Jieyun International Investments Pty Ltd v Toorak Development Group Pty Ltd
[2022] VSC 387
•11 July 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2018 00919
| JIEYUN INTERNATIONAL INVESTMENTS PTY LTD (ACN 612 359 064) | Plaintiff |
| v | |
| TOORAK DEVELOPMENT GROUP PTY LTD (ACN 615 889 640) and others | Defendants |
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JUDGE: | Riordan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 March 2022 20 June 2022 |
DATE OF JUDGMENT: | 11 July 2022 |
CASE MAY BE CITED AS: | Jieyun International Investments Pty Ltd v Toorak Development Group Pty Ltd and ors |
MEDIUM NEUTRAL CITATION: | [2022] VSC 387 |
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TRUSTS – Loan money advanced for an ‘Approved Purpose’ – Principles with respect to whether loan money subject to a trust – Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 considered.
TRUSTS – Mixed fund – Whether repayments to the trustee were impressed with the trust –Whether misappropriated money was held on trust for the plaintiff.
EQUITY Principles of liability of third parties as accessories to a breach of trust – Whether defendants liable for knowing assistance for transferring trust money in breach of trust – Whether defendants liable as recipients of trust money.
MISLEADING AND DECEPTIVE CONDUCT – Whether defendant represented that funds would be used for settlement of land contracts – Whether reasonable grounds for representation – Whether plaintiff established reliance on the representation.
MISLEADING AND DECEPTIVE CONDUCT – Whether failure by defendant to disclose the result of a planning decision was misleading and deceptive – Whether but for non-disclosure plaintiff would have withheld further advance.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Hayes QC with Mr O Wolahan | Hiways Lawyers |
| For the Thirteenth Defendant | Mr D Carlile | Interise Legal |
Contents
Background
Questions to be Determined
Mr He’s knowing assistance in the SMM payments
Mr He’s knowing assistance in the Xu payment
Mr He’s settlement representations
Mr He’s silent settlement representations
Principles of accessorial liability of a third party to a breach of trust
Were the Jieyun Advances held by TDG on the Jieyun Trust?
Jieyun’s submissions
Mr He’s submissions
Principles
Conclusion
Was the transfer of the Balint payment from funds held by TDG on the Jieyun Trust?
Mr He’s submissions
Jieyun’s submissions
Conclusion
Was the Balint payment a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Mr He’s submissions
Conclusion
Were the Sentosa Capital payments a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Mr He’s submissions
Conclusion
Were the SMM payments a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Mr He’s submissions
Conclusion
By the SMM payments, did Mr He assist in the dishonest and fraudulent breach of the Jieyun Trust?
Submissions
Conclusion
Did Mr He know of the essential facts constituting the dishonest and fraudulent breach of the Jieyun Trust by the SMM payments?
Jieyun’s submissions
Mr He’s submissions
Conclusion
Was the Xu payment a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Mr He’s submissions
Conclusion
By the Xu payment, did Mr He assist in the dishonest and fraudulent breach of the Jieyun Trust?
Submissions
Conclusion
Did Mr He know of the essential facts constituting the dishonest and fraudulent breach of the Jieyun Trust by the Xu payment?
Submissions
Conclusion
Did Mr He make the Settlement Representation?
Jieyun’s submissions
Mr He’s submissions
Principles – what is the test for determining whether a representation has been made?
Conclusion
Did Mr He have reasonable grounds for making the Settlement Representation?
Jieyun’s submissions
Mr He’s submissions
Conclusion
But for the Settlement Representation, would Jieyun have avoided the loss of the Second Tranche or part of it?
Jieyun’s submissions
Mr He’s submissions
Conclusion
Did Mr He make the Silent Settlement Representations
Jieyun’s submissions
Mr He’s submissions
Principles
Conclusion
But for the Silent Settlement Representations would Jieyun have avoided the loss of the Second Tranche or part of it?
Jieyun’s submissions
Mr He’s submissions
Conclusion
Undefended claims
Agreements and loan deeds
Payments and transfers
Jieyun debt claim
Breach of Trust by TDG
Liability of Mr Cvek and Mr Mihailescu under the second limb of Barnes v Addy
Liability of corporations associated with Mr Cvek and Mr Mihailescu under the first limb of Barnes v Addy
8 Hopetoun Rd
Hennessy Group
East Asia
Aberdeen Holdings Pty Ltd
Hopetoun Development
Granville
Sentosa Capital
Mandeville
Orders
SCHEDULE 1
SCHEDULE 2
SCHEDULE 3
HIS HONOUR:
By writ filed 21 August 2018, as amended on 8 October 2018 and 5 December 2019, and by the second further amended statement of claim filed 28 March 2022, the plaintiff (‘Jieyun’) claims relief against the first to fifteenth defendants arising out of the advance of the sum of $8 million by Jieyun to the first defendant, being Toorak Development Group Pty Ltd (‘TDG’) pursuant to a loan deed dated 20 September 2017 (‘the Loan Deed’) as part of a venture to develop apartments on properties at 1093 to 1095 and 1097 to 1099 Malvern Road, Toorak (‘the Toorak Properties’).
The claim against the fourteenth defendant (‘Mr Balint’) settled prior to trial and, with the exception of the thirteenth defendant (‘Mr He’), the trial proceeded on an undefended basis.
In these reasons, I propose to first deal with the claims against Mr He and the eleventh defendant, being Sentosa Marketing and Management Pty Ltd (‘SMM’). Mr He was a director and shareholder of SMM and conducted much of his business through SMM. The claims against both are closely related and are in summary as follows:
(a)A claim for equitable compensation from Mr He and SMM for:
(i)the sum of $155,156 arising from the transfer of that sum by the eighth defendant, being Sentosa Capital Pty Ltd (‘Sentosa Capital’) to SMM on 4 September 2018, in breach of trust; and
(ii)the sum of $150,000 arising from the transfer of part of that sum by SMM to Mr Hening Xu in Hong Kong on 11 September 2018 in breach of trust.[1]
(b)A claim for damages of $4 million against Mr He for alleged misleading and deceptive conduct, in contravention of s 18 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (‘the ACL’), based on the alleged misrepresentation that the second tranche of funds of $4 million payable by Jieyun under the Loan Deed would be used to complete the settlement of the purchase of the Toorak Properties (‘the Settlement Representation’).
(c)A claim for damages of $2 million against Mr He for alleged misleading and deceptive conduct, in contravention of s 18 of the ACL, based on a failure to disclose that the Victorian Civil and Administrative Tribunal (‘VCAT’) had declined the planning permit for the development of the Toorak Properties (set out further in paragraph 102 below and defined there as ‘the Silent Settlement Representation’.
[1]In various documents, Mr Hening Xu is also referred to as Mr Xu Hening. With no disrespect intended, I refer to him throughout these reasons as ‘Mr Xu’.
Background
Mr He was born in China and moved to Australia in 1997. In 2011, he registered Leimeng Investment Pty Ltd (‘Leimeng‘) with his then business partner to develop a property in Croydon, which was completed in 2016.
On 9 March 2016, Sentosa Capital was registered with the third defendant (‘Mr Mihailescu’) as the sole director and shareholder.[2] In its promotional material, Sentosa Capital was described as ‘an Australian high-end low-density apartment property development management and investment company focused on the Toorak Premium Apartment project in Melbourne's traditional wealthy district’.
[2]Although Mr Cvek is shown as having being appointed as a director and secretary on 22 April 2019 and ceasing on the same date.
In May 2016, Guihong Zhu (‘Mr Zhu’) and Liang Lou (‘Mr Luo’), with whom Mr He had been acquainted since September 2015, enquired whether it might be possible to invest in a property project together. They agreed they had a total of $3 million to invest and started the search for potential project sites.
By September 2016, it had been decided that their investment vehicle would be the Leimeng Unit Trust (‘the Leimeng Trust’), of which Leimeng was trustee, and the unit holding was split 34%, 33% and 33%.
After meeting the second defendant (‘Mr Cvek’) through a senior manager at the National Australia Bank in September 2016, Mr He arranged a meeting at a coffee shop in Box Hill with Mr Cvek and Mr Mihailescu to discuss potential property investments.
In October 2016, Mr He arranged a further meeting with Mr Cvek, Mr Mihailescu, Mr Zhu and Mr Luo at a coffee shop in Toorak. At this meeting, a number of projects were discussed including a proposed development of the Toorak Properties. Mr Cvek produced a feasibility report which showed an annualised return per unit per annum over 27 months of 23.54%.
After the meeting, it was agreed that Leimeng would invest a total of $8 million, comprised of:
(a)$4 million from Mr Zhu; and
(b)$2 million from each of Mr Lou and Mr He.
In September and October 2016, Mr Cvek entered into the following contracts of sale with respect to the Toorak Properties:
(a)on 24 September 2016, a contract of sale to purchase the property more particularly described as Lot 1 on registered plan number TP093370D in Certificate of Title Volume 10086 Folio 350, being 1097-1099 Malvern Road, Toorak, for $6,850,000, with the settlement date of 28 February 2018; and
(b)on 26 October 2016, a contract of sale to purchase the property more particularly described as Lot 4 on registered plan number PS005543 in Certificate of Title Volume 3667, Folio 291, being 1093-1095 Malvern Road, Toorak, for $8,250,000 with the settlement date of 28 March 2018,
(collectively, ‘the contracts of sale’).
In November 2016, it was agreed that Mr Zhu would transfer 12.5% of his units in the Leimeng Trust to a friend of his, Mr Chen, in consideration of Mr Chen investing $1 million in Leimeng, thereby reducing Mr Zhu’s investment to $3 million.
On 14 November 2016, TDG was incorporated as a special purpose vehicle for the development of the Toorak Properties. The directors were Mr Cvek, Mr Mihailescu and Mr He. By nomination forms dated 14 November 2016, Mr Cvek nominated TDG as the purchaser under the contracts of sale.
In or around February 2017, Mr Chen and (according to Mr He) Mr Zhu, introduced Mr He to Mr Yong Huang and Ms Acai Ren at a social occasion. After the meeting, Mr He provided Mr Huang the following documents by WeChat message:
(a)on 1 March 2017, the Chinese version of a brochure for Sentosa Capital; and
(b)on 10 March 2017, the web address for Sentosa Capital.
In July or August 2017, Mr Huang says he was told by Mr He and Mr Chen about the fact that they had invested in the development of a four or five level apartment building in Malvern Road and that Mr Huang should consider investing.
The next day Mr Huang says that Mr Chen drove Mr Fei Song, a close friend of Mr Huang and him to see the Toorak Properties and several other properties in Toorak which Mr Huang was told had been developed by Mr Cvek. They then drove to an office in Toorak for a meeting with Mr He, Mr Mihailescu and Mr Balint. At the meeting, Mr Huang and Mr Song were provided with project documents and plans, much of which Mr Huang could not read because they were in English.
Either on the same day or shortly after, Mr Huang and Mr Song met with Mr He at a café in Glen Waverley. Mr Huang and Mr Song decided that they would jointly invest in the Toorak Properties.
On 29 August 2017, Jieyun was registered, with Mr Song and Ms Ren being the directors and shareholders, holding 50 shares each.
In late August 2017, Mr He organised a dinner on Albert Park Lake to celebrate the Mid-Autumn Festival, on behalf of Sentosa Capital. There were approximately 70 or 80 people in attendance; and Mr Chen drove Mr Song, Mr Huang and Ms Ren to the function.
On 3 September 2018, Mr Huang returned to China and shortly thereafter Mr He and Mr Zhu travelled to visit him in Bo Zhou, Anhui Province, China. During the course of the visit, Mr Huang told Mr He that he and Mr Song would make a joint investment of $8 million in the Toorak Properties.
By WeChat message of 12 September 2017 to Ms Ren, Mr He stated:
Which day will you be free? So I can get the lawyers to go to [the accountant’s] place to interpret the contract and the feasibility report to you.
By the Loan Deed, Jieyun agreed to make a loan to TDG of $8 million to assist TDG to ‘purchase, develop and construct’ the Toorak Properties on terms including the following:
(a)The advance was to be made in two tranches of $4 million each, payable by no later than 22 September 2017 (‘the First Tranche’) and 1 December 2017 (‘the Second Tranche’) (cl 3.2).
(b)The term ‘Approved Purpose’ was defined in cl 1.1 as:
(a) the purchase by TDG of the Toorak Properties; and
(b)the payment by TDG of development and construction expenses related to the Toorak Properties.
(c)The parties acknowledge and agree that the Loan must only be used for the Approved Purpose (cl 3.3).
Pursuant to cl 5 of the Loan Deed, Jieyun agreed not to charge interest, and under cl 4.1(c) it was a condition precedent that Jieyun would subscribe for 130 units in the Toorak Development Group Trust No 1 for 10 cents per unit.
The Loan Deed was signed by:
(a)Mr Song and Ms Ren as directors of Jieyun; and
(b)Mr He and Mr Balint (as Mr Cvek’s attorney under power), as directors of TDG.
