Hoh v Frosthollow Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2012 06147

KIANG PO HOH (also known as GEORGE HOH) AND OTHERS (according to the schedule of parties attached)	Plaintiffs
v
FROSTHOLLOW PTY LTD (ACN 151 816 401) AND OTHERS (according to the schedule of parties attached)	Defendants

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JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	6 September 2013
DATE OF JUDGMENT:	7 March 2014
CASE MAY BE CITED AS:	Hoh and ors v Frosthollow Pty Ltd and ors
MEDIUM NEUTRAL CITATION:	[2014] VSC 77

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PRACTICE AND PROCEDURE — Pleadings summons — applicable principles — Pleading material facts to establish essential elements of cause of action not all the circumstances — Pleading to be in intelligible form — Statement of Claim pleading unnecessary and irrelevant allegations, facts which do not lead to any defined cause of action — Pleading conclusions without material facts — Particulars referring to documents and meetings without stating the alleged effect — Pleading prolix and embarrassing as a consequence.

EQUITY — Fiduciary duties – Nature of fiduciary duties — Whether prescriptive duties available — Whether only proscriptive duties, the no conflict duty and no profit duty — Whether pleading of prescriptive duties should be struck out — Allegations of prescriptive duties struck out.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr N Lucarelli QC and Mr MP Costello	Minter Ellison
For the Defendants	Mr NJ O’Bryan SC	Arnold Bloch Leibler

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Background facts................................................................................................................................ 1

Strike Out Principles......................................................................................................................... 3

The Questions..................................................................................................................................... 9

First Question– the Joint Investment Understanding............................................................... 10

Second Question – the alleged Fiduciary Duties....................................................................... 17

Third Question – vague and irrelevant allegations, particulars rather than material facts 27

Conclusion......................................................................................................................................... 31

HIS HONOUR:

Introduction

By Summons dated 9 April 2013, the second defendant, Kiang Ngan Hoh (Frank Hoh) applies pursuant to Rule 23.02 of the Supreme Court (General Civil Procedure) Rules 2005 to strike out certain paragraphs of the plaintiffs’ Amended Statement of Claim (ASOC) on the grounds that they do not disclose a cause of action, plead particulars rather than material facts, are irrelevant, or may prejudice, embarrass or delay the fair trial of the proceeding. Alternatively, Frank Hoh applies to strike out the whole ASOC.

Background facts

The disputes raised in the ASOC concern members of the Hoh family and, in particular, concern the control over Australian-based assets forming parts of the Ying Mui discretionary trust and the Amore discretionary trust. The first and second plaintiffs are respectively the brother (George Hoh) and nephew (Han Hoh) of Frank Hoh. The assets in question were held by Ying Mui Pty Ltd (the third defendant) (Ying Mui) and Amore Pty Ltd (the fourth defendant) (Amore) respectively but were transferred to Frosthollow Pty Ltd (Frosthollow) after Frank Hoh exercised powers of appointment. The plaintiffs dispute the validity of these transfers of assets.
George Hoh and Frank Hoh are directly or indirectly shareholders in Ying Mui.[1] Their elder brother (Robert) was also a shareholder in Ying Mui before his death in early 1988. His eldest son is Han Hoh who now holds his father’s share.
[1] In Frank’s case by a company controlled by him, Lokit Pty Ltd: see [100] ASoC.
Other members of the Hoh family have, at various times, owned shares in Ying Mui. However, by mid-to-late-1998, it became apparent to Robert, George and Frank that they would soon be the controlling shareholders of Ying Mui.[2] Discussions commenced as to the use of the company as a vehicle for investments in Australia.
[2]The only other shareholder was then expected to remain was their sister, Maureen.
By November 2000, an understanding had been reached between Robert, Frank and George Hoh (the joint investors) as to the use of Ying Mui as the vehicle for investments in Australia. The elements of that understanding are set out in paragraphs 50(a) to (h) of the ASOC. This is what the plaintiffs describe as the joint investment understanding.
In substance this is alleged to be an understanding that they would use Ying Mui to invest in Australia for the benefit of the members of Ying Mui that remained after two other brothers, Derek and Richard, were no longer shareholders. Frank Hoh, as the brother residing in Australia, would seek out potential property investments and, where he thought appropriate, propose them to Robert and George Hoh. Investments, and divestments, would only be made if they were agreed to unanimously by each of the joint investors. The three would contribute equally to the funds required, and share equally in the capital in income generated. Where any one of the joint investors died, the arrangement would continue for the benefit of his child who became entitled to the father’s share in Ying Mui. Frank Hoh would facilitate the acquisition of the agreed investments and manage them on a day to day basis for the benefit of the joint investors (the Management Power).
It is alleged that, by the reaching this joint investment understanding, Robert and George Hoh reposed trust and confidence in Frank Hoh, that Frank accepted the trust and confidence reposed in him,[3] and that by reason of those matters, Frank owed the ‘joint investors’ fiduciary duties.
[3][51]-[52] ASoC.
In the critical paragraph of the ASOC (paragraph 53) five specific fiduciary duties are pleaded:
(a)not to act other than in the best interests of all the joint investors;
(b)not to exercise the Management Power other than for the benefit of all the joint investors;
(c)to act honestly and in good faith as to the interests of the joint investors;
(d)not to profit from his position or to use his position to obtain a profit for another without the fully informed consent of the joint investors; and
(e)not to exercise the Management Power contrary to the joint investment understanding.
Sixteen separate acts of Frank Hoh are alleged to constitute a breach of one or more of the duties.[4]
[4]See ASoC at [76], [116], [163], [188], [191], [194], [198], [206], [214], [224], [230], [244], [264], [266], [268] and [270].
The ASOC comprises 103 pages (5 pages of which are prayers for relief), and 283 paragraphs, many with multiple sub-paragraphs.

Strike Out Principles[5]

[5]See Vo v Nguyen and ors, [2013] VSC 304.

