Ying Mui Pty Ltd v Hoh (No 6)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2012 06147

YING MUI PTY LTD (ACN 009 992 449)	First Plaintiff/First Defendant by Counterclaim
AMORE CORPORATION PTY LTD (ACN 097 964 175)	Second Plaintiff/Second Defendant by Counterclaim
KIANG PO HOH (ALSO KNOWN AS GEORGE HOH)	Third Plaintiff/Third Defendant by Counterclaim
HAN KEYET HOH	Fourth Plaintiff/Fourth Defendant by Counterclaim
and
SHARIKAT YING MUI SDN BHD	Fifth Defendant by Counterclaim
v
FRANK KIANG NGAN HOH	First Defendant/First Plaintiff by Counterclaim
POOI YOKE LIM HOH	Second Defendant/Second Plaintiff by Counterclaim
LYNN YOOK LIEN HOH	Third Defendant/Third Plaintiff by Counterclaim
IAN HAN LOK HOH	Fourth Defendant/Fourth Plaintiff by Counterclaim
LOKIT INVESTMENTS PTY LTD (ACN 006 855 741)	Fifth Defendant
LUMARKYE PTY LTD (ACN 131 575 785)	Sixth Defendant
FROSTHOLLOW PTY LTD (ACN 151 816 401)	Seventh Defendant/Sixth Defendant by Counterclaim
OLREY PTY LTD (ACN 140 494 319)	Eighth Defendant/Seventh Defendant by Counterclaim

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JUDGE:	VICKERY J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	11, 12, 15 and 16 MAY 2017
DATE OF JUDGMENT:	15 DECEMBER 2017
CASE MAY BE CITED AS:	YING MUI & ORS v FRANK KIANG NGAN HOH & ORS (No 6)
MEDIUM NEUTRAL CITATION:	[2017] VSC 730

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CORPORATIONS — Duties of director of corporate trustee — Whether director breached fiduciary duties to corporate trustee — Director breached his duty by failing to exercise his relevant powers for a proper purpose and failing to act in good faith in the best interests of the relevant companies — Directors of trust company failed to act honestly – Directors ought not be excused pursuant to s 1318 Corporations Act 2001 (Cth) — Knowing assistance and involvement in contraventions under s 79 Corporations Act — Elements considered.

EQUITY — Defaulting fiduciary — Whether allowance should be made for fiduciary’s work in managing the business of trusts — Principles in Robert Deutsch & Ors v Erwin Deutsch & Ors [2012] VSC 227 at [170] applied — Whether under a trust a director of the trustee breached the No Conflict Rule by purporting to appoint himself to the office of appointor — No breach on this basis found — Equitable jurisdiction as to entitlement to fair and reasonable remuneration for management services irrespective of breaches of duty by claimant parties.

REAL PROPERTY — Section 42 of the Transfer of Land Act1958 (Vic) — Whether proprietary relief available — Meaning of ‘fraud’ in s 42 considered — Fraud under s 42 found — Indefeasibility of title not established — Constructive trusts to be declared.

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

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Osborne QC with Mr P Creighton-Selvay	Strongman & Crouch
For the First to Fifth Defendants	Mr P Bick QC with Mr C Truong	Arnold Bloch Leibler
For the Sixth Defendant	Mr M G R Gronow	Tribeca Legal
For the Seventh and Eighth Defendants	Mr C E Shaw	SBA Law
For the Fifth Defendant by Counterclaim	Mr T J F McEvoy QC	Herbert Smith Freehills

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TABLE OF CONTENTS

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

Background......................................................................................................................................... 2

The Hoh family and the family factions............................................................................................ 2
First Tranche Questions................................................................................................................... 3

Developments following delivery of the First Tranche Reasons.............................................. 6

Order under ‘Slip Rule’ made 27 April 2017................................................................................... 8
Lumarkye contentions in relation to answer to First Tranche Question 3(a)................................... 9
Plaintiffs’ contentions in relation to answer to First Tranche Question 3(a).................................. 12
Conclusion in relation to answer to First Tranche Question 3(a).................................................. 13

The Second Tranche Questions.................................................................................................... 15

Position of Fifth Defendant by Counterclaim............................................................................ 18

Claims arising from any breach of No Conflict Rule by Frank.............................................. 19

Question 1:................................................................................................................................... 19
Plaintiffs’ fiduciary duty contention............................................................................... 20
First to Fifth Defendants’ fiduciary duty contention.................................................... 20
Contentions of the Seventh Defendant (Frosthollow).................................................. 21
Plaintiffs’ pleaded case as to fiduciary duty................................................................. 21
First to Fifth Defendants’ pleaded case as to fiduciary duty...................................... 22
Whether Plaintiffs’ claimed fiduciary duty within case as pleaded......................... 24
Legal principles as to fiduciary duty outside a contract............................................. 27
Whether a fiduciary duty arose as alleged.................................................................... 29
Conclusion as to Question 1............................................................................................ 31

Question 2:................................................................................................................................... 31
Question 3:................................................................................................................................... 32
Question 4:................................................................................................................................... 32
Question 5:................................................................................................................................... 33

Impugned Ying Mui & Amore Payments, Agreements & Invoices....................................... 37

Question 6 (1):.............................................................................................................................. 37
Relevant legal principles.................................................................................................. 37
Content of the duties of a director - Duty to exercise power for a proper purpose 38
Content of the duties of a Director - Duty to act in good faith in the best interests of the company.................................................................................................................................. 39
Contentions of the Plaintiffs............................................................................................. 40
Contentions of the First to Fifth Defendants.................................................................. 41
Findings and Conclusions................................................................................................ 45
Failure to exercise powers for a proper purpose......................................................... 46
Failure to act in good faith in the best interests of the company and improper purpose 49

Question 6(2):............................................................................................................................... 52
Fully informed consent..................................................................................................... 53
Waiver of rights and/or release of Frank...................................................................... 53
Section 1318 of the Corporations Act.............................................................................. 54

Question 7(1):............................................................................................................................... 56
Contentions of the Plaintiffs............................................................................................. 57
Contentions of the First to Fifth Defendants.................................................................. 57
Analysis and conclusions................................................................................................. 58

Question 7(2):............................................................................................................................... 60
Question 7(3):............................................................................................................................... 61
Question 8(1):............................................................................................................................... 70
Question 8(2):............................................................................................................................... 73
Question 8(3):............................................................................................................................... 75
Question 9(1):............................................................................................................................... 76
Question 9(2):............................................................................................................................... 80
Question 10(1):............................................................................................................................. 80
Question 10(2):............................................................................................................................. 83
Question 11:................................................................................................................................. 84
Legal principles................................................................................................................. 84
Contentions of the First to Fifth Defendants.................................................................. 89
Contentions of the Plaintiffs............................................................................................. 93
Analysis and conclusions................................................................................................. 94

Sale of the Docklands Property, Unit 10 and Lot 201................................................................ 99

Question 12(1):............................................................................................................................. 99
Plaintiffs’ contentions...................................................................................................... 101
First to Fifth Defendants’ contentions........................................................................... 101
Conclusions as to the sales of the Docklands Property, Unit 10 and Lot 201........ 104

Question 12(2):........................................................................................................................... 109

2011 – 2014 Distribution Payments............................................................................................. 110

Question 14:............................................................................................................................... 110
Question 14(1):........................................................................................................................... 110
Duties of a trustee............................................................................................................ 110
Submissions of the Plaintiffs.......................................................................................... 113
Submissions of the First to Fifth Defendants............................................................... 117
Submissions of the Seventh Defendant (Frosthollow)............................................... 119
Conclusions and credit findings................................................................................... 123