By Unit Trust-Fixed Deed dated 20 September 2017 (‘the Unit Trust Deed’), the Toorak Development Group Trust No 1 (‘the TDG Unit Trust’) was established. The Unit Trust Deed recorded the unit holdings in the TDG Unit Trust as a total of 1000, held as follows:
(a)820 units by Rothman Piper Investment Group Pty Ltd, as trustee of the Cvek Family Trust No 8;
(b)50 units by Leimeng; and
(c)130 units by Jieyun.
The Unit Trust Deed was signed by:
(a)Mr Song and Ms Ren as directors of Jieyun;
(b)Mr He and Mr Zhu as directors of Leimeng;
(c)Mr He and Mr Balint (as Mr Cvek’s attorney under power) as directors of TDG; and
(d)Mr Balint (as Mr Cvek’s attorney under power) as the sole director of Rothman Piper Investment Group Pty Ltd.
By letter dated 22 September 2017 to TDG, Mr He stated:
Please be advised that as I am the approved representative of Jeiyun International Investments Pty Ltd (Jeiyun) [sic] ACN: 621 359 064, and have been appointed to act, communicate and disclose information on behalf of Jeiyun [sic] to TDG.
Additionally, we request that any and or all information relating to the TDG project be communicated to me and I have the necessary authority to share and communicate decisions on behalf of Jeiyun [sic] to TDG.
In accordance with the Loan Deed, Jieyun paid the sum of $8 million to TDG (‘the Jieyun Advances’) in the following payments:
(a)25 September 2017: $1.8 million (‘the First Portion of the First Tranche’);
(b)3 October 2017: $2.2 million (‘the Second Portion of the First Tranche’);
(c)28 February 2018: $2 million (‘the First Portion of the Second Tranche’); and
(d)5 March 2018: $2 million (‘the Second Portion of the Second Tranche’).
On 25 September 2017, Jieyun transferred the First Portion of the First Tranche to TDG’s Westpac account number 444101 (‘the TDG Account 4101’) from Jieyun’s Westpac account No 012280.
On 28 September 2017, Mr Song gave Mr He a cheque drawn on the same Jieyun account for the Second Portion of the First Tranche. The Second Portion of the First Tranche was debited to Jieyun’s account and credited the TDG Account 4101 on 3 October 2017.
On 28 September 2017, Mr Song returned to Melbourne from China. Mr He drove him to TDG’s office in Toorak where he signed the Loan Deed and the Unit Trust Deed.
By document dated 25 September 2017, Mr He resigned as a director of TDG, purportedly from 25 September 2017. However, the document was not lodged with ASIC until 21 October 2018.
By WeChat message of 17 October 2017 to Mr Zhu’s wife, Ms Ren stated:
But I have heard [Mr He] saying that we are investing in the same apartment. Initially only 4 levels could be built, and subsequent application has been made to the government for another level.
On 6 November 2017, Mr He says that he arranged for the purchasing of tables at the ‘Asian Executive 2017 Melbourne Cup Horse racing festival Charity evening’, which was sponsored by Sentosa Capital (‘the Melbourne Cup Charity Event’). Promotional material from the evening, which was posted online, contains a photograph that included Mr Cvek, Mr Mihailescu and Mr He with the description: ‘Sentosa Capital Senior Management Team’. Later in the document, under ‘Sentosa Capital Company Profile’, there are photos of individuals labelled: ‘Our Team - Sentosa Capital’, which includes Mr He who is described as ‘Director’.
On 13 November 2017, SMM was registered with Mr He, Mr Hao Liang and Mr Cvek as the directors. Mr He is recorded as holding 67 out of a total of 100 issued shares.
On 27 November 2017, Mr He says he organised the ‘2017 Sentosa Cup Huayi Team President Cup golf Elite Invitational’ at Moonah Links Golf Course on the Mornington Peninsula (‘the Moonah Links Golf Event’). It was sponsored by Sentosa Capital. In the promotional material posted online, under the heading ‘Our Team - Sentosa Capital’, Mr He is again included and described as ‘Director’.
By WeChat message of 29 November 2017 to Mr Huang, Mr He stated:
To each shareholder our project has already made some progress the plan and our design is now confirmed we have 5 floors and 28 apartments. The total area available for sale is 7,000 sq metres. There are 8 people who have objected to our project. However, have confidence we will obtain the permit but we need to go to VCAT on 31 Jan 2018 to achieve the best outcome. Our legal team is made up of Chis Townsend and Peter Small who are leaders in the legal field and all the work has been confirmed to be finished during the middle of December. We have increased our HR as we are preparing the project progress report in Chinese. Because there are a lot of documents to be translated we still need several days, the market is strong, and sales will exceed expectations. We still do not know if we can maximise the profit but this is highly possible. Please wait for the Chinese report in detail. Thank you.
By WeChat message of 17 January 2018 to Mr Huang, Mr He attached a project report. In the report, the ‘project overview’ stated:
Land Transaction Price: $15,100,000 The scope of investment: 18 months, four stories, 20 apartment units
Project status: Project planning has·been submitted to the local council government, the 31st of January 2018 VCAT
Total project area: 6526m2
Sales Area: 5387m2
Estimated Selling Price: $86,192,000
Expected development profit: 55.40%
Estimated completion time of the project: mid-2019.The report included a table, which estimated that the annual return rate for the project would be greater for a four-storey project than a five-storey project. It noted that a four-storey project has the following advantages:
1.The construction period is shortened. The retrieve of funds will be faster than expected for several months.
2.In contrast to selling 28 apartments, the 20 apartments of the new plan will reduce the impact of the project on the local housing market. At the same time, it allows our designers to make a better design for each apartment of the project hence making the price per square meter higher.
After successfully obtaining the permit for the four-storey apartment plan, we may continue to apply for the permit of the five-storey plan. However, after taking into account many factors including time, we believe that applying for the permit for the four-storey apartment plan is the best choice for the project at the moment. This plan maximizes the project earnings while ensures no delay to the construction period.
By WeChat message of 23 January 2018 to Mr Song, Mr He stated:
Dear Shareholders, the part two investments are to be completed [paid] by the end of 2017 as agreed originally, but because VCAT has been scheduled on 31st January this year, I did not notify everyone to invest before the finalization of the ultimate proposal. It won't make sense either to keep the money in the account for two months. The current situation … is clear, we will obtain the permit in February and start presale. Please refer to the project progress report sent a few days ago for details. Currently, we need to settle the two lots of lands with clear fund before the end of February. As we need to quickly prepare for the construction loan the lands must be paid in full and obtain clear title. This way, the bank will be able to loan us the full construction loan. Everyone please prepare your investment fund. I have arranged for the shareholders' meeting on 10/11 February, and DALI will be back to MELBOURE on 7th, apart from him, architect, town planner, VCAT lawyer, sales consultant and others will also be attending the meeting. Thanks!
On 11 February 2018, there was a meeting of TDG’s shareholders at a restaurant in Docklands, attended by Mr Cvek, Mr Mihailescu, Mr Balint, Mr Scott Stewart (a planner), Mr Song, Mr Huang, Mr Zhu, Mr Chen, Ms Yan Liang (Mr Chen’s wife), Mr David Xue (Jieyun’s lawyer) and Mr He and Ms Sammie Liang. At the meeting, Mr Huang complained that Leimeng held 20% of the units in the TDG Unit Trust while Jieyun only held 13% of the units.[3] Mr Huang insisted on an increase to Jieyun’s unit holding before the Second Tranche would be paid.
[3]It was not explained how Leimeng’s interest in the Unit Trust had increased from 5% referred to in the Unit Trust Deed, to 20%.
By WeChat message of 12 February 2018 to Mr Huang, Mr He stated:
I have negotiated with DALI [Cvek], recalculation was done, and has helped you [plural] secure 16%. Therefore, your annual return would be similar to our investment return.
Hope you will be satisfied. Thanks!
I will amend the contract shortly.
Mr Huang replied on the same day saying: ‘Got it I will forward it to Chief SONG for him to take a look’.
By WeChat message of 14 February 2018 to Mr Huang and Mr Song, Mr He stated:
Dear all, I talked to DALI yesterday, in fact up to now the project is trending positively. In relation to the shareholding ratio fluctuating according to cash invested, at present there has not been specific figures to be based on. In actual fact there has been no fundamental difference in the opinions of the two parties. The difference only lies in their ways of thinking. DALI and I have been leaning towards protecting the rate of return, as it is simple and clear. Otherwise at every juncture, one has to recalculate the figures which is not feasible at all. Now the various parties have all understood the proposition of one another and the questions and requests brought up, everyone is also slowly resolving their difference. At the moment the most important matter is for the balance of the fund to be put in place at the end of the month (latest 9th March), otherwise if the settlement fails, it will put us on the back foot and lead to a situation beyond redemption, with everything back to zero. Therefore currently we must all try hard to ensure the funds are in place in a timely manner. Thank you and wish you a happy Chinese New Year and happiness in your families!
DALI will give 3% to Chief HUANG and Chief SONG's side. This will be added to the contract later.
In mid-February 2018, Mr Cvek proposed the execution of an agreement called ‘Terms of Settlement’ between Mr Cvek and Jieyun on the basis that Mr Cvek would transfer 5% of his unit holdings in the TDG Unit Trust to Jieyun. Mr Huang referred these terms to his lawyer.
The Terms of Settlement stated that the transfer of units from Mr Cvek to Jieyun would be ‘[i]n consideration of [Jieyun] paying the amount of $4,000,000 by no later than 28 February 2018’.
By WeChat message of 23 February 2018 to Mr He, Mr Huang stated:
I am on board a flight. Just now my lawyer messaged me to say that several clauses in the agreement are too harsh. Please communicate with him/her. Also, the (4 million) will be in place before the 28th. Can you tell him/her, [Mr He]?
After an exchange of WeChat messages on 24 February 2018, Mr He replied to Mr Huang stating:
[I]f we communicate, at the end of the day, it will still be the lawyers who will make the decisions. Then it will be better to get the lawyers to talk to each other. I just want to state one point that I have been protecting the security of our funds throughout, and there is nothing deceptive or unfounded in this.
On 25 February 2018 at 1:33 pm, Mr Zhu commented in a WeChat message group called ‘Toorak team of four – Leimeng (7)’:
I had a look at Mr. Huang’s supplementary agreement, and I really felt that his lawyer was a little fussy, making suggestions carelessly without considering the actual situation.
On the same day at 4:25 pm, Mr Zhu again said in the same WeChat message group:
@Lei He
Mr. Huang has basically been convinced.
After further WeChat message exchanges between Mr Huang and Mr He, on 28 February 2018, the First Portion of the Second Tranche was transferred from Jieyun’s Westpac account No 012280 to TDG’s Westpac account No 444259 (‘the TDG Account 4259’).
By email of 1 March 2018 to Mr Cvek, Mr Balint, Mr Mihailescu and others, Mr Scott Stewart attached VCAT’s decision, which refused TDG’s application for a planning permit (‘the VCAT Decision’), and stated:
Attached is the Tribunal’s decision which despite being dated 15 February 2018 was not sent to us at that time.
Unfortunately the Tribunal has refused the application. The main reason is neighbourhood character and the lack of separation in the front and rear facades. The Tribunal was also concerned about the depth of the apartments and concerned about internal amenity as a result, despite the size and quality of the apartments. As I have mentioned, this is a regular cause of concern to Tribunal members at present.
I am surprised and disappointed in the decision obviously. It was not what was anticipated given how the hearing ran, but these were of course always major issues for us to overcome.
The Tribunal has given reasonably clear guidance however about what it finds acceptable about the proposal which means any new application should be able to respond well to those matters and there should be strong prospects of success. Of course you will need to respond to the new planning controls including the Better Apartment Design Standards and the revised schedule to the Zone.
One option you may wish to consider would be to look to seek review of the decision to the Supreme Court on a question of law. It is not immediately apparent what such a question may be, but I recommend we obtain advice from senior counsel about this if you wish to consider. You have 28 days from the date of the decision to seek leave, so approximately 2 weeks from now. Although you are unlikely to succeed in such a leave application, it might be possible to attempt to reach a negotiated position with the Council and other parties about a modified design which could then either be approved by the Court, or remitted to VCAT to approve. This would of course be very difficult to achieve, so it may be that a new application is a more worthwhile option, provided that the new planning controls do not greatly impact on what can be achieved on the site so this should be looked at immediately.
There are of course lessons in this for Toorak Road and Glenferrie Road hearings. In particular for Glenferrie Road, it again demonstrates why Council and neighbours are keen to see a break in the rear façade like that in the front. It may be sensible for us to make that additional change before we distribute the plans.
Please let me have your thoughts as soon as possible about a possible application for leave to the Supreme Court.
On 1 March 2018, Mr He telephoned Mr Balint and informed him that the application for the planning permit had been rejected by VCAT.
On 5 March 2018, the Second Portion of the Second Tranche was paid from Jieyun’s Westpac account No 012280 to the TDG Account 4259.