Rule 23.02 of the Rules provides:
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading-
(a)does not disclose a cause of action or defence;
(b)is scandalous, frivolous or vexatious;
(c)may prejudice, embarrass or delay the fair trial of the proceeding; or
(d)is otherwise an abuse of the process of the Court--
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
Under this Rule, the objection is to the manner of expression of the claim or defence in the indorsement of claim or pleading. That is, the indorsement or pleading does not disclose the cause of action or defence or its contents are such that it is scandalous, frivolous or vexatious, or may prejudice, embarrass or delay the fair trial of the proceeding, or is otherwise an abuse of process. Under this Rule, the defendants do not ask that the proceeding be brought to an end. They seek an order that the offending indorsement be struck out or amended, and that the plaintiff present the claim in the proper way: Brinson v Rocla Concrete Pipes Ltd.[6] The meanings of some of the terms are not immediately obvious to the modern eye. They are:
(a)Scandalous: Allegations made in a pleading for the purpose only of abusing or injuring the opposite party and allegations which are indecent or offensive are scandalous within the meaning of the rule, and liable to be struck out: Christie v Christie;[7] Coyle v Cuming;[8] Cashin v Craddock.[9]
(b)Frivolous or vexatious: These words in combination have traditionally been used to describe a wide variety of circumstances in which a claim is found to be groundless, or lacking a legal basis or merit
(c)Prejudice, embarrass or delay: In general, a pleading or indorsement is embarrassing when it places the opposite party in the position that he or she does not know what is alleged against him or her: Girando v Padbury;[10] Meckiff v Simpson;[11] Gunns Ltd v Marr.[12] Thus, a pleading which is unintelligible (Hoffnung v Fletcher),[13] or is vague or ambiguous (Byrd v Nunn),[14] or is too general (British & Colonial Land Assn Ltd v Foster)[15] is embarrassing.[16]
[6][1982] 2 NSWLR 937.
[7](1873) LR 8 Ch App 499.
[8](1879) 40 LT 455
[9](1876) 3 Ch D 376. See Williams, Civil Procedure Victoria, 23.02.30.
[10](1919) 22 WALR 7.
[11][1968] VR 62 at 70.
[12][2005] VSC 251 at [15].
[13](1887) 4 WN (NSW) 68.
[14](1877) 7 Ch D 284.
[15](1888) 4 TLR 574.
[16]See Williams, Civil Procedure Victoria, 23.02.35.
In Wheelahan v City of Casey (No 12),[17] Dixon J set out the essential principles derived from three recent decisions of this court, SMEC Australia Pty Ltd & Anor v McConnell Dowell Constructors (Aust) Pty Ltd & Ors (No 2),[18] Environinvest Ltd v Pescott & Ors; Environinvest Ltd v Blackburne Pty Ltd & Ors,[19] and Clarke & Ors v Great Southern Finance Pty Ltd & Ors,[20] as follows:
[17][2012] VSC 316 at [25].
[18][2011] VSC 492 (30 September 2011).
[19][2011] VSC 325 (19 July 2011).
[20][2010] VSC 473 (20 October 2010).
(a)the function of a pleading in civil proceedings is to alert the other party to the case they need to meet (and hence satisfy basic requirements of procedural fairness) and further, to define the precise issues for determination so that the court may conduct a fair trial;[21]
[21]The function of defining issues for trial is required from an early stage. Otherwise, discovery and other interlocutory process are likely to be misdirected: Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd& Ors (1996) ATPR 41-522 per Burchett J at 42,679.
(b)the cardinal rule is that a pleading must state all the material facts to establish a reasonable cause of action (or defence).[22] The expression ‘material facts’ is not synonymous with providing all the circumstances. Material facts are only those relied on to establish the essential elements of the cause of action;[23]
[22]A reasonable cause of action or defence is one with a real chance of success, assuming the correctness of the allegations of fact in the challenged pleading.
[23] Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568 [13], citing Bruce v Oldhams Press Ltd [1936] 1 KB 697, 712-713.
(c)as a corollary, the pleading must be presented in an intelligible form – it must not be vague or ambiguous or inconsistent.[24] Thus a pleading is ‘embarrassing’ within the meaning of r 23.02 when it places the opposite party in the position of not knowing what is alleged;
[24]In Environinvest, the pleading was struck out because it was confusing, often circular, sometimes inconsistent and contained no coherent narrative.
(d)the fact that a proceeding arises from a complex factual matrix does not detract from the pleading requirements. To the contrary, the requirements become more poignant;[25]
[25]SMEC Australia Pty Ltd & Anor v McConnell Dowell Constructors (Aust) Pty Ltd & Ors (No 2) [2011] VSC 492 (30 September 2011), (SMEC) at [8].
(e)pleadings, when well-drawn, serve the overarching purpose of the Civil Procedure Act 2010 (Vic);[26]
[26] SMEC at [9].
(f)a pleading which contains unnecessary or irrelevant allegations may be embarrassing – for example, if it contains a body of material by way of background factual matrix which does not lead to the making out of any defined cause of action (or defence), particularly if the offending paragraphs tend to obfuscate the issues to be determined;[27]
[27]SMEC at [28]–[31]. In SMEC, Vickery J remarked (at [5]) that good pleading calls for ‘judgment and courage to shed what is unnecessary’.
(g)it is not sufficient to simply plead a conclusion from unstated facts.[28] In this instance, the pleading is embarrassing;
(h)every pleading must contain in a summary form a statement of all material facts upon which the party relies, but not the evidence by which the facts are to be proved (r 13.02(1)(a));
(i)the effect of any document or purport of any conversation, if material, must be pleaded as briefly as possible, and the precise words of the document or the conversation must not be pleaded unless the words are themselves material (r 13.03);[29]
(j)particulars are not intended to fill gaps in a deficient pleading. Rather, they are intended to meet a separate requirement – namely, to fill in the picture of the plaintiff’s cause of action (or defendant’s defence) with information sufficiently detailed to put the other party on guard as to the case that must be met.[30] An object and function of particulars is to limit the generality of a pleading and thereby limit and define the issues to be tried;[31]
(k)a pleading should not be so prolix that the opposite party is unable to ascertain with precision the causes of action and the material facts that are alleged against it;[32]
(l)extensive cross-referencing of facts in a pleading may render parts of the pleading unintelligible;[33]
(m)in an application under r 23.02, the court will only look at the pleading itself and the documents referred to in the pleading;[34]
(n)the power to strike out a pleading is discretionary. As a rule, the power will be exercised only when there is some substantial objection to the pleading complained of or some real embarrassment is shown;[35]
(o)if the objectionable part of the pleading is so intertwined with the rest of the pleading so as to make separation difficult, the appropriate course is to strike out the whole of the pleading;[36] and
(p)Rule 13.10, which requires a pleading to contain the necessary particulars of any fact or matter pleaded.
[28]Trade Practices Commission v David Jones (Australia) Pty Ltd & Ors (1985) 7 FCR 109, 114.
[29]In Gunns Ltd & Ors v Marr [2005] VSC 251, Bongiorno J remarked (at [52]) that the paragraphs in the pleading ‘contain quotations from newspapers, websites and correspondence which are inappropriate in form’.
[30]Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 per Mason CJ and Gaudron J at 286.
[31]Clarke at [9].
[32]Knorr v CSIRO & Ors (No 2) [2012] VSC 268.
[33]In Gunns, Bongiorno J noted (at [20]) that the particulars to the amended statement of claim under attack incorporated allegations of approximately 40 other paragraphs, requiring the defendants to navigate through a labyrinth of allegations. His Honour refused leave to file the amended statement of claim in the proposed form.
[34]Rule 23.04 and Day v William Hill (Park Lane) Ltd [1949] 1 KB 632.
[35]Clarke at [11].
[36]Davy v Garrett (1878) 7 Ch D 473.
A number of the authorities referred to above support the proposition that a statement of claim must contain material facts, being the facts necessary for the purpose of formulating a complete cause of action, and that it is not sufficient simply to plead a conclusion drawn from unstated facts: see for example Trade Practices Commission v David Jones (Australia) Pty Ltd;[37] Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees’ Association of Western Australia;[38] Pioneer Electronics Australia Pty Ltd v Edge Technology Pty Ltd.[39]
[37](1985) 7 FCR 109 at 114-115 per Fisher J.
[38](1987) 13 FCR 413 at 417.
[39][1999] FCA 142 at para 7 per Kenny J.
The material facts are those necessary for the purposes of formulating a complete cause of action: Bruce v Odhams Press Ltd.[40] In practice it is often difficult to distinguish between a ‘material fact’ and a ‘particular’. Antecedent to that distinction however, is the definition of the level of generality at which the material facts should be pleaded. It is an ancient and established rule of pleading that the question of generality of pleading must depend upon the general subject-matter: Ratcliffe v Evans.[41]
[40][1936] 1 KB 697 at 712 per Scott LJ.
[41][1892) 2 QB 524 at 532; Op. Cit. Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees’ Association of Western Australia (1987) 13 FCR 413 at 417.
In Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees’ Association of Western Australia,[42] French J (as he then was) said:
Whatever level of generality is adopted in a statement of claim it must, in my opinion, be consistent with the purpose of pleadings, namely to define the issues and thereby inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it… There are certain levels of generality of pleading which, while they may bring in all facts necessary to establish a cause of action, are insufficient for the purpose of properly informing the defendant of the case it has to meet…. The sufficiency of the pleading may be judged first by reference to the necessary condition that it disclose a reasonable cause of action and secondly, by reference to the requirement for sufficient particularity that the respondents know in advance the case they have to meet.
[42](1987) 13 FCR 413 at 417.
A statement of a conclusion drawn from facts, which are not in the statement of claim may not, depending on the subject matter and nature of the claim, be an allegation of a material fact. There are cases where a conclusion is a material fact, and it will conform to the requirements of the Rules if there are sufficient facts that lead up to it, or which are given as particulars to it.[43]
[43]Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees’ Association of Western Australia (1987) 13 FCR 413 at 418.
Whether it is appropriate that the conclusion is supported merely by particulars, rather than be preceded by separate allegations of the facts leading to the conclusion, depends on the case at hand. Thus, it is common, and usually unobjectionable, to plead as a conclusion that on a certain date a contract was entered into or an agreement was reached between certain identified parties and having a certain subject matter. That allegation is then supported by particulars, which may allege the contract or agreement to be, for example, partly written, partly oral and partly to be implied, setting out the facts from which each of those elements is supported, but not the evidence. This is sufficient to enable the opposite party to know what is alleged against it, to plead to the allegation, to avoid surprise and define the questions for trial: See the requirements of r.13.10 (2).