Question 14(2):........................................................................................................................... 127
Question 15:............................................................................................................................... 129
Submissions of the Plaintiffs.......................................................................................... 129
Submissions of the First to Fifth Defendants............................................................... 129
Conclusions...................................................................................................................... 129

Appointment of Frosthollow and Impugned Agreements..................................................... 131

Question 16................................................................................................................................ 134
Legal principles as to power of appointment............................................................. 134
Submissions of the First to Fifth Defendants............................................................... 137
Conclusions as to the exercise of the power of appointment................................... 142
Consequential equitable relief...................................................................................... 144

Question 17(1):........................................................................................................................... 145
Findings of fact................................................................................................................. 145
Plaintiffs’ contentions...................................................................................................... 146
Submissions of Frosthollow and Olrey........................................................................ 148
Submissions of First to Fifth Defendants..................................................................... 148
Conclusions...................................................................................................................... 150

Questinon 17(2):........................................................................................................................ 152

Replacement of existing trustees................................................................................................. 152

Question 18:............................................................................................................................... 152
Legal principles relating to the removal and appointment of replacement trustee 153
Plaintiffs’ contentions...................................................................................................... 157
First to Fifth Defendants’ submissions......................................................................... 158
Conclusions as to the replacement of trustees............................................................ 158

Miscellaneous issues..................................................................................................................... 159

Question 19:............................................................................................................................... 159
Submissions of First to Fifth Defendants..................................................................... 162
Submissions of Frosthollow........................................................................................... 162
Conclusions as to whether the Ying Mui Trust should indemnify Ying Mui in respect of the loans....................................................................................................................... 163

Relief against Lumarkye............................................................................................................... 166

Question 22:............................................................................................................................... 168
Legal principles relating to the fraud exception s 42 TLA........................................ 169
Submissions of Lumarkye.............................................................................................. 171
Submissions of First to Fifth Defendants..................................................................... 171
Submissions of the Plaintiffs.......................................................................................... 172
Conclusion as to the fraud exception – s 42 TLA....................................................... 172

Question 23:............................................................................................................................... 177

Executive Summary of Second Tranche Findings................................................................... 177

Question 1:................................................................................................................................. 177
Question 2:................................................................................................................................. 177
Question 3:................................................................................................................................. 178
Question 4:................................................................................................................................. 178
Question 5:................................................................................................................................. 179
Question 6:................................................................................................................................. 179
Question 7:................................................................................................................................. 180
Question 8:................................................................................................................................. 180
Question 9:................................................................................................................................. 181
Question 10:............................................................................................................................... 181
Question 11:............................................................................................................................... 182
Question 12:............................................................................................................................... 182
Question 14:............................................................................................................................... 182

Question 15:............................................................................................................................... 182
Question 16:............................................................................................................................... 183
Question 17:............................................................................................................................... 183
Question 18:............................................................................................................................... 184
Question 19:............................................................................................................................... 184
Question 22:............................................................................................................................... 184
Question 23:............................................................................................................................... 184

Conclusion....................................................................................................................................... 185

HIS HONOUR:

Introduction

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

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

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

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

The trial of the proceeding has been conducted pursuant to a ‘sequential trial’ model described and ordered in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 1).[1]
[1]Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 1) [2016] VSC 519.

The first tranche of questions were determined in the reasons for judgment provided in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 3) (the ‘First Tranche Reasons’).[2]
[2]Ying Mui (No 3) [2017] VSC 29.

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

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

I adopt a similar approach to that taken in relation to the hearing and determination of the first tranche questions in the trial.[3]
[3]Ibid [13]–[15].

Background
The Hoh family and the family factions

In order to assist in the reading of these Second Tranche Reasons the structure of the Hoh family, which has been outlined previously,[4] is referred to and repeated.
[4]See Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 1) [2016] VSC 519 [2]–[6]; Ying Mui (No 3) [2017] VSC 29 [17]–[20].

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

The seven children of Hoh Senior and Madam Yow were:

(1)       Robert Hoh Kiang Chan (‘Robert’), who passed away on 24 December 2007;
(2)       Linda Hoh Yuet Ngo, who passed away in 1959;
(3)       Maureen Yuet Ming Oborn (nee Hoh) (‘Maureen’, also nicknamed ‘Binky’);
(4)       Derek Hoh Kiang Howe (‘Derek’);
(5)       George Hoh Kiang Po (‘George’) (the ‘Third Plaintiff’);
(6)       Frank Hoh Kiang Ngan (‘Frank’) (the ‘First Defendant’); and
(7)       Richard Hoh Kiang Seong (‘Richard’).

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

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

George Frank

Maureen (George and Frank’s sister) Pooi (Frank’s wife)

Han (Robert’s son and George’s nephew) Lynn (Frank’s daughter)

Ian (Frank’s son)

Dominic (Lynn’s husband)

First Tranche Questions

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

(1)In or about April 2001, or at any other and what time, was the alleged Joint Investment Agreement (the ‘JI Agreement’) formed between George, Frank and Robert Hoh to undertake property investment in Victoria through the vehicle of Ying Mui Pty Ltd, and if so:
(a) what were the terms of the JI Agreement?
(b)was property investment in Victoria subsequently undertaken by George, Frank and Robert Hoh pursuant to the JI Agreement?

(2)If not, in and after April 2001, was any or all property investment in Victoria undertaken by the Hoh family:
(a) for and on behalf of the family company, SYM; and/or
(b) pursuant the alleged benevolent purpose; and/or
(c)paid for by capital advanced by SYM, and not by loan funds;
(d)and if so, should any and what assets be held wholly or partly on a resulting and/or a constructive trust for SYM?

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

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

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

On 8 February 2017, judgment in respect of the First Tranche Questions was handed down and published in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 3).[5]
[5][2017] VSC 29.

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

In answer to the question: In or about April 2001, or at any other and what time, was the alleged Joint Investment Agreement (the ‘JI Agreement’) formed between George, Frank and Robert Hoh to undertake property investment in Victoria through the vehicle of Ying Mui Pty Ltd?
The answer is: No legally binding agreement came into existence. However, an arrangement or understanding for a joint endeavour arose and operated between Frank, Robert (later Han) and George between October 2001 and early 2010 for investment in property in Australia.[6]
[6]Ibid [192].
In answer to the question: What were the terms [of the arrangement or understanding]?
The answer is: The arrangement or understanding was governed by the trust deeds of the three trusts and the control of the trusts was governed by the trustees of the trusts, namely by the Ying Mui, Amore and Olrey companies, managed in accordance with the applicable company constitutions and the corporations law.[7]
[7]Ibid [193].
In answer to the question: Was property investment in Victoria subsequently undertaken by George, Frank and Robert Hoh pursuant to the JI Agreement?
The answer is: No. The property investment was undertaken pursuant to a joint endeavour under the arrangement or understanding described.[8]
[8]Ibid [194].
In answer to the First Tranche Questions 2 in and after April 2001, was any or all property investment in Victoria undertaken by the Hoh family:
(a)       for and on behalf of the family company, SYM; and/or
(b)      pursuant the alleged benevolent purpose; and/or
(c)       paid for by capital advanced by SYM, and not by loan funds;
(d)and if so, should any and what assets be held wholly or partly on a resulting and/or a constructive trust for SYM?[9]