By WeChat message of 7 March 2018 to Mr He, Mr Cvek explained the background to the investment in the Toorak Properties and stated that, following the VCAT Decision, if no permit is granted, consideration could be given to selling the site. It included the following:
At no point was any investment subject to permits being granted or any other conditions. …
TDG in its ordinary course of business is required to undertake all actions necessary in order to obtain a permit in order to move to the next step. The directors of which have an obligation to the company to ensure that it continues to make every effort to do whats [sic] in the best interest of the company.
At the current stage we have had a permit declined with a clear indication of what changes are required in order for this to be resubmitted. The decision is far from a negative one.
By WeChat message of 7 March 2018 to Ms Ren, Zheng Huang (Mr Zhu’s wife) sent TDG’s bank statement that showed substantial amounts transferred out of it; and forwarded on the above WeChat message of 7 March 2018 from Mr Cvek, referring to the VCAT Decision.
By email of 8 March 2018 to Mr Scott Stewart and others, Senior Counsel stated:
I’ve read the reasons and, although hard line on the merits, I can’t see any legal error.
It really is so easy for the tribunal to find a hook upon which to hang a refusal given the myriad of dot points in policy. To give great weight to a neighbourhood character policy consideration about rhythm and spacing of buildings in an acknowledged area for substantial change isn’t a fair balance. But sadly we can’t say they didn’t have regard to relevant matters etc.
By invoice number 1803 dated 20 March 2018 (‘Invoice 1803’) and invoice number 1801 dated 30 March 2018 (‘Invoice 1801’), both issued to TDG, SMM claimed respectively:
(a)By Invoice 1803, the sum of $76,780 (inclusive of GST) for:
TDG OVEARSEAS TRAVELLING----
Event Organisation---MarketingMaterial, Labor, Product, Catering, accommadation [sic].
(b)By Invoice 1801, the sum of $85,800 (inclusive of GST) for
Sentosa Marketing Service----
MELBOURNE CUP CHARITY EVENT SPONSORSHIP
Middle autumn festival gala dinnerGolf Champion and TDG Project promotion.
By WeChat message of 25 March 2018 to Mr Huang, Mr He said:
We are going to formalize everything! There is no issue with your side, and the extra 5% [units] for you all are also formalized. We have problem here, big problem. The ungrateful missus is in charge who does not know the law nor her own position. The main thing is her attitude is not good.
On or about 26 March 2018:
(a)Mr Huang and Ms Ren on behalf of Jieyun; and
(b)Mr Chen, Ms Zheng, Mr Luo and Ms Liang on behalf of Leimeng,
engaged Ms Serena Ding of Riverson Lawyers to negotiate a solution with TDG.
By WeChat message of 29 March 2018 to Mr Huang, Mr He said:
The messy issues inside Leimeng has affected your confidence. I feel so bad about it.
After a series of WeChat messages from 19 March 2018 relating to Leimeng’s failure to pay its second tranche, by WeChat message of 30 March 2018 to Mr He, Mr Huang stated:
[W]e have reached the following agreement today, 30 March, through this morning's exchange of opinions : 1. Due to the delay of the land settlement(s), please transfer over the AUD 4,000,000 we transferred before 9 March to Toorak Development, to be transferred into your company two days before the land settlement(s); 2. In relation to the additional 5% of individual shares [units] DALI supplement for JIEYUN, please amend the 13% shareholding in the agreement and loan contract to 18% shares [units]; 3. The company JIEYUN is requesting to send a representative to DALI to facilitate communication; 4. Perfect all legal documents and from now on all communications will base on the legal documents of the lawyers. Chief HE, please deal with this four requests made by JIEYUN ASAP before 7th April.
By WeChat message of 19 April 2018 to Mr Song, Mr He said:
I just spoke with [Mr Balint] over the phone, he said that your lawyer have [sic] contacted them, and he would respond to your lawyer’s letter tomorrow. The letter will provide answers to all questions related to how the funds will be applied to complete the settlement. I want to look at this email first. In addition, he expressed clearly over the phone that the only fund for settlement missing is LEIMENG’s $3,000,000, which can be transferred directly to the settlement lawyer’s trust account.
Mr He gave evidence that sometime in March or April 2018, he asked Mr Cvek how settlement of the Toorak Properties would occur. Mr He was told by Mr Cvek:
[T]he money was in one of the accounts of their group, and before the settlement the money will come back.
By WeChat messages of 23 April 2018 between Mr Song and Mr He, the settlement was proposed for Friday, 27 April 2018 but it is stated that Leimeng ‘has over played its game’.
By WeChat message of 25 April 2018 to Mr He, Mr Huang asked for the return of the Second Tranche to Jieyun’s account, in the event that settlement does not go through. This request was repeated on 26 April 2018 to Mr He. Mr Huang stated:
Please return the money to JIEYUN’s account ASAP
Please consider this carefully
After a number of WeChat messages with further requests for the return of the Second Tranche, by WeChat message of 5 May 2018 at 11:16 pm to Mr He, Mr Song stated:
[Y]our lawyer replied with messages yesterday. The gist is LEI MENG's subsequent 4 million will not be invested. At the beginning of our investment, you said the investment ratios of the two companies Jieyun and Leimeng would be the same, now we Jieyun is also requesting to be the same as Leimeng, invest the first 4 million and not the subsequent 4 million. Because the lawyer is requesting a response by the 8th, as our policy will be the same as Leimeng's
By WeChat message of 5 May 2018 at 11:37 pm to Mr Song, Mr He replied saying: ‘New proposition, a challenging one, it is all to do with time’.
By WeChat message of 5 May 2018 at 11:43 pm to Mr He, Mr Song further stated:
[W]e said we wanted the same as Leimeng at the beginning of our investment collaboration, now I demand to be the same as Leimeng!
By WeChat message of 6 May 2018 at 12:10 am to Mr Song, Mr He said:
The right way has no short cuts. Your withdrawal will be what my work will focus on now. Chief SONG, only a few months’ time, we will all try to accommodate, the facilitate the safe and dignified withdrawal of your investment.
After a further exchange of WeChat messages on 6 May 2018 at 11:04 am, Mr He stated to Mr Song:
Have communicated with the lawyer and a few proposals have been come up with. I think they have also included the opinion you expressed yesterday. I am not a director but a shareholder, I can only forward opinions. I have made the appointment to meet DALI in HONG KONG on 12th.
At about this time, there were negotiations between Jieyun and Mr Cvek to compensate Jieyun by paying interest on their investment funds. Mr He told Mr Song on 14 May 2018 that Mr Cvek had agreed to pay Jieyun interest of approximately 7% per annum for their investment funds.
In August 2018, Mr Song, Ms Ren and Mr Huang engaged their current solicitors independently from Leimeng because Ms Ren said that Riverson Lawyers were unable to reach any resolution for them.
By invoice number 1802 dated 18 July 2018 to TDG (‘Invoice 1802’), SMM invoiced $70,400 (inclusive of GST) for the following services:
TDG OVERSEAS TRAVELLING ----
Eight trips including airfares, accommodation and Gifts
I refer to Invoice 1802, together with Invoice 1801 and Invoice 1803 as ‘the SMM Invoices’.
Following a request, by email of 3 August 2018 to Ms Ren, Riverson Lawyers attached an expenditure transaction list from ‘November 2016 to February 2018’ by TDG (‘the November 2016 to February 2018 TDG Expenditure List’).
On 15 August 2018, Ms Ren downloaded the most recent bank statement and ‘expenditure transaction list’(‘the September 2017 to August 2018 the Expenditure List’) from the TDG investors web page.
On 21 August 2018, Jieyun filed this proceeding against the first to ninth defendants.
By invoice dated 22 August 2018 to TDG, Sentosa Capital invoiced $381,718 (inclusive of GST) for services described as follows:
Payment for expenses incurred on behalf of TDG for the following:
- ABL Legal fees
- Ratio Consultants
- First Valuation Group
- Toorak Law legal fees
- Gadens legal fees
- Marketing expenses related to raising of funds for project
- ACA fees
- Urbis consultantsOn 22 August 2018, the sum of $381,718 was transferred from the TDG Account 4101 to the Westpac account of Mr Balint (‘the Balint payment’), who was not then joined as a defendant.
On 23 August 2018, Lyons J made an interim freezing order against the assets of the first to ninth defendants.
At the direction of Mr Mihailescu, Mr Balint:
(a)transferred $345,000 from his Westpac account into his ANZ account on 23 August 2018; and
(b)transferred $10,000 to the trust account of Gadens solicitors on 29 August 2018 from his ANZ account.
By email of 3 September 2018 to Mr Balint and Mr Cvek, the solicitors for the first to ninth defendants advised as follows:
In relation to your query as to transfer of the funds back to Sentosa, either way the transfer in and out will be seen when we provide the Sentosa records, as required by the order.
Overall, given that the spreadsheet says that Sentosa received the money, it would be better that the funds be in that account, and if you make legitimate payments of TDG expenses -such as legal expenses and ordinary business expenses incurred by TDG, then that would look better.
We will still have to account for any expenses you have paid on behalf of TDG - but presumably you did that on behalf of Sentosa, who in turn paid on behalf of TDG.
On 4 September 2018, at the direction of Mr Mihailescu, Mr Balint transferred the following amounts to Sentosa Capital:
(a)the sum of $337,122 from his ANZ account; and
(b)the sum of $34,873 from his Westpac account,
(together, ‘the Sentosa Capital payments’).
Immediately prior to the receipt of the two transfers on 4 September 2018, Sentosa Capital’s ANZ account number 68419 was $2.32 in debit.
On 4 September 2018, after receipt of the funds from Mr Balint’s ANZ account, Sentosa Capital transferred $69,328 and $85,828 to SMM’s Bank of Melbourne account (‘the SMM payment’).
On 10 September 2018, Lyons J made a freezing order with respect to the assets of SMM.
On 11 September 2018, Mr He transferred $150,000 from the account of SMM to Mr Xu in Hong Kong (‘the Xu payment’), which according to Mr He was ‘to repay a personal loan owed by me’.
Mr He is recorded by ASIC as ceasing as a director of Leimeng on 1 October 2018.
Questions to be Determined
It is agreed between the parties that the questions requiring determination for resolution of the claims against Mr He and SMM are as follows:
Mr He’s knowing assistance in the SMM payments
Were the Jieyun Advances held by TDG on the Jieyun Trust?
Was the transfer of the Balint payment from funds held by TDG on the Jieyun Trust?
Was the Balint payment a dishonest and fraudulent breach of the Jieyun Trust?
Were the Sentosa Capital payments a dishonest and fraudulent breach of the Jieyun Trust?
Were the SMM payments a dishonest and fraudulent breach of the Jieyun Trust?
By the SMM payments, did Mr He assist in the dishonest and fraudulent breach of the Jieyun Trust?
Did Mr He know of the essential facts constituting the dishonest and fraudulent breach of the Jieyun Trust by the SMM payments?
Mr He’s knowing assistance in the Xu payment
Was the Xu payment a dishonest and fraudulent breach of the Jieyun Trust?
By the Xu payment, did Mr He assist in the dishonest and fraudulent breach of the Jieyun Trust?
Did Mr He know of the essential facts constituting the dishonest and fraudulent breach of the Jieyun Trust by the Xu payment?
Mr He’s settlement representations
Between 23 January 2018 and 28 February 2018, did Mr He represent to Jieyun that the Second Tranche to be advanced under the Loan Deed would be used to complete the settlement of the Toorak Properties (‘the Settlement Representation’)?
Did Mr He have reasonable grounds for making the Settlement Representation?
But for the Settlement Representation, would Jieyun have avoided the loss of the Second Tranche or part of it?
Mr He’s silent settlement representations
Between 1 March 2018 and 5 March 2018, did Mr He represent to Jieyun that:
(a)the scale of the Toorak project remained unchanged and was ongoing; and/or
(b)the Toorak project continued to be profitable, viable and feasible, as originally forecast and anticipated prior to the VCAT Decision,
(‘the Silent Settlement Representations’)?
In particular, in the circumstances, was Mr He’s failure to inform Jieyun of the VCAT Decision, misleading and deceptive within the meaning of the ACL?
But for the Silent Settlement Representations, would Jieyun have avoided the loss of the Second Tranche or part of it?
Principles of accessorial liability of a third party to a breach of trust
Jieyun’s first contention was that Mr He and SMM were liable as accessories to TDG’s breaches of trust in making the SMM payment and the Xu payment.
A third party may be found liable for a breach of fiduciary duty by a fiduciary (as a trustee or otherwise) in circumstances including the following:
(a)Under the first limb of Barnes v Addy,[4] if:
[4](1874) LR 9 Ch App 244 (‘Barnes v Addy’).