As Harper J (as he then was) pointed out in Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd,[44] pleadings have another important audience: the Judge or Magistrate. In most cases, the opposite party will have the assistance of some knowledge of the factual background—some knowledge, in other words, of the facts against which the pleadings can be assessed. The tribunal of fact will never be in that position. The pleadings must therefore be drawn so as to allow the impartial and uninformed reader to know what the case is about. This end cannot be achieved unless the pleadings form a coherent narrative, of material fact, with the necessary detail included as particulars. They must be drawn with a careful eye to the evidence that will necessarily be called if the case is to be made out. If the party pleading does not have that evidence, then the case ought not go to trial. Indeed, it is generally true to say that it ought not to proceed beyond the point at which the party pleading appreciates, perhaps because the very act of pleading reveals it, that there is and will remain a gap in the evidence upon which the cause of action or defence is based and without which that cause of action or defence will fail.
[44][2008] VSC 77, [1]-[4].
The power to summarily strikeout or dismiss the whole or a part of a claim under rule 23.02, on the grounds that it does not disclose a cause of action, is to be exercised with caution, especially where it appears to the Court that there is a real question to be tried. Particular caution is warranted where the objections taken are technical and the boundaries of the area of law relied upon to support the pleading are still developing.[45] The Court will not make an order under rule 23.02 where the pleading raises a debatable point of law.[46] The power should only be exercised where, assuming the facts pleaded are established, the claim is so manifestly hopeless that a trial will be a futility.[47] Where a pleading is struck out under rule 23.02, the affected party will generally be given leave to amend the pleading, or where the whole pleading is struck out, to serve another pleading.[48]
[45]E A Negri Pty Ltd v Technip Oceania Pty Ltd (2010) 27 VR 31.
[46]A v Ipec Aust Ltd [1973] VR 39 at 53.
[47]Opat Decorating Service (Vic) Pty Ltd v Jennings Group Limited, Victorian Supreme Court, Byrne J, 16 September 1994, unreported (BC9405102).
[48]Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69.

The Questions

Frank Hoh seeks to strike out a number of parts of the ASOC on the grounds that it does not disclose a cause of action and, rather than relying on the specific pleading deficiencies raised in the summons, asserts that it has a tendency to frustrate and delay the just, efficient, timely and economical resolution of the proceeding, contrary to the overriding objectives of civil litigation in this Court, as articulated in s 7 of the Civil Procedure Act 2010 (Vic).
There seem to me to be three questions that arise from Frank Hoh’s application:
(a)First, is the joint investment understanding sufficiently pleaded so as arguably to give rise to a fiduciary relationship?
(b)Secondly, are the pleaded fiduciary duties open as a matter of law?
(c)Thirdly, does the pleading contain allegations that are vague, irrelevant or particulars that ought be pleaded as material facts, or vice versa?

First Question– the Joint Investment Understanding

Second Defendant’s Submissions

The submissions related to this matter got off to what turned out to be a false start. In written submissions Frank Hoh submitted that–
(a)The concept of a joint investment understanding does not have any legal signification, nor does it fall within any of the well-recognised categories for the imposition of fiduciary duties.[49] It is alleged that there was simply an ‘understanding’ between the brothers as to how investments in Australia would be procured and managed;
(b)There is no other relationship or transaction between the joint investors which is alleged to give rise to a fiduciary relationship between them. There is no other alleged legal relationship, for example any contract, joint venture[50] or other transaction from which a fiduciary relationship is said to arise. It is not alleged that Frank Hoh was acting as an agent for his brothers Robert and George Hoh;[51]
(c)The alleged Management Power is claimed to arise from a non-binding and non-contractual ‘understanding’; and
(d)The bare allegation of a joint investment understanding cannot provide a factual or legal basis for the imposition of fiduciary duties, and paragraphs 51 and 52 of the ASOC should be struck out.
[49]See Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96 to 97 per Mason J; see also Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 270 FLR 1 at [834]–[835] per Lee AJA (appeal pending).
[50]See, for example United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1.
[51]The second defendant accepts that an agent commonly owes duties of a fiduciary nature to his or her principal: see generally Meagher Gummow & LeHan Hohe’s Equity Doctrines & Remedies (4th edition) at [5-190]–[5-195].
In oral argument it was not suggested that an understanding, properly pleaded, is incapable of giving rise to a fiduciary duty.[52] The complaint was limited to a pure pleading issue, namely, it is insufficient to baldly assert what is really a conclusion of mixed fact and law about the understanding in paragraph 50.[53]
[52]Transcript p.13.
[53]Transcript p.5.
In addition, it was submitted on behalf of Frank Hoh that:
(a)the purported particulars were not proper particulars of the alleged understanding; and
(b)in pleading an ‘understanding’ it is necessary to identify what it was that comprised the understanding and, in this regard reference was made to the authorities relating to the collocation “contract, arrangement or understanding” where they appeared in s 45E of the Trade Practices Act 1974 (now s 45E of the Competition and Consumer Act 2010).
Paragraph 50 of the ASOC bases the fiduciary duties upon an understanding, with no other explanation as to what that is as a matter of law. It is not explained how it arises. The understanding is simply asserted in paragraph 50 as a conclusion that there was an understanding. That conclusion, it was submitted, is really a conclusion of mixed fact and law for which there is an insufficient basis in the pleaded or particularised facts as to who said what or did whatever acts that are said to give rise, as a matter of inference, to the understanding. Then in paragraph 51 the plaintiffs clothe the ‘understanding’ with the dress of a fiduciary set of obligations, which are set out in paragraph 53.

Plaintiffs’ Submissions

The plaintiffs submitted that notwithstanding that Frank Hoh limited this aspect of the application to matters of pleading, it is useful to set out the way the plaintiffs contend the fiduciary relationship arises as it impacts on the expression of the particular duties that may arise out of the relationship, the matter raised by the second question.
The plaintiffs submitted that that the facts and circumstances alleged in paragraphs 51 and 52 are clearly capable of giving rise to a fiduciary relationship. It is common ground that the relationship between Frank Hoh (on the one hand) and Robert (later Han Hoh) and George Hoh (on the other) does not fall within a presumed category of fiduciary relationship (e.g. solicitor and client, employer and employee, guardian and ward). It was common ground that the classes of relationship that will give rise to fiduciary obligations are not closed.[54] In order to determine whether a fiduciary relationship has arisen, it is necessary to have regard to the characteristics of the particular relationship.
[54]Hospital Products Limited v United States Surgical Corp (1984) 156 CLR 41 at 96 per Mason J.
The plaintiffs referred to the observations of Mason J in Hospital Products Ltd v United States Surgical Corporation (Hospital Products),[55] where his Honour explained that a fiduciary relationship will typically exhibit these characteristics:
(a)the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person;
(b)the fiduciary is vested with the exercise of a power or a discretion; and
(c)the exercise of the power or discretion affects the interests of the other person in a legal or practical sense.
[55](1984) 156 CLR 41 at 96-97.
The plaintiffs submitted that applying Mason J’s dicta here:
(a)by the joint investment understanding and his acceptance or assumption of the Management Power, Frank Hoh undertook or agreed to act on behalf of the joint investors by making and managing the joint investments;
(b)the conferral of the Management Power, and the circumstances by which the joint investment understanding was implemented, vested Frank Hoh with a power or discretion; and
(c)an exercise of the Management Power necessarily affected the interests of Robert and George Hoh in a legal or practical nature by altering their interest in the joint investments.
The plaintiffs pointed to other tests that have been proposed. For example, in Bristol & West Building Society v Mothew (Mothew), Millett LJ described a fiduciary as ‘someone who has undertaken to act for or on behalf of another person in particular matter in circumstances which give rise to a relationship of trust and confidence’,[56] and in Hospital Products, Dawson J considered that ‘inherent in the nature of the relationship itself is a position of disadvantage or vulnerability on the part of one of the parties which causes him to place reliance upon the other and requires protection of equity acting upon the conscience of that other’.[57]
[56] [1998] Ch 1 at 18.
[57] (1984) 156 CLR 41 at 142.