The answer to each of the above questions (a) to (d) inclusive is: No in each case.[10]
In answer to the First Tranche Question 3: Did Lumarkye, in receiving the Sydenham Property and Lot 202 from Ying Mui, knowingly receive trust property? The answer is: Yes.[11]
In answer to the First Tranche Question 3: Is Lumarkye a constructive trustee with respect to the Sydenham Property and Lot 202 or is it required to pay compensation to Ying Mui? The answer is that the Court is presently unable to answer this question in the light of the submissions that have been made.[12]
It is a matter of note that, although the two properties comprised real estate which was, in all likelihood, subject to the Torrens system of land registration in Victoria, no defence of indefeasibility of title was either pleaded by Lumarkye or contended for in submissions. In Farah Constructions, the High Court held that the recipient of the real estate there in question had obtained indefeasible title to the properties transferred upon registration under the Torrens system. For this reason, it was held that the recipients could not be liable for knowing receipt, even if they had received the properties with notice of the breach of fiduciary duty. With some exceptions, indefeasibility of title protects registered proprietors from adverse claims to land in the absence of actual fraud on their part or on the part of their agents. The breach of fiduciary duty on the part of the fiduciary in Farah Constructions even if it had occurred, was held not to be of such an order that it could be described as ‘actual fraud’. For this reason, the recipients, who became the registered proprietors of the properties in question, could not be guilty of fraud, even if they had received the properties with actual knowledge of the fiduciary’s breach.[13]
However, no such case was pleaded or at this point pressed in submissions.[14]
The Court will need to hear further from the parties as to whether any and what amendment to the pleadings and further submissions should be entertained before determining this part of the First Tranche Question 3.[15]
[9]Ibid [360].
[10]Ibid [361].
[11]Ibid [574].
[12]Ibid [575].
[13]Ibid [576].
[14]Ibid [577].
[15]Ibid [578].

Developments following delivery of the First Tranche Reasons

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

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

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

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

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

(b)an amended pleading in the terms of its draft Amended Consolidated Statement of Claim which relevantly pleads four new groups of claims and consequential amendments, being:
(i)alternative claims for relief being an account of profits and equitable rescission;

(ii) the proposed joinder of Dominic Low as a party;
(iii)amendments in relation to the Joint Investment Agreement (the ‘JI Agreement’) to conform with the findings made by the Court in answer to the First Tranche Question 1; and
(iv)claims that Lynn Ho acted as agent of Lumarkye and Dominic Low in relation to the two properties transferred to it as pleaded in the draft by paragraphs [315A], [342A], [323A], [349A], [335A] and [362A].

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

The application was heard on 2 March 2017.

On 6 March 2017, the Court published its determination in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 4).[16]
[16][2017] VSC 85.

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

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

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

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

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

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

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

Order under ‘Slip Rule’ made 27 April 2017

On 24 April 2017, having considered the submissions of the relevant parties, I prepared reasons in relation to the exercise of the Court’s discretion to correct an error in a judgment. See: Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 5) (Slip Rule) (the ‘Slip Rule Reasons’).[17]
[17][2017] VSC 211.

The Slip Rule Reasons are here set out:[18]
[18]Footnotes omitted.

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

3This was a mistake. The use of the word ‘No’ in its context was plainly inconsistent with the reasoning in the Judgment. Any suggestion to the contrary, as maintained by Lumarkye, is rejected.
4Further, in a subsequent ruling, Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 4) the Court expressly stated that the Plaintiffs had succeeded in their knowing receipt claim against Lumarkye. This very clearly reflected the intention of the Court to use of the word ‘Yes’, and not ‘No’, in answer to question 3(a).
5Rule 36.07 of the Supreme Court (General Civil Procedure) Rules 2015, known as the ‘Slip Rule’, provides:
The Court may at any time correct a clerical mistake in a judgment or an order or an error arising in a judgment or an order from any accidental slip or omission.

6The error which occurred in this case was an error arising in a judgment from an accidental slip, which the Court has a discretion to correct.
7It would not be in the interests of justice to permit the error to remain in the Judgment uncorrected.
8The answer to the first tranche question 3(a) should have been expressed as ‘Yes’, and paragraph 574 of the Judgment will be amended accordingly.
9It is directed that the answer to the first tranche question 3(a) in paragraph 574 of the Judgment be amended to ‘Yes’.

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

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

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

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

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

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

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

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

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

In these circumstances, Lumarkye submits that where there has been no breach of trust specifically found in relation to the transactions in which Lumarkye purchased properties from the Plaintiffs in late 2011, it is not appropriate to permit the Plaintiffs to ‘trace’ the properties or award relief against Lumarkye in respect of its acquisition of either of them, even in circumstances where the Court has found that Lumarkye had (though Lynn and Frank Hoh) the requisite level of knowledge to justify a ‘knowing receipt’ claim under the principles in Barnes v Addy[19] and answered the First Tranche Question 3(a) in the affirmative.
[19](1874) LR 9 Ch App 244.

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

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

(a)to order Lumarkye to pay equitable compensation to the plaintiffs as they have not suffered any loss as a result of its acquisition of the Sydenham Property or Lot 202; nor
(b)to find that it holds either property on constructive trust for the plaintiffs, where the trustee, the beneficiaries and the trust property have not suffered any detriment or diminution as a result of any transaction involving Lumarkye.

It contended that this is so even if (as the Court has found) Lynn Hoh was the ‘controlling mind’ of Lumarkye in relation to those transactions,[20] and it has ‘knowingly received’ the two properties as a result.
[20]Ying Mui (No 3) [2017] VSC 29, [546]–[550].

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

It was put in the alternative, that even though the Court has found that Lumarkye ‘knowingly received’ properties alienated by a trustee as the result of a breach of trust, the remedies sought by the Plaintiffs are, like all equitable remedies, discretionary,[21] and should only be ordered where it is fair and equitable to do so.
[21]J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) [3.050].

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

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

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

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

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

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

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

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

[22]Ying Mui (No 3) [2017] VSC 29 [547].

[23][2017] VSC 85 [4].

[24]Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (Ruling No 5) (Slip Rule) [2017] VSC 211 [4].

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

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

The Plaintiffs’ allegations against Lumarkye are based on the first limb of Barnes v Addy,[25] that is to say it received trust property (namely the two properties) with knowledge of Frank and Ian’s alleged breaches of fiduciary duty which they owed to Ying Mui as its directors. In other words, the Plaintiffs claim that Lumarkye received the two properties with notice of the trusts.
[25]That is, a claim ‘to hold a recipient of property from a fiduciary, who has acted in breach of obligation, personally liable to make restitution for the value of the property received’: Michael Bryan ‘The Liability of the Recipient: Restitution at Common Law or Wrongdoing in Equity?’ in Simone Degeling and James Edelman (eds), Equity in Commercial Law (Lawbook, 2005) 327, 330.

In the First Tranche Reasons, it was found that Lynn should be treated as the controlling mind of Lumarkye.[26] It was further found that Lynn had actual knowledge of the critical matters.[27]
[26]Ying Mui (No 3) [2016] VSC 29 [561]; [566]–[567].
[27]Ibid [567].

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

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

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

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

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

Findings were made in the First Tranche Reasons as to the breaches of duty on the part of Frank[28] and Ian[29] in relation to the Sydenham Property and Lot 202. Added to this ‘is the conduct of both Frank and Ian arising from payments to Lokit (the “Lokit Payments”)’.[30]
[28]Ibid [517].
[29]Ibid [524].
[30]Ibid [525].

This section of the First Tranche Reasons contained the alleged ‘error’ made by the Court. However, this section was merely additional to the findings against Frank and Ian which had already been made. Further, it was directed to making the finding at that ‘[t]he breach of duty in relation to the Lokit Payments is also established’.[31] It was not directed to making any finding in relation to the breaches of duty found on the part of Frank and Ian in disposing of the Sydenham Property and Lot 202.
[31]Ibid [533].