(i)the fiduciary duty existed with respect to property;
(ii)there was ‘misapplication of trust property by the trustee or fiduciary’;
(iii)the third party received such property; and
(iv)the third party knew, at the time of receipt of the property, that it was misapplied trust property.[5]
(b)Under the second limb of Barnes v Addy, if:
(i)breach of trust was part of a dishonest and fraudulent design by the fiduciary;
(ii)the third party assisted the trustee in the breach; and
(iii)the third party had knowledge of the essential facts constituting the dishonest and fraudulent design. Under this limb, it is not necessary to show the third party acted dishonestly.[6]
(c)If the third party dishonestly procured or induced the breach of trust.[7] Here, it is not necessary to show the breach of trust was part of a dishonest and fraudulent design by the fiduciary.
[5]Simmons v New South Wales Trustee and Guardian (2014) 17 BPR 33,717, 33,732–3 [86]–[91] (Gleeson JA with whom Beazley P and Barrett JA agreed). Quoted with approval in Lewis Securities Ltd (in liq) v Carter (2018) 355 ALR 703, 742 [183] (Emmett AJA with whom Leeming JA and Sackville AJA agreed), although the second element appears to be misquoted as ‘the misapplication of such property by the trustee or beneficiary’ (emphasis added).
[6]Harstedt Pty Ltd v Tomanek (2018) 55 VR 158, 177–9 [79]–[87], [93] (Santamaria, McLeish and Niall JJA).
[7]Ibid 174 [68].
Were the Jieyun Advances held by TDG on the Jieyun Trust?
By its second further amended statement of claim, Jieyun claims that, as a result of cl 3.3 of the Loan Deed, pursuant to which the Jieyun Advances ‘must only be used for the Approved Purpose’, TDG held the Jieyun Advances on trust for Jieyun (‘the Jieyun Trust’).
Jieyun’s submissions
Jieyun submitted that the Jieyun Advances were held by TDG on a ‘Quistclose trust’, for the following reasons:
(a)The Loan Deed expressly provided that ‘the Loan must only be used for the Approved Purpose’, namely ‘the purchase by TDG of the Toorak Properties’ and ‘the payment by TDG of development and construction expenses related to the Toorak Properties’.
(b)The recital to the Loan Deed recognised that the purpose of the funds was ‘to assist TDG purchase, develop and construct the Toorak Properties’.
(c)The loan was interest free.
(d)Repayment of the loan was to be made after the last apartment was sold.
(e)The evidence was that Ms Ren was told by the accountant Jennifer Lou and Mr He that ‘this special money needs to be used for special purpose’.
Mr He’s submissions
Mr He submitted that the Court should find there was no Jieyun Trust, for the following reasons:
(a)Despite the fact that the Loan Deed limited the use of moneys to the ‘Approved Purpose’, this was inconsistent with the Unit Trust Deed executed on the same day, which provided for the trustee to carry on the business of real estate development of the Toorak Properties, including the power to invest the assets in the trust, borrow and create a security interest over the assets of the trust.
(b)In circumstances where the Loan Deed provided for no interest, the return on the $8 million advance arose from the trust (ie the Jieyun Advances), and the trustee was obliged to generate moneys in the manner it saw fit. Accordingly, the conferring of the powers and duties of the trustee were inconsistent with the narrow purpose prescribed in the Loan Deed and Jieyun knew that the funds would be paid into the TDG Unit Trust.
(c)As the trustee was obliged to generate a return, it could not be limited to simply using the funds in the manner described in the Loan Deed.
Principles
The expression ‘Quistclose trust’ refers to the decision of the House of Lords in Barclays Bank Ltd v Quistclose Investments Ltd,[8] in which the House of Lords considered whether a trust arose in circumstances where a company in serious financial difficulty borrowed money for the purpose of paying a declared dividend. The loan was advanced on the basis that it would ‘only be used to meet the dividend due on July 24, 1964’,[9] and would be paid into a special account. After the money was paid into the account, but before the dividend was paid, the company went into voluntary liquidation.[10]
[8][1970] AC 567 (Lord Reid, Lord Morris of Borth-y-Gest, Lord Guest, Lord Pearce and Lord Wilberforce) (‘Quistclose’).
[9]Ibid 579.
[10]Ibid 569.
Lord Wilberforce found that a primary trust arose in favour of the dividend creditors because it was the mutual intention of the parties that the loan moneys should not become part of the assets of the company, but should be used exclusively for the payment of those dividend creditors.[11] His Lordship also found that the parties had intended to create a secondary trust to return the money to the lender, if the primary trust to pay the dividend could not be carried out.[12] He stated:
A necessary consequence from [the mutual intention to use the loan moneys exclusively for the payment of dividend creditors], by process simply of interpretation, must be that if, for any reason, the dividend could not be paid, the money was to be returned to the respondents: the word ‘only’ or ‘exclusively’ can have no other meaning or effect.[13]
[11]Ibid 580 (Lord Wilberforce with whom the other Law Lords agreed).
[12]Ibid 582.
[13]Ibid 580.
In Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq), Gibbs ACJ explained the decision in Quistclose as standing for the following proposition:
[W]here money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust.[14]
[14](1978) 141 CLR 335, 353 (with whom Jacobs and Murphy JJ agreed).
In Raulfs v Fishy Bite Pty Ltd, Campbell JA, after reviewing the authorities, suggested that the question of whether loan moneys were held on a trust should be approached as follows:
[O]ne needs to analyse an individual fact situation for the purpose of deciding whether there is an intention to create a trust, and, if so, on what terms. Quistclose recognises that sometimes there can be a trust whose terms are that the trust property is to be paid to particular people, and if it is not paid to those people, it is to be held for someone else. That is a matter arising from analysis of the facts of the particular case in accordance with well established principles for identifying when there is a trust, not because there is any separate legal institution known as a ‘Quistclose trust’. Further, it is a gloss upon the law concerning identification of the terms of a trust to say that the ‘question in every case is whether the parties intended the money to be at the free disposal of the recipient’. That suggests that being at the free disposal of the recipient marks a dividing line between a ‘Quistclose trust’ and something else. Facts about the intention with which a person has parted with an item of property cannot usefully be categorised in such a cut and dried fashion. However, the more limited statements in the passage I have quoted from On Equity are correct.[15]
[15][2012] NSWCA 135, [51] (with whom Meagher and Barrett JJA agreed) (‘Fishy Bite’).
The reference in the final sentence is to the following statement by Young, Croft and Smith, in On Equity:
Cases in this area will often depend on a close analysis of the facts and, in particular, whether the person who provided the money annexed a trust or equitable obligation that it was only to be used for the nominated purpose. The mutual intention of the parties ... will be important. A trust will not necessarily arise just because a lender inquires into the purpose for which a loan is sought and money is paid over for that particular purpose.[16]
[16]Peter W Young, Clyde Croft and Megan Louise Smith, On Equity (Thomson Reuters, 2009) 470 [6.1020].
In Eumeralla Estate Pty Ltd v Chen, the Court of Appeal found that money advanced to a company was held on an express trust to be applied in the acquisition of a particular property; with a resulting trust that it would be returned if the acquisition did not proceed.[17] The Court found that the intention to create the trust arose from the findings that:
(a)it was a condition of the advance that it would be applied for the purchase of the particular property;[18] and
(b)there was an implied stipulation in the transaction that, if the purpose failed, the money would be repaid.[19]
[17][2022] VSCA 78 (Maxwell P, Kennedy and Walker JJA) (‘Eumeralla’).
[18]Ibid [89], [93], [95].
[19]Ibid [87].
Their Honours identified the following propositions as being relevant in ascertaining whether a resulting trust has been established:
(a)First, as Gummow J explained in Elizabethan Theatre Trust, a trust of the kind held to subsist in Quistclose is a species of express trust. As a consequence, the question of whether such a trust exists is to be answered by reference to intention.
(b)Secondly, ordinarily the relevant intention is that of the alleged settlor, although there may be exceptions to that proposition. Those exceptions are not presently relevant.
(c)Thirdly, a trust may be recognised in a commercial setting (including a loan) notwithstanding the absence of an express statement of intention to create a trust. Neither writing nor formal words are necessary to create a trust.
(d)Fourthly, whether it will be possible to infer an intention to create a trust in a particular case will depend upon a consideration of the language of the parties, construed in context, including the matrix of circumstances.
(e)Fifthly, whether an intention to create a trust exists must be determined by reference to the ‘outward manifestation’ of such an intention, rather than to the subjective intention of the alleged settlor. As Gummow and Hayne JJ observed in Byrnes, a settlor
must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant. If he enters into arrangements which have the effect of creating a trust, it is not necessary that he should appreciate that they do so; it is sufficient that he intends to enter into them.
(f)This fifth proposition applies not only to an alleged express bilateral covenant to create a trust, but also to a unilateral declaration of an alleged trust and to an alleged trust that is not wholly in writing. In relation to an alleged trust that is not wholly in writing, the need to draw inferences from circumstances in construing the terms of conversations may in practice widen the extent of the inquiry, but it does not alter its nature.
(g)Sixthly, trust obligations arise where equity operates on the conscience of the holder of the legal interest. A person cannot be a trustee of property if that person is ignorant of the facts alleged to affect their conscience. That is, unless the putative trustee is aware that they are intended to hold the property for the benefit of others, their conscience will not be affected in a relevant way.
(h)Seventhly, where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested in B alone, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A. This is only a presumption, which presumption may be rebutted.
(i)Eighthly, a payment (including a loan) for a specific purpose, where the recipient is not free to apply the money for any other purpose, gives rise to a trust. However, a trust does not necessarily arise merely because money is paid for a particular purpose. The question in every case is whether the money was intended to be at the free disposal of the recipient or whether the person providing the funds intended to retain a beneficial interest in the funds. A freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose. That is because a necessary consequence of a finding of an exclusive purpose must be that if, for any reason, the purpose could not be carried out, the money was to be returned.
(j)Finally, a court will not readily infer that funds provided to a company will be impressed with a primary express trust for use exclusively for a specific purpose, the failure of which creates a secondary resulting trust in favour of the person who provided the funds. A mere ‘expectation’ or ‘general understanding’ or ‘preference’ that the funds are to be used for a specific purpose is insufficient. Rather, it is necessary to demonstrate an intention that the funds have been provided on the condition that they will be earmarked for use exclusively in accordance with an agreed purpose.[20]
[20]Ibid [83] (citations omitted).
In summary, the relevant intention is to be inferred from the language employed by the parties in question. For that purpose, the Court may look to the nature of the transaction and the relevant circumstances attending the relationship between them.[21] The use of the expression ‘Quistclose trust’ has been said to distract from the proper question of whether, on the operation of principle upon the facts as found, a trust relationship has been established.[22] The Court of Appeal in Eumeralla emphasised that a Quistclose trust is not a separate species of trust and its existence must be based on a finding of the requisite intention in accordance with normal principles referrable to express trusts.[23]
[21]Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, 503 (Gummow J).
[22]Ibid. See also Nationwide News Pty Ltd v Rush (2020) 380 ALR 432, 506 [383] (White, Gleeson and Wheelahan JJ).
[23]Eumeralla [2022] VSCA 78, [83]. See also Fishy Bite Pty Ltd [2012] NSWCA 135, [51] (Campbell JA), Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, 502-3 (Gummow J); Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 523 [112] (Bell, Gageler and Keane JJ).
Conclusion
In my opinion, the Jieyun Advances were paid to TDG on trust, to be applied only for the ‘Approved Purpose’ as defined in the Loan Deed and returned to Jieyun if the settlements of the Toorak Properties did not proceed. The intention to create the trust is to be inferred from the following:
(a)Jieyun and TDG expressly acknowledged and agreed that the Jieyun Advances must only be used for the Approved Purpose. It is difficult to envisage the purpose of including these words in the Loan Deed unless it was intended to make clear that the Jieyun Advances were not intended to become the beneficial property of TDG. As the Court of Appeal said in Eumeralla:
A freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose.[24]
(b)The fact that TDG was a special purpose vehicle to be trustee of the TDG Unit Trust which was established for the purpose of carrying on the business of real estate, in developing the Toorak Properties.
[24]Eumeralla [2022] VSCA 78, [83(i)] (Maxwell P, Kennedy and Walker JJA) (citations omitted).
I reject Mr He’s submission outlined in paragraph 108 above for the following reason. There is no inconsistency between:
(a)the fact that the trustee’s powers under the Unit Trust Deed were more expansive than those under the Loan Deed (which limited the application of the Jieyun Advances to the Approved Purpose); and
(b)an intention to form a trust with respect to the Jieyun Advances.
The terms of the Unit Trust Deed do not affect Jieyun’s interests under the Loan Deed which are ‘engrafted onto [the Jieyun Advances] as a restriction on the manner in which the trustee may deal with trust assets’.[25]
[25]Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 268 CLR 524, 560-1 [82] (Bell, Gageler and Nettle JJ) (citations omitted).
Further, I do not consider the fact that the commercial arrangement between TDG and Jieyun, being that:
(a)the Jieyun Advances were to be interest free; and
(b)the consideration for the Jieyun Advances was units in the TDG Unit Trust,
is inconsistent with a trust being inferred from the express words in the Loan Deed that the Jieyun Advances ‘must only’ be used for the Approved Purpose.