Reasoning and Decision

There is no generally agreed definition of who is a ‘fiduciary’: Grimaldi v Chameleon Mining NL (Grimaldi).[58]In that case, the Full Court of the Federal Court comprising Finn, Stone and Perram JJ advanced the following description:

…a person will be in a fiduciary relationship with another when and in so far as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other’s interest to the exclusion of his or her own or a third party’s interest.[59] [Citations omitted]

[58](2012) 200 FCR 296 at [177].

[59](2012) 200 FCR 296 at [177].

By the conferral of the Management Power, Robert and George Hoh imparted trust and confidence in Frank Hoh in the sense described by Millett LJ in Mothew. That Frank Hoh had ample authority in the form of the Management Power, that the joint investments were to be exclusively in Australia, and that Frank Hoh was the only Australian resident joint investor, rendered Robert and George Hoh vulnerable to abuse in the manner contemplated by Dawson J in Hospital Products.
It seems to me that whichever test (Hospital Products or Mothew) is accepted, the facts and circumstances set out in the ASOC are capable of giving rise to a fiduciary relationship. Whether in fact they ultimately do so is a matter for trial.
It may be important in this case, where there is no pleaded underlying agreement or contract that forms the basis of the fiduciary relationship, to recognise that the subject matter and extent of fiduciary obligations are to be ascertained not merely from the agreement of the parties but from the course of dealing pursued by them: Birtchnell v Equity Trustees Executors & Agency Co Ltd.[60] Where there is no identifiable contract or agreement pleaded as giving rise to a fiduciary relationship, it may nevertheless arise from the course of dealings between the parties, just as a contract or agreement may arise from such a course of dealings. Indeed this is a case where the facts pleaded point to the possibility of a meeting of the minds of the participants sufficient to enable the pleading of an agreement, as counsel for the plaintiffs conceded in argument.[61]
[60](1929) 42 CLR 384 at 408.
[61]Transcript p. 46.
The authorities to which Mr O’Bryan referred relating to the collocation ‘contract, arrangement or understanding’ where they appeared in s 45E of the Trade Practices Act 1974 (namely Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd,[62] and that case on appeal Communications Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission),[63] show that for an understanding in that context to be established it is necessary to prove a consensus or meeting of the minds under which one party or both parties commit to a particular course of action and that a mere expectation that a party or parties would act in a certain way is insufficient. That is little different from the relevant ordinary meaning of the word ‘understanding’. The Macquarie Dictionary definition that is the most apt to the current circumstances is: ‘a mutual agreement of a private or unannounced kind’.[64]
[62](2006) 157 FCR 162.
[63](2007) 162 FCR 466.
[64]3^rd Edition meaning 6.
The allegedly bare allegation of an understanding in this case is little different from the allegation of an agreement supported by appropriate particulars. Each is undoubtedly a conclusion and one of some generality. But that level of generality is not offensive in the context of the causes of action alleged in this case. It is in relation to the particulars that questions clearly arise.
On the face of the particulars to paragraph 50, without close analysis, it might be thought that there are sufficient facts pleaded to underpin the ‘understanding’. But a closer analysis shows:
(a)Extensive cross-referencing to the paragraphs which have no other apparent function than to support the ‘understanding’. Although, the facts in these introductory paragraphs are in chronological order, without close attention to the cross-referencing in the particulars to paragraph 50, they appear irrelevant and lead nowhere. They contain material by way of background facts which do not lead to the making out of the causes of action. They are not material facts forming essential parts of the causes of action pleaded. They are at best facts that provide material from which the understanding is to be inferred. They are unnecessary or irrelevant and tend to obfuscate the issues to be determined. They should be included in the particulars to paragraph 50. The paragraphs concerned are: 30, 31, 32, 33, 34, 36, 37, 38, 39, 40, 41, 48, 49;
(b)Particulars that are, at best, perplexing because they refer to meetings and documents without identifying what it is in the meeting or document that supports the ‘understanding’.
In relation to particulars that refer to documents, Counsel for the plaintiffs contended that because the documents referred to in the pleading form part of the pleading it is not necessary to plead the content of them. This misunderstands the rules of court relating to pleading. Rule 13.03 provides that ‘[t]he effect of any document or the purport of any conversation, if material, shall be pleaded as briefly as possible, and the precise words of the document or conversation shall not be pleaded unless those words are themselves material’. A mere reference to the document is insufficient. The opposite party is entitled to be told what is the alleged effect of the document relied upon.[65] It is true that there are authorities that support the proposition that a document referred to in a pleading becomes part of a pleading: Day v William Hill (Park Lane) Ld. [1949] 1 K.B. 632 at p. 639; and Carrick v Armstrong [1969] Q.R. 185 at p. 190. But those cases were not concerned with the adequacy of the pleading by reference to a document without any allegation of its effect. In Bloeman v Atkinson, Hanger CJ noted in relation to these cases that:[66]

In the first case [Day v William], the defendant had applied to strike out a statement of claim under the English Rule, O. 25, r. 4, which provided a means of getting rid of a pleading instead of demurring. As to this, the Queensland rule 6 in Order 29 shows that on a demurrer a Court may see documents referred to in a pleading. That the English Court should have a similar power on applications under O. 25 r. 4 is understandable. In the second case [Carrick v Armstrong], the statement of claim set out the effect of the contract being sued on; it stated that a copy of the contract was annexed and annexed a copy. The Full Court said that the contract became part of the statement of claim but I cannot regard the case as an authority for the broad proposition that because a document is referred to in a statement of claim, it becomes part of it. See Metropolitan Theatres Ltd. v. Harris (1935) 35 S.R.(N.S.W.) 228, at p. 233, per Jordan C.J. ‘The fact that the plaintiff refers to a document, and craves leave to refer to its contents, does not make it permissible for him or for the defendants to treat the whole document as embodied by reference in the pleadings; and both parties are restricted to the document as pleaded’… A plaintiff is not entitled to tell a defendant that his case is based on an identified document (which may contain five or fifty paragraphs—the number does not affect the principle) and leave the defendant to work out for himself what particular paragraph he thinks the plaintiff may be basing his case on. He is entitled to be told what the plaintiff says was the effect of the portion of the document which he relies on.

[65]Williams, Civil Procedure Victoria, paragraph 13.03.1, and the authorities there cited.

[66][1977] Qd R 291, 294–5.

The references in the particulars to paragraph 50 that offend this requirement are particulars A4, A6, A7, A8, A11, D2 and D3. They are not proper particulars and should be struck out.

Second Question – the alleged Fiduciary Duties

Second defendant’s Submissions

Ordinarily, the terms of an express contract, trust deed, partnership agreement or other instrument will define the duties of a fiduciary.[67] However, no agreement, contract or other instrument is relied on in this proceeding as a source of fiduciary duty.
[67]Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384 at 408; Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1.
The second defendant submitted that there are only two duties recognised and imposed under Australian law on a fiduciary. Those are the duties to avoid any conflict of interest and not to profit or benefit from the fiduciary obligation without full disclosure and consent.[68] The no profit duty is captured in paragraph 53(d). There are only three alleged breaches of this particular duty[69] in the ASOC.
[68]See Chan v Zacharia (1984) 154 CLR 178 at 198-9 per Deane J. The conflict rule and the profit rule were described as the two principal themes of fiduciary law in EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 at [407]–[414] per Beech J.
[69]See paragraphs 163(d), 224 and 230.
In Breen v Williams[70] Gaudron and McHugh JJ said:
In this country, fiduciary obligations arise because a person has come under an obligation to act in another’s interests. As a result, equity imposes on the fiduciary proscriptive obligations – not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach. But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed.” (Emphasis added)[71]
[70](1996) 186 CLR 71.
[71]At 113 and at 137-8 per Gummow J. This passage was cited with approval in Pilmer v Duke Group Pty Ltd (in liq) (2001) 207 CLR 165 at 198 per McHugh, Gummow, Hayne and Callinan JJ.

In Grimaldi the Court said that the obligation of loyalty imposed upon a fiduciary is expressed in two overlapping proscriptive ‘themes’ which govern the fiduciary’s liability to account to his or her own beneficiary. The best known formulation of these is that of Deane J in Chan v Zacharia (Chan):[72]

The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage.

