Mui agreeing to transfer to Frank a unit in the 'Hampton Street Project' at cost. In this respect, Frank gave evidence that '[t]he opportunity to purchase a unit in the Hampton Property was a reward for my work in securing the development project in Hampton Street and managing the entire development. My purchase of the unit was not part of my management fee'.[174] Accordingly, it was submitted that there is no need for Frank to be granted an allowance in respect of his work managing the development of Hampton Street, in circumstances where he has already received 'a reward' for this work.

333 Third, it was contended that the evidence establishes that Frank retained real estate agents to lease many of the properties and to sell all properties in the Ying Mui Trust and Amore Trust and paid them commission, leasing and management fees to do so. In these circumstances, it was submitted that there is no proper basis for Frank to be paid an allowance in respect of such properties. Frank did not undertake any 'management' activities in respect of such properties. Further, the grant of an allowance to Frank would unduly deplete the assets of the Ying Mui Trust and Amore Trust, in circumstances where Ying Mui and Amore have already paid commission, leasing and management fees in respect of such properties.

334 Finally, the Plaintiffs submitted that there is no need for Frank to be granted a just allowance, in circumstances where he is a beneficiary of the Ying Mui Trust and Amore Trust, which the Court has determined were established to benefit Frank, Robert and George (and their immediate families).[175] That is, to the extent that any conduct of Frank contributed to the growth in value of the assets held by the Ying Mui Trust and Amore Trust, he benefited from that growth in value by reason of his status as a beneficiary of the Ying Mui Trust and Amore Trust. In these circumstances, it was put that there is no need for him to be granted a separate and further allowance.

335 I apply the legal principles summarised by Hargrave J in Robert Deutsch & Ors v Erwin Deutsch & Ors [176] referred to above.

336 First, I do not accept the contention of the Plaintiffs that the time at which the misconduct occurs is irrelevant. The statement of Hargrave J in Robert Deutsch & Ors v Erwin Deutsch & Ors,[177] citing from Lord Denning MR in Phipps v Boardman[178] that 'If the agent has been guilty of any dishonesty or bad faith, or surreptitious dealing, he might not be allowed any remuneration or reward'[179] [emphasis added], when taken in context does not stand for this proposition. There is no such hard and fast rule. As stated by Lord Denning MR, the Court, in the exercise of its discretion may or may not allow a party who has done valuable work a recompense, 'It depends on the circumstances'.[180] The time at which the misconduct occurs may become relevant in the assessment undertaken by the Court when the relevant factors are considered as a whole.

337 Secondly, I have earlier found that there was no agreement ever reached between the relevant parties that Frank would be paid for his management role.

338 Thirdly, I find that Frank never claimed, nor was paid any management fee, until his unilateral decision to characterise payments which he misappropriated as such.

339 I find that Frank acted dishonestly, in bad faith, and surreptitiously in appropriating the monies which he characterised as management fees.

340 Frank does not contend that he acted mistakenly, or pursuant to wrong independent professional advice. I find that he appropriated the monies in question for his stated purpose, and did so deliberately for that purpose. His breaches of fiduciary duty were obvious and blatant.

341 I do however, accept the contentions advanced by Frank that his management role was a very significant one.

342 Taking these matters into consideration, I find that Frank has not discharged the onus which is upon him, to establish that it would be inequitable to be subjected to an order that he repay the entire amount of the unauthorised management fees paid through the mechanisms which he put in place or that he has any entitlement to remuneration.

343 Frank should be ordered to repay the sums to be determined for misappropriation of trust funds which he effectively paid for personal purposes of himself and his immediate family which he characterised as management fees.

344 Further, and in any event, Frank should not be granted an allowance in respect of his work managing the development of Hampton Street, because he has already received reward for this work. The reward was provided by Ying Mui agreeing to transfer to Frank a unit in the Hampton Street Project at cost.

345 Insofar as the evidence establishes that Frank retained real estate agents to lease many of the properties and paid them fees, limited to management fees, for doing so, Frank should not be permitted to charge management fees in respect of such properties.

346 For the reasons earlier provided, I do not accept that fraud on the part of Frank has been substantively pleaded beyond what is advanced in the Reply of the Plaintiffs. This plea is specifically confined to mounting an in personam case in fraud with the object of defeating Lumarkye's claim to indefeasibility of title in respect of the Sydenham Property and Lot 202. It does not have general application to the conduct of Frank beyond these circumstances.

347 However, I accept the thrust of the Plaintiffs claim that Frank, with the assistance of his immediate family, implemented the Asset Sale and Distribution Decision, and that this was a covert and dishonest scheme to misappropriate the assets of the Ying Mui Trust and Amore Trust for his own benefit, and that of aligned family members.

348 The conduct which I find and take into account for this purpose is the grave misconduct described below on the part of Frank and, where applicable, Lokit.

349 First, the Court has already determined in the First Tranche Reasons a serious breach of fiduciary duty was perpetrated inter alia by Frank arising from the sale of the Sydenham Property and Lot 202 and application of the proceeds of these trust properties. The Court found:[181]

In effect by authorising the sale of the Sydenham Property and Lot 202, Frank and Ian converted assets of the Ying Mui Trust into cash, which was deposited with Lokit and which they in turn used to defend allegations in the present proceeding [and in this way] they acted in breach of fiduciary duty whilst directors of the trustee of the Ying Mui Trust.

Further, in so doing, both Frank and Ian acted with a clear conflict of interest in relation to Ying Mui and out of self-interest in authorising and undertaking the sales of the two properties to generate the necessary cash for purposes which, I find, they had in contemplation at the time the sales were effected.

Looking at the relevant facts and circumstances from the perspective of a reasonable person, I am satisfied that the personal interests of Frank and Ian were such that a reasonable person would think there was a real or substantial possibility of the fiduciary being swayed by their desire to make the Lokit Payments. They took no step to avoid the conflicts but in fact pursued their personal interests.

The breach of fiduciary duty on the part of both Frank and Ian in relation to the Lokit Payments is also established.

350 The evidence given by Frank in cross examination demonstrated the gravity of his breach of fiduciary duty: 'I took it as fighting fund, I think from memory the figure was about 2.7 or so, 2.6, 2.7 million'.[182] Further, the evidence of Frank in re-examination was that:[183]

In response to his questions, you said that distribution was made because you needed a fighting fund. Would you please tell His Honour why you thought you needed a fighting fund during the financial year ended 30 June 2011?---Your Honour, because I knew that if they took control of the company, they would take legal action against me.

What action did you anticipate would be taken against you, or might be taken against you?---They would take control of the trust and all the properties, that's - I thought they would do that.

And what did you anticipate the fighting fund might be used for?---Pay legal fees.

Yes. You gave evidence in answer to a question from our learned friend this morning that $2m had been spent thus far and it didn't allow for the three weeks of this court hearing. Do you recall giving that evidence?---Yes. It's very expensive.

What exactly has that $2m been spent on?---What was spent, is it?

Sorry?---What - - -

What exactly has that $2m been spent on? Is it just this case?---Yes, yes.

351 Second, the findings made in the course of answering Questions 4; 5; 6(1) & (2); 8(3); 9(1) & (2) and 10(1) & (2) above insofar as they implicate Frank and Lokit.

352 It would offend against equity to grant Frank and/or Lokit remuneration in circumstances where the only reason why there were any funds available to be paid out of the trusts was because Frank had implemented the covert asset sale scheme, whereby the properties held by the trusts were liquidated and the proceeds of sale distributed to Lokit and members of the Hoh family aligned with Frank.

353 To the extent that it is asserted that the conduct of Frank can be excused on the basis that 'Trustees regularly seek to be reimbursed out of trust funds for litigation expenses [and] [t]his is entirely proper', the analogy drawn is inapt. Frank did not 'seek' to be to reimbursed out of the Ying Mui Trust or Amore Trust for litigation expenses. He simply helped himself and misappropriated trust funds to be deployed in this proceeding for his own benefit, not on behalf of Ying Mui Trust or Amore Trust.

354 Finally, the misconduct of Frank described had the effect that the assets of the Ying Mui Trust and Amore Trust were substantially diminished. The evidence of Frank was unequivocal: 'I took it as fighting fund, I think from memory the figure was about 2.7 or so, 2.6, 2.7 million'.[184] Indeed, the evidence of Frank in re-examination was that:[185]

In response to his questions, you said that distribution was made because you needed a fighting fund. Would you please tell His Honour why you thought you needed a fighting fund during the financial year ended 30 June 2011?---Your Honour, because I knew that if they took control of the company, they would take legal action against me.

What action did you anticipate would be taken against you, or might be taken against you?---They would take control of the trust and all the properties, that's - I thought they would do that.

And what did you anticipate the fighting fund might be used for?---Pay legal fees.

Yes. You gave evidence in answer to a question from our learned friend this morning that $2m had been spent thus far and it didn't allow for the three weeks of this court hearing. Do you recall giving that evidence?---Yes. It's very expensive.

What exactly has that $2m been spent on?---What was spent, is it?

Sorry?---What - - -

What exactly has that $2m been spent on? Is it just this case?---Yes, yes.

355 As a result, over $2,000,000 of trust funds have been dissipated on legal fees. This is not conduct which should be rewarded or sanctioned by the grant of equitable remuneration.

356 Accordingly, I am driven to the conclusion that there was conduct on the part of Frank which is tainted with the character of a covert and dishonest scheme to misappropriate the assets of Ying Mui Trust and Amore Trust for his own benefit and that of his aligned family members. Although by reason of the absence of any pleading of actionable fraud it is not to be taken into account in framing a cause of action for damages or other relief against Frank, nevertheless, I am satisfied that certain of the conduct is capable of being taken into account in the exercise of the Court's equitable jurisdiction, to refuse any award to be made in favour of Frank or Lokit for the remuneration which they claim.

357 For these reasons I determine, in the exercise of the Court's equitable jurisdiction, that neither Frank nor Lokit are entitled to any remuneration in respect of any of the services they provided to Ying Mui or Amore or the Ying Mui Trust or the Amore Trust.

Sale of the Docklands Property, Unit 10 and Lot 201

Did Frank, Lynn, Pooi and/or Ian breach any fiduciary or statutory duties to Ying Mui by arranging, authorising and facilitating the sale of the Docklands Property, Unit 10, or Lot 201 to third parties?

358 The Court has already considered, and determined that Frank and Ian acted in breach of fiduciary duty in arranging and facilitating, the sale of the Sydenham Property and Lot 202 out of the Ying Mui Trust.[186]

359 As found in the First Tranche Reasons, the Sydenham Property was sold on 30 September 2011 and Lot 202 was sold on 28 October 2011.[187]

360 Three other properties were sold off as part of the asset sale process implemented by Frank, before Ying Mui was replaced as trustee by Frosthollow. The properties were the Docklands Property, Unit 10 and Lot 201.

361 By way of further background, on 1 October 2010, and following the falling out between Frank and George, Frank, Pooi and Ian voted in favour of a resolution that Ying Mui sell the Docklands Property to a third party for $563,280. Frank executed the contract of sale on 21 October 2010 and Frank and Pooi executed the transfer of property.