Was the transfer of the Balint payment from funds held by TDG on the Jieyun Trust?
Mr He’s submissions
During the course of final submissions on behalf of Mr He, it was submitted for the first time that, if the Jieyun Advances were held by TDG on trust, the Court could not be satisfied that the Balint payment was from funds held by TDG on the Jieyun Trust. By written submissions filed with leave, counsel for Mr He relied on the following:
(a)The Balint payment was made from TDG to which $13 million had been paid as follows:
(i) $8 million by Jieyun (being the Jieyun Advances);
(ii) $4 million by Leimeng; and
(iii) $1 million by Mr He.
(b)The money invested by Leimeng in TDG (‘the Leimeng Advance’) was also held on trust because the evidence is that Leimeng had invested this money on similar terms to the Jieyun Advances; and the Court could not determine this matter without regard to the payment of moneys to TDG’s accounts from parties other than Jieyun.
(c)The total of $6,336,251.20, which was paid into TDG’s accounts after 5 March 2018, consisted of:
(i)$1 million by Mr He on 13 April 2018; and
(ii)$5,336,251.20 that appears to have been deposited by related companies.
(d)Having considered the above, either:
(i)the effect of moneys going in and out of TDG’s accounts leads to there being no basis to conclude that the moneys returned to TDG’s accounts are trust moneys rather than simply funds available for distribution; or
(ii)the moneys are at least partially trust funds on the basis of tracing.
Accordingly, it was submitted that, adopting the pari passu approach, given that Jieyun had only contributed $8 million out of the total $13 million sum deposited into TDG’s account, Jieyun could only claim 8/13ths of the Balint payment as trust money. Applying that percentage to the $150,000 paid from SMM to Mr Xu, Jieyun’s claim would be limited to $92,307.
Jieyun’s submissions
Jieyun submitted that the Court should find that there was no ‘mixed trust’ because the only trust moneys paid into the TDG accounts were those paid by Jieyun, for the following reasons:
(a)Mr He did not plead the existence of a trust in respect of funds invested by Leimeng or make any allegation in respect of a mixed trust.
(b)Although there was evidence suggesting that Leimeng’s investment in TDG may have been on similar terms to Jieyun’s, Mr He did not tender any document in respect of Leimeng’s investment and provided no explanation for his failure to do so. Accordingly, the Court:
(i)may infer that the evidence would not have assisted Mr He’s case; and
(ii)is more likely to draw inferences which are unfavourable to Mr He.
Jieyun further submitted that, even if it was accepted that the Leimeng Advance had been paid on trust, the evidence was that:
(a)the Leimeng Advance of $4 million had been invested by Leimeng before 20 September 2017;
(b)Leimeng did not deposit with TDG a second sum of $4 million; and
(c)before Jieyun deposited the $2 million comprising the First Portion of the Second Tranche on 28 February 2018, the balance of TDG’s bank accounts were as follows:
(i)the TDG Account 4101was at $16.02 in debit; and
(ii)the TDG Account 4250 was at $474.90 in credit,
(collectively, ‘the TDG accounts’).
Accordingly, it was submitted that after 28 February 2018, deposits into the TDG accounts totalled $10,336,071 [sic] consisting of:
(a)the First Tranche, advanced by Jieyun;
(b)$1 million deposited on 13 April 2018, which the Court should not accept was deposited by Mr He;
(c)the balance of $5,336,251.20, which the evidence establishes consisted of:
(i)the sum of $1,340,883.52, being transferred from TDG’s other accounts; and
(ii)$3,995,367.68, being repayments of loans from the fifth defendant, being Hennessy Group Pty Ltd (‘Hennessy Group’) and the tenth defendant, being Hopetoun Development Group Pty Ltd (‘Hopetoun Development’).
In summary, Jieyun submitted that the Court should conclude as follows:
(a)There was no Leimeng trust.
(b)If the Leimeng Advance had been advanced on trust, the funds would be exhausted before Jieyun paid the Second Tranche.
(c)Mr He did not contribute an additional $1 million.
(d)The transfers to TDG from Hennessy Group and Hopetoun Development were repayments of money loaned from the Jieyun Trust to those companies.
Conclusion
I am not satisfied that the Leimeng Advance was made on trust for the following reasons:
(a)The only submission relied on by Mr He in support of the contention that TDG held the Leimeng Advance on trust was that ‘[t]here is evidence that Leimeng invested on similar terms as to Jieyun’. In fact, the evidence was that, although Mr Huang understood that Jieyun had invested in TDG on the same terms as Leimeng, Jieyun did not. Jieyun discovered that Leimeng held 20% of the units while Jieyun only held 13%, which was the subject of an ongoing dispute from February 2018.
(b)No evidence was adduced on behalf of Mr He that the Leimeng Advance was made on the basis that the funds would only be applied to an approved purpose or were otherwise to be held by TDG on trust. In particular, Mr He did not produce any deed or other document evidencing that the Leimeng Advance was received by TDG on trust; and did not offer any explanation for the failure to produce such a document.
(c)As submitted by Jieyun, the limit of the evidence in support of the Leimeng Advance being on trust was that:
(i)Ms Ren gave evidence that Mr He produced documents in English on 20 September 2017 including the Loan Deed and Mr He said that ‘Jieyun’s documents were the same as the documents signed by Leimeng for its investment’; and
(ii)Mr He agreed in cross-examination to the proposition that ‘Leimeng entered into a similar agreement to Jieyun, where it too had agreed to pay $8,000,000 in two groups of $4,000,000’.
(d)There is no basis to infer that the loan agreement between TDG and Leimeng would have limited the use of the Leimeng Advance to an approved purpose similar to that in the Loan Deed. Other loan deeds entered into by TDG at about the same time, which adopted a similar form, included an ‘Approved Purpose’ that permitted a broad use of the loan money.[26]
[26]See paragraphs 197 to 205 below. Although it is to be noted that in these agreements TDG was the lender.
Accordingly, to the extent that the Jieyun Advances were mixed with TDG’s own funds in the account, it is presumed that TDG drew out its own funds first. [27] On this basis, I find that the Balint payment was made from funds held on the Jieyun Trust.
[27]Re Hallett’s Estate (1879) 13 Ch D 696; Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1306, [145] (Ward J); Brady v Stapleton (1952) 88 CLR 322, 336 (Dixon CJ and Fullagar J).
Further, even if I was to accept that the Leimeng Advance was made on trust and adopt the pari passu principle (as contended for by Mr He), the calculation of the percentage of the Balint payment that was from Jieyun Trust money would have regard to the following:
(a)No submission was made on behalf of Mr He as to why the Court should be satisfied that the balance of $592,574.20 in the TDG Account 4101 at 25 September 2017, or any part thereof, was the product of the Leimeng Advance or even whether the whole of the Leimeng Advance was paid into that account.
(b)In any event, by 16 November 2017, all but $1.79 had been disbursed from the TDG Account 4101.
(c)The Balint payment was the balance remaining in the TDG Account 4101 after $3,153,383.52 was credited to that account between 26 April 2018 and 16 May 2018, as set out in paragraph 210 below being:
(i)the transfer of the residue of the Second Tranche in February/March 2018 from the TDG Account 4259; and
(ii)part repayments of the loans by Hopetoun Development and Hennessy Group, which loans had been substantially or wholly funded from the First Tranche (paid in 2017). Such payments were impressed with the Jieyun trust because I infer that the trustee intended that these payments would be in replacement of the misappropriated trust moneys.[28]
[28]Re Global Finance Group Pty Ltd (2003) WAR 385, 408 [103] (McLure J).
In the circumstances, any tracing of the Leimeng Advance to the Balint payment was, at best, not significant.
Was the Balint payment a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Jieyun submitted that the transfer of $381,718, being the Balint payment, to Mr Balint’s Westpac account was a dishonest and fraudulent breach of the Jieyun Trust by TDG, for the following reasons:
(a)TDG, by its directors Mr Cvek (by his attorney Balint) and Mr He, were a signatory to the Loan Deed and knew of the ‘Approved Purpose’.
(b)The proceeding was filed on 21 August 2018 ,together with a summons seeking a freezing order over TDG’s assets.
(c)On 22 August 2018, Mr Mihailescu, at Mr Cvek’s direction, transferred $381,718 of the $381,718.15 in TDG’s account, to Mr Balint’s Westpac account.
(d)At the time of the transfer, it was impossible for TDG to complete the settlement of the Toorak Properties, which required an amount of $13,755,000.
(e)Mr Cvek produced an ‘invoice’ purporting to support the amounts transferred, in which Sentosa Capital invoiced TDG for an improbable collection of expenses incurred on behalf of TDG.
(f)At close to midnight on 3 September 2018, TDG’s solicitor emailed Mr Balint, copied to Mr Cvek, advising that it would ‘look better’ if funds in the account were used for ‘legitimate payments of TDG expenses -such as legal expenses and ordinary business expenses incurred by TDG’.[29]
(g)Mr Balint did not recall having the invoice when he transferred funds out of his account on 4 September 2018.
(h)Those expenses included payments that were ultimately made to SMM, and which Mr He accepted were in respect of services provided to Mr Cvek or the Sentosa Group of companies, and not TDG.
(i)Mr Cvek and Mr Mihailescu have not made themselves available or sought to participate in the proceeding so as to explain this transfer.
[29]Bold in the original.
Jieyun further submitted that there were the following highly unusual and irregular features surrounding the transfer from which fraud and dishonesty could be inferred.
(a)The timing of the transaction, with it happening the day after TDG, Mr Cvek and Mr Mihailescu became aware that TDG’s account was to be frozen.
(b)The fact that it was TDG that was invoiced for services purportedly provided by Sentosa Capital, rather than any of the other special purpose entities within the Sentosa Group.
(c)The amount invoiced, being pretty much the entirety of the moneys in TDG’s account.
(d)The non-particularised nature of the expenses claimed in the SMM invoices.
(e)The payment of such an amount to Mr Balint, an employee of Hennessy Group Pty Ltd (a special purpose entity within the Sentosa Group – but where Mr Balint’s role was a broader one within the Sentosa Group) and not SMM, the purported creditor who had issued the invoices.
(f)Payment was made to Mr Balint’s personal account.
(g)Mr Balint had admitted the transaction in his statement.
(h)No evidence is before the Court which satisfactorily explains the above anomalies or that the transaction was in any way genuine.
(i)These features of the transactions must have been known to Mr Cvek and Mr Mihailescu (and Mr Balint).
Mr He’s submissions
Mr He submitted that there is a high threshold of proof for Jieyun to establish that the assistance was in furtherance of a dishonest and fraudulent design, and that Jieyun had not satisfied that burden, for the following reasons:
(a)Jieyun failed to plead and particularise the requisite fraudulent design.
(b)The case was circumstantial.
(c)The fact that Mr Balint was told by Mr Cvek that the moneys were for services provided by various entities does not constitute a dishonest and fraudulent design.
Conclusion
I am satisfied that the Balint payment was effected by TDG, through the agency of Mr Cvek and Mr Mihailescu, for the fraudulent and dishonest purpose of misappropriating the funds from TDG’s account, for the reasons submitted by Jieyun.
In particular, in my opinion, the following facts strongly support the finding of the fraudulent and dishonest misappropriation of funds from TDG:
(a)The purported invoice of 22 August 2018 from Sentosa Capital to TDG is dated the day after this proceeding was filed.
(b)The amount of the invoice and the amount of the transfer was, with the exception of 15 cents, the precise amount remaining in the relevant TDG account at the time.
(c)The transfer was made to Mr Balint’s Westpac account, and Mr Balint claimed no entitlement.
Were the Sentosa Capital payments a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Jieyun submitted that the Sentosa Capital payments were dishonest and fraudulent because they were a further conversion of funds belonging to the Jieyun Trust, for the same reasons as set out in paragraphs 133-134 above.
Mr He’s submissions
Mr He submitted that the transfers from Mr Balint’s Westpac account to Sentosa Capital’s ANZ account were not dishonest and fraudulent because:
(a)Mr Balint gave evidence that he was given advice that the freezing order allowed for the payment of reasonable legal and legitimate business expenses; and
(b)these payments could only be a breach of trust if the Balint payment was a breach of trust.
Conclusion
It is common ground between the parties that the Sentosa Capital payments were part of the series of transfers, which commenced with the Balint payment; and that the findings with respect to the previous transfer would affect this transfer.
In my opinion, the Sentosa Capital payments were a dishonest and fraudulent breach of the Jieyun Trust for the same reasons as applied to the Balint payment and was part of the same scheme to misappropriate the balance of the funds held by TDG.
Were the SMM payments a dishonest and fraudulent breach of the Jieyun Trust?
Jieyun’s submissions
Jieyun submitted that the Court should find that the SMM payments were a dishonest and fraudulent breach of the Jieyun Trust, for the following reasons:
(a)The transfers were carried out by Mr Mihailescu.