[72](1984) 154 CLR 178 at 198-9 ; 53 ALR 417 at 433.

It was therefore submitted by Frank Hoh that the remaining alleged duties in paragraph 53 of the ASOC (and the resulting alleged breaches) have no legal or factual foundation. Some of them resemble the statutory duties imposed on directors and officers of companies,[73] namely:
(a)to exercise powers and discharge duties with due care and diligence;[74]
(b)to exercise powers and discharge duties in good faith in the best interests of the company and for a proper purposes;[75]
(c)to not improperly use their position or information obtained from their position to gain an advantage for themselves or to cause detriment to the company.[76]
[73]See ss 180 to 184 of the Corporations Act 2001 (Cth). A director and company is an established fiduciary relationship: see Hospital Products Ltd v United Surgical Corp (1984) 156 CLR 41 at 96-7 per Mason J.
[74]Section 180 Corporations Act 2001 (Cth).
[75]Sections 181 and 184 Corporations Act 2001 (Cth).
[76]Sections 182 and 183 Corporations Act 2001 (Cth).
Frank Hoh submitted that the statutory duties owed by directors are not fiduciary in nature: Permanent Building Society (in liq) v Wheeler.[77] In that case, Ipp J (with whom Malcolm CJ and Seaman J agreed) said:
The duty of a director to exercise care and skill is owed both in equity and in law … It is essential to bear in mind that the existence of a fiduciary relationship does not mean that every duty owed by a fiduciary to the beneficiary is a fiduciary duty. … The director’s duty to exercise reasonable care and skill has nothing do with any position of disadvantage or vulnerability on the part of the company. It is not a duty that stems from the requirements of trust and confidence imposed on a fiduciary. In my opinion, that duty is not a fiduciary duty…[78]
[77](1994) 11 WAR 187 at 235-6, 237 and 239.
[78]See also Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157 at [1978].
For these reasons, the paragraphs relating to the pleaded fiduciary duties which are not recognised by Australian law should be struck out.

Plaintiffs’ Submissions

The plaintiffs contended that the fiduciary duties pleaded in paragraph 53 are arguable as a matter of law.
Cases alleging breaches of fiduciary relationships are necessarily fact intensive, as a full understanding of the nature of, and events within, the relationship is necessary to determine whether fiduciary duties are owed and, if so, what duties.[79] This matter is not one that can be appropriately dealt with absent the evidence.
[79]Re Coomber; Coomber v Coomber [1911] 1 Ch 723 at 729 per Fletcher Moulton LJ, Bell Group v Westpac Banking Corporation (No. 9) (2008) 70 ACSR 1 at 269 [4550] per Owen J, Phipps v Boardman [1966] 2 AC 46 at 127 per Lord Upjohn.
In circumstances where the ‘boundaries [of the cause of action] are still developing’[80] it is ordinarily necessary to have regard to the evidence —not just the pleaded allegations—in order to determine the matter on its merits: Wickstead v Browne.[81]
[80]E A Negri Pty Ltd v Technip Oceania Pty Ltd (2010) 27 VR 31.
[81]Wickstead v Browne (1992) 30 NSWLR 1 at 16 per Handley and Cripps JJA. Applied in Abel v State Trustees Ltd [2013] VSC 20 at [36] per Almond J and Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222 at [13] per Dixon J.
What particular duties are owed is a question of law answered by reference to material facts alleged and the evidence led at trial. On an application to strike out a statement of claim the question ‘is whether it would be open to the plaintiffs upon the pleadings to prove facts at the trial which would constitute a cause of action’.[82] Whether the cause of action made out is that which the drafter had in mind is not relevant.[83] Thus, for example, if the allegations of fact set out in the statement of claim were made out at trial, the Court could find a breach of a fiduciary duty other than that pleaded in paragraph 53(c) of the ASOC.
[82]Mutual Life and Citizens Assurance Co Ltd v Evatt [1971] AC 793 at 801.
[83]Wickstead v Browne (1992) 30 NSWLR 1 at 16 per Handley and Cripps JJA.
The appropriate time for the determination of contested points of law is at trial (or perhaps, if the factual controversy is narrow, by determination of a preliminary issue).[84] For the pleading to stand, all the Court need be satisfied of is that the ASOC contains material facts that, if proved, would make out a fiduciary relationship and could give rise to a breach of fiduciary duty, whether or not the particular duty has been alleged.
[84]Noall v Middleton [1961] VR 285.
In any event, the duties alleged in the ASOC are duties that the Court could find to be owed in the circumstances. Frank Hoh concedes that the duty not to profit (paragraph 53(e)) is a recognised duty. The other duties[85] are in dispute (the disputed duties). The defendant’s submissions refer to various statutory duties of directors as having an apparent resemblance to the disputed duties.[86] One of the alleged similar duties is to exercise due care and diligence. It is no part of the plaintiffs’ case that such a duty was owed.
[85]Being the duties: (a) not to act other than in the best interests, (b) not to exercise the management power other than in the interests of the joint investors, (c) to act honestly and in good faith, and (e) not to exercises the management power contrary to the interests of the joint investors.
[86]Defendant’s submissions [29] – [32].
The disputed duties are entirely orthodox. In Mothew, Millett LJ described the content of a fiduciary’s obligations as follows:[87]
A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.
[87][1998] Ch 1 per Millet LJ at 18.
The plaintiffs pointed, particularly, to the statements in this passage that ‘a fiduciary must act in good faith’, that ‘he may not act for his own benefit or the benefit of a third person without the informed consent of his principal’ and that ‘this is not an exhaustive list’, so as to support the proposition that, contrary to Frank Hoh’s submission, there can be prescriptive fiduciary duties.
That passage has been cited and approved in numerous Australian cases since the decision of the High Court in Pilmer.[88] Chief Justice Warren made a similar point in Disctronics Ltd & Ors v Edmonds & Ors, a case concerning fiduciary duties arising from an joint venture relationship:[89]

The duties commonly imposed in an employment context are generally similar to those imposed in a joint venture. There is a duty to act honestly and in good faith, to act in the interests of the employer or joint venture and to avoid a conflict of interest and to treat confidential information as confidential and not to disclose it without consent. There is a further duty generally accepted not to cause detriment to the employer or the joint venture as the case may be: see, for example, Chan v Zacharia;[90] Phipps v Boardman;[91] Hospital Products Ltd v United States Surgical Corporation;[92] Colour Control Centre Pty Ltd v Ty.[93]Quite clearly, Edmonds and Cahill caused detriment to the joint venture by stealing the successful bid based upon confidential information obtained during their participation in the joint venture.

[88]See, for example, Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [11]-[12] per Finn J, ASIC v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 at [287]-[292] per Jacobson J, Ambridge Investments Pty Ltd v Baker & Ors [2010] VSC 59 at [12] per Vickery J, Thomas v SMP International (No 4) [2010] NSWSC 984 at [67]-[71] per Permbroke J, Hodgson v Amcor Ltd; Amcor Ltd & Ors v Barnes & Ors (2012) 264 FLR 1 at [1356] per Vickery J, Westpac Banking Corporation v Bell Group Ltd (In liq) (No 3) (2012) 270 FLR 1 at [1988] per Drummond AJA, [2718] per Carr AJA.

[89][2002] VSC 454 at [136]. (Footnotes omitted, emphasis added)

[90](1983-4) 154 CLR 178, 197-198.

[91](1967) 2 AC 46, 123.

[92](1984) 156 CLR 41.

[93]Unreported judgment of Santow J, Supreme Court of New South Wales, 24 July 1995.