362 Then, on 10 February 2011, Frank, Lynn and Ian voted in favour of a resolution that Ying Mui be authorised to sell Unit 10 of the Hampton Street Property to a third party for $645,000. At the time, the tenant of Unit 10 had previously signed 'a very long lease'. Lynn executed the contract of sale on 10 February 2011 and Frank and Lynn executed the transfer of property.

363 Further, on 27 May 2011, Frank, Lynn and Ian voted in favour of a resolution that Ying Mui be authorised to sell Lot 201 of the Hampton Street Property to a third party for $1,800,000. Lynn executed the contract of sale on 27 May 2011 and Lynn and Ian executed the transfer of property. The tenant, Australia Post, had only recently signed a lengthy extension of its lease.

364 Accordingly, the sales of the Docklands Property, Unit 10 and Lot 201 were also undertaken prior to the 12 October Letter referred to in the First Tranche Reasons,[188] and, I find, were transactions undertaken without the knowledge or consent of George, Han and Maureen, and were in fact concealed from them.

365 The Plaintiffs contended that Frank, with the assistance of Pooi, Lynn and Ian, sold the Docklands Property, Unit 10 and Lot 201 to implement the Asset Sale and Distribution Decision, and did so in breach of fiduciary duty.

366 It was put that this was conduct motivated entirely by self-interest. Indeed, it was contended that Frank admitted as much in the following passages of his cross-examination: 'You chose didn't you to advantage your company, Lokit and yourself personally at the expense of Ying Mui, didn't you?---As you have said in the last sentences, yes'. Reference was also made to the earlier findings of the Court in the First Tranche Reasons where the Court determined that 'the driving motivation' was 'Frank's personal interest' and he exercised his powers as a director 'for the improper purpose of obtaining substantial and direct personal benefits'.[189]

367 The Plaintiffs also contended, in part relying on findings made in the First Tranche Reasons,[190] that each of Pooi, Lynn and Ian were well aware of, and complicit in, this course of conduct, and acted in concert with Frank to sell off the assets of the Ying Mui Trust for their own personal benefit.

368 It was acknowledged by the First to Fifth Defendants that the Court has made findings in connection with the sales of the Sydenham Property and Lot 202 from Ying Mui to Lumarkye. It was submitted that the Court's findings of breach against Frank and Ian must be viewed in the context of the personal association and connection found to exist between Frank, Lynn and Lumarkye and its officers - Dominic and Vgene.

369 It was submitted however that the claims in respect of the Docklands Property, Unit 10 and Lot 201 concern alleged breaches of fiduciary and statutory duties arising from the sale of other properties by Ying Mui. It was observed that the key distinguishing feature in these sales is that they did not involve any sale to a family member or other related entity. It is not in dispute that these sales were to third parties who had no relationship with Ying Mui or any member of Frank's immediate family. That is why no separate claim was made against any of these purchasers, unlike the situation with Lumarkye.

370 It was submitted that the evidence concerning each sale must be separately considered. Further, the Court must consider the evidence recorded in Hoh family minutes of meeting dated April 2004 that Ying Mui's agreed investment policy included selling assets where the price offered was attractive.

371 It was further submitted by the First to Fifth Defendants that Ying Mui had a power of sale under the relevant Trust Deed to sell the Docklands Property, Unit 10 and Lot 201, in addition to the Sydenham Property and Lot 202. Section 13(1) of the Trustee Act 1958 (Vic) confers a broad discretion on a trustee with a power of sale.

372 The First to Fifth Defendants also pointed to there being shareholder assent to the sales in question because each property was sold at an attractive price. The stated investment policy of Ying Mui as recorded in the minutes of meeting of 9 April 2004 expressly contemplated the selling of properties from time to time. The minutes relevant stated:

The INVESTMENT POLICY of YMA properties was discussed. The consensus of the opinion is that the policy should be and include the following elements:

...

(iv) That existing investments may [be] sold if an attractive price is offered. That is, no investment should be regarded as fixed and shall never be sold.

373 This was said to be a highly probative document. The investment policy was conceded by George in cross-examination and supported by Lynn in her cross-examination.

374 It was submitted further that, in effect, the shareholders of Ying Mui (being Robert, George and Frank) and Maureen, who also represented a significant proportion of the classes of beneficiaries of the Ying Mui Trust and the Amore Trust, agreed that the officeholders of Ying Mui, including Frank, could sell any investment if an attractive price was offered and that no investment should necessarily be retained. In these circumstances, there was no need to consult shareholders or beneficiaries on potential sales.

375 As to the agreed investment policy, it was contended that this mandated Frank and other directors of Ying Mui to take steps to sell at any time when an attractive price was offered. On this basis there was shareholder assent to selling properties at attractive prices. What was an attractive price was left for the judgment of Frank, just as in the end what was an attractive purchase price had been a matter for the judgment of Frank.

376 It was submitted that there was full disclosure and discussion about Ying Mui's investment policy, Ying Mui's assets, costs and expenses relating to each property and financial position at this meeting. Both Frank and George gave schedules of information concerning the properties and sources of funds. There was shareholder assent to future sales of assets at attractive prices based on this discussion and disclosure to the shareholders of Ying Mui. This was the last of the recorded Hoh family minutes and was the most comprehensive in terms of the details covered.

377 Detailed submissions were also made by the First to Fifth Defendants in support of the contention that the directors did not act for any improper or ulterior purpose in deciding to sell the properties, including the particular circumstances of the three properties in question, being the Docklands Property, Unit 10 and Lot 201.

378 In these circumstances, it was submitted that there was no breach of fiduciary or statutory duty on the part of Frank, Pooi, Lynn or Ian in facilitating the sales to third parties, and this was so by reason of the following principal matters:

(a) by reason of the agreed Ying Mui investment policy in April 2004, there was informed consent to selling each property at an attractive price, it not being alleged that any sale was at under market value;

(b) each of the properties in question - the Docklands Property, Unit 10 and Lot 201 - were sold at an attractive price and therefore there was informed assent to each sale by the shareholders of Ying Mui;

(c) in any event, the substantial purpose for selling each property was to reduce debt and corresponding personal exposure to Frank and Pooi (necessarily tied to the reduction of debt) and to pass on a 'clean slate' to Lynn as the successor manager of the trust assets;

(d) Frank, Pooi, Lynn and Ian, unlike the position with regard to the Sydenham property and Lot 202, did not have any material interest or relationship with any of the third party purchasers and therefore they were not swayed by any personal interest in that regard;

(e) each of the properties was sold at a perceived above market value and therefore was sold at an attractive price;

(f) bank debt and personal guarantees of Frank and Pooi were in fact discharged; and

(g) following the sales of the Docklands Property, Unit 10 and Lot 201, Frosthollow and Olrey continued to hold valuable trust assets in Glen Waverley and Camberwell and purchase a new asset in Pakenham.

Conclusions as to the sales of the Docklands Property, Unit 10 and Lot 201

379 It is not in question that under the relevant deeds of trust Frank and his co-directors had the power to sell the Docklands Property, Unit 10 and Lot 201 (the 'Remaining Properties'). However, the question is whether they exercised that power for an improper purpose in breach of trust.

380 Further, it is accepted that an investment policy was in place at the relevant times of the sales of the Docklands Property, Unit 10 and Lot 201, as described in the minutes of meeting of 9 April 2004 earlier referred to. However, the question remains as to whether the investment policy in this case was in fact administered for an improper purpose in breach of trust.

381 Further, although the relevant properties were sold to third party purchasers who were outside the family group, in what is inferred to be arm's length transactions and at what I find to be attractive prices, the question remains as to whether, in achieving sales on these terms, the directors acted for an improper purpose in breach of trust.

382 I am satisfied that Frank, Lynn, Pooi and Ian did each breach their fiduciary and statutory duties owed to Ying Mui in arranging, authorising and facilitating the sale of each of the Docklands Property, Unit 10 and Lot 201 by reason that those sales represented part of the implementation of the Asset Sale and Distribution Decision and as part of that scheme.

383 As such, the purposes for the sale of the Docklands Property, Unit 10 and Lot 201 were the same as the purposes for the sale of the Sydenham Property and Lot 202. For the same reasons as identified by the Court in First Tranche Reasons[191], each of Frank, Lynn, Pooi and Ian breached their fiduciary and statutory duties to Ying Mui by arranging, authorising and facilitating the sale of the Docklands Property, Unit 10 and Lot 201. As the Court held in First Tranche Reasons in respect of the Sydenham Property and Lot 202, the sale of Docklands Property, Unit 10 and Lot 201 was 'part of the broader property asset sales programme initiated by Frank for his personal purposes'.[192]

384 The evidence of Frank was that he sold the properties held by the Ying Mui Trust, including the Docklands Property, Unit 10 and Lot 201 comprising the Remaining Properties, for three reasons, namely:

(a) He wanted to generate cash to be distributed to Lokit to be used in defence of anticipated litigation - 'I need the money for the fighting fund';

(b) He wanted to generate cash to be paid as a 'management fee' to Lokit - 'I wanted to get my management fee and my fighting fund. So I said don't sit on it, move on it, because they are coming'; and

(c) He wanted to 'get rid of my personal, my family's commitment to the bank', by reducing his exposure and that of Pooi under personal guarantees. However, as the Court held in First Tranche Reasons, 'there was a strong cash flow available to comfortably service the debt'[193] and 'Frank's immediate concern was in relation to legal action that George might take in the course of the dispute'.[194]

385 In other words, Frank, with the assistance of Pooi, Lynn and Ian, sold the Docklands Property, Unit 10 and Lot 201 to implement the Asset Sale and Distribution Decision, in breach of fiduciary duty. This was conduct motivated entirely by self-interest. Indeed, Frank admitted as much: 'You chose didn't you to advantage your company, Lokit and yourself personally at the expense of Ying Mui, didn't you?---As you have said in the last sentences, yes'.[195] In this respect, the Court has determined that 'the driving motivation' was 'Frank's personal interest' and he exercised his powers as a director 'for the improper purpose of obtaining substantial and direct personal benefits'.[196]

386 Each of Pooi, Lynn and Ian were well aware of, and complicit in, this course of conduct, and acted in concert with Frank to sell off the assets of the Ying Mui Trust for their own personal benefit. The relevant evidence is set out, in part, in Ying Mui written submissions[197] and in the First Tranche Reasons.[198]

387 Pooi confirmed in cross-examination that she knew that 'those sales would be needed in order for Frank to pay himself monies out of the Ying Mui Trust'[199] and further that 'one purpose in selling those properties was to create a fighting fund' which was to be 'a pool of money used to fund your defence of anticipated litigation'.[200] She also gave evidence that 'I wanted to sell of as much as possible to discharge the guarantees that Frank and I had personally given'.[201] Her evidence in respect of the sale of the Docklands Property was:[202]

Your motivation in selling it was to ensure that your personal guarantee would not be called upon, do you agree?---Yes.

To ensure there was a fighting fund?---Yes.

To ensure that Frank was paid management fees?---Yes.