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

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

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

The Second Tranche Questions

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

The Second Tranche Questions are:

Claims arising from any breach of No Conflict Rule by Frank
1Did Frank owe a fiduciary duty to the other Joint Investors not to pursue his interests in conflict with the interests of the Joint Investors (the No Conflict Rule)?;
2Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the Ying Mui Trust? If so, should Frank’s purported appointment be set aside?
3Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the AT? If so, should Frank’s purported appointment be set aside?
4From July 2010, did Frank, with the knowledge and approval of Pooi, Lynn and Ian, decide to:
(a)Procure the sale by Ying Mui of certain of Ying Mui’s property assets;
(b)Distribute the proceeds of sale of those assets to himself, his family or to entities controlled by him or his immediate family or at their direction, or in any event, to the exclusion of George, Han and Maureen; and
(c)Otherwise transfer the assets of Ying Mui and Amore to entities controlled by him or his immediate family or at their direction, or in any event to the exclusion of George, Han and Maureen (the Asset Sale and Distribution Decision)?

5Did Frank breach the No Conflict Rule in entering into the Impugned YM Agreements? If so, should the Impugned YM Agreements be set aside?

Impugned YM & Amore Payments, Agreements & Invoices
6Did Frank breach any fiduciary or statutory duties to Ying Mui or Amore by arranging, authorising or facilitating the Impugned YM & Amore Payments? If so, are any of the pleaded equitable defences established and/or should Frank be relieved from liability pursuant to s 1318 Corporations Act?
7Did Lynn breach any fiduciary or statutory duties to Ying Mui by executing the Impugned YM Agreement? If so, should Lynn be relieved from liability pursuant to s 1318 Corporations Act? Are Frank or Pooi liable for knowingly assisting, or being involved in, any breaches?
8Did Pooi breach any fiduciary or statutory duties to Amore by executing the Impugned Amore Agreement? If so, should Pooi be relieved from liability pursuant to s 1318 Corporations Act? Are Frank or Lynn liable for knowingly assisting, or being involved in, those breaches?
9Did Frank, Lynn, Pooi or Ian breach any fiduciary or statutory duties to Ying Mui or Amore by voting in favour of resolutions that Ying Mui and Amore be authorised to pay the Impugned YM & Amore Invoices? If so, should any of them be relieved from liability pursuant to s 1318 Corporations Act?
10In receiving the Impugned YM & Amore Payments, whether pursuant to the Impugned YM & Amore Invoices or otherwise, did Lokit or Lynn knowingly receive trust property? If so, are Lokit or Lynn:
(a)liable as constructive trustees with respect to the YM & Amore Payments; or

(b) liable to pay compensation to Ying Mui and Amore?
11Was Frank and/or Lokit entitled to fair and reasonable remuneration in respect of the services they provided to Ying Mui and Lokit? (quantum to be determined later)

Sale of the Docklands Property, Unit 10 and Lot 201
12Did Frank, Lynn, Pooi and/or Ian breach any fiduciary or statutory duties to Ying Mui by arranging, authorising and facilitating the sale of the Docklands Property, Unit 10, or Lot 201 to third parties? If so, should any of them be relieved from liability pursuant to s 1318 Corporations Act?

2011 – 2014 Distribution Payments
14Did Ying Mui and/or Frosthollow act in breach of trust by making the 2011, 2012, 2013 & 2014 Distribution Payments? If so, did Frank, Lynn or Ian knowingly assist those breaches of trust?
15In receiving the 2011, 2012 & 2013 Distribution Payments, did Lokit knowingly receive trust property? If so, is Lokit:
(a)liable as a constructive trustee with respect to the 2011, 2012 & 2013 Distribution Payments; or

(b) liable to pay compensation to Ying Mui?

Appointment of Frosthollow & Impugned Agreements
16What duties did Frank owe as appointor of the Ying Mui and Amore Trusts and did he breach those duties by removing Ying Mui and Amore and appointing Frosthollow as trustee of those trusts? If so, is the appointment of Frosthollow as trustee of the Ying Mui and Amore trusts invalid or liable to be set aside?
17Did Frosthollow and Olrey act in breach of trust by executing the Impugned Frosthollow and Olrey Agreements? If so, did Frank or Lynn knowingly assist those breaches of trust?

Replacement of existing trustees
18Is it expedient for the Court to remove Frosthollow as trustee of the Ying Mui and Amore Trusts and/or Olrey as trustee of the FRG Investments Trust and appoint independent trustees, Ying Mui or Amore as trustee of those trusts?

Miscellaneous issues
19Is Ying Mui entitled to an indemnity out of the assets of the Ying Mui Trust in respect of the First Loan and Second Loan?

Relief against Lumarkye
22Is proprietary relief available against Lumarkye in light of s 42 of the Transfer of Land Act 1958 (Vic) (with the terms of such proprietary relief to be determined at the quantum stage of the proceeding).

23 If no to 22, is the First Plaintiff entitled to relief against Lumarkye:
23.1by way of equitable compensation or alternatively an account of profits (with the quantum of any such compensation or the amount of any account to be determined at the hearing of the quantum stage of the proceeding)?
23.2alternatively to 23.1, is the Plaintiff entitled to equitable relief against Lumarkye in the form of rescission and ancillary relief thereto including an order that Lumarkye transfer Lot 202 and the Sydenham properties to Ying Mui?

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

Question 13: Did Frank breach any fiduciary or statutory duties to Ying Mui by arranging, authorising or facilitating the 2011 Distribution Payments? If so, should Frank be relieved from liability pursuant to s 1318 Corporations Act?
Question 20: Was there a Unit 7 Sale Agreement? If so, did Frank breach the Unit 7 Sale Agreement by purchasing Unit 7 for $300,000? Is this claim statute-barred or are the pleaded equitable defences to this claim otherwise established?
Question 21: Did Frank breach any fiduciary or statutory duties to Ying Mui by arranging, authorising or facilitating the Unit 7 Sale? If there is a breach, is the claim statute-barred or are the pleaded equitable defences to this claim otherwise established and/or should Frank be relieved from liability pursuant to s 1318 of the Corporations Act.

Position of Fifth Defendant by Counterclaim

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

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

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

(a)       George Hoh
(b)      Frank Hoh
(c)       Han Hoh;
(d)      Leonard Hoh;
(e)       Jonathan Hoh;
(f)       Gloria Hoh, as alternate director to Leonard Hoh;
(g)      Cordelia Hoh, as alternate director to Jonathan Hoh;
(h)      Richard Hoh, as alternate director to Frank Hoh; and

The current shareholders in SYM are:
(i)       George Hoh;
(j)        Maureen Oborn;
(k)      Braden Hoh;
(l)       Han Hoh;
(m)     Richard Hoh;
(n)      Cordelia Hoh;
(o)      Yook Yung Sdn Bhd;
(p)      Leonard Hoh;
(q)      Jonathan Hoh;
(r)       Ian Hoh;
(s)       Frank Hoh; and
(t)       Linlok Enterprises Sdn Bhd.[33]

[33]Further corporate details of SYM are set out in table G (‘Sharikat Ying Mui Sdn Bhd (SYM) (the fifth named defendant by counterclaim)’) of the annexure to the First Tranche Reasons.

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

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

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

Claims arising from any breach of No Conflict Rule by Frank
Question 1:

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

In its First Tranche Reasons, the Court distilled the relevant principles concerning the fiduciary and statutory duties owed by a director to his or her company.[34] The directors of Ying Mui and Amore plainly owed fiduciary and statutory duties to the relevant trustee companies.
[34]Ying Mui (No 3) [2017] VSC 29 [382]–[409].