Senior Counsel for the plaintiff, Mr Lucarelli, relied on the decision of the Court of Appeal of Western Australia in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (Westpac v Bell Group)[94] to support the existence of positive fiduciary duties. As Lee AJA observed in that case[95]
The prime task in a claim in equity for relief for breach of fiduciary duty will be first, as stated in Hospital Products at CLR 100; ALR 457 and CLR 102; ALR 458 per Mason J, to examine the matter on its merits to see if the essential elements of a fiduciary relationship are present. After that examination the nature of the duties that arise out of the core pledges of loyalty and trust in that relationship, and the extent to which any of those duties are fiduciary obligations, can be ascertained.
Comments made in Breen on the distinction between prescriptive and proscriptive duties must be read in the context of the particular facts of that case which concerned a very limited fiduciary relationship of patient and specialist medical practitioner. Neither the broad contractual relationship nor the narrower fiduciary relationship presented any obligation on the practitioner to provide access to personal records maintained by the practitioner in respect of the assessment and treatment of the patient. It followed that there was no duty to grant access to those records, let alone an argument that there was a fiduciary duty to do so. The foregoing comments in Breen were directed at rejecting the suggestion that mere existence of a fiduciary relationship per se could impose an obligation on a fiduciary to act in all circumstances in the interests of the other party to the relationship and that failure so to act would provide a right to relief in equity for breach of a fiduciary duty: at CLR 137-8; ALR 308-9; ALD 525-6 per Gummow J.
Rejection of that proposition was a plain statement of the orthodox. The disapproval expressed by Dawson and Toohey JJ (at CLR 95; ALR 275; ALD 495) in respect of the tendency in the United States and Canada for fiduciary relationships to be used for ‘creating new forms of civil wrong’ was qualified by an express statement that there had been no occurrence of such a development in Australia. Similarly, the comment in the reasons of Gaudron and McHugh JJ (at CLR 112-13; ALR 289; ALD 508) that ‘Australian courts only recognise proscriptive fiduciary duties’ has to be understood in the context in which it was made. As with the remarks of Dawson and Toohey JJ, it was directed squarely at what was regarded as an unacceptable development of law in Canadian jurisprudence. Likewise the comments of Gummow J (at 137-8; ALR 308-9; ALD 525-6) were directed at supporting the remarks of Gaudron and McHugh JJ on what was regarded as an unsatisfactory development of law of fiduciary obligation in Canada and the United States. Furthermore, (at 112; ALR 288; ALD 507), the comment by Gaudron and McHugh JJ was preceded by an acknowledgement that as Australian law stood an obligation on a fiduciary to provide information may arise under a ‘status-based fiduciary relationship’ where a ‘general fiduciary duty’ may arise or under a fiduciary relationship created by special circumstances that required provision and disclosure of information by the fiduciary. It must be remembered also, that Toohey and McHugh JJ had already accepted in Bennett that the positive or prescriptive duty imposed on the guardian in that case was a fiduciary duty.
Breen confirmed that developments in Canadian law on fiduciary obligations would not be adopted in Australia but it did not purport to alter or restate the existing law in Australia. His Honour (at [4569]-[4581]) duly analysed and properly applied the law in that regard.
[94](2012) 270 FLR 1 at [883]-[908] (per Lee AJA) and [1947]-[1978] (per Drummond AJA).
[95]At [899 ]-[900].
Lee AJA then demonstrated the existence of prescriptive duties arising in decided cases forming a part of the existing law of Australia.
Drummond AJA concluded after his review of the authorities that, in the context of directors’ fiduciary duties:[96]
To say that, so far as the fiduciary relationship of director and company is concerned, the only fiduciary obligations which will be recognised are the two proscriptive obligations mentioned does not appear to be consistent with the well-established rule that the scope of the fiduciary duties in a particular relationship will vary and is to be determined according to the nature of the relationship and the facts of the particular case: see Hospital Products Ltd v United States Surgical Corporation at 69 (Gibbs CJ), 102 (Mason J), United Dominions Corporations Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 11; Pilmer v Duke Group Ltd at [77]. Even in the case of an accepted category of fiduciary relationship, the scope of the relationship and the nature of the duties owed by the fiduciary in the circumstances of the particular case must be similarly determined. In Maguire v Makaronis (1997) 188 CLR 449, Brennan CJ, Gaudron, McHugh and Gummow JJ said (at 464):
The present case stands apart from those just mentioned because it involves both a fiduciary relationship within a well-recognised category [solicitor and client] as well as the claim to a well-established remedy. Nevertheless, even here, to say that the appellants stood as fiduciaries to the respondents calls for the ascertainment of the particular obligations owed to the respondents and consideration of what acts and omissions amounted to failure to discharge those obligations.
…
In my opinion, until the High Court declares the law to be otherwise, long established authority requires the duties of company directors to act bona fide in the interests of the company and to exercise their powers for proper purposes to be accepted as fiduciary ones even though they may require the directors to take positive action. Further, that the directors’ own interests may be involved or that they may be in a situation of conflict will not necessarily mean that they have breached their fiduciary obligations in taking such action, if their actions have benefited the company.
[96]At [1970] and [1978].
As Counsel for the second defendant pointed out, this aspect of the decision was challenged and special leave granted in the High Court. The point, so far as relevant here, was that the law only recognises proscriptive fiduciary duties, and not prescriptive fiduciary duties. That appeal did not proceed. So the state of the law is that there is a conflict between the opinions of Lee AJA and Drummond AJA in Westpac v Bell Group, and the law as determined by the High Court in Chan, Breen and Pilmer, and other cases.

Reasoning and Decision

A case must be very clear indeed to justify the summary intervention of the Court to prevent a plaintiff from submitting its case for determination.[97] Moreover, there is a need for caution in a case where the ultimate outcome turns upon the resolution of disputed issues of fact.[98] But in relation to the question of whether the law recognises fiduciary duties as extending beyond the two undoubted duties, the ‘no conflict duty’ and the ‘no profit duty’, does not depend on the resolution of disputed questions of fact in this case but, like the position facing Hollingworth J in P&V Industries Pty Ltd v Porto,[99] is a matter of law not dependant on first resolving any underlying factual dispute.
[97]Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 92 per Dixon J, as he then was.
[98]Webster v Lampard (1993) 177 CLR 598 at 602 per Mason CJ, Deane and Dawson JJ; P&V Industries Pty Ltd v Porto [2006] VSC 131 ; (2006) 14 VR 1 at [10].
[99][2006] VSC 131 ; (2006) 14 VR 1.
The ‘no conflict rule’ is, in essence, that a fiduciary is under an obligation, without informed consent, not to promote their personal interest by making or pursuing a gain in circumstances where there is a conflict, or real or substantial possibility of a conflict, between their personal interests and those to whom the duty is owed: Pilmer v The Duke Group Ltd (in liq) at [78];[100] Streeter v Western Areas Exploration Pty Ltd [No 2] (Streeter),[101]
[100][2001] HCA 31; (2001) 207 CLR 165 at [78]; EC Dawson Investments Pty Ltd -v- Crystal Finance Pty Ltd [No 3] [2013] WASC 183 at [411].
[101][2011] WASCA 17at [66], [372]; op cit EC Dawson Investments Pty Ltd -v- Crystal Finance Pty Ltd [No 3] [2013] WASC 183 at [411].
The ‘no profit rule’ is often formulated by reference to an account of profits. In Warman International Ltd v Dwyer[102] the High Court said that ‘a fiduciary must account for a profit or benefit if it was obtained ... by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position’.[103]
[102][1995] HCA 18; (1995) 182 CLR 544, 557.
[103]See Streeter at [73], [386]; op cit EC Dawson Investments Pty Ltd -v- Crystal Finance Pty Ltd [No 3] [2013] WASC 183 at [414].
Some of the duties alleged in paragraph 53 are, notwithstanding their negative form, positive in substance (paragraphs 53(a), (b) and (e)). The only other disputed duty is in paragraph 53(c) and is alleged as a duty to act honestly and in good faith as to the interests of the joint investors. These pleaded duties are inconsistent with the High Court authorities to which I have referred (which hold that fiduciary duties are proscriptive not prescriptive in character).
The views of Millett LJ in Mothew, relied on by the plaintiffs, do not add to the duties, but underpin them. When his Lordship spoke of the distinguishing obligation of a fiduciary being the obligation of loyalty, he was not identifying another duty, but a special feature of the relationship that gives rise to the proscriptive duties. This is made clear by the fact that the principal (or beneficiary) is entitled to the single-minded loyalty of his fiduciary. When Millett LJ spoke of this core liability having several facets, he went on to identify the very duties that under Australian law are the only duties recognised, to wit the ‘no profit duty’ and the ‘no conflict duty’. The obligation of the fiduciary to act in good faith is not a separate duty but another part of the basis for the two proscriptive duties.