388 Lynn confirmed that she knew that Frank, following his dispute with George, wanted to 'put all the properties on the market'.[203] She gave evidence that 'the distributable income was largely attributable to capital gains realised from the sale of properties'[204] and that the distributable income paid to Lokit formed part of the fighting fund.[205] Lynn also asserted that she wanted to sell the assets of the Ying Mui Trust because she was 'concerned about the level of debt that [her] parents were exposed to'.[206]

389 Ian confirmed that it was his understanding that Frank 'wanted to sell these properties because he wanted to create a fighting fund' and that part of the proceeds of the sale of the properties have been used to pay legal fees in this proceeding.[207] Ian also confirmed that he did not 'give any independent consideration in relation to any of these property sales as to whether it would be in the best interest of Ying Mui'.[208]

390 Further, there was no commercial reason which required the sale of any of these properties.

391 Ying Mui had owned the Docklands Property since 2000[209] and it was tenanted.[210] Frank had previously consulted George in respect of the potential sale of the Docklands Property and decided not to sell.[211] However, within three months of the dispute erupting between Frank and George, it was sold without notice to George.[212] Frank confirmed in cross-examination that, if the Docklands Property had not been sold, Ying Mui would not have had the cash available to make the Third Lokit Payment[213] and that this sale (along with the sale of Unit 10) generated the distributable profit for the Ying Mui Trust for the year ending 30 June 2011.[214]

392 Ying Mui had owned Unit 10 (post-development of the Hampton Street Property) since 2004/05.[215] It had been a secure investment because the tenant of Unit 10 had previously 'signed a very long' lease, as he had 'a special permit' to use it as an office.[216] Frank had previously raised with George whether Ying Mui should lease Unit 10 with an option to purchase,[217] but they decided not to sell. However, within seven months of the dispute between Frank and George, it was sold without notice to George.[218] As with the Docklands Property, had Unit 10 not been sold, Ying Mui would not have had the cash available to make the Third Lokit Payment[219] and this sale (along with the sale of the Docklands Property) generated the distributable profit for the Ying Mui Trust for the year ending 30 June 2011.[220]

393 Ying Mui had owned Lot 201 (post-development of the Hampton Street Property) since 2004/05 and it was tenanted (by Australia Post).[221] Prior to the dispute between Frank and George in 2010, Ying Mui had never sold any incoming producing commercial property.[222] This was because the agreed business model of Ying Mui[223] involved the long term acquisition and holding of commercial properties, to produce an income stream.[224] Further, at the time Ying Mui sold Lot 201 in 2011, Australia Post had only recently extended the term of its lease until 2018 - the evidence of Lynn was that 'I think they were at the beginning of the term at the time of the sale'.[225] As with all other property sales, the sale of Lot 201 was concealed from George and Han, because Frank was concerned that 'If I told them they would stop me straight away'.[226]

394 As a result, it is clear that each of Frank, Pooi, Lynn and Ian acted with a conflict of interest, as directors and/or shareholders of Lokit,[227] the intended (and actual) recipient of the 'management fees' and 'fighting fund' to be paid out from the proceeds of sale of the Docklands Property, Unit 10 and Lot 201. So much is well illustrated by the fact that the funds paid out to Lokit have been used by Frank, Pooi, Lynn and Ian to pay legal fees in this proceeding.[228]

395 None of Frank, Pooi, Lynn or Ian ever 'considered the separate interests of the company'[229] or 'the legitimate interest of the beneficiaries' of the Ying Mui Trust[230] when selling the Docklands Property, Unit 10 or Lot 201. It was not in the best interests of Ying Mui, or the beneficiaries of the Ying Mui Trust as a whole, for Ying Mui to dispose of valuable real estate assets to facilitate payments to Frank and his side of the family, to the exclusion of all others. This was a case where Frank, with the assistance of Pooi, Lynn and Ian, acted as if the assets of the trust fund were 'his to do with as he pleased'.[231]

If so, should any of them be relieved from liability pursuant to s 1318 Corporations Act?

396 The First to Fifth Defendants contended that, if there is a finding of breach by any director, the Court ought to exercise its power under s 1318 of the Corporations Act to relieve Frank, Pooi, Lynn and Ian of liability for any breaches of duty in relation to the sale of the properties because the evidence establishes that they acted honestly in relation to each sale and they ought fairly to be excused for any contravention.

397 I do not accept the contentions of the First to Fifth Defendants in this regard. Frank, Pooi, Lynn and Ian conspired to sell off the assets of the Ying Mui Trust for their own benefit. They concealed this conduct from George, Han and Maureen. There is no basis for them to be relieved from liability pursuant to s 1318 of the Corporations Act.

Did Ying Mui and/or Frosthollow act in breach of trust by making the 2011, 2012, 2013 & 2014 Distribution Payments? If so, did Frank, Lynn or Ian knowingly assist those breaches of trust?

398 These claims concern distributions made by Ying Mui and Frosthollow in the years 2011 to 2014. The relevant trusts are family discretionary trusts.

399 The Plaintiffs allege that the distributions made by Ying Mui and Frosthollow in the years 2011 to 2014 were made in breach of trust because they were made to give effect to the alleged Asset Sale and Distribution Decision, without any real or genuine consideration to the exercise of discretion and motivated by bad faith.

Did Ying Mui and/or Frosthollow act in breach of trust by making the 2011, 2012, 2013 & 2014 Distribution Payments?

400 In Hartigan Nominees v Rydge,[232] Mahoney JA explained: [233]

A trustee must exercise its discretion within the limits of what the law allows. In the case of a discretion, particularly an 'absolute' or 'uncontrolled' discretion, these limits are wide.

401 Courts are not inclined to interfere in the exercise of a trustee's powers, particularly in the case of an absolute and unfettered power.[234]

402 In particular, a court will not examine or review the exercise of a discretion in broad and unfettered terms if the discretion is exercised by the trustee in good faith, upon real and genuine consideration, and in accordance with the purposes for which the discretion is conferred and not for some ulterior purpose.[235]

403 Further, a court will not generally interfere with the exercise of a power or discretion simply on the ground that the trustee might have reached a different or better conclusion[236] or that the trustee was wrong in the appreciation of the facts or made an unwise exercise of discretion.[237]

404 However, the law expects a high standard on the part of a trustee. As observed by the learned authors of Ford and Lee: Principles of the Law of Trusts: [238]

Trustees giving a genuine, that is an active and informed consideration to the exercise of a discretion must decide what to do in accordance with the high standard of conduct the law expects of trustees ... Honesty, good faith, integrity and fairness are standards frequently alluded to by the courts.

405 By way of summary, trustees are required to exercise their powers in compliance with the following minimum general duties, namely in exercising their powers, trustees are required to: act in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between different classes of beneficiaries;[239] and in so doing, act:

(b) Upon a genuine consideration of the issues;[241] and

(c) In accordance with the purposes for which the discretion is conferred and not for some ulterior purpose.[242]

406 Possessing the power to do something enables a power to be exercised by a trustee. Nevertheless, the existence of the power, however broad, does not of itself legitimise the exercise of that power, if it be exercised improperly.

407 Thus, where a trustee exercises a discretion, it may be impugned on a number of different bases, such as that it was exercised in bad faith, arbitrarily, capriciously, wantonly, irresponsibly, mischievously or irrelevantly to any sensible expectation of the settlor, or without giving a real or genuine consideration to the exercise of the discretion.[243]

408 In the exercise of a discretion in accordance with these principles, it has been held that trustees must:[244]

(b) direct themselves correctly in law and adopt a correct construction of the trust deed; and

(c) not arrive at a perverse decision, that is, one at which no reasonable trustee could arrive, taking into account all relevant, and no irrelevant, factors.

409 As to the consequences of breach on the part of a trustee, even where the trustee does not apprehend the nature of the duty or understand the relevant discretion, the purported exercise of power in breach of trust is invalid[245] on the basis that trustees in this position could not be said to have applied their minds to the exercise of their discretion and are therefore in breach oftrustees' duty.

410 Accordingly, there are cases where the court will act to protect beneficiaries. For example, in Sinclair v Moss,[246] Byrne J held that '[t]he Court will interfere where a clear case is made out that the discretion [was] not exercised upon a real and genuine consideration of the matter entrusted to the trustees' discretion'.[247]

411 By way of summary, the Plaintiffs contended that the relevant distributions were made to give effect to the Asset Sale and Distribution Decision. It was further submitted that the distributions were made in breach of trust by reason of inter alia that fact that they were:

(a) made to give effect to the Asset Sale and distribution decision, without any real or genuine consideration as to the exercise of the discretion;

(b) motivated by a bad faith, arbitrary, capricious, wanton, irresponsible and mischievous desire by Frank, with the knowledge, assistance and approval of Lynn, to give effect to the Asset Sale and Distribution Decision, by transferring what were formerly Ying Mui's assets:

(i) to entities controlled by Frank or his immediate family or at their direction; and

(ii) in any event, to the exclusion of George, Han and Maureen; and

(c) made for a purpose beyond that for which the discretion of appointment was bestowed on Frosthollow, namely, to give effect to the Asset Sale and Distribution Decision.

412 Clauses 4, 7 and 8.30 of the Trust Deeds conferred on the trustees of the Ying Mui Trust and the Amore Trust broad discretionary powers with respect to the determination and application of income, how the trust funds were to be dealt with, and the allocation of income to beneficiaries.[248] Those powers were required to be exercised in accordance with the principles set out above.

413 It was contended by the Plaintiffs that, in the present case, these powers were not exercised according to law in the following respects.

414 First, reliance was placed on the evidence adduced at trial which, it was contended, evidenced that the 2011-2014 Distributions were made in bad faith, for the capricious, mischievous and ulterior purpose of implementing the Asset Sale and Distribution Decision, namely, to transfer the assets of the Ying Mui Trust and the Amore Trust for the benefit of Frank and his immediate family, and to the exclusion of George, Han, and Maureen, and that this was done, amongst other things, to fund the defence of anticipated proceedings, including this proceeding, by Frank, Pooi, Lynn and Ian.

415 In support, the Plaintiffs pointed to the evidence of Frank where he said in his cross-examination: 'I took it as fighting fund, I think from memory the figure was about 2.7 or so, 2.6, 2.7 million'.[249] Further, the evidence of Frank in re-examination was that:[250]

In response to his questions, you said that distribution was made because you needed a fighting fund. Would you please tell His Honour why you thought you needed a fighting fund during the financial year ended 30 June 2011?---Your Honour, because I knew that if they took control of the company, they would take legal action against me.

What action did you anticipate would be taken against you, or might be taken against you?---They would take control of the trust and all the properties, that's - I thought they would do that.

And what did you anticipate the fighting fund might be used for?---Pay legal fees.

Yes. You gave evidence in answer to a question from our learned friend this morning that $2m had been spent thus far and it didn't allow for the three weeks of this court hearing. Do you recall giving that evidence?---Yes. It's very expensive.

What exactly has that $2m been spent on?---What was spent, is it?

Sorry?---What - - -

What exactly has that $2m been spent on? Is it just this case?---Yes, yes.

416 To similar effect was the cross-examination of Ian, which evidences that he voted in favour of the resolution authorising the 2011 Distribution Payments in order to create a legal fighting fund:[251]

And also you knew at the time of passing this resolution and authorising this distribution that Frank wanted to create a fighting fund?---Yes.

In other words, he wanted to distribute cash to Lokit to be used in defence of anticipated litigation?---Yes.

And you were content to authorise a distribution on that basis?---Yes.