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

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

Plaintiffs’ fiduciary duty contention

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

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

First to Fifth Defendants’ fiduciary duty contention

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

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

Contentions of the Seventh Defendant (Frosthollow)

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

(a)the claim by the Plaintiffs that Frosthollow indemnify the first plaintiff (Ying Mui) for the alleged loans made by the third plaintiff (George), Robert Hoh (Robert) and the fifth defendant (Lokit) (the indemnity claim); and
(b)the claim by the Plaintiffs that distributions made by Frosthollow to beneficiaries in 2012, 2013 and 2014 were made in breach of trust (the distribution claim).

Plaintiffs’ pleaded case as to fiduciary duty

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

44(c)
44. There were terms of the Joint Investment Agreement, inter alia, that:
…
(c) Frank would:
(i)be principally responsible for proposing joint investments in Australia;
(ii)facilitate the acquisition by Ying Mui, for the benefit of the Joint Investors, of the agreed investments; and
(iii)manage the joint investments on a day to day basis for the benefit of the Joint Investors (the Management Power);

…
45
45. By reason of:

(a) the terms and effect of the Joint Investment Agreement;
(b)the other Joint Investors reposing trust and confidence in Frank by granting him the Management Power;

(c) Frank’s acceptance of the Management Power;
(d) the nature of the Management Power which:
(i)gave Frank the ability to affect the interests of the Joint Investors; and
(ii)required Frank to act for and on behalf of the Joint Investors in the exercise of that power;

(e)       the fact that Frank was the only joint investor that was:
(i)        resident in Australia; and
(ii)       a director of Ying Mui; and
the fact that the funds referred to in paragraph 70 below were transferred at Frank’s request and were in his effective control once they were transferred –

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

First to Fifth Defendants’ pleaded case as to fiduciary duty

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

43
43 As to paragraph 43 Frank:
(a) says that:
(i)the Hoh family, through Ying Mui, Amore and Olrey, has made various investments in Australia in the circumstances set out below;

(ii) Hoh Ying Chye (father) died on 21 April 1988;
(iii)at all relevant times, father intended and the members of the Hoh family understood that the assets and investments of the principal Hoh family company in Malaysia, Sharikat Ying Mui Sdn Bhd (Company No 8046-A) (SYM) the fifth defendant by counterclaim, would be acquired and managed for the benefit of the Hoh family with the intent that income generated from its assets would be used where possible to support or supplement current and future members of the Hoh family in times of financial difficulty or need (benevolent purpose);
(iv)at all relevant times from at least 1988, father’s children – Robert, Frank, Maureen, George, Derek Hoh and Richard Hoh – understood, accepted and acted consistently with the benevolent purpose;
(v)at all relevant time from at least 2000, some of father’s children – Frank, Robert, George and Maureen – understood, accepted and acted consistently with the benevolent purpose in respect of Hoh family investments in Australia, by investing funds of SYM derived from SYM’s business activities in Malaysia in Australia through Ying Mui, Amore and later Olrey for the benefit of SYM and thereby for the benefit of all members of the Hoh family having a direct or indirect interest in SYM;
(vi)the benevolent purpose was not intended to be and is not legally enforceable;
(vii)SYM has issued proceedings in Malaysia against certain members of the Hoh family in which it assets, inter alia, ownership of certain funds including SYM’s funds invested in Australia the subject of this proceeding.

(b) refers to the matters alleged at paragraphs 1 and 5 above;
(c) otherwise denies the allegations.

PARTICULARS

Particulars of the benevolent purpose and father’s children’s understanding, acceptance and actions consistent with the benevolent purpose are set out in Schedules A and B respectively.
44. As to paragraph 44 Frank:
(a) refers to the matters alleged at paragraph 43 above;
(b)says that at all times from around 2000, Ying Mui, Amore and later Olrey operated in the following way:
(i)Frank, being the SYM director who resided in Australia, established and managed the operations of Ying Mui, Amore and Olrey on a day to day basis;
(ii)Frank requested funds from SYM through George and on occasion Robert, being the SYM directors residing in Malaysia, from time to time;
(iii)George would arrange for funds to be remitted from Malaysia using SYM’s monies held in pawnshop and other accounts when requested by Frank and when available;
(iv)Ying Mui’s and Amore’s bank borrowings were secured by personal guarantees provided by Frank and Pooi without which the investments by Ying Mui, Amore and Olrey could not have occurred;
(v)Frank notified and updated George of Ying Mui’s, Amore’s and Olrey’s investments with SYM’s funds from time to time as a matter of courtesy and similarly updated family members who were present at family meetings;
(vi)no approval was sought or needed from George and/or other members of the Hoh family prior to Ying Mui, Amore and/or Olrey making or seeling investments;
(vii)investments by Ying Mui, Amore and Olrey were held by each company in their respective capacities as trustees of the Ying Mui Trust, the AT and FRGIT because the discretionary trust was the structure best suited to promoting the Australian investment activities conducted with SYM’s funds and the benevolent purpose and protecting beneficiaries;
(viii)Ying Mui, Amore and Olrey invested in property in accordance with an investment strategy devised by Frank (Hoh business model);
(ix)through the Hoh business model, the investments made by Ying Mui, Amore and Olrey in the relevant period resulted in substantial returns on investments.

PARTICULARS

As to sub-paragraph 44(b)(viii) above, refer to Schedule C.
As to sub-paragraph 44(b)(ix) above, refer to Schedule D.
(c)       otherwise denies the allegations.
45.      As to paragraph 45 Frank:
(a)       refers to the matters alleged at paragraphs 43 and 44 above;
(b)       otherwise denies the allegations.

Whether Plaintiffs’ claimed fiduciary duty within case as pleaded

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

The case as pleaded by the Plaintiffs relied in part on the alleged JI Agreement. The Court made the following findings as to the JI Agreement in the First Tranche Reasons:[35]
[35]Ibid [186]–[191].

Although I am satisfied that Frank, and George and Robert (and later Han), as a matter of practice, adopted a procedure of consultation in relation to the acquisition of investment properties in Australia between October 2001 and early 2010, I am not satisfied that the arrangement and the conduct evidenced a binding agreement in the nature of an enforceable contract between the three brothers, Frank, Robert and George (and later Han).
Although there was some conduct consistent with what are alleged to be the terms of the JI Agreement, there is insufficient evidence to satisfy me that the initial participating parties, namely Frank, Robert and George, considered themselves bound by its terms.
Rather, the arrangement as to purchase, ownership and division of the proceeds of sale of the various properties was governed by the trust deed of the three trusts and the sale control of the trusts was governed by the trustees of the trusts, namely the Ying Mui, Amore and Olrey companies, managed in accordance with the applicable company constitutions and the corporations law.
The three brothers were content to have these structures govern their relationship in law and in equity in relation to investments in property in Australia.
Frank, as the local representative in Australia for himself and his two brothers, Robert and George, assumed the primary role of sourcing properties for property investment. The arrangement as to the buying and management of the various properties adopted a practice of consultation between the three brothers from time to time.
Beyond this structure, the following factors point to there being no intention to enter into any agreement that would be enforceable at law between them of the character of a binding contract:
(a)At least one of the companies of the arrangement evidenced by the Malaysian Investment Conversations were never acted upon or enforced, namely that Frank would be paid a management salary, which was open to be proposed by him, but which in fact was never proposed. This remained the position until well after 2001, when Frank fell into dispute with George and unilaterally, and without any proposal and without any prior consultation, claimed a lump sum for monies for ‘salary’ he said was due to him and proceeded to pay himself the sum he claimed from trust funds;
(b)The arrangement was made between three brothers, who made investments of property in Australia for a considerable period, between October 2001 and early 2010, without any apparent intention to document their arrangements any further than the trust and corporate structures they had put in place; and
(c)The arrangement as to the buying and management of the various properties adopted a practice of consultation between the three brothers from time to time, where the practice was founded on a common understanding, but was not intended to be legally enforceable between them. [footnote omitted]