(b)Before the transfer by Mr Balint into Sentosa Capital’s ANZ account referred to above, it had a negative balance.
(c)The Court should reject the evidence of Mr He and find that he was aware of the nature of the proceedings commenced against TDG and the freezing order made on 23 August 2018.
(d)There were the following anomalies with respect to the SMM Invoices in respect of which the transfer to SMM was purportedly in payment of:
(i)the invoices were directed to TDG but the work was not conducted for TDG and no breakdown was provided on the invoices;
(ii)there is no direct relationship between the amount stated in the SMM Invoices and the amounts transferred;
(iii)the invoices were dated many months after the services were purportedly provided;
(iv)no documents were produced showing the SMM Invoices were forwarded to any person before 29 August 2018, nor was there any corroborating evidence as to when the invoices were created; and
(v)the SMM Invoices bear sequential numbers but the invoice bearing the number ‘TDG-1803’ was apparently dated earlier than the invoice bearing ‘TDG-1802’.
(e)There was no explanation from Mr He, Mr Cvek, Mr Mihailescu or Mr Balint as to why Sentosa Capital was paying out these unusual invoices to Mr He’s company, SMM.
(f)The Court should reject Mr He’s assertion that he resigned as a director of TDG on 25 September 2017 and he may be presumed to have known of the existence of funds in TDG’s bank account and the circumstances related to the transfer out of that bank account.
Mr He’s submissions
Mr He submitted that the SMM payments were not a dishonest and fraudulent breach of the Jieyun Trust, for the following reasons:
(a)There was no evidence that Mr He knew that the sums of $69,328 and $85,828 had originally come from TDG.
(b)There was no evidence that Mr He was aware of the anterior transactions because:
(i)Mr Balint did not say that he had told him and there is no reason why he would have; and
(ii)Mr He was not a director of Sentosa Capital.
(c)The Court should not conclude that the SMM Invoices were fake, for the following reasons:
(i)There was no doubt that Mr He incurred promotional costs.
(ii)It would make no sense for Mr He to create the invoices after he returned to Australia on 22 August 2018, because at that date, TDG had no funds and it would have made more sense to invoice Sentosa Capital, as it ultimately received the funds.
(iii)Despite some delay, it was unsurprising that Mr He would seek to recover the costs which he had been previously promised but did not occur.
(iv)Some of the source documents for the invoices were tendered.
(v)Mr Balint gave no evidence that he told Mr He about the freezing order which affected TDG’s assets.
(d)The Court should accept that Mr He was an investor liaison person, rather than a director of TDG, for the following reasons:
(i)It was consistent with the evidence given by Mr Balint.
(ii)Mr He told Jieyun on 6 May 2018 that he was not a director; and the fact that the resignation was not entered into ASIC records is not unusual.
(iii)The fact that Mr Cvek would require Mr He to resign as a director because of the possibility of a conflict of interest given his position as the representative of Jieyun and Leimeng ‘makes sense’.
(iv)The evidence establishes that Mr He was expected to convey information to Jieyun and Leimeng, as the investors.
(v)There is no document that identifies Mr He as a director of TDG post 25 September 2017.
(vi)The promotional material following the Sentosa Capital event, incorrectly showing incorrectly Mr He to be a director of Sentosa Capital, does not mean he was holding himself out to be a director of TDG. Further, the fact that Mr He organised a promotional event for the Sentosa Group does not mean he must have been involved in the day to day running of the businesses.
Conclusion
I consider that Mr He, as the director of SMM, was aware that the SMM payments were part of the fraudulent and dishonest breach of the Jieyun Trust, being the misappropriation of the balance of the relevant TDG account.
Further, I am satisfied, to the Briginshaw standard, that Mr He fabricated the SMM Invoices for the purpose of misappropriating the balance of TDG’s account, for the following reasons.
The services which were the subject of each of the SMM Invoices were not performed on the instruction of TDG; but on the instruction of Sentosa Capital. In fact, except for one visit to China, the services did not relate to the development of the Toorak Properties by TDG. In particular:
(a)With respect to the ‘TDG Overseas Travelling’ referred to in Invoice 1802, which was dated 18 July 2018, Mr He’s evidence was that, except for one visit to China in 2017 to visit Mr Huang, these trips related to Sentosa Capital and were unrelated to TDG. The lack of any credible explanation by Mr He, about why the invoice to TDG included ‘all eight trips’, supports an inference that it was part of an ex post facto plan to justify the misappropriation of TDG’s funds.
(b)The Mid-Autumn Festival in August 2017 was, on Mr He’s own evidence, a dinner he organised on behalf of Sentosa Capital. Although Mr Huang, Ms Ren and Mr Song were invited and attended among the 70 or 80 guests, there is no evidence suggesting that this was an event organised on the instruction of, or for the benefit of, TDG.
(c)The Melbourne Cup Charity Event and the Moonah Links Golf Event were both organised for Sentosa Capital. The contemporaneous promotional material posted online shows no connection to TDG. Mr He conceded both that point and that, by the time of the Melbourne Cup Charity Event, the investors in TDG (being Jieyun and Leimeng) were finalised.
(d)The absence of any credible explanation by Mr He for adding ‘TDG’ in the false description of the Moonah Links Golf Event in Invoice 1801 dated 30 March 2018, being ‘Golf Champion and TDG Project promotion’ leads to the inference that it was part of an ex post facto plan to justify the misappropriation of TDG’s funds.
(e)In fact, Mr He gave no evidence of any promotion of TDG undertaken by SMM or why there would have been a need to do so. There was no credible attempt by Mr He to explain why he directed the SMM Invoices to TDG for services provided on instruction from Sentosa Capital. On the other hand, the presentation of the SMM Invoices after this proceeding was filed was consistent with the legal advice provided to Mr Balint and Mr Cvek by the solicitors for the first to tenth and twelfth defendants on 3 September 2018 that ‘it would be better that the funds be in that account, and if you make legitimate payments of TDG expenses – such as legal expenses and ordinary business expenses incurred by TDG, then that would look better’.[30]
[30]Bold in original.
Undefended claims
Agreements and loan deeds
The Loan Deed, dated 20 September 2017, provided the loan must only be used for the Approved Purpose as set out in paragraph 22 and was signed by:
(a)Mr Song and Ms Ren as directors of Jieyun; and
(b)Mr He and Mr Balint (as Mr Cvek’s attorney under power) as directors of TDG.
By loan deed dated 20 September 2017 between TDG and Hennessy Group, TDG agreed to loan the sum of $3,250,000 to Hennessy Group, on terms including that:
The investment funds will be used by [Hennessy Group] for a short to medium term basis as working capital to invest or conduct any business that it deems necessary including the selection, acquisition, marketing of any development property or payout existing partners and paydown of loan facilities on the property and/or any other purposes the company deems necessary.
The loan deed was signed by:
(a)Mr He and Mr Mihailescu for TDG; and
(b)Mr Cvek for Hennessy Group Pty Ltd.
By
aloan deed dated 21 September 2017, TDG agreed to loan $2.4 million to Hennessy Group for ‘an existing obligation on or around April, May or June 2018 which requires a capital injection of $2,400,000’, on terms including that:The investment funds will be used by [Hennessy Group] for a short to medium term basis as (but not exclusive to) working capital to invest or conduct any business that it deems necessary including the selection, acquisition, marketing of any development property or payout existing partners and paydown of loan facilities on the property and/or any other purposes the company deems necessary.
The loan deed was signed by:
(a)Mr He and Mr Mihailescu for TDG; and
(b)Mr Cvek for Hennessy Group.
By a loan deed dated 25 September 2017 between TDG and Hopetoun Development, TDG agreed to loan the sum of $600,000 to Hopetoun Development, on terms including that:
The investment funds will be used by [Hopetoun Development] as working capital to invest or conduct any business that it deems necessary including the selection, acquisition, marketing of any development property or payout existing partners and paydown the loan facility on the properties and/or any other purposes the company deems necessary
The loan deed was signed by:
(a)Mr Mihailescu for TDG; and
(b)Mr Cvek for Hopetoun Development.
By a loan deed dated 16 October 2017 between TDG and Hopetoun Development, TDG agreed to loan the sum of $1,890,000 to Hopetoun Development, on terms including that:
The investment funds will be used by [Hopetoun Development] on a short to medium term basis as working capital to Invest or conduct any business that it deems necessary including the selection, acquisition, marketing of any development property or payout existing partners and paydown the loan facility on the properties and/or any other purposes the company deems necessary.
The loan deed was signed by:
(a)Mr Cvek and Mr Mihailescu for TDG; and
(b)Mr Cvek for Hopetoun Development.
Payments and transfers
On 25 September 2017 and 3 October 2017, Jieyun transferred the First Tranche by instalments of $1.8 million and $2.2 million, being the:
(a)First Portion of the First Tranche; and
(b)Second Portion of the First Tranche,
respectively into the TDG Account 4101. At the time the First Portion of the First Tranche was paid on 25 September 2017, the TDG Account 4101 was $592,574.20 in credit.
From 26 September 2017 to 16 November 2017, TDG made payments totalling $4,582,397 from the TDG Account 4101 to persons or entities associated with Mr Cvek and Mr Mihailescu, as set out in schedule 1;[39] and left a balance in the account of $1.79 as at 16 November 2017.
[39]Source from the defence of the first to tenth and twelfth defendants.
On 28 February 2018, the TDG Account 4259 was $474.90 in credit. After Jieyun transferred the Second Tranche by payments of $2,000,000 on each of 28 February and 5 March 2018, the account was $4,000,472.40 in credit.[40]
[40]A transaction fee of $2.50 was debited on 1 March 2018.
From 13 March 2018 to 13 April 2018, TDG made payments totalling $2,626,500 from the TDG Account 4259 to persons or entities associated with Mr Cvek and Mr Mihailescu, as set out in schedule 2;[41] and after TDG transferred $1,340,883 from this account to the TDG Account 4101on 26 April 2018, the account balance of the TDG Account 4259 was zero.
[41]See above n 39.
Between 26 April 2018 and 16 May 2018, the September 2017 to August 2018 Expenditure List records that a total sum of $3,153,383.52 was transferred to the TDG Account 4101, consisting of:
(a)$1,340,883.52 transferred from the TDG Account 4259 on 26 April 2018 (referred to in the previous paragraph);
(b)$1 million on 16 May 2018, being part repayment of the advance of $2,483,747 by TDG to Hopetoun Development; and
(c)$812,500 on 16 May 2018, being part repayment of the advance of $3,250,000 to Hennessy Group.
From 3 May 2018 to 22 August 2018, TDG made the payments totalling $3,119,818 from the TDG Account 4101 to persons or entities associated with Mr Cvek and Mr Mihailescu, as set out in schedule 3;[42] and left a balance in the account of $0.15.
[42]Ibid.
The above calculations ignore the following credits to the TDG Account 4101, which were reversed:
(a)The deposit of $1 million on 26 April 2018 because the contemporaneous records of TDG and the Hopetoun Development bank statements record this sum as being offset by a debit of $1,000,099.80 on 26 April 2018.
(b)The deposit of $1,182,867.68 on 26 April 2018 because the contemporaneous records of TDG and the Hennessy Group bank statements record this sum as being reversed on 26 April 2018.
(c)The deposit of $1 million by Mr He on 13 April 2018, on the basis that I accept the allegation in the defence of the first to tenth and twelfth defendants (‘the defence’) that this sum was reimbursed to Mr He on 23 April 2018. I accept the allegation for the following reasons:
(i)The contemporaneous records of TDG, as at August 2018, record the contributions of Jieyun into the TDG Account 4101between 25 September 2017 and 22 August 2018, but not any contribution by Mr He. This is consistent with the payment being reimbursed on 23 April 2018 shortly after the $1 million deposit was made.
(ii)The bank statement for the TDG Account 4101records the receipt of $1 million from Mr He on 13 April 2018 and the transfer out of the same sum on 23 April 2018.
(iii)I reject the evidence of Mr He that he was not reimbursed the $1 million because of my assessment of his credibility, to which I have previously referred, and the fact that there was no corroboration such as:
(1)production of records showing the absence of the reimbursement; or
(2)evidence of attempts to recover the $1 million, as Jieyun did when it became apparent that the settlement had been seriously delayed.
Jieyun debt claim
The Loan Deed provides that:
(a)the Jieyun Advances were loaned only for the ‘Approved Purpose’ as set out in paragraph 22 above;
(b)it was an Event of Default, if TDG (among other things):
(i)failed to observe the provisions of the Loan Deed;
(ii)disposes of the Toorak Properties; or
(iii)ceased to carry on business (cl 9.1).
(c)Upon an Event of Default, Jieyun has the ‘right to demand the immediate payment’ of the Jieyun Advances (cl 9.2).
By letter of 21 August 2018 to TDG, Hiways Lawyers, acting on behalf of Jieyun, exercised Jieyun’s right under cl 9.2 of the Loan Deed to demand repayment of the Jieyun Advances.