And you knew that the effect of this distribution was directly to benefit Lokit, a company of which you're a director? ---Yes.

Did you give any consideration in authorising this distribution as to whether it would be in the best interests of all present and future beneficiaries of the Ying Mui Trust?---No.

417 Lynn also gave evidence relied upon by the Plaintiffs that 'the distributable income was largely attributable to capital gains realised from the sale of properties'[252] and that her justification for this distribution was: 'I think we're calling it a legal fighting fund was required to protect the family's assets, um, for the benefit of the family'.[253]

418 The Plaintiffs submitted that the discretions bestowed on the trustees of the Ying Mui Trust and the Amore Trust by the Trust Deeds could not be validly exercised so that they could make substantial cash distributions to the directors of those trustees to enable them to then deploy the cash for their own personal benefit to defend proceedings which ultimately sought to hold them to account for acting in breach of fiduciary duty. Such conduct was in breach of the duty of the trustees _'_to exercise their powers in the best interests of the present and future beneficiaries of the trust'.[254]

419 The Plaintiffs placed reliance on the approach taken in Application of Uncle's Joint Pty Ltd ACN 148 176 792 & Anor[255] in the context of an analogous family dispute concerning trust assets, where it was found in relation to the defendants to the proceeding that:[256]

The plaintiffs, who dispute the validity of the appointment, must rely on their own resources to fund the litigation, subject to the possibility of receiving a costs order, if successful, in due course. I see no justice or fairness in permitting their opponents to have recourse to the trust assets to fund the litigation, while the plaintiffs do not (...)

[I]n the context of a family dispute, where the trustees ought to be neutral, and those with a real interest in defending the appointment of the applicants are the appointors who appointed them and/or those of the beneficiaries who wish them to retain office, it would be unjust to permit the applicants to have recourse to the trust fund for the purposes of funding their defence before the conclusion of the proceedings.

420 Secondly, insofar as the 2011 Distribution Payments were concerned, the Plaintiffs pointed to evidence which they said established that the motivation for the resolution of 29 June 2011 which determined that 100 percent of the net income for Ying Mui Trust be distributed to Lokit and this was to retrospectively authorise the First, Second and Third Lokit Payments.

421 The written evidence of Frank relied upon was:[257]

I discussed this with Lynn, who raised some concerns with the way the sums had been paid, including with the fact that there was no documented management agreement, GST had not been paid and the payments were not recorded properly for BAS purposes. She said it needed to be fixed up.

Lynn decided that the funds already paid out would be treated as interim distributions rather than management fees and that the management fee would need to be paid pursuant to formal management fee agreements. On 29 June 2011, I attended a board meeting of Ying Mui, with Lynn and Ian. We resolved to distribute 100 percent of the net income of the Ying Mui Trust for the year ended 30 June 2011 to Lokit, including the payments referred to in paragraph 200 above.

422 As submitted by the Plaintiffs, Frank confirmed this in his oral evidence:[258]

So you would agree, wouldn't you, that by passing this resolution the trust distributed $1.433m to your family trust?---Yes, Your Honour.

And the motivation for doing so was to overcome the problem that payments had been made earlier for management fees, in circumstances where there was no management fee agreement in place and no invoice had been levied?---Yes. There was no management fee agreement in place. But the minutes said that I could take a management fee.

423 The Plaintiffs submitted that the following evidence of Lynn was to similar effect:[259]

... I told Frank the payment of the management fees, without any previous record of the fees being due, any written agreement that the fees should be paid or an invoice being issue, was a problem ...

Prior to 30 June 2011 I consulted Aston Ryan Malcolm about how to characterise the earlier payments. Because of the matters described above, David Coutts at Aston Ryan Malcolm and I came to the conclusion that the earlier payments could not be treated, after the fact, as payments of management fees. Rather, I formed the view that they should be treated as interim distributions to Lokit. Further, any subsequent payment, such as the $150,000 payment made on 28 June 2011, should be treated as an interim distribution, as well.

On 29 June 2011 I attend[ed] a broad meeting of Ying Mui. Frank and Ian also attended. We together resolved to distribute 100 percent of the net income of the Ying Mui Trust for the year ended 30 June 2011 to Lokit (including the payments referred to above).

424 The First to Fifth Defendants pointed to the fact that copies of the YM Trust Deed were distributed to all relevant parties in April 2003. George, Robert and Maureen knew and accepted the broad unfettered discretion conferred on Ying Mui in exercising its discretionary powers. The Court has concluded in the First Tranche Reasons that the three brothers were content to have their commercial relationship governed by the trust deeds.

425 The First to Fifth Defendants referred to the relevant provisions of the Ying Mui Trust Deed as including the following:

(a) Powers to distribute income (cl 4.3, cl 4.4.5) and capital (cl 7) to beneficiaries. Any determination to distribute income or capital is at the Trustee's 'absolute discretion' (cls 4.4.5, 7) and the Trustee 'shall not be required to assign any reason' for such determination (cl 4.4.5);

(b) Clause 8.21 gives the trustee the power to 'take such action as the Trustee shall think fit for the adequate protection of any part or parts of the Trust Fund';

(c) Clause 8.32 provides that the trustee may exercise any power or discretion 'notwithstanding that the Trustee may have a direct or other personal interest in the mode or result of exercising any such power or discretion';

(d) Clause 11 provides that 'every discretion vested in the Trusteeand every power vested in the Trustee shall be exercisable in the Trustee's absolute and uncontrolled discretion without any obligation to consider competing claims of beneficiaries'; and

(e) Clause 21 provides that the Trustee is not bound to disclose written deliberations of the Trustee as to how or why it has exercised any powers or discretions.

426 The Amore Trust Trust Deed was in similar form with similar powers conferred on the Trustee. It was submitted that the breadth of the powers of the trustee should inform the Court's assessments of the powers that were in fact exercised.

427 The First to Fifth Defendants conceded in relation to the 2011 distribution that it was made to Frank as a beneficiary to establish a 'fighting fund' in connection with anticipated litigation. However it was submitted that this was a bona fide exercise of the trustee's discretion and was made for a proper purpose. On this basis, it was submitted that Frank's facilitation of this distribution was not made in breach of any fiduciary or statutory duty.

428 It was put that Frank exercised a discretionary power to make a distribution to Lokit for the purposes of defending apprehended litigation from George and his allies who, it was anticipated, would soon assume control over the relevant trusts. It was submitted that the distribution to Lokit involved an assessment of Lokit's position and the need for a 'fighting fund'. This involved a real and genuine consideration of exercise of the discretion. Given the unfettered nature of the discretion, this was not irrational, fraudulent or for an ulterior purpose.

429 It was also submitted that the decision to distribute to SYM was on the basis of a good faith assessment undertaken at that time to enable SYM to, in turn, pay out dividends to its shareholders.

430 The First to Fifth Defendants submitted that the evidence demonstrated that each of the distributions involved an honest and good faith assessment by the trustee of the situation facing each of the beneficiaries of the trust and were not motivated by any improper desire to give effect to the alleged Asset Sale and Distribution Decision. For these reasons, it was contended that there was no relevant breach of trust in making the distributions.

Submissions of the Seventh Defendant (Frosthollow)

431 Frosthollow contended that Frank's evidence was that he had no involvement in Frosthollow's decision to make the distribution payments and he was not challenged on that evidence. Lynn gave like evidence.

432 Further, it was put that Lynn's evidence was that in each of the years, she considered whether and to whom distributions should be made over the course of the financial year and that she made the final decision just prior to 30 June.

433 It was submitted that she considered whether the Trust had distributable income and whether it ought be distributed or accumulated. She considered that the Trust was established to give effect to her grandfather's legacy, that is, to provide for current and future members of the Hoh family, particularly when they were or were expected to be in financial need or difficulty and to assist with higher education and to further her grandfather's charitable ways, including gifts to beneficiaries for occasions or significant events. She considered who the beneficiaries were, whether they were or were expected to be in need of financial support, whether they had experienced a significant event, whether a distribution should be made to charity, what her grandfather would have done, whether the Trust had cash available to meet a distribution and whether a party would demand immediate payment.

434 It was further submitted that she explained that distributions were made to Lokit because she considered that, consistent with her grandfather's legacy, the assets of the Ying Mui Trust and the Amore Trust needed protection and that funds needed to be made available to defend against anyone seeking control of the assets having no regard to carrying out the benevolent purpose. She considered that George and Han would be likely to issue legal proceedings against her and her immediate family to gain control of the Ying Mui Trust and the Amore Trust, which they would use for their own benefit rather than the benevolent purpose. She formed the view that a fighting fund should be held separately by Lokit under her immediate family's control.

435 Evidence was pointed to which demonstrated that none of the other beneficiaries were in financial need or needed their incomes supplemented. She also gave detailed evidence of the considerations she gave before distributing the 2014 income to SYM.

436 Accordingly, it was submitted that it has not been established, and indeed there is no evidence to support the proposition, that the distributions by Frosthollow to beneficiaries in 2012, 2013 and 2014 were made to give effect to the Asset Sale and Distribution decision and ought not be considered or treated as such.

437 Frosthollow acknowledged that, in the First Tranche Reasons, the Court has made the following findings:

(a) The proposal contained in Lynn's letter to Han dated 31 July 2010 was made by Lynn on behalf of her father as agent and given that George and Han did not accept that proposal, the informed consent of Ying Mui in respect of it was not forthcoming;[260]

(b) Following the sending of the letter of 31 July 2010, Frank determined to sell off as much as possible of the assets held by the Ying Mui trust;[261]

(c) Frank wanted to put all the Ying Mui properties on the market to reduce he and Pooi's exposure under personal guarantees, to create a fighting fund to be used in defence of anticipated litigation and to obtain a management fee from Ying Mui[262]

(d) Asset sales, distributions and payments in 2011 were concealed from George, Han and Maureen at the time of the transactions being taken;[263]

(e) All of the 2012, 2013 and 2014 distribution payments were funded by capital gains realised from the asset sales authorised by Frank, Pooi, Lynn and Ian;[264]

(f) The sale of the two properties to Lumarkye were part of the broader property asset sales program initiated by Frank for his personal purposes;[265]

(g) The Court was satisfied that Frank exercised his powers as a director for the improper purpose of obtaining substantial and direct personal benefits and he did not give any consideration to what was in the interests of Ying Mui or the beneficiaries of the trust of which it was trustee.[266]

438 Nevertheless, Frosthollow submits that the Court ought not be satisfied that the distributions by Frosthollow to beneficiaries in 2012, 2013 and 2014 comprised a breach of trust.

439 Frosthollow points to the Plaintiffs alleging that the distributions by Frosthollow in 2012, 2013 and 2014 were made in breach of trust on three bases: first, that they were made without any real of genuine consideration, secondly, that they were motivated by a bad faith, arbitrary, capricious, wanton, irresponsible and mischievous desire to give effect to the Asset Sale and Distribution Decision, and thirdly, that they were made for a purpose beyond that for which the discretion of appointment was bestowed.

440 As to the 'no real or genuine consideration' ground, Frosthollow says that these matters do not show that the distributions were made without any real or genuine consideration. It points to Clause 11 of the Ying Mui Trust Deed which provides as follows:

11. TRUSTEE'S DECISIONS ABSOLUTE

Subject always to any express provision to the contrary herein contained every discretion vested in the Trustee shall be absolute and uncontrolled and every power vested in the Trustee shall be exercisable in the Trustee's absolute and uncontrolled discretion without any obligation to consider competing claims of beneficiaries.