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

In answer to the question: In or about April 2001, or at any other and what time, was the alleged Joint Investment Agreement (the ‘JI Agreement’) formed between George, Frank and Robert Hoh to undertake property investment in Victoria through the vehicle of Ying Mui Pty Ltd?
The answer is: No legally binding agreement came into existence. However, an arrangement or understanding for a joint endeavour arose and operated between Frank, Robert (later Han) and George between October 2001 and early 2010 for investment in property in Australia.
In answer to the question: What were the terms [of the arrangement or understanding]?
The answer is: The arrangement or understanding was governed by the trust deeds of the three trusts and the control of the trusts was governed by the trustees of the trusts, namely by the Ying Mui, Amore and Olrey companies, managed in accordance with the applicable company constitutions and the corporations law.
In answer to the question: Was property investment in Victoria subsequently undertaken by George, Frank and Robert Hoh pursuant to the JI Agreement?
The answer is: No. The property investment was undertaken to a joint endeavour under the arrangement or understanding described.

[36]Ibid [192]–[194].

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

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

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

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

(a) Frank was the only joint investor that was:

(i) resident in Australia; and
(ii) a director of Ying Mui; and
(b)funds were transferred at Frank’s request and were in his effective control once transferred.

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

Legal principles as to fiduciary duty outside a contract

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

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

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

[37](1984) 156 CLR 41.

[38]Ibid 96–97.

Further, the categories of fiduciary relationships are not closed and the fact that a particular relationship ‘does not fit within any clearly established category of fiduciary relationships is not necessarily a barrier to fiduciary duties being imposed’.[39]
[39]News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410, 538.

Of importance to this case is that a relationship between parties can give rise to fiduciary obligations even if there is no binding contractual arrangement between them.[40]
[40]United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1, 12.

Whether or not a fiduciary relationship arises will depend upon the particular facts found in each case. It has been held that ‘the existence and scope of fiduciary obligations must always be assessed in the particular context in which they are claimed to arise’.[41] The key question is whether the relationship ‘is founded on "mutual trust and confidence" in a relevant sense’.[42] It is also ‘well settled that a person may be a fiduciary in some activities but not in others’.[43]
[41]Edmonds v Donovan [2005] VSCA 27 [58] (Phillips JA, Winneke P and Charles JA agreeing).
[42]News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410, 538.
[43]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 98 (Mason J).

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

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

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

[44](1985) 157 CLR 1, 10–11 (Mason, Brennan and Deane JJ).

Further, Dawson J characterised a joint venture as ‘an association of persons who engage in a common undertaking for profit’.[45]
[45]Ibid 15–16.

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

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

[46] Ibid 11-12. See also Edmonds v Donovan [2005] VSCA 27 [59].

Whether a fiduciary duty arose as alleged

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

The mere fact that the relationship between Frank, Robert (later Han) and George was akin to a joint venture ‘is not enough to give rise to fiduciary obligations’.[47] For a fiduciary duties to be imposed, the ‘necessary confidence’ will need to be ‘reposed by the participants in one another’.[48]
[47]Brendan Wilfred King v Robert Lawrence Adams & Ors [2016] NSWSC 1798 [50] (Sackar J).
[48]United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1, 16 (Dawson J).

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

The Court found in the First Tranche Reasons that:

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

[49]Ying Mui (No 3) [2017] VSC 29 [192]–[194].

The Court further found that the arrangement continued:

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

[50]Ibid [191(b)]–[191(c)].

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

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

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

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

(i)From October 2001 – early 2010, Frank identified, and discussed with George, a range of potential property investments in Australia;
(ii)George then discussed those property investments with Robert;
(iii)Frank sought the approval of George and Robert before making the property investments for the benefit of Frank, Robert and George; and
(iv)George and Robert then arranged to remit funds, under the control of Frank, Robert and George, ‘as loans from themselves to the Ying Mui Trust, the Amore Trust and the FRG Investments Trust’ for investment in Australia.

Applying the important facts as found to the case law, I determine that Frank, in identifying, making and managing property investments in Australia for the benefit of the three brothers as the Joint Investors, had the power and discretion to affect the interests of George and Robert ‘in a legal or practical sense’.[51] In the absence of any legally binding agreement being in place, and in circumstances where Frank was the only of the three brothers who was a director of Ying Mui and Amore, Frank had ‘a special opportunity to exercise the power or discretion to the detriment of’ the other brothers,[52] as it was Frank alone who could control how the funds remitted by George and Robert were invested and how the properties held by Ying Mui, Amore and Olrey were managed.
[51]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 97.
[52]Ibid.

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

Conclusion as to Question 1

Relief against Lumarkye

A number of questions arise in relation to the relief claimed by the Plaintiffs against Lumarkye. These arise from the findings of the Court in relation to the First Tranche Reasons.

The Court held in First Tranche Reasons that Lumarkye was liable for knowingly receiving the Sydenham Property and Lot 201,[359] being ‘two properties [that] were trust property being misapplied or transferred pursuant to a breach of fiduciary duty or trust’.[360]
[359]Ying Mui (No 3) [2017] VSC 29 [570]. See also Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 4) [2017] VSC 85 [4].
[360]Ying Mui (No 3) [2017] VSC 29 [546]–[550].

However, by orders dated 6 March 2017, the Court granted Lumarkye leave to file and serve an Amended Defence, relying upon s 42 of the TLA, as a defence to Ying Mui’s claim for relief in the nature of a constructive trust over the Sydenham Property and Lot 202.[361] Such leave was granted on the basis that the Plaintiffs also be granted leave to file and serve:

(a)The Third Further Amended Statement of Claim, in which they alleged, inter alia, that Lynn acted as the agent of Dominic in respect of his negotiation and entry into the contracts of sale for the Sydenham Property and Lot 202, and sought orders for equitable rescission of those contracts of sale and consequential orders requiring the conveyance by Lumarkye of the Sydenham Property and Lot 202 to Ying Mui, subject to the repayment of the purchase price;[362] and
(b)A Reply to Lumarkye’s Amended Defence, in which the Plaintiffs denied that s 42 of the TLA provided Lumarkye with a defence to Ying Mui’s claim for a constructive trust, on the basis that:
(i)The title acquired by Lumarkye to the Sydenham Property and Lot 202 was defeasible, because Lumarkye acquired such title by reason of, with knowledge of, and as an instrument of, the fraud of Frank, Lynn and Ian (or any of them); and
(ii)Alternatively, Ying Mui has an in personam claim against Lumarkye for knowing receipt.[363]

[361]See Lumarkye’s Defence dated 17 March 2017 at [321] and [347].

[362]See Third Further Amended Statement of Claim at [315A], [322], [323A], [337A], [342A], [348A], [349A] & [363A].

[363]See the Plaintiffs’ Reply dated 20 March 2017 at [2] & [3].

Accordingly, the following issues arise for determination:

(a)First, is the fraud exception contained with s 42 of the TLA enlivened, such that Lumarkye is disentitled from asserting the indefeasibility of title defence?
(b)Second, and if there was no fraud, is Ying Mui entitled to a constructive trust over the Sydenham Property and Lot 202 on the basis that it has an in personam claim against Lumarkye?
(c)Third, and if there was no fraud and Ying Mui does not have an in personam claim, is Ying Mui nevertheless entitled to orders for equitable rescission of those contracts of sale and consequential orders requiring the conveyance by Lumarkye of the Sydenham Property and Lot 202 to Ying Mui, subject to the repayment of the purchase price?
(d)If all of the questions identified above are answered in the negative, is Ying Mui entitled to equitable compensation or an account of profits (with quantum to be determined at the quantum stage of the proceeding?