The High Court authorities which hold that fiduciary duties are proscriptive, and not prescriptive, in character have frequently been applied by courts at first instance: Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq),[104] P&V Industries Pty Ltd v Porto,[105] Levy v Bablis,[106] and on appeal: for example see Du Boulay v Worrell;[107] St Alder and Ors v Waverley Local Council and Anor[108], (Allsop P, Beazley JA and Handley AJA); Blackmagic Design Ltd v Overliese[109] (Finkelstein, Jacobson and Besanko JJ) and Grimaldi (Finn, Stone and Perram JJ) at [174], [178].
[104][2001] FCA 1628 ; (2001) 188 ALR 566 at [32].
[105][2006] VSC 131 ; (2006) 14 VR 1 at [42]-[43].
[106][2007] NSWSC 565 at [18].
[107][2009] QCA 63 (Keane JA, Muir and Fraser JJA agreeing, at [32]-[34].
[108][2010] NSWCA 22 at [48], [57].
[109](2011) 276 ALR 646, at [93], [105]-[108].
In both P&V Industries Pty Ltd v Porto and Levy v Bablis, an allegation of such a duty was struck out. In P&V Industries the question was whether the law recognises a positive duty of disclosure in a fiduciary relationship. In Levy v Bablis the duty alleged was a positive duty to advise not to advance funds without security, and Gzell J, in an ex tempore judgment, followed P&V Industries. In Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq), Finkelstein J noted that:[110]
The conclusion that equity will impose a positive duty requiring a fiduciary to act in the interests of another person by disclosing information to that other person, appears to be at odds with principle. It is widely accepted that fiduciary obligations are only proscriptive: Breen v Williams (1996) 186 CLR 71 ; 138 ALR 259; Pilmer v Duke Group Ltd (in liq) (2001) 180 ALR 249 ; 75 ALJR 1067. So, that which is often regarded as a fiduciary obligation of disclosure should not be seen as a positive duty resting on a fiduciary, but a means by which the fiduciary obtains the release or forgiveness of a negative duty; such as the duty to avoid a conflict of interest, or the duty not to make a secret profit: R Nolan "A Fiduciary Duty to Disclose" (1997) 113 Law Quarterly Review 220 at 224.
[110]At [32].
On the other side of the ledger are the views recently expressed by the Court of Appeal of the Supreme Court of Western Australia in Westpac v Bell Group, decided in the context of directors’ duties; see also Commonwealth of Australia v Davis Samuel Pty Ltd (No 7) [2013] ACTSC 146 at [313]-[314] and Lacullo v Lacullo.[111]These cases stand in lonely isolation. They are at odds with decisions that bind me, particularly P&V Industries, but also, of course, the decisions of the High Court in Chan, Breen and Pilmer.
[111][2013] NSWSC 1517 at [106].
This is not a case where it can be said that the boundaries of the fiduciary duties available to the plaintiffs are still developing. So far as concerns the available fiduciary duties, the High Court has spoken and the boundaries are, for present purposes, not capable of movement at this level. The evidence will not change that conclusion.
In these circumstances I can follow no other course than to uphold the challenge to the prescriptive duties alleged in paragraph 53 of the ASOC.
It seems to me, however, that in large measure the two proscriptive duties can be made to work across the range of alleged breaches of duty. So, for example, the ‘no conflict duty’ gives rise to breaches where the fiduciary has acted in his own interests or promoted his personal interest by making or pursuing a gain in circumstances where there is a conflict, or real or substantial possibility of a conflict, between his personal interests and the interests of plaintiffs to whom the duty is owed.

Third Question – vague and irrelevant allegations, etc

Second defendant’s submissions

Frank Hoh submitted that in the paragraphs preceding the alleged joint investment understanding, there are pleaded historical matters which are not relevant to any pleaded cause of action, some of the matters relied on are particulars rather than material facts and the references to, and reliance on, Syarikat Ying Mui are vague, general and confusing. In some detail it was submitted by Frank Hoh that:
(a)paragraphs 4 to 49 relate to the Hoh family structure and historical matters and events occurring between 1985 and 2000. These matters are not material to any cause of action. They are calculated to raise false issues in the proceedings, which will tend to delay and complicate the case unnecessarily;
(b)some of the historical matters are relied on as particulars of the alleged ‘joint investment understanding’. If so, they should not be pleaded as material facts and should be confined to particulars;
(c)it is not clear how the activities of the Malaysian entity, Syarikat Ying Mui, are relevant to any of the claims in this proceeding.
Syarikat Ying Mui is first referred to in paragraph 10 of the ASOC where it is alleged that at the time Ying Mui was procured, ‘the Hoh family already had a company that was used for the Hoh family’s investments in Malaysia, namely Syarikat Ying Mui Sdn Bhd (Syarikat Ying Mui)’. That allegation is vague and no particulars or details are provided of Syarikat Ying Mui, its legal and beneficial ownership, its structure, its actual and intended use for family investments and/or what investments it made.
At paragraph 12, Syarikat Ying Mui is referred to in the particulars, presumably to support the allegation concerning ‘father’s intention’ as to the use and purpose of Ying Mui. That paragraph is not relevant to any claim.
Further, ‘father’s intentions’ (Robert having died in 1988) are irrelevant factually and legally. The only subsequent reference to ‘father’s intentions’ is in the particulars to paragraph 50 where it is relied on as a particular of the alleged joint investment understanding that the brothers would use Syarikat Ying Mui as an investment vehicle for investments in Australia.
Frank Hoh submitted that the particulars to paragraph 50 refer to ‘the custom and usage of the Hoh family, including father and mother, that upon the death of father each of the children would benefit equally from the assets of the family’. If that allegation is intended to include the activities of Syarikat Ying Mui, or the matters in paragraph 12, that should be made clear. There is no express reference to Syarikat Ying Mui in support of the allegation. In any event, so-called ‘custom and usage’, whatever it means, which is not embodied in a legally recognised category of subject matter, is irrelevant.
There is one later reference to Syarikat Ying Mui as a source of funding for Ying Mui’s and Amore’s operations.[112] Again, it is not clear how these allegations relate to the alleged breaches of fiduciary duty.
[112]See for example, particulars to paragraph 102.
For these reasons, Frank Hoh submitted, the paragraphs preceding the alleged joint investment understanding and those concerning Syarikat Ying Mui should be struck out.

Plaintiffs’ Submissions

The plaintiffs relied on the proposition that there is no class of case in which one ought to more carefully bear in mind the facts of the case[113] than one involving an alleged fiduciary relationship. This demonstrates the onus upon a plaintiff in a case where fiduciary duties are alleged to fully explain the facts and circumstances leading to the creation of the alleged fiduciary relationship, as well as the nature and incidents of the relationship, its scope and its subject matter.
[113]Re Coomber; Coomber v Coomber [1911] 1 Ch 723 at 729 per Fletcher Moulton LJ. See also: Bell Group v Westpac Banking Corporation (No. 9) (2008) 70 ACSR 1 at 269 [4550] per Owen J ‘In my view it is necessary to look closely at the facts of each individual case so as to identify the relationship between the parties, the functions that are to be performed within the relationship and the powers and duties attendant on the carrying out of the functions.’ See also, Phipps v Boardman [1966] 2 AC 46 at 127 per Lord Upjohn.
The plaintiffs’ ASOC traverses:
(a)factual matters over approximately 25 years, though the bulk of the allegations concern conduct after November 2000, (that is from the time the joint investment understanding was reached until the time that Ying Mui took steps to appoint a new trustee); and
(b)a range of conduct before the joint investment understanding was reached so as to contextualise both the joint investment understanding and the relationship of the joint investors.
The plaintiffs submitted that, although lengthy, the ASOC includes material necessary to put the defendants on notice as to the circumstances that the plaintiffs contend give rise to the fiduciary duties alleged and to inform the Court as to the chronological sequence of events.