441 Accordingly, Frosthollow submitted that the Plaintiffs cannot establish that there was no real or genuine consideration.

442 Further, Frosthollow says that it was not obliged to consider whether the Distribution Payments were in the best interests of beneficiaries or fair or impartial. Reliance was placed on authority where it has been held that it was meaningless to speak of a duty to act impartially and a duty to act in the best interests of beneficiaries in the context of a discretionary power to choose which beneficiaries or which classes of beneficiaries should be the recipients of trust benefits. Because trustees are entitled to exclude some beneficiaries and prefer others, they are entitled to be partial.

443 As to bad faith, it was submitted that this element can be established in one of two ways. First, that the discretion was exercised dishonestly. Secondly, that the discretion was exercised for a purpose inconsistent with the purpose for which the discretion was conferred. The plaintiffs allege that the distributions were made to transfer the assets of the Ying Mui Trust and the Amore Trust to the benefit of Frank and his immediate family and to the exclusion of George, Han and Maureen, and so as to fund the defence of this proceeding.

444 Frosthollow contends that where, as is submitted to be the case here, the trust is a discretionary trust and, the discretion vested in the trustee is absolute and uncontrolled, and where there is no obligation to consider competing claims of beneficiaries, the plaintiffs cannot establish that the distributions made by Frosthollow were for a purpose inconsistent with that for which the discretion was conferred.

445 In relation to the 'improper purpose' allegation, Frosthollow points to Clause 5 of the trust deed as constituting an exceptionally broad provision. It was submitted that a discretion will have been exercised for an improper purpose if it was exercised for a purpose which is inconsistent with the purpose for which the discretion was conferred, for example it is exercised to benefit an object who falls outside of the trust instrument.

446 Again, Frosthollow contends that, given the fact that the trust is a discretionary trust where the discretion is absolute and uncontrolled and there is no obligation to consider the competing claims of beneficiaries, and where the clause dealing with the purpose of the trust is as broad as clause 5 of the trust deed, it is contended that the plaintiffs cannot establish that the exercise of the discretion was for an improper purpose and therefore a breach of trust.

447 For these reasons, Frosthollow submits that no breach of trust as a result of the Distributions in 2012, 2013 and 2014 has been established, notwithstanding the Court's findings in the First Tranche Reasons.

448 For the reasons which follow, I find that Frank, Lynn and Ian procured Ying Mui to make the 2011 Distribution Payments in breach of trust and that Lynn procured Frosthollow to make the 2012-2014 Distribution Payments in breach of trust.

449 Possessing the power to do something enables a power to be exercised by a trustee. Nevertheless, the existence of the power, however broad, does not of itself legitimise the exercise of that power, if it be exercised improperly.

450 Lynn sought to deny, in her oral evidence at trial, any link between the First, Second and Third Lokit Payments and the resolution which she passed, together with Frank and Ian, on 29 June 2011, authorising the 2011 Distribution Payments. Her oral evidence at trial was that:[267]

At the time we made a decision, that is my brother, my father and I made a decision to make a distribution to Lokit, we did not take into consideration any money that had been paid to it. It actually just didn't enter our minds at that time, Your Honour ...

As I said, at the time I made a decision to distribute the distributable income from the Ying Mui Trust, I did not take into account the 550,000 payment that had already been made to Lokit.

451 I do not accept this evidence as a truthful account. It was contradicted by Lynn's written evidence, and by Frank's written evidence and by Frank's oral evidence. I find that, in passing the resolution, the object was to legitimise, after the fact, the First, Second and Third Lokit Payments. This was the primary reason why Frank, Lynn and Ian voted in favour of the resolution dated 29 June 2011.

452 I further reject the evidence given by Lynn as to the reasons why she passed the resolutions authorising the 2012, 2013 and 2014 Distribution Payments. Lynn gave evidence that, when making the 2012, 2013 and 2014 Distribution Payments, she considered matters which included the following:[268]

I considered the [Ying Mui Trust] was established to give effect to my grandfather's legacy, that is, the [Ying Mui Trust] was set up to provide for current and future members of the Hoh family particularly when they are in or excepted to be in financial need or difficult and to assist with higher education and to further my grandfather's charitable ways, including gifting to a beneficiary of the [Ying Mui Trust] for a certain occasion, significant event or any other specific reason ... at [122(d)].

I considered that, consistent with my grandfather's legacy, the assets of the [Ying Mui Trust] and [the Amore Trust] needed protection and funds needed to be made available to defend against anyone seeking control of the assets having no regard to carrying out the benevolent purpose. I considered that George and Han would be likely to issue legal proceedings against me and my immediate family members to gain control of the [Ying Mui Trust] and the [Amore Trust], which they would use for their own benefit rather than for the benevolent purpose. I formed the view that the fighting fund should be held separately by Lokit under my immediate family's control. This was another consideration that I took into account when making the distributions to Lokit at [124].

A distribution did not need to be made to the other beneficiaries of the [Ying Mui Trust] as they were not in financial need or difficulty and did not require funds to supplement their income or assist with higher education. [at 125].

453 This evidence of Lynn cannot be reconciled with the finding of the Court in First Tranche Reasons that:[269]

To the extent that witnesses called on behalf of the Frank Faction made reference to the Benevolent Purpose continuing as a purpose governing the investments made in Australia, I find this evidence to be a self-serving personal interpretation of the facts.

454 It is not open to find that the 2012, 2013 and 2014 Distribution Payments were undertaken having regard to the 'benevolent purpose', because the Court has found that no such 'benevolent purpose' ever governed the investments made in Australia. As the Court found in First Tranche Reasons:[270]the purpose of acquiring the investments in Australia - whether made through Ying Mui, Amore or Olrey - was to benefit Frank, Robert and George (and their immediate families), rather than the extended Hoh family encompassing Richard and Derek or SYM...'. The Court further rejected the proposition that the so called 'benevolent purpose' was an intended and effective motivating purpose governing the investments in Australia,[271] and likewise rejected the contention that the Australian assets were held on a resulting and/or constructive trust for SYM.[272]

455 Even if the Court was minded to accept Lynn's evidence as to her personal motivation being one to further and protect the 'benevolent purpose', it is clear that Lynn misapprehended the trust duties reposed in her. The relevant trust deeds made no reference to the alleged 'benevolent purpose' as an object of the trusts. It follows that the exercise of the discretion, purportedly for a non-existent 'benevolent purpose', was not effected for a 'proper purpose' and hence miscarried.

456 This finding is supported by the following oral evidence provided by Ian, where he said that, beyond Frank and George and their immediate families, Han and his immediate family and Maureen, it was his belief that the benefits of the Ying Mui Trust did not extend to the broader Hoh family. In this regard he said in his examination:[273]

[Y]ou believed that the Ying Mui Trust was for the benefit of your father Frank and his immediately family?---Yes.

George and his immediate family?---Yes.

Han and his immediate family?---Yes.

And Maureen?---Yes.

But not other members of the extended Hoh family?---No.

And did you also discuss the Ying Mui trust with Lynne?---Yes.

And is the understanding you've just articulated also an understanding based on conversations you had with Lynn?---Yes ...

457 I am driven to reject the evidence given by Lynn as to the considerations she took into account in making the 2012-2014 Distribution Payments.

458 I find that in making the 2012-2014 Distribution Payments, Lynn did not give any genuine consideration to how the discretion of appointment ought to have been exercised or whether the 2012-2014 Distribution Payments were in the best interests of the present and future beneficiaries of the Ying Mui Trust and the Amore Trust.

459 Further, I find that the relevant decisions were made by her in bad faith in a dishonest fashion.

460 All of the 2012, 2013 and 2014 distribution payments were funded by capital gains realised from the asset sales authorised by Frank, Pooi, Lynn and Ian, and all were concealed from George, Han and Maureen at the time the distribution payments were made.

461 Indeed, it is apparent that Lynn recognised that wrongful nature of the distributions when she said, during her cross-examination: 'we had every intention if we were not sued to gift that money back to the family'. In relation to the expressed intention to make a repayment, I treat this evidence with scepticism. It was not documented in any fashion.

462 I also find that the distributions in question were undertaken for an improper purpose, namely, Lynn in exercising her power as sole director of the corporate trustee, Frosthollow, for the collateral purpose of appropriating to Lokit substantial cash reserves to be used in anticipated litigation against George and Han, both of whom were specified beneficiaries of the Ying Mui Trust and the Amore Trust, and distributing cash to SYM after George and Han had lost control of that company. This conduct places the distributions in an entirely different context to a regular distribution to trust beneficiaries.

463 Further, as to the 2014 Distribution Payments to SYM, I do not accept that these payments were made to SYM on the grounds identified by Lynn in her written evidence. I do not accept that at the relevant time SYM was 'in financial need or difficulty', or 'in need of funds', or 'had experienced a significant event that would have been celebrated', or that SYM was 'a charity'.

464 For these reasons, I find that Frank, Lynn and Ian procured Ying Mui to make the 2011 Distribution Payments in breach of trust and that Lynn procured Frosthollow to make the 2012-2014 Distribution Payments in breach of trust.

Did Frank, Lynn or Ian knowingly assist those breaches of trust?

465 The First to Fifth Defendants did not address on the question as to whether Frank, Lynn or Ian knowingly assisted in the claimed breaches of trust.

466 The Plaintiffs contended that, if the Court determines that the 2011-2014 Distribution Payments were made in breach of trust, it must follow from the evidence that Frank, Lynn and Ian procured and/or knowingly assisted those breaches of trust.

467 By way of conclusion, the following findings are made on the issue.

468 In the case of the 2011 Distribution by Ying Mui, the relevant resolution authorising the distribution of the entirety of the profit for that financial year to Lokit was passed by Ying Mui's then directors, Frank, Lynn and Ian.

469 In the case of the 2012-2014 Distributions, the relevant resolutions were passed by Frosthollow's sole director, Lynn.

470 Frank, Lynn and Ian were the individuals who caused Ying Mui and Frosthollow to make the relevant distributions in 2011 (and Lynn in the case of 2012 to 2014). They clearly had a 'practical involvement in the contravening conduct',[274] were well aware of 'the essential elements constituting the contravention',[275] and had actual knowledge that the 2011-2014 Distribution Payments were being made for the purpose of obtaining a 'fighting fund' to be used by one group of beneficiaries of the Ying Mui Trust and the Amore Trust (the Frank faction) against another group of beneficiaries (the George faction) in anticipated litigation concerning the administration and control of the Ying Mui Trust and the Amore Trust.

471 For these reasons, I find that Lynn procured that the trustee breach its duties as trustee with respect to each of the 2011-2014 Distributions.

472 I also find that Ian and Frank procured the breach by the trustee in relation to the 2011 Distributions.

473 It follows that Frank, Lynn and Ian knowingly procured Ying Mui to make the 2011 Distribution Payments in breach of trust and thereby knowingly assisted in this breach of trust.

474 It further follows that Lynn knowingly procured Frosthollow to make the 2012-2014 Distribution Payments in breach of trust and thereby knowingly assisted in these breaches of trust.