The Plaintiffs contend that each of these questions should be answered in the affirmative.

Question 22:
Is proprietary relief available against Lumarkye in light of s 42 of the Transfer of Land Act 1958 (Vic) (with the terms of such proprietary relief to be determined at the quantum stage of the proceeding).

Two basic issues arise under this question:

(a)Does the fraud exception to indefeasibility in s 42 of the TLA apply? or

(b) Does the in personam exception to indefeasibility apply?

The corporate structure of Lumarkye and one of its shareholders, River Ventures Pty Ltd, at relevant times was as follows:

Lumarkye Pty Ltd (the sixth named defendant)

Incorporated: 12/06/2008

Current directors:
Dominic Low (appointed 09/09/2011)

You Keun Hoo (Vgene)
(appointed 09/09/2011)

Former directors: Not relevant

Current shareholders:
River Ventures Pty Ltd – 100 shares (since 09/09/2011)

Dominic Low – 100 shares
(since 09/09/2011)

Former shareholders relevantly include:
FKIL Pty Ltd – 25 shares
(ceased 09/09/2011)

Linjoshan Pty Ltd – 25 shares
(ceased 09/09/2011)

River Ventures Pty Ltd

Incorporated: 29/06/2011

Current director: Frank Hoh (appointed 29/06/2011)

Former directors: None

Current shareholders: Teck Keun Ho – 100 shares
(from 29/06/2011)
Chok Keun Hoo – 150 shares
(from 29/06/2011)
You Keun Hoo (Vgene) – 150 shares (from 29/06/2011)
Pei Leng Siew – 100 shares
(from 29/06/2011)
Legal principles relating to the fraud exception s 42 TLA

Section 42(1) of TLA provides:

Notwithstanding the existence in any other person of any estate or interest (whether derived by grant from Her Majesty or otherwise) which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever … [Emphasis added]

In Latec Investments Ltd & Ors v Hotel Terrigal Pty Ltd (‘Latec’)[364] it was held by Kitto J that if the collaboration of a vendor and purchaser ‘through their common directors amounted to fraud’, any claim to proprietary relief will ‘not [be] defeated by the indefeasibility which those sections accord to a registered title’.[365]
[364](1965) 113 CLR 265.
[365]Ibid 273.

The question of what constitutes ‘fraud’ for the purposes of s 42(1) of TLA has been considered in case law.

Turning again to Latec, Kitto J, in responding to a contention that fraud requires a fraudulent misrepresentation, held that:[366]

The whole course of authority on this branch of the law is to the contrary. Moral turpitude there must be; but a designed cheating of a registered proprietor out of his rights by means of a collusive and colourable sale by a mortgagee company to a subsidiary is as clearly a fraud, as clearly a defrauding of the mortgagor, as a cheating by any other means…
There was pretence and collusion in the conscious misuse of a power. It may be that those concerned salved their consciences by telling themselves that the mortgagor company, being already in liq, was in so parlous a financial condition that the course they were taking was unlikely in the long run to do anyone any harm. But it was a dishonest course none the less, and the proper name for it is fraud. [Emphasis added]

[366]Ibid 273-274.

Applying the considerations adopted by Kitto J in Latec above, the relevant fraud for the purposes of s 42(1) TLA may be constituted by conduct which includes:

(a)       conduct which amounts to moral turpitude; or
(b)      which is a designed cheating of a registered proprietor; or
(c)       a cheating by any other means; or a
(d)      conscious misuse of a power.

Four members of the High Court in Bahr & Anor v Nicolay & Ors (No 2) (‘Bahr v Nicolay’)[367] cited the first part of the passage above with approval.[368]
[367](1998) 164 CLR 604.
[368]Ibid 614 (Mason CJ and Dawson J) and 632 (Wilson and Toohey JJ). The implications of that decision were considered in detail by Vickery J in Body Corporate No 12870 & Ors v Aldal Pty Ltd & Ors (2010) 29 VR 81 [76]–[111].

Mason CJ and Dawson J further held that ‘personal dishonesty or moral turpitude lie at the heart’[369] of the fraud exception, and endorsed the view cited by Higgins J in Stuart v Kingston[370] that s 42 of the TLA should be ‘construed strictly and the exception liberally’.[371]
[369](1998) 164 CLR 604, 614 (Mason CJ and Dawson J).
[370](1923) 32 CLR 309, 345.
[371](1998) 164 CLR 604, 615.

In Macquarie Bank Ltd v Sixty Fourth Throne Pty Ltd,[372] Tadgell JA held (Winneke P agreeing) that ‘an underhand scheme designed to cheat another may be fraudulent towards that other although involving neither representation to nor direct dealing with him’.[373] Indeed, fraud may be found even if the perpetrator ‘may not have appreciated that his actions were dishonest’,[374] because a person may act dishonestly when ‘judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest’.[375]
[372](1998) 3 VR 133.
[373]Ibid 143.
[374]Sino Iron Pty Ltd & Anor v Worldwide Wagering Pty Ltd & Ors [2017] VSC 101 [378].
[375]Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (2007) 230 CLR 89, 162.

Then, in Russo v Bendigo Bank Ltd & Anor,[376] Ormiston JA (Winneke P agreeing) undertook an analysis of the fraud exception.[377] His Honour noted that ‘some accumulation or aggregation of matters of factors may be permitted’[378] for the purpose of assessing fraud, and held that ‘the most satisfactory definition of the concept of fraud’[379] was that articulated by Salmon J in Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd,[380] namely:

The term “fraud” is not here used in its most restricted sense as including merely deceit, not in its widest sense as including the constructive or equitable fraud of the Court of Chancery. It means dishonesty – a wilful and conscious disregard and violation of the rights of other persons.
[Emphasis added]

[376](1999) 3 VR 376.

[377]Ibid [23]–[34].

[378]Ibid [46].

[379]Ibid.

[380][1923] NZLR 1137, 1173.

More recently, a similar approach was adopted by Hargrave J in Sino Iron Pty Ltd & Anor v Worldwide Wagering Pty Ltd & Ors,[381] in which his Honour cited Farah and Bahr v Nicolay and commented that ‘”Fraud” in s 42(1) means “actual fraud, moral turpitude”, or “dishonesty of some sort”’.[382]
[381][2017] VSC 101.
[382]Ibid [373].

Submissions of Lumarkye

Lumarkye denies that there was any relevant fraud.

However, it does so by asserting that ‘Ying Mui engaged in the perfectly proper activity of selling the trust property at or above market value to repay properly incurred trust debts’. This submission is made in the face of findings to the contrary made in the First Tranche Reasons.

Lumarkye has not made out a case which answers the Plaintiffs’ case that, given that Lumarkye has been found to be a knowing recipient of the Sydenham Property and Lot 202 in the context of this case, the fraud exception applies.

Submissions of First to Fifth Defendants

The First to Fifth Defendants took the position that this section concerns only issues between the Plaintiffs and Lumarkye, save as to the issue of the agency of Lynn.

As to the question of the agency of Lynn, this issue is no longer alive in these proceedings given the findings of the Court in relation to Lynn being the ‘controlling mind’ of Lumarkye made in the First Tranche Reasons,[383] especially where it was found:[384]

At least until completion of those transactions,[385] Lynn was the controlling mind of Lumarkye when the company received benefits of the transfers of the two properties to it.
[383]Ying Mui (No 3) [2017] VSC 29 [545]–[566].
[384]Ibid [566].
[385]The sales of the Sydenham Property and Lot 202 to Lumarkye.