Reasoning and Decision

I agree, generally, with the submissions of the second defendant that in the paragraphs preceding the alleged joint investment understanding, there are pleaded historical matters which are only relevant as background and a significant range of separate allegations are more properly characterised as particulars rather than material facts. I also agree that the references to, and reliance on, Syarikat Ying Mui are vague, general and confusing. Rather than deal at length in the body of these reasons with each and every paragraph that is the subject of complaint, I have made my observations in a table in the Schedule to these reasons.
The ASOC displays many features which are objectionable. The ASOC:
(a)   contains unnecessary or irrelevant allegations. There are references to historical matters of marginal background relevance and included are many proposed transactions which did not proceed and which clutter up the pleading. The offending paragraphs tend to obfuscate the issues to be determined. Some of this material may be appropriate as particulars of a course of conduct that provides the material foundation for the joint investment understanding;
(b)   contains a range of purported allegations that are properly to be regarded as particulars. The material facts should only be those relied on to establish the essential elements of the cause of action;
(c)    contains particulars that do not limit the generality of a pleading, as they should, so as to limit and define the issues to be tried (the particulars to paragraph 50);
(d) is so long and complicated, so encumbered with irrelevant and unnecessary material, and so cluttered with allegations that are more properly regarded as particulars, that the it is less intelligible than it should be and it is difficult to ascertain with precision the material facts that are alleged.
The objectionable parts of the pleading are so intertwined with the rest of the pleading that separation is difficult, making it appropriate to strike out the whole of the pleading.

Conclusion

The ASOC is overly long, difficult to follow, encumbered with unnecessary allegations and allegations of fact that should be no more than particulars. It pleads prescriptive fiduciary duties not open as a matter of law.
Having regard to the conclusions I have reached regarding the paragraphs that should be removed, the particulars to paragraph 50 that should be struck out, the fiduciary duties in paragraph 53 that are not open and the other pleadings identified in the Schedule that are either particulars only or need to be re-pleaded because of the decision as to the fiduciary duties, the whole ASOC should be struck out with leave to file and serve a Further Amended Statement of Claim.
Orders will be made accordingly. The costs should follow the event.

SCHEDULE

Kiang Po Hoh (and others) v Frosthollow Pty Ltd (and others) (SCI 2012 6147) Second Defendant’s summary of objections to Plaintiffs’ Amended Statement of Claim dated 20 March 2013

Paragraphs	Summary of relevant allegations	Objection	Decision
4 to 7	Details of Hoh family	Relevance, pleads particulars rather than material facts.	These paragraphs are introductory and by way of background. Although they do not directly allege material facts relevant to the pleaded causes of action, they do set the scene and should be allowed, whether in the current form or in another appropriate form.
9 to 18	History of Ying Mui from 1985 to 1999 including father’s intentions as to Ying Mui	Relevance, pleads particulars rather than material facts, delay fair trial of proceeding.	Paragraphs 9-12 are relevant only as particulars underpinning the Joint Investment Understanding. Paragraph 13 is irrelevant. The allegations in paragraphs 14- 18 are irrelevant to the causes of action pleaded and are at best explanatory background. Fathers Intention may be relevant as a particular to paragraph 50, but in its present form it alleges a state on mind that lacks proper particulars. The particulars to paragraph 12(b) are not proper particulars. They are assertions of intention and not facts from which the intention may be inferred.
26	Change to register of Ying Mui to better reflect father’s intentions	Relevance, pleads particulars rather than material facts, delay fair trial of proceeding.	This allegation rolls together a fact that is better viewed as a particular and an assertion that has no basis in the facts alleged, namely the phrase “so that the register of Ying Mui Pty Ltd better reflected father’s intention. It should be struck out and re-pleaded.
30 to 34	Richard and Derek ceasing to be shareholders of Ying Mui	Relevance, pleads particulars rather than material facts, delay fair trial of proceeding.	These are particulars. See paragraph 38 above.
36 to 41	Proposed use of Ying Mui by Robert, George Hoh and Frank Hoh	Relevance, pleads particulars rather than material facts, delay fair trial of proceeding.	These are particulars (See paragraph 38 above) or are irrelevant (transactions that did not proceed, at best particulars of a course of conduct evidencing the “understanding”.
44 to 69	Establishment of joint investment understanding between Robert, Frank Hoh and George Hoh, including the exercise of Management Power by Frank Hoh giving rise to fiduciary duties, initial implementation of joint investment understanding. The joint investment understanding the Management Power is the basis for all pleaded breaches of fiduciary duty.	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding. The joint investment understanding (which is not said to be binding) is unknown to the law as a basis for a fiduciary relationship. Further, the alleged content of the duties goes beyond those recognised in Australia.	Paragraph 46 referring to the Red House dispute is irrelevant and should be struck out. Otherwise objection rejected except as outlined in the Reasons at paragraphs 32 to 40.
75 to 97	First alleged breach of fiduciary duty in 2001	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	In light of the decision regarding the duties pleaded in paragraph 53, these alleged breaches need to be re-pleaded.
99	December 2001 variation to joint investment understanding	Does not disclose a cause of action, embarrassing, delay fair trial of proceeding.	Objection rejected. This allegation demonstrates that the joint investment understanding is properly characterised as an agreement or an agreement, arrangement or understanding.
101 to 109	Further actions toward joint investment understanding in early to mid- 2002	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	Objection that no cause of action disclosed rejected. However these allegations are all particulars of moneys transmitted and properties purchased pursuant to the joint investment understanding.
116 to 132	Second alleged breach of fiduciary duty and further actions toward joint investment understanding in late 2002	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	116-117: In light of the decision regarding the duties pleaded in paragraph 53, these alleged breaches need to be re-pleaded. 118-132: these allegations are all particulars of moneys transmitted and properties purchased pursuant to the joint investment understanding.
135 to 159	April 2003 variation to joint investment understanding and further actions toward joint investment understanding between 2003 and March 2007	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	Objection rejected. These allegations demonstrate that the joint investment understanding is properly characterised as an agreement or an agreement, arrangement or understanding. However, some paragraphs are merely particulars: 144-159.
163	Fifth alleged breach of fiduciary duty in 2007	Does not disclose a cause of action, embarrassing, delay fair trial of proceeding.	In light of the decision regarding the duties pleaded in paragraph 53, these alleged breaches need to be re-pleaded.
167 to 172	Further actions toward joint investment understanding in mid-2007 and	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	See ruling re paragraphs 135-159.
174	Transfer of shares from Robert to Han Hoh in accordance with joint investment understanding	Does not disclose a cause of action, embarrassing, delay fair trial of proceeding.	Objection rejected. Material facts alleged entitling Robert to claim.
175	Continued operation of joint investment understanding for benefit of Robert, Frank Hoh and Han Hoh	Does not disclose a cause of action, embarrassing, delay fair trial of proceeding.	Same as 174.
180 – 191	Further actions toward joint investment understanding between mid-2008 and 2009 including alleged sixth and seventh breach of fiduciary duties	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	Objection rejected. Particulars to paragraph 180 required. 181 – 185 are particulars. 186: this paragraph contains material allegations. 187: is unclear and needs re-pleading. 188 -191: needs to be re-pleaded in light of the decision regarding the duties pleaded in paragraph 53.
194, 195	Eighth alleged breach of fiduciary duty in 2010 by reason of wrongful entry into management fee agreement	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	These paragraphs need to be re-pleaded in light of the decision regarding the duties pleaded in paragraph 53.
198 to 199	Ninth alleged breach of fiduciary duty in 2010 by reason of wrongful entry into management fee agreement	Do not disclose a cause of action, embarrassing, delay fair trial of proceeding.	These paragraphs need to be re-pleaded in light of the decision regarding the duties pleaded in paragraph 53.

SCHEDULE OF PARTIES

KIANG PO HOH (ALSO KNOWN AS GEORGE HOH HOH)

First Plaintiff

HAN HOH KEYET HOH

Second Plaintiff

and

FROSTHOLLOW PTY LTD
(A.C.N. 151 816 401)

First Defendant

KIANG NGAN HOH (ALSO KNOWN AS FRANK HOH)

Second Defendant

YING MUI PTY LTD
(A.C.N. 002 992 449)

Third Defendant

AMORE CORPORATION PTY LTD
(A.C.N. 097 964 175)

Fourth Defendant

[2014] VSC 77

7 March 2014