Chu v Lin, in the matter of Gold Stone Capital Pty Ltd (Trial Judgment)

In the matter of Gold Stone Capital Pty Ltd, the plaintiffs, represented by Mr Chu and Mr Xu, sought relief against the defendants, Ms Lin and Mr Wu, for breaches of trust, misappropriation, and other related claims. The dispute centred on investments made by the plaintiffs into a secured income mortgage fund with the intent of obtaining a significant investor visa. The fund's constitution stipulated that loans must be secured by a mortgage, but the fund issued unsecured loans instead, which led to the plaintiffs' claims. The plaintiffs alleged that these loans were unauthorised, imprudent, and issued for improper purposes. Additionally, they argued that the defendants were accessory to the breach of trust, knowingly inducing or procuring the breach and assisting in a dishonest and fraudulent design.

The court examined whether the loans were indeed unauthorised and imprudent, and if they were issued for an improper purpose. The court also had to determine whether the fund was an unregistered managed investment scheme and whether misleading or deceptive conduct occurred. Furthermore, the court needed to decide if the plaintiffs had a reasonable expectation of disclosure, which led to causation of loss. The court addressed the breach of directors' duties, specifically the duty of reasonable care and diligence, and whether the defendants were liable as accessories. The limitation periods for statutory and tortious actions were also scrutinised, along with the applicability of an extension of time for the limitation period.

The court found that the loans were unauthorised and imprudent, issued for improper purposes. It ruled that the fund was an unregistered managed investment scheme and that misleading or deceptive conduct did occur, resulting in causation of loss. The plaintiffs were granted equitable compensation for the misappropriation, and the defendants were held accessory to the breach of trust. The court held that the defendants were liable as accessories, knowingly inducing or procuring the breach of trust. The court concluded that the limitation periods had expired, and the statutory action for loss or damage arising from the breaches of duty had also lapsed. Therefore, the plaintiffs' claim against Mr Wu was dismissed.

The court ordered the plaintiffs to serve draft orders to give effect to its reasons, along with detailed calculations of interest, by 26 July 2024. The defendants were to respond with their calculations and explanations by 9 August 2024. The parties were to confer and attempt to reach agreement on the draft orders and calculations by 16 August 2024, with written submissions to follow if no agreement was reached. An oral hearing was scheduled for 23 August 2024, unless it was determined that such a hearing was not required by 21 August 2024. The parties were granted liberty to apply on two days’ notice.