I am satisfied that, by reason of the matters referred to in paragraphs 207, 209, 211 and 217, an Event of Default arose under cl 3.2 of the Loan Deed and that TDG has failed to repay any of the loan sum of $8 million (the Jieyun Advances).
Accordingly, TDG is indebted to Jieyun in the sum of $8 million, being the full amount of the Jieyun Advances.
Breach of Trust by TDG
As is apparent from the matters referred to in paragraphs 206 to 211 above, shortly after receipt of each of the four instalments comprising the Jieyun Advances, TDG expended virtually the entirety of the Jieyun Advances to entities or persons associated with Mr Cvek and/or Mr Mihailescu. This expenditure was not only in breach of the express terms of the Jieyun Trust, it was also in breach of its fiduciary duty not to permit a conflict between its duty as trustee and the interests of companies related to Mr Cvek and Mr Mihailescu.
The direct result of these breaches of trust and its fiduciary duty was that TDG was left with insufficient funds to:
(a)proceed with the settlement of the Toorak Properties; or
(b)refund the Jieyun Advances to Jieyun.
In the circumstances, TDG is liable to pay equitable compensation to Jieyun in the sum of $8 million, being the sum of the Jieyun Advances.
Liability of Mr Cvek and Mr Mihailescu under the second limb of Barnes v Addy
Mr Cvek and Mr Mihailescu will each be liable for the breach of trust by TDG for knowing assistance in the breach if it is established that:
(a)TDG’s breach of trust was part of a dishonest and fraudulent design;
(b)Mr Cvek and Mr Mihailescu assisted TDG in the breach; and
(c)Mr Cvek and Mr Mihailescu had knowledge of the dishonest and fraudulent design.[43]
[43]Harstedt Pty Ltd v Tomanek (2018) 55 VR 158, 177-9 [79]-[87] (Santamaria, McLeish and Niall JJ).
I am satisfied that Mr Cvek and Mr Mihailescu dishonestly and fraudulently effected the misappropriation of the Jieyun Advances on behalf of TDG, for the following reasons:
(a)Mr Cvek was a director of TDG and a director of the following entities that were beneficiaries of the misappropriations:
(i)8 Hopetoun Rd Pty Ltd (the fourth defendant) (‘8 Hopetoun Rd’);
(ii)Hennessy Group;
(iii)East Asia Group Pty Ltd (the sixth defendant) (‘East Asia’);
(iv)Aberdeen Holdings Pty Ltd (the seventh defendant) (‘Aberdeen Holdings’);
(v)Hopetoun Development;
(vi)SMM; and
(vii)Granville Group Pty Ltd (the twelfth defendant) (‘Granville’).
(b)Mr Mihailescu was a director of TDG and a director of the following entities that were beneficiaries of the misappropriations:
(i)Sentosa Capital; and
(ii)Mandeville Group Pty Ltd (the ninth defendant) (‘Mandeville’).
Further, Mr Mihailescu was the ‘Line Manager’ to whom Mr Balint was required to report under the terms of Mr Balint’s employment contract with Hennessy Group as its ‘Investment Liaison Officer/Project Manager’.
(c)Mr Cvek and Mr Mihailescu were both aware of the relevant facts constituting the Jieyun Trust as signatories to the Loan Deed.[44]
[44]Mr Cvek by his attorney under power, Mr Balint.
(d)With respect to the loan deeds dated 20 September 2017, 21 September 2017, 25 September 2017 and 16 October 2017, referred to in paragraphs 198 to 205 above, the following facts are supportive of the dishonest and fraudulent intention of Mr Cvek and Mr Mihailescu as to the misappropriation of the Jieyun Advances:
(i)Mr Cvek and Mr Mihailescu were each signatories to the loan deeds.
(ii)By the loan deeds, TDG agreed to loan the Jieyun Advances which it held on the Jieyun Trust to the companies related to one or other or both Mr Cvek and Mr Mihailescu.
(iii)The loan deeds committed TDG to lend $8,140,000, which given the state of TDG’s accounts could only be met from using the Jieyun Advances.
(iv)The temporal proximity between the date of the Loan Deed and the commitment of the funds due under that deed to related companies was as follows:
(1)$3,250,000 to be loaned to Hennessy Group on the same day;
(2)$2.4 million to be loaned to Hennessy Group on the day after;
(3)$600,000 to be loaned to Hopetoun Development five days after; and
(4)$1,890,000 to be loaned to Hopetoun Development 26 days after.
(v)There was no evidence of any disclosure by Mr Cvek and Mr Mihailescu to Jieyun or any of Jieyun’s directors or agents of their intention for TDG to immediately on-lend the Jieyun Advances to assist its related companies.
(e)As I have already found, Mr Cvek and Mr Mihailescu were both directly responsible for the dishonest and fraudulent misappropriation of the Balint payment.[45]
(f)TDG paid out virtually the entirety of the Jieyun Advances to entities associated with Mr Cvek and Mr Mihailescu promptly after receipt (as referred to in paragraph 217 which consequently rendered TDG without sufficient funds to settle the purchase of either of the Toorak Properties.
[45]See paragraphs 133-134 above.
As it was:
(a)the dishonest and fraudulent design of Mr Cvek and Mr Mihailescu that was attributed to TDG (being company directors); and
(b)their conduct that deliberately effected the design,
I am satisfied that each of Mr Cvek and Mr Mihailescu are each liable under the second limb of Barnes v Addy.
In the circumstances, Mr Cvek and Mr Mihailescu are each liable to pay equitable compensation to the Jieyun for the misappropriation of Jieyun Advances, being the sum of $8 million.
Liability of corporations associated with Mr Cvek and Mr Mihailescu under the first limb of Barnes v Addy
8 Hopetoun Rd
Jieyun alleges that the sum of $600,000 was paid in two separate payments on:
(a)27 September 2017 of $100,000; and
(b)28 September 2017 of $500,000,
(‘the Alleged 8 Hopetoun Payments’), to 8 Hopetoun Rd.
Although the November 2016 to February 2018 TDG Expenditure List records the Alleged 8 Hopetoun Payments as paid to 8 Hopetoun Rd, I am not satisfied that the Alleged 8 Hopetoun Payments were ultimately made to 8 Hopetoun Rd, because:
(a)the defence alleges that the Alleged 8 Hopetoun Payments were made to Hopetoun Development as a ‘loan’;
(b)the September 2017 to August 2018 the Expenditure List’ records the Alleged 8 Hopetoun Payments as made to Hopetoun Development as ‘loans’ for the ‘Property acquisition - 659 Orrong rd, Toorak’; and
(c)the Alleged 8 Hopetoun Payments are consistent with the first defendant’s obligation to pay $600,000 to Hopetoun Development under the loan deed between those parties dated 25 September 2017.
Hennessy Group
Jieyun alleges that the sum of $5,775,000 was paid in four separate payments on:
(a)4 October 2017 of $3,250,000 (‘the 4 October Payment’);
(b)9 October 2017 of $75,000 (‘the 9 October Payment’);
(c)30 October 2017 of $50,000 (‘the 30 October Payment’); and
(d)16 May 2018 of $2,400,000 (‘the 16 May Payment’),
(collectively, ‘the Alleged Hennessy Payments’), to Hennessy Group.
I am satisfied that the 4 October Payment, the 9 October Payment and the 16 May Payment were made to Hennessy Group, for the following reasons:
(a)The 4 October Payment and the 16 May Payment are admitted in the defence and are consistent with TDG’s obligation to make these payments under the loan agreements dated 20 September and 21 September 2017 respectively.
(b)The 9 October Payment is recorded in both the TDG Expenditure Transaction List and the September 2017 to August 2018 TDG Expenditure List as being made to Hennessy Group.
Although the November 2016 to February 2018 TDG Expenditure List records the Alleged Hennessy Payments as alleged, I am not satisfied that the 30 October Payment was ultimately made to Hennessy Group because:
(a)the defence alleges that the 30 October Payment was made to Mr He as ‘Marketing expenses related to raising funds for TDG as part of fundraising agreement’; and
(b)the September 2017 to August 2018 TDG Expenditure List records the 30 October Payment as made to Sentosa Capital as ‘Marketing/promotion - Sammie’.
East Asia
Jieyun alleges that the sum of $20,000 was paid on 5 October 2017 (‘the Alleged East Asia Payment’) to East Asia.
Although the November 2016 to February 2018 TDG Expenditure List records the Alleged East Asia Payment as alleged, I am not satisfied that it was made to East Asia because:
(a)the defence alleges that the Alleged East Asia Payment was made to Sentosa Capital as ‘Marketing expenses payable on behalf of TDG for investment fund raising, Townplanning consultants’ for the benefit of:
(i)Mr Cvek as to $15,000; and
(ii)Urbis as to $5,000; and
(b)the September 2017 to August 2018 TDG Expenditure List records the Alleged East Asia Payment in a manner broadly consistent with the defence, being two separate payments to:
(i)Sentosa Capital as to $15,000 for ‘Marketing’; and
(ii)Urbis as to $5,000 for ‘Consulting on townplanning’.
Aberdeen Holdings Pty Ltd
Jieyun alleges that the sum of $116,000 was paid in five separate payments on:
(a)12 October 2017 of $27,400;
(b)16 October 2017 of $15,000;
(c)17 October 2017 of $19,100;
(d)27 October 2017 of $44,500; and
(e)31 October 2017 of $10,000,
(collectively, ‘the Alleged Aberdeen Payments’), to Aberdeen Holdings.
Although the November 2016 to February 2018 TDG Expenditure List records the Alleged Aberdeen Payments as alleged, I am not satisfied that the Alleged Aberdeen Payments were ultimately made to Aberdeen Holdings because:
(a)the defence records the Alleged Aberdeen Payments as made to Mr Cvek and Sentosa Capital; and
(b)the September 2017 to August 2018 TDG Expenditure List records the Alleged Aberdeen Payments as being to Sentosa Capital.
Hopetoun Development
Jieyun alleges that the sum of $2,583,747 was paid in five separate payments on:
(a)27 September 2017 of $100,000 (‘the 27 September Payment’);
(b)17 October 2017 of $83,747 (‘the 17 October Payment’);
(c)15 March 2018 of $600,000 (‘the 15 March Payment’);
(d)29 March 2018 of $1,170,700 (‘the First 29 March Payment’); and
(e)29 March 2018 of $629,300 (‘the Second 29 March Payment’),
(collectively, the Alleged Hopetoun Payments’) to Hopetoun Development.
I am satisfied that:
(a)the 17 October Payment;
(b)the First 29 March Payment; and
(c)the Second 29 March Payment,
totalling $1,883,747, were made to Hopetoun Development because they are:
(i)admitted in the defence and are consistent (within $7,000) with TDG’s obligation to make these payments under the loan agreement dated 16 October 2017; and
(ii)recorded in the September 2017 to August 2018 TDG Expenditure List as being made to Hopetoun Development.
I am satisfied that the 27 September Payment was made to Hopetoun Development because it is:
(a)admitted in the defence; and
(b)recorded in the September 2017 to August 2018 TDG Expenditure List as being made to Hopetoun Development.
I am satisfied that the 15 March Payment was made to Hopetoun Development because it is:
(a)admitted in the defence and is consistent with TDG’s obligation to make the payment of this sum under the loan agreement dated 25 October 2017; and
(b)recorded in the September 2017 to August 2018 TDG Expenditure List as being made to Hopetoun Development.
Granville
Jieyun alleges that the sum of $1,175,600 was paid in 27 separate payments (‘the Alleged Granville Payments’) to Granville as follows:
| 26/09/2017 | $24,200.00 |
| 02/10/2017 | $38,350.00 |
| 04/10/2017 | $26,150.00 |
| 06/10/2017 | $12,300.00 |
| 06/10/2017 | $15,000.00 |
| 25/10/2017 | $24,200.00 |
| 31/10/2017 | $10,000.00 |
| 08/11/2017 | $10,000.00 |
| 09/11/2017 | $32,000.00 |
| 14/03/2018 | $24,200.00 |
| 15/03/2018 | $600,000.00 |
| 16/03/2018 | $5,000.00 |
| 05/04/2018 | $24,200.00 |
| 10/04/2018 | $12,100.00 |
| 13/04/2018 | $5,000.00 |
| 13/04/2018 | $6,000.00 |
| 03/05/2018 | $24,200.00 |
| 04/06/2018 | $24,200.00 |
| 12/06/2018 | $24,200.00 |
| 15/06/2018 | $35,000.00 |
| 21/06/2018 | $25,000.00 |
| 27/06/2018 | $44,000.00 |
| 02/07/2018 | $27,500.00 |
| 04/07/2018 | $24,400.00 |
| 20/07/2018 | $24,200.00 |
| 03/08/2018 | $30,000.00 |
| 17/08/2018 | $24,200.00 |
I am not satisfied that the payments on 31 October 2017 and 8 November 2017, each of $10,000, were made to Granville because:
(a)although the September 2017 to August 2018 TDG Expenditure List records the payments as made to Granville, the TDG Expenditure List records them as made to Aberdeen Holdings and Sentosa Capital respectively; and
(b)the defence alleges these payments were paid to:
(i)Sentosa Capital on 31 October 2017 as ‘Interior render work, marketing fund raising expenses on behalf of TDG’; and
(ii)Mr Cvek on 8 November 2017 as ‘Call on funds as per ACA agreement’.