In receiving the 2011, 2012 and 2013 Distribution Payments, did Lokit knowingly receive trust property? If so, is Lokit:

(a) liable as a constructive trustee with respect to the 2011, 2012 & 2013 Distribution Payments; or

475 The Plaintiffs submitted that Lokit is liable for knowingly receiving each of the 2011, 2012 and 2013 Distribution Payments.

476 It was contended by the Plaintiffs that Lokit had actual (and to the extent necessary, constructive) knowledge of the fact that each of the 2011, 2012 and 2013 Distribution Payments were made in breach of trust.

477 The First to Fifth Defendants submitted that Lynn and Frosthollow's knowledge of each impugned distribution cannot be imputed to Lokit and Frank as its controlling mind.

478 It was contended that Lynn made independent decisions to make the distributions, and that the Plaintiffs are not able to establish that Lokit had the requisite knowledge of any breach of trust by Frosthollow.

479 In these circumstances, it was submitted that Lokit is not liable as constructive trustee or otherwise liable to pay compensation.

480 There is no dispute that Lokit received the 2011, and 2012 and 2013 Distribution Payments.

481 Each of the 2011 and 2012 and 2013 Distribution Payments was made in breach of trust, for the reasons set out above.

482 I find that Frank, Lynn and Ian did indeed procure and/or knowingly assist in these breaches of trust.

483 In the case of the 2011 Distribution by Ying Mui, the relevant resolution authorising the distribution of the entirety of the profit for that financial year to Lokit was passed by Ying Mui's then directors, Frank, Lynn and Ian.

484 In the case of the 2012 and 2013 Distributions, the relevant resolutions were passed by a resolution of Frosthollow's sole director, Lynn.

485 It follows that, whilst Lynn, Ian and Frank procured the breach by the trustee in relation to the 2011 Distributions, Lynn procured that the trustee breach its duties as trustee with respect to each of the 2012 and 2013 Distributions.

486 It further follows that these natural person parties had a 'practical involvement in the contravening conduct',[276] were well aware of 'the essential elements constituting the contravention',[277] and had actual knowledge that the 2011-2013 Distribution Payments were being made for the purpose of obtaining a 'fighting fund' to be used by one group of beneficiaries of the Ying Mui Trust and the Amore Trust (the Frank faction) against another group of beneficiaries (the George faction) in anticipated litigation concerning the administration and control of the Ying Mui Trust and the Amore Trust.

487 A finding is also made that Frank, Lynn and Ian not only had actual knowledge of the dishonest and fraudulent asset sale scheme, but they also wilfully shut their eyes to the dishonest nature of the asset sales process giving rise to 'knowledge of circumstances which would indicate the facts to an honest and reasonable man'.[278] They were well aware that the assets of the Ying Mui Trust and the AmoreTrust were being liquidated, and the sales proceeds distributed to Lokit, for the illegitimate purposes of establishing a 'fighting fund', and of the fact that this activity was being concealed from George, Han and Maureen.

488 It follows that in receiving the 2011, 2012 and 2013 Distribution Payments, Lokit knowingly received trust property.

(a) is liable as a constructive trustee with respect to the 2011, 2012 and 2013 Distribution Payments; and

Appointment of Frosthollow and Impugned Agreements

490 Questions 16 and 17 arise from the circumstances in which Frank exercised his powers as appointor under the Trust Deeds to remove Ying Mui and Amore, and appoint Frosthollow, as trustee of the Ying Mui Trust and the Amore Trust. These circumstances are described in the First Tranche Reasons.[279]

(a) Following the passing of resolutions authorising the sale of the Docklands Property, Unit 10, Lot 201, and the Sydenham Property; and

(b) Following the making of the First, Second, Third, and Fourth Lokit Payments; and

(c) Following the making of the Impugned Amore Payment; and

(d) Following the execution of the Impugned Ying Mui and Amore Agreements; and

(e) Following the passing by Frank, Lynn and Ian of a resolution that 100 percent of the net income for the Ying Mui Trust for the year ended 30 June 2011 be distributed to Lokit;

Frank, Lynn and Ian wrote a letter to George, Han and Maureen on 12 October 2011 (the '12 October 2011 Letter') in which they referred to the prospect of 'a long and difficult family dispute', and stated that 'it is our present intention to cause YM, in its capacity as trustee, to sell the Trust's assets, for distribution among the beneficiaries'. The letter concluded by stating that 'The purpose of this letter is to inform you, as a matter of courtesy, of the course YM now intends to take'.

492 The 12 October 2011 Letter was, as the Court held in First Tranche Reasons], 'patently false and misleading and, I find, deliberately so'.[280]

493 Upon receipt of the 12 October 2011 Letter, which concealed all of the earlier mentioned asset sales, distributions and payments which had in fact by that time already occurred, the following events took place:

(a) On 21 October 2011, Minter Ellison, on behalf of George, requested the directors of Ying Mui call a general meeting to consider resolutions that Lynn, Pooi and Ian be removed, and George, Han and Maureen appointed, as directors of Ying Mui. By separate letter, Minter Ellison also stated that George objected to 'your proposal to cause Ying Mui Pty Ltd, in its capacity as trustee of the Trust, to sell the Trust's assets';

(b) On 11 November 2011, Lynn sent a letter on behalf of Ying Mui providing notice of a general meeting to be held on 21 December 2011, to consider the resolutions proposed by George;

(c) Lynn by letter dated 17 November 2011 on behalf of Ying Mui, stated that it 'will take no immediate steps to sell the Trust's assets except where, in the opinion of the trustee, such a sale is reasonable in all the circumstances and in the best interests of the beneficiaries';

(d) However, on 18 November 2011, and prior to the Ying Mui special general meeting having been called by Lynn on 11 November 2011 for 21 December 2011, and without notice to George, Han and Maureen, Frank exercised his powers as appointor of the Ying Mui Trust to remove Ying Mui, and appoint Frosthollow, as trustee with immediate effect. The deeds were witnessed by Pooi and signed by Lynn in her capacity as the sole director of Frosthollow;

(e) Then, on 5 December 2011, Frank, Lynn and Ian voted in favour of a resolution that, having ceased to act as trustee, Ying Mui transfer the Glen Waverley and Wantirna South Properties to Frosthollow. On the same day, Frank and Ian executed transfers of land, pursuant to which Ying Mui transferred the Glen Waverley and Wantirna South Properties to Frosthollow. Lynn executed those transfers on behalf of Frosthollow;

(f) On 21 December 2011, the special general meeting of Ying Mui took place. Pooi and Lynn were removed as directors of Ying Mui and George, Han and Maureen joined Frank as a director. Frank and Lynn did not disclose to George and Han at the meeting that the asset sales had already taken place and that Ying Mui was no longer the trustee of the Ying Mui Trust; and

(g) On 23 December 2011, having sold or transferred all of its real estate properties and paid off its bank debts, Ying Mui transferred $1,050,836.60 to Frosthollow.

(i) Frank exercised his powers as appointor of the Amore Trust to remove Amore, and appoint Frosthollow, as trustee of that trust. The deeds were witnessed by Pooi and signed by Lynn in her capacity as a director of Frosthollow;[281]

(ii) Frank, Lynn and Pooi voted in favour of a resolution that, having ceased to act as trustee, Amore transfer the Knox Properties to Frosthollow;[282] and

(iii) Frank and Pooi executed transfers of land, pursuant to which Amore transferred the Knox Properties to Frosthollow. Lynn executed those transfers on behalf of Frosthollow.[283]

495 Frank did not tell George, Maureen or Han that Amore had been removed as trustee of the Amore Trust. Unaware of that event, George's then solicitors Minter Ellison requested a meeting of shareholders of Amore to remove Ian, Pooi and Lynn as directors (but not Frank) by letter dated 7 March 2012.[284]

496 It was not until 15 March 2012, that Lynn advised that Amore had been removed as trustee on 8 December 2011.[285]

497 These events give rise to the following questions:

What duties did Frank owe as appointor of the Ying Mui and Amore Trusts and did he breach those duties by removing Ying Mui and Amore and appointing Frosthollow as trustee of those trusts?

If so, is the appointment of Frosthollow as trustee of the Ying Mui and Amore trusts invalid or liable to be set aside?

498 In Scaffidi v Montevento Holdings Pty Ltd,[286] Murphy JA and Hall J held that 'the power to appoint trustees may be construed as a "fiduciary power"'.[287] Their Honours cited with approval the analysis of Kay J in Re Skeats' Settlement[288] as to the exercise of the power of appointment:[289]

The universal rule is that a man should not be judge in his own case; that he should not decide that he is the best possible person, and say that he ought to be the trustee. Naturally no human being can be imagined who would not have some bias one way or the other as to his own personal fitness, and to appoint himself among other people, or excluding them to appoint himself, would certainly be an improper exercise of any power of selection of a fiduciary character such as this is. In my opinion it would be extremely improper for a person who has a power to appoint or select new trustees to appoint or select himself, for that principal reason.

499 In Re Burton, Wily v Burton,[290] Davies J said:[291]

... the power to remove a trustee and to appoint a new trustee is neither a general power of appointment nor a power which may be exercised in the interests of the appointor. The interests of persons other than the appointor must be taken into account. The power is a trust or fiduciary power, being a power conferred by a deed of trust, and must be exercised accordingly, in the interests of the beneficiaries.

... When the power is contained in a deed of trust, the donee of the power is even more constrained to act in the interests of the persons for whose benefit the power was conferred.

500 His Honour also cited with approval the observations of Kay J in Re Skeats' Settlement,[292] where his Lordship held that, as a power of appointing new trustees was a fiduciary power, the donee of the power may not exercise it so as to appoint himself.[293]

501 Further, even if the power of appointment is not a fiduciary power,[294] it is clear that the power of appointment 'must nevertheless be exercised bona fide for the purpose for which it was conferred'.[295] In particular, the discretion of appointment 'is to be exercised by reference to the objects and purposes of the trust, having regard to the competing interests of the various potential beneficiaries, and without taking into account improper, irrelevant or irrational considerations'.[296]

502 The First to Fifth Defendants, in their submissions made, reference to Mercanti v Mercanti,[297] a proceeding heard in the Court of Appeal of the Supreme Court of Western Australia concerning the proper construction of a family discretionary trust deed in relation to the exercise of a power to facilitate the appointment of a new or replacement trustee.

