Chen v Liu (No 2)

The case of Chen v Liu (No 2) involved a dispute regarding the control of an incorporated association. The matter was heard in the Supreme Court of Victoria, where the plaintiff, Chen, sought to recoup legal expenses from the association's funds. The central issue for the court was whether it was appropriate for an incorporated body to expend funds on determining who controlled it. Furthermore, the court had to consider the effect of a costs agreement between the plaintiff's lawyer and the association, which resulted in the plaintiffs breaching their fiduciary obligations in causing the association to enter into the agreement.

The court found that the agreement led to the plaintiffs breaching their fiduciary obligations, and upholding the agreement would involve the plaintiff's solicitor as an accessory to that breach. The court examined the circumstances surrounding the costs agreement and the parties' conduct. The court noted that the agreement was entered into without proper consideration of the association's interests and that the association's funds were used to pay for the legal expenses incurred by the plaintiffs. The court held that the plaintiffs had breached their fiduciary obligations by causing the association to enter into the costs agreement, and that it would not be appropriate to uphold the agreement.

The court also considered whether it was appropriate for the association to expend funds on determining who controlled it. The court found that the association's funds were not properly used to pay for the legal expenses incurred by the plaintiffs. The court held that the association's funds should not be used to determine who controls it, and that the plaintiffs were not entitled to recoup their legal expenses from the association's funds. The court further held that the association's funds should be used for the proper purposes of the association, and that any legal expenses incurred in determining who controls the association should be borne by the party seeking to establish control.

In conclusion, the court found that the plaintiffs breached their fiduciary obligations by causing the association to enter into the costs agreement. The court held that it was not appropriate to uphold the agreement, and that the plaintiffs were not entitled to recoup their legal expenses from the association's funds. The court ordered that the association's funds should be used for the proper purposes of the association, and that any legal expenses incurred in determining who controls the association should be borne by the party seeking to establish control.