I am satisfied that the balance of the Alleged Granville Payments were made to Granville because they are admitted in the defence.
Sentosa Capital
Jieyun alleges that the sum of $1,003,468 was paid in 26 separate payments (‘the Alleged Sentosa Capital Payments’) to Sentosa Capital as follows:
| 05/10/2017 | $20,000.00 |
| 06/10/2017 | $15,000.00 |
| 12/10/2017 | $27,400.00 |
| 16/10/2017 | $15,000.00 |
| 16/10/2017 | $69,500.00 |
| 17/10/2017 | $19,100.00 |
| 23/10/2017 | $8,450.00 |
| 25/10/2017 | $24,200.00 |
| 25/10/2017 | $27,400.00 |
| 27/10/2017 | $44,500.00 |
| 30/10/2017 | $28,000.00 |
| 30/10/2017 | $50,000.00 |
| 31/10/2017 | $10,000.00 |
| 31/10/2017 | $16,000.00 |
| 08/11/2017 | $3,800.00 |
| 08/11/2017 | $10,000.00 |
| 13/03/2018 | $150,000.00 |
| 13/04/2018 | $5,000.00 |
| 13/04/2018 | $6,000.00 |
| 04/05/2018 | $5,000.00 |
| 04/07/2018 | $24,400.00 |
| 06/07/2018 | $4,000.00 |
| 11/07/2018 | $5,000.00 |
| 13/07/2018 | $4,000.00 |
| 03/08/2018 | $30,000.00 |
| 22/08/2018 | $381,718.00 |
I am not satisfied of the following:
(a)The payment of $27,400 of 12 October 2017 was made to Sentosa Capital because:
(i)the defence alleges this line entry was ‘a bank reversal which has been process on the bank account’, (which is presumably a reference to a deposit of the same amount on 19 October 2017 into the TDG Account 4101); and
(ii)the reversal is consistent with there being no corresponding line entry for it in either the September 2017 to August 2018 TDG Expenditure List or the November 2016 to February 2018 TDG Expenditure List.
(b)The payments on:
(i)17 October 2017 of $19,100;
(ii)25 October 2017 of $24,200; and
(iii)27 October 2017 of $44,500,
were made to Sentosa Capital because each of the line entries in the September 2017 to August 2018 TDG Expenditure List conflict with:
(1)the corresponding line entries in the November 2016 to February 2018 TDG Expenditure List (which records these payments as paid to Aberdeen Holdings or Granville); and
(2)the defence (which alleges these payments were paid to Mr Cvek).
(c)The payment on 30 October 2017 of $50,000 was made to Sentosa Capital because the line entry in the September 2017 to August 2018 TDG Expenditure List conflicts with:
(i)the corresponding line entry in the November 2016 to February 2018 TDG Expenditure List (which records it as paid to Hennessy Group); and
(ii)the defence (which alleges it was paid to Mr He).
(d)The payment on 8 November 2017 of $10,000 was made to Sentosa Capital given that its entry in the September 2017 to August 2018 TDG Expenditure List conflicts with:
(i)the corresponding line entry in the November 2016 to February 2018 TDG Expenditure List (which records it as paid to Granville); and
(ii)the defence (which alleges it was paid to Mr He).
I am satisfied as follows:
(a)The payments on:
(i)16 October 2017 of $69,500,
(ii)25 October 2017 of $27,400; and
(iii)30 October 2017 of $28,000,
were made to Sentosa Capital because each is so recorded as a loan to Sentosa Capital in both the September 2017 to August 2018 TDG Expenditure List and the November 2016 to February 2018 TDG Expenditure List.
(b)The payment on 13 March 2018 of $150,000 was made to Sentosa Capital because it is so recorded as a loan in the September 2017 to August 2018 the Expenditure List.
(c)The payments on:
(i)13 April 2018 of $3,500;
(ii)13 April 2018 of $6,000; and
(iii)3 August 2018 of $16,610,
were received by Sentosa Capital because each amount is admitted in the defence.
(d)the balance of the Alleged Sentosa Capital Payments were made to Sentosa Capital because they are admitted in the defence.
Mandeville
Jieyun alleges that the sum of $608,097 was paid in 4 separate payments to Mandeville Group:
(a)on 28 September 2017 of $500,000;
(b)on 17 October 2017 of $83,747;
(c)on 24 October 2017 of $8,350; and
(d)on 24 October 2017 of $16,000.
| 28/09/2017 | Hopetoun Development /8 Hopetoun Rd | $500,000.00 |
| 17/10/2017 | Hopetoun Development | $83,747.00 |
| 24/10/2017 | Dali Cvek / Granville | $8,350.00 |
| 24/10/2017 | Dali Cvek / Granville | $16,000.00 |
I am satisfied that on 28 September 2017 the sum of $500,000 was paid to Mandeville because:
(a)it is admitted in the defence as the actual recipient of the payment; and
(b)its bank statement shows a deposit of $500,000 on that date.
I am not satisfied of the following:
(a)The payment of $83,747 on 17 October 2017 was paid to Mandeville because:
(i)the corresponding line entry in the September 2017 to August 2018 TDG Expenditure List (which records it as a loan to Hopetoun Developments) conflicts with the entry in the TDG List; and
(ii)the defence alleges this payment was made to Hopetoun Development.
(b)The payments of $8,350 and $16,000 both made on 24 October 2017, totalling $24,350, were made to Mandeville given that the entries in the September 2017 to August 2018 TDG Expenditure List conflict with:
(i)the corresponding line entry in the November 2016 to February 2018 TDG Expenditure List (which records the 24 October Payments as paid to Granville); and
(ii)the defence, which alleges these payments were paid to Mr Cvek.
Accordingly, I am satisfied that the following payments were transferred from funds held by TDG on the Jieyun Trust to the following recipients:
(a)Hennessy Group $5,725,000
(b)Hopetoun Development $2,583,747
(c)Granville $1,155,600
(d)Sentosa Capital $ 828,268
(e)Mandeville $ 500,000
I am further satisfied that each of the recipients is liable respectively in respect of each of the above amounts transferred, for the following reasons:
(a)TDG owed a fiduciary duty as trustee under the Jieyun Trust with respect to the amounts transferred, for the reasons set out in paragraphs 117 to 119.
(b)Each of the amounts transferred were misapplied by TDG, for the reasons set out in paragraph 217.
(c)Each recipient knew, at the time of the receipt, that it was misapplied trust money, for the reasons set out in paragraph 221.
Orders
Accordingly, I propose to order as follows:
(a)The first defendant pay the plaintiff the sum of $8,000,000 as a debt.
(b)The first defendant pay the plaintiff equitable compensation in the sum of $8,000,000.
(c)The eleventh and thirteenth defendants pay the plaintiff equitable compensation in the sum of $155,156.
(d)The second and third defendants pay the plaintiff equitable compensation in the sum of $8,000,000.
(e)The fifth defendant pay the plaintiff equitable compensation in the sum of $5,725,000
(f)The eighth defendant pay the plaintiff equitable compensation in the sum of $828,268.
(g)The ninth defendants pay the plaintiff equitable compensation in the sum of $500,000.
(h)The tenth defendant pay the plaintiff equitable compensation in the sum of $2,583,747.
(i)The twelfth defendant pay the plaintiff equitable compensation in the sum of $1,155,600.
(j)The claims against the fourth, sixth and seventh defendants be dismissed.
I will hear the parties with respect to further orders on the claims against the thirteenth defendant; and from the plaintiff with respect to:
(a)the claim with respect to fifteenth defendant and the money held in Court on its behalf,
(b)orders with respect to the sixteenth defendant, the seventeenth defendant and the nineteenth defendant;
(c)orders with respect to other amounts held in Court; and
(d)any further orders.
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SCHEDULE 1
| Date | Beneficiary | Payment |
| 26/09/2017 | Granville Group Pty Ltd | $24,200.00 |
| 27/09/2017 | Hopetoun Development Group Pty Ltd | $100,000.00 |
| 28/09/2017 | Hopetoun Development Group Pty Ltd | $500,000.00 |
| 02/10/2017 | Granville Group Pty Ltd | $38,350.00 |
| 03/10/2017 | Granville Group Pty Ltd | $25,000.00 |
| 04/10/2017 | Granville Group Pty Ltd | $26,150.00 |
| 04/10/2017 | Hennessy Group Pty Ltd | $3,250,000.00 |
| 05/10/2017 | Sentosa Capital Pty Ltd | $20,000.00 |
| 06/10/2017 | Granville Group Pty Ltd | $12,300.00 |
| 06/10/2017 | Granville Group Pty Ltd | $15,000.00 |
| 09/10/2017 | Dali Cvek | $75,000.00 |
| 12/10/2017 | Dali Cvek | $27,400.00 |
| 16/10/2017 | Sentosa Capital Pty Ltd | $15,000.00 |
| 16/10/2017 | Dali Cvek | $69,500.00 |
| 17/10/2017 | Dali Cvek | $19,100.00 |
| 17/10/2017 | Hopetoun Development Group Pty Ltd | $83,747.00 |
| 23/10/2017 | Sentosa Capital Pty Ltd | $8,450.00 |
| 24/10/2017 | Dali Cvek | $8,300.00 |
| 24/10/2017 | Dali Cvek | $16,000.00 |
| 25/10/2017 | Granville Group Pty Ltd | $24,200.00 |
| 25/10/2017 | Dali Cvek | $27,400.00 |
| 27/10/2017 | Sentosa Capital Pty Ltd | $3,000.00 |
| 27/10/2017 | Dali Cvek | $44,500.00 |
| 30/10/2017 | Dali Cvek | $28,000.00 |
| 30/10/2017 | Lei He | $50,000.00 |
| 31/10/2017 | Sentosa Capital Pty Ltd | $10,000.00 |
| 31/10/2017 | Sentosa Capital Pty Ltd | $16,000.00 |
| 08/11/2017 | Sentosa Capital Pty Ltd | $3,800.00 |
| 08/11/2017 | Dali Cvek | $10,000.00 |
| 09/11/2017 | Granville Group Pty Ltd | $32,000.00 |
| $4,582,397.00 |
SCHEDULE 2
| Date | Beneficiary | Payment |
| 13/03/2018 | Dali Cvek | $150,000.00 |
| 14/03/2018 | Granville Group Pty Ltd | $24,200.00 |
| 15/03/2018 | Granville Group Pty Ltd | $600,000.00 |
| 16/03/2018 | Granville Group Pty Ltd | $5,000.00 |
| 29/03/2018 | Hopetoun Development Group Pty Ltd | $1,170,700.00 |
| 29/03/2018 | Hopetoun Development Group Pty Ltd | $629,300.00 |
| 05/04/2018 | Granville Group Pty Ltd | $24,200.00 |
| 10/04/2018 | Granville Group Pty Ltd | $12,100.00 |
| 13/04/2018 | Granville Group Pty Ltd | $5,000.00 |
| 13/04/2018 | Granville Group Pty Ltd | $6,000.00 |
| $2,626,500.00 |
SCHEDULE 3
| Date | Beneficiary | Payment | |
| 03/05/2018 | Granville Group Pty Ltd | $24,200.00 | |
| 04/05/2018 | Sentosa Capital Pty Ltd | $5,000.00 | |
| 16/05/2018 | Hennessy Group Pty Ltd | $2,400,000.00 | |
| 04/06/2018 | Granville Group Pty Ltd | $24,200.00 | |
| 12/06/2018 | Granville Group Pty Ltd | $24,200.00 | |
| 15/06/2018 | Granville Group Pty Ltd | $35,000.00 | |
| 21/06/2018 | Granville Group Pty Ltd | $25,000.00 | |
| 27/06/2018 | Granville Group Pty Ltd | $44,000.00 | |
| 29/06/2018 | Sentosa Capital Pty Ltd | $13,200.00 | |
| 02/07/2018 | Granville Group Pty Ltd | $27,500.00 | |
| 04/07/2018 | Granville Group Pty Ltd | $24,400.00 | |
| 06/07/2018 | Sentosa Capital Pty Ltd | $4,000.00 | |
| 11/07/2018 | Sentosa Capital Pty Ltd | $5,000.00 | |
| 13/07/2018 | Sentosa Capital Pty Ltd | $4,000.00 | |
| 20/07/2018 | Granville Group Pty Ltd | $24,200.00 | |
| 03/08/2018 | Granville Group Pty Ltd | $30,000.00 | |
| 17/08/2018 | Granville Group Pty Ltd | $24,200.00 | |
| 22/08/2018 | Sentosa Capital Pty Ltd | $381,718.00 | |
| $3,119,818.00 | |||
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