503 In that case, the Court of Appeal upheld findings at first instance that a done, in exercising his powers of appointment in appointing a corporate trustee over which he had control, did not act for an improper purpose because the purpose was to reinstate the management of the business and continue the status quo on management which had existed for over 10 years and not for personal purposes.[298]

504 In the appeal, Newnes and Murphy JJA observed:[299]

397 The object of the power under a provision such as cl 21 is to facilitate the appointment of a new or replacement trustee. A trustee is the archetype of the fiduciary and the office of trustee only exists for the benefit of the beneficiaries. A power of this kind conferred in a trust instrument has generally been construed as having been conferred by the settlor not for the purpose of advancing the personal interests of the appointor or otherwise for the personal enjoyment of the appointor, but rather for the due execution of the trusts for the benefit of the objects of the trust. See, eg, Re Burton; Pope v DRP Nominees Pty Ltd; McLeary v Swift; Berger v Lysteron Pty Ltd; Rayner v NJ Sheaffe Pty Ltd; Scaffidi; Harre v Clark. Underhill and Hayton, Law of Trusts and Trustees; Young, Croft & Smith "On Equity"; Food & Lee "Principles of the Law of Trusts". [Footnotes omitted]

398 Nevertheless, each instrument must be construed according to its own terms. In this case, although under the MMF Trust Deed (as varied), the Appointor may be eligible object of the trust, when the trust is read as a whole, the power under cl 21 is, objectively construed, conferred for the purposes of the due execution of the trusts of the MMF Trust for the benefit of its objects, rather than as a personal privilege, or for the personal benefit, of the Appointor. The following matters are particularly relevant: the prohibition in cl 21 on the Appointor appointing himself or herself as trustee whilst he or she is a beneficiary; the provisions providing for the circumstances in which the Appointor may be replaced; the proviso in cl 21 that where no Appointor exists, the power to remove and appoint new Trustees may be exercised instead by the Trustees (ie, fiduciary office holders); and the fact that the power under cl 21 is not expressed in unconditional and absolute terms. It is not necessary to enter into the debate as to whether the power to appoint a trustee held by a donee who does not hold a fiduciary office as such (eg, the donee does not hold the office of trustee) is a "fiduciary power", properly so-called. In this case, the judge, having, in substance, correctly understood the nature of the power, and applied it to the facts of the case, was not in error in not describing the power as a "fiduciary power".

505 It was submitted that Buss P went further, holding that not every power created by a trust deed is necessarily a fiduciary power and distinguished personal powers from fiduciary powers where, on a proper construction of the trust deed, the donee is entitled to exercise the power for his or her own benefit.[300]

506 I do not accept the submission advanced by the First to Fifth Defendants to the effect that Mercanti v Mercanti leaves uncertain the issue of whether donees of a power of appointment under a discretionary trust deed are under fiduciary duties when they are exercising a power of appointment, or materially qualifies or brings into question the observations of Kay J in Re Skeats' Settlement.

507 The First to Fifth Defendants contended that, under the terms of the relevant trust deeds in this proceeding:

(b) the classes of beneficiaries include both Specified Beneficiaries (being individuals and entities directly associated with George, Frank, Robert and Maureen) and the General Beneficiaries (which encompass the broader Hoh family);

(c) a broad and absolute discretion is conferred on the trustee in determining and applying income and dealing with trust funds (clauses 4 and 6);

(d) broad additional powers are conferred on the trustee including a power of appointment of a Trustee and notwithstanding any interest in a transaction (cl 8);

(g) the powers of appointment are similarly extensive (cl 16) and relevantly provide as follows:

16.1 The Appointor ... shall be entitled by instrument in writing at any time and from time to time:

16.1.1 To remove any Trustee hereof

16.1.2 To appoint any additional Trustee or Trustees

16.1.3 To appoint a new Trustee or Trustees in the place of any Trustee who resigns abandons the appointment or ceases to be a Trustee by operation of law

PROVIDED

16.1.4 If and so long as the Appointor is a General Beneficiary the Appointor shall not be eligible to be appointed as a Trustee

16.1.5 If there is no Appointor names in the Schedule or if at any time there is no one entitled to exercise the power of removal and appointment, the statutory and other rights of removing and appointing Trustees may be exercised by the Trustee ... and in the event that a Trustee shall be removed or cease to act by reason of any of the matters set out in Clause 16.3 [dealing with lunacy and unsound mind] the power to appoint a new Trustee shall be exercised by a majority vote of the Specified Beneficiaries and if there be a deadlock that cannot be resolved by mediation by the Settlor or the Legal Personal Representative of the Settlor as the case shall require.

508 It was then submitted that, having regard to the terms of the trust deeds and the current state of authority, the exercise by Frank of his powers of appointment were not fiduciary in nature. It is was said to be relevant that the powers of appointment in the trust deeds contemplated that Frank, as a specified beneficiary, could appoint himself as a trustee, because he was a specified beneficiary not a general beneficiary.

509 Further, it was said to be relevant that the Court found that the 'three brothers were content to have these structures [the trust structures] govern their relationship in law and in equity in relation to investments in property in Australia'.[301]

510 It was accepted by the First to Fifth Defendants that, in exercising his powers of appointment, Frank owed duties to consider the interests of the objects of the relevant trusts and not to act for an improper purpose which were limitations implied under the trust deeds, but that there were no other limitations in exercising this power.

511 The First to Fifth Defendants contended however, that the evidence disclosed that Frank, in the exercise of his powers of appointment, acted for a proper purpose, and had proper regard to the objects of the trusts and the interests of the beneficiaries.

512 Reference was made to Franks' written evidence, where he gave evidence as to the circumstances in which he exercised his powers of appointment:[302]

In order to protect the broader Hoh family investments from George and Han, I decided that I needed to change trustees. Between them, George and Han were able to take control of the Ying Mui and Amore boards (which they ultimately did) and, accordingly, I considered that the trust assets were not safe in the hands of Ying Mui and Amore. I believed the appointment of a new trustee was necessary to ensure that the assets were insulated from George's and Han's actions.

...

Frosthollow was incorporated on 30 June 2011 as a shelf company. Since shortly after its incorporation, Lynn has been the sole director and shareholder of Frosthollow. I appointed Frosthollow as trustee of the Ying Mui Trust and Amore Trust to 'pass the baton' to the next generation.

At the time, as mentioned above, I was concerned about what George and Han would do if they took control of the trustee companies in Australia. Specifically, I was concerned that George and Han would take most of the assets for themselves (as they were claiming they were entitled to do). ...

I did not feel it was appropriate that I continue to manage the trusts as I was planning to retire. After giving the matter careful consideration, I decided that Lynn, through a corporate entity, was the most appropriate person to continue to manage the broader Hoh family investments in Australia because:

(a) my first criterion was that it needed to be someone in the family. I did not consider that an independent trustee would be appropriate. Ying Mui (and the other entities) formed part of the family business. Both in Australia and Malaysia, it has always been managed by family members. I considered that it would be difficult for an independent trustee, having not being brought up in the family, to understand the objectives of the companies or the importance of my parents' legacy. It was therefore important to me to find someone in the family to take on this responsibility;

(b) next, I needed to find someone in the family, living in Australia, with the education, background and intelligence necessary to handle the properties and manage the accounts. Lynn's education and work experience made her perfect for this role. Lynn excelled at school and later at university. She is a Chartered Accountant and has previously worked as an accountant for Arthur Anderson and Ernst & Young. In my (admittedly biased) opinion, she is intelligent and diligent. I also believe, based on my observations of her, that Lynn is responsible, fair and trustworthy. I was confident that Lynn would act fairly and reasonably towards all family members. She also knew what was happening in the broader Hoh family, having kept in touch with many of her aunts, uncles and cousins in Malaysia. In my opinion, there was no better person within the broader Hoh family who had the ability to handle the responsibility; and

(c) finally, I needed to find someone willing to take on the responsibility. In the past, not all family members have been willing to devote the time and energy required to manage the Australian investments. Lynn had previously demonstrated an interest in the investments and a willingness to take on the role of managing the broader Hoh family affairs in Australia.

513 The First to Fifth Defendants submitted that, in these circumstances, it was not improper for Frank to act as he did. In this regard, the facts in Mercanti were submitted to be not dissimilar to the facts of this case, where the control over relevant trusts resided in Frank and his family for over 9 years. Even if it is found that Frank sought to retain control within his immediate family, that would not amount to an improper purpose or a disregard of the interests of the beneficiaries.

514 Accordingly, in exercising his powers of appointment to remove Ying Mui and Amore and replace them with Frosthollow, Frank did not breach any fiduciary duty.

515 Indeed, it was contended that Frank acted positively in the interests of the beneficiaries, believing at the time that George and Han would act in a manner detrimental to the interests of the beneficiaries and that the trust assets needed protection from them. For this reason, it was submitted that Frank appointed Frosthollow as the new trustee, a company managed by Lynn, who was well qualified to conduct the trust businesses. He did not appoint himself or a company under his personal control as trustee despite the trust deeds allowing him to do so. Further, the evidence does not disclose that he exerted improper control or influence over Lynn in relation to her management of the trusts.

516 It was further submitted that the appointment of Frosthollow as trustee could not have been to ensure a continuation of the sale process or the alleged Asset Sale and Distribution Decision as contended by the Plaintiffs. This submission was supported by the contentions that:

(a) there was in fact no Asset Sale and Distribution Decision;

(b) Frosthollow did not in fact sell any of the properties; it was Ying Mui which sold the properties and the properties had already been sold;

(c) Frosthollow in fact acquired a new property in Pakenham, incurring considerable new financial liability in doing so, representing independent decision making by a new trustee;

(d) there was a clean slate and surplus money handed to Frosthollow. The Court found that on '23 December 2011, having sold or transferred all of its real estate properties and paid off its bank debt, Ying Mui transferred $1,050,836.60 to Frosthollow;[303] and

(e) it is wrong to characterise the appointment of Frosthollow as being motivated by Frank retaining control over assets which he or his immediate family could 'liquidate as they pleased' as contended at paragraph 249 of the plaintiffs' submissions because this is not what in fact occurred.

517 Further, it was submitted that there was no need for Frank to consult George or Han prior to exercising his power of appointment.[304] For this reason, the concealment of the appointment was submitted to be irrelevant to the propriety of the appointment, and, in itself, did not amount to improper conduct.

518 For these reasons, the First to Fifth Defendants submitted that Frank did not breach any duties he owed as appointor under the relevant trusts. Accordingly, it was said that there is no basis for the Court to set aside either appointment.

519 Further, and in any event, it was submitted that there is no utility in setting aside the appointments in circumstances where the Court has before it a claim for relief to replace the trustees.

Conclusions as to the exercise of the power of appointment

520 Possessing the power to do something enables a power to be exercised by a trustee. Nevertheless, the existence of the power, however broad, does not of itself legitimise the exercise of that power, if it be exercised improperly.

521 Frank has admitted in his pleaded defence that in exercising the power of appointment in respect of the Ying Mui Trust and the Amore Trust, he 'was required to act in the best interest interests of the beneficiaries of the Ying Mui Trust and not for a collateral purpose, for his own benefit or with an ulterior motive'.[305]

522 I am satisfied that Frank, in removing Ying Mui and Amore and appointing Frosthollow as trustee of the relevant trusts, did indeed owe a fiduciary duty to the beneficiaries of the trusts to act in their best interests and not for a collateral purpose, for his own benefit or with any ulterior purpose.

523 I am further satisfied that Frank breached those duties by removing Ying Mui and Amore and appointing Frosthollow as trustee of those trusts, for the reasons which follow.

524 First, the Court has already found in the First Tranche Reasons,[306] in its analysis of the evidence given by Frank at trial, that Frank exercised his powers as appointor 'because he knew that George and Han had the majority, that they could take control of Ying Mui, and if they did so, the asset sale process would stop'. I am satisfied that the principal reason why Frank exercised his powers as appointor was because he was concerned that the asset sale process which he had implemented for his benefit would cease. I am further satisfied that, in making his decision, he was not principally motivated by the various matters identified in his written evidence, and in particular he did not have any proper regard to the objects of the trusts and the interests of all of the beneficiaries.

525 Second, and consequently, I am satisfied that Frank acted primarily out of self-interest. The evidence Frank gave at trial pointed to him exercising his powers as appointor to remove Ying Mui and Amore and appoint Frosthollow for the reason that he did not want the asset sale process to stop. It was for this purpose he wanted to ensure that Lynn, and not George and Han, gained control of the Ying Mui Trust and the Amore Trust.

526 The scheme set in train by Frank in deciding to appoint Frosthollow as the trustee of the Ying Mui Trust and the Amore Trust was used to the advantage of the interests allied with him. These steps further evidenced the improper purpose which had been conceived from the outset in making the decision. I find that at the time of making his decision Frank was likely to have been well aware that his daughter Lynn would act in his interests upon being installed as the sole director of the new trustee company, Frosthollow.

527 By way of summary, Frosthollow made the 2012, 2013 and 2014 Distributions, the effect of which was to divert the profits from the sales of the property assets to the benefit of Frank and his immediate family. This is evidenced by the following steps.

528 On 29 June 2012, and following the removal of Ying Mui and appointment of Frosthollow as trustee, Lynn, as the sole director of Frosthollow, resolved to make, inter alia, a distribution from the Ying Mui Trust of $1,012,904 to Frank's company Lokit. Nothing was distributed to George, Han or Maureen.

529 On 28 June 2013, Lynn, as the sole director of Frosthollow, resolved to make, inter alia, a distribution from the Ying Mui Trust of $280,604 to Frank's company Lokit. Nothing was distributed to George, Han or Maureen.

530 On 30 June 2014, Lynn, as the sole director of Frosthollow, resolved to distribute 100 percent of the distributable profit of the Ying Mui Trust ($631,471 and Amore Trust ($596,394) to SYM, a company of which Frank had been installed as an authorised signatory of its bank accounts. Again, nothing was distributed to George, Han or Maureen.

531 The facts of Mercanti v Mercanti,[307] are to be distinguished from the present case. The trial judge in Mercanti held that there was 'no evidence' that the appointor intended the appointee 'to deal improperly with trust assets' or to 'achieve any purpose other than the proper and effective management of the business'.[308] Further, the power of appointment was exercised in circumstances where other members of the family had taken 'physical control of the trust business' whilst the appointor was overseas, and had done so in a matter which 'effectively repudiated' the trust.[309] The Court of Appeal held that the appointor had exercised the power of appointment 'with a legitimate concern for "the proper and effective management of the business"'.[310]

532 For the reasons already analysed, these observations made in Mercanti cannot be applied to Frank.

533 In the circumstances, in order to provide relief in equity, it is appropriate to grant a declaration that the appointment of Frosthollow as trustee of the Ying Mui and Amore trusts was and remains invalid, and consequently should be ordered to be aside.

534 This would give rise to the following consequences in terms of the Ying Mui Trust. The trustee would revert to being Ying Mui Pty Ltd. The directors of this trustee are George Hoh, Han Hoh, Maureen Oborn and Frank Hoh. Given the Hoh family factional split between the 'George' faction on the one hand and the 'Frank' faction on the other, a question arises as to whether it is appropriate to remove Ying Mui Pty Ltd as the trustee by separate order. This issue will be dealt with below.

535 The outcome of the declaration would give rise to the following consequences in terms of the Amore Trust. The trustee would revert to being Amore Corporation Pty Ltd. The directors of this trustee similarly are George Hoh, Han Hoh, Maureen Oborn and Frank Hoh. Given the Hoh family factional split between the 'George' faction on the one hand and the 'Frank' faction on the other, a question arises as to whether it is appropriate to remove Amore Corporation Pty Ltd as the trustee by separate order. This issue will also be dealt with below.

Did Frosthollow and Olrey act in breach of trust by executing the Impugned Frosthollow and Olrey Agreements? If so, did Frank or Lynn knowingly assist those breaches of trust?

536 I accept that shortly after the appointment of Frosthollow as trustee of the Ying Mui Trust and the Amore Trust, on 19 December 2011, Lynn, a company called Linjoshan, and Frosthollow, executed two 'Management Fee Agreements'. Pursuant to these management Fee Agreements, Frosthollow agreed to pay 6 percent of all rental proceeds derived from the remaining properties to Linjoshan in consideration for Lynn's services (the 'Impugned Frosthollow Agreements'). Lynn executed the agreements on behalf of herself and Frosthollow and Frank executed the agreement on behalf of Linjoshan.

537 The sole beneficiary of the Impugned Frosthollow Agreements was Linjoshan, a company whose directors and shareholders comprised Frank, Lynn and Ian.

538 I accept that the sole director of Frosthollow at relevant times was Lynn.

539 I also accept that Frank and Lokit entered into a similar Management Fee Agreement with Olrey, dated 8 March 2011. This agreement required Olrey to pay management fees to Lokit derived from 8 percent of the rental sourced from the Camberwell Property (the 'Impugned Olrey Agreement'). The Impugned Olrey Agreement was executed by Lynn on behalf of Lokit, Pooi on behalf of Olrey, and Frank in his own name.

540 On 23 December 2011, four days after the Impugned Frosthollow Agreements were executed, Lynn procured Frosthollow to execute exclusive leasing and managing authorities with Appleby Real Estate. Pursuant to these authorities, Frosthollow was obliged to pay a 5.5 percent managing fee to Appleby Real Estate. These authorities were in respect of the very same properties that were apparently being 'managed' by Lynn, namely: the 'Wantirna South Property' and the 'Knox Properties'.

541 The conduct of Frosthollow in executing the Impugned Frosthollow Agreements with Linjoshan and Lynn, and the conduct of Olrey in executing the Impugned Olrey Agreement with Frank and Lokit, were alleged by the Plaintiffs to have constituted a breach of trust. Those agreements were submitted to have been executed in bad faith and for the ulterior purpose of implementing the Asset Sale and Distribution Decision.

542 The Plaintiffs contended that, at all relevant times, Lynn acted in accordance with Frank's desire to misappropriate the assets of the Ying Mui Trust and the Amore Trust for his own benefit, namely for the legal fighting fund, and that this was deliberately concealed from George and Han.

543 The Plaintiffs further contended that the Impugned Frosthollow Agreements conferred a direct financial benefit, by way of a contractual entitlement to the payment of 'management fees', on a company owned and controlled by Frank, Lynn and Ian, in much the same way as the Impugned Ying Mui an Amore Agreements conferred similar benefits on Lokit.

544 The Plaintiffs also relied upon Lynn procuring Frosthollow, on 23 December 2011, to execute exclusive leasing and managing authorities with Appleby Real Estate. Pursuant to these authorities, Frosthollow was obliged to pay a 5.5 percent managing fee to Appleby Real Estate. These authorities were in respect of the very same properties that were apparently being 'managed' by Lynn, namely the 'Wantirna South Property' and the 'Knox Properties'.

545 In these circumstances it was contended by the Plaintiffs that:

(a) Appleby Real Estate would be responsible for, and would be paid a 5.5 percent managing fee, leasing the Wantirna South Property and the Knox Properties; and at the same time

(b) Lynn was effectively relieved of personally providing those services in relation to the leasing of the Wantirna South Property and the Knox Properties; and yet

(c) Linjoshan would nevertheless be paid an amount of 6 percent of all rental proceeds generated by those properties.

546 Insofar as the Impugned Olrey Agreement is concerned, the Plaintiffs submitted that agreement was executed by the same three individuals who also executed the Impugned Ying Mui and Amore Agreements, namely, Frank, Pooi and Lynn. As with the Impugned Ying Mui and Amore Agreements, the beneficiary of the Impugned Olrey Agreement was Lokit, a company owned by Frank and Pooi, and the directors of which comprised Frank, Pooi, Lynn and Ian. It was Lokit that received the benefit of a contractual entitlement to management fees of 8 percent in respect of the Camberwell Property.

547 Further, and as with the Impugned Ying Mui, Amore and Frosthollow Agreements, it was contended by the Plaintiffs that the evidence established that Lokit received from Olrey the payment of management fees pursuant to the Impugned Olrey Agreement. Lynn confirmed in her evidence that 'The total management fees charged to Olrey under the Olrey Agreement is approximately $40,000'.[311]

548 On this basis, the Plaintiffs contended that each of the Impugned Ying Mui, Amore, Frosthollow, and Olrey Agreements, were executed by Frank, Lynn, and in some cases by Pooi, for the purpose of providing a contractual vehicle for funds to be paid out of the Ying Mui Trust, the Amore Trust and the FRGIT, to Lokit and Linjoshan, in each case ultimately for the benefit of Frank and his immediate family, and to the exclusion of George, Han and Maureen.

549 It was submitted by the Plaintiffs that this was not in the best interests of the beneficiaries of the Ying Mui Trust, the Amore Trust or the FRGIT. Rather, it was conduct undertaken in bad faith, and for the ulterior purpose of diverting trust assets for the benefit of Frank and his immediate family.

550 For these reasons, it was submitted by the Plaintiffs that the conduct of Frosthollow in executing the Impugned Frosthollow Agreements, and the conduct of Olrey in executing the Impugned Olrey Agreement, constituted breaches of trust.

551 Frosthollow and Olrey did not take an active involvement in these issues.

552 The First to Fifth Defendants made the following principal submissions.

553 They conceded that the Court made the following factual findings:

On 19 December 2011, Lynn, the company Linjoshan, together with Frosthollow, executed two 'Management Fee Agreements', pursuant to which Frosthollow agreed to pay 6 per cent of all rental proceeds to Linjoshan in consideration for Lynn's services. Lynn executed the agreement on behalf of herself and Frosthollow and Frank executed the agreement on behalf of Linjoshan.[312]

Frank and Lokit also purported to enter into a similar Management Fee Agreement with Olrey, apparently dated 8 March 2011, which required Olrey to pay 8 per cent management fees to Lokit in respect of the Camberwell property.[313]

554 They acknowledge the claims of the Plaintiffs to the effect that the Frosthollow Agreement and the Olrey Agreement were executed in breach of trust because it was conduct engaged in to give effect to the Asset Sale and Distribution Decision, and in each case was motivated by a bad faith, arbitrary, capricious, wanton, irresponsible and mischievous desire, with the knowledge, assistance and approval of Lynn, to give effect to the Asset sale and Distribution Decision by transferring the assets of the Ying Mui Trust and the Amore Trust to entities controlled by Frank and his immediate family and to the exclusion of George, Han and Maureen.

555 However, the First to Fifth Defendants point to the broad powers vested in Frosthollow and Olrey which clearly and expressly authorise the trustee to enter into management agreements. Further, each of trust deeds provided for the trustee to deal with a corporation in which the trustee had an interest and that the trustee could act notwithstanding any interest in a transaction.

556 In his witness statement, Frank set out the reasons why the various management fee agreements were prepared and entered into by Ying Mui and Amore and why management fees were paid to him and Lokit pursuant to those agreements.

557 Further, in her consolidated witness statement, Lynn set out her evidence in relation to the Frosthollow management agreements and the Olrey agreement in the following terms:[314]