Submissions of the Plaintiffs

The Plaintiffs submitted that the title acquired by Lumarkye to the Sydenham Property and Lot 202 was defeasible because Lumarkye acquired such title by reason of, with knowledge of, and as an instrument of, the fraud of Frank, Lynn and Ian.

The conduct relied upon by the Plaintiffs to establish the relevant fraud was the conduct of Frank, Lynn and Ian in transferring the Sydenham Property and Lot 202 to Lumarkye in the context of the surrounding facts of this case in which these transactions were effected.

The Plaintiffs pointed to numbers of matters arising in the evidence in making out their submissions under the fraud exception of s 42 TLA.

Conclusion as to the fraud exception – s 42 TLA

Lumarkye secured registration under the TLA in respect of the Sydenham Property and Lot 202 and became the registered proprietor of these properties.

However, I am satisfied that the fraud exception under s 42(1) applies, with the result that Lumarkye did not achieve an indefeasible title to those properties.

This finding is made for the following reasons.

First, the Sydenham Property and Lot 202 were disposed of by Frank and Ian, and with knowing the assistance of Lynn, for the purpose of implementing the Asset Sale and Distribution Decision.

Second, the transactions which resulted in transfer of the two properties to Lumarkye I find on the evidence to be ‘an underhand scheme designed to cheat another’, [386] namely, George, Han and Maureen, of the assets of the Ying Mui Trust and the Amore Trust.
[386]Macquarie Bank Ltd v Sixty Fourth Throne Pty Ltd [1998] 3 VR 133, 143.

As to concealment from George, Han and Maureen, in selling the Sydenham Property and Lot 202 to implement the Asset Sale and Distribution Decision, there ‘was pretence (…) in the conscious misuse of a power’[387] which amounted to dishonest concealment.
[387]Latec Investments Ltd & Ors v Hotel Terrigal Pty Ltd & Ors (1965) 113 CLR 265, 274.

The Court has already determined that ‘All of the asset sales, distributions and payments described above were concealed from George, Han and Maureen at the time of the transactions being undertaken’.[388]
[388]Ying Mui (No 3) [2017] VSC 29 [475].

Indeed, the whole asset sale process, including the payment of management fees and distributions, was intentionally concealed from George, Han and Maureen. The admissions made by Frank in his evidence made out this case.

Further, Lynn consciously concealed the asset sale process, which I find included the sale of the Sydenham Property and Lot 202, from George, Han and Maureen. The admissions made by Lynn in her evidence similarly made out this case.

The deliberate concealment of the asset sale process is further evidenced by the letter of 12 October 2011, in which Frank, Lynn and Ian stated that ‘it is our present intention to cause YM, in its capacity as trustee, to sell the Trust’s assets, for distribution among the beneficiaries’, when in fact they had already disposed of many of the assets of the Ying Mui Trust. That letter was, as the Court held in First Tranche Reasons, ‘patently false and misleading and, I find, deliberately so’.[389] It was signed by the two directors of Ying Mui who authorised the sale of the Sydenham Property and Lot 202 to Lumarkye, namely, Frank and Ian. It was also signed by Lynn, who the Court has determined ‘was the key instrument in effecting the sale transactions and was the directing mind and will behind the transactions on behalf of the company’.[390]
[389]Ibid [478].
[390]Ibid [550].

Third, the evidence establishes that there was a ‘wilful and conscious disregard and violation of the rights of other persons’.[391] [Emphasis added] Frank admitted that he made a conscious decision to act in his own self-interest, to the detriment of Ying Mui:[392]

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

[391]Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1923] NZLR 1137, 1173; approved in Russo v Bendigo Bank Ltd & Anor (1999) 3 VR 385 [33].

[392]Frank at T585.29-31.

A body of other evidence already canvassed in reasons delivered in this proceeding supports this admission.

In this regard, I am also satisfied that the transactions took place in circumstances which demonstrate that the properties concerned, namely the Sydenham Property and Lot 202, were valuable assets which had the potential for long term growth, and as such, were sound investments.

I reject the submissions of Lumarkye to the effect that ‘Ying Mui engaged in the perfectly proper activity of selling the trust property at or above market value to repay properly incurred trust debts’. There is no evidence that Ying Mui was under any unusual financial pressure to sell the properties, whether arising from defaulting or unreliable tenants or otherwise. True it is that bank re-financing of the properties had become necessary following impending expiration of the term of existing facilities. However, there is no evidence that re-financing on reasonable commercial terms was not likely to have been secured, had it been applied for by the Ying Mui Trust.

It is accepted that the stated investment policy of Ying Mui, as recorded in the minutes of meeting of 9 April 2004, did contemplate the selling of properties from time to time. The minutes relevantly stated:

The INVESTMENT POLICY of YMA properties was discussed. The consensus of the opinion is that the policy should be and include the following elements:
…
(iv)That existing investments may [be] sold if an attractive price is offered. That is, no investment should be regarded as fixed and shall never be sold.

However, in making the decision to sell the Sydenham Property and Lot 202 to Lumarkye, I am satisfied that no proper consideration was given as to whether it would have been to the benefit of the beneficiaries as a whole to have retained the properties in the trust for their investment value in the longer term.

The Sydenham Property and Lot 202 were valuable assets which had the potential for long term growth. The two properties were securely tenanted at the time they were transferred to Lumarkye towards the end of 2011, as the following table demonstrates:

530 Keilor Melton Road, Sydenham (‘Sydenham property’)
·Leased by Capital Radiology
o 10 year lease entered into on 17 December 2001; further 10 year lease entered into on 17 December 2011
·Sold to Lumarkye on 30 September 2011

Lot 202, 440A Hampton Street, Hampton (‘Lot 202’)
·Leased by the National Australia Bank
o 5 year lease term: 1 May 2008 – 30 April 2013 with options to renew
·Sold to Lumarkye on 28 October 2011

As such, the continued holding of the properties by the Ying Mui Trust was likely to have been of long term benefit for its beneficiaries as investments.

This finding is further evidenced by the conduct of Lynn, Ian and Vgene, in proceeding with the purchase of the properties on behalf of Lumarkye. On behalf of its shareholders, Ian and River Ventures Pty Ltd (which included Vgene as a shareholder), Lumarkye was prepared to pay slightly more than market value. This supports an inference that Lynn, who was an astute investor and the initiator of the sales transactions, her husband Ian, and her friend Vgene, recognised the value of these properties and their potential for further growth in the market place. This, in turn, supports a finding that the two properties did in fact have such value and potential for future growth.

By its conduct in orchestrating the transfer to the two properties to it, Lumarkye, was in fact denying the potential for growth in value and the value of the properties as long term investments to the Ying Mui Trust beneficiaries.

Fourth, I am satisfied that the transactions arose from a ‘conscious misuse of a power’.[393]
[393]Latec Investments Ltd & Ors v Hotel Terrigal Pty Ltd & Ors (1965) 113 CLR 265, 274.

A trustee having the power to do something does not confer legitimacy on an improper use of that power.

The Court has already determined that there was a misuse by Frank and Ian of their powers as directors of Ying Mui in disposing of the Sydenham Property and Lot 202 to Lumarkye.[394]
[394]See generally, Ying Mui (No 3) [2017] VSC 29 [512]–[524].

The misuse of power in the part of Frank involved the sale of the Sydenham Property and Lot 202 as ‘part of the broader property asset sales programme initiated by Frank for his personal purposes’, for the ‘improper purpose of obtaining substantial and direct financial benefits’, the ‘driving motivation’ of which ‘was Frank’s personal interest’.[395]
[395]Ibid [512]–[515].

Similarly, in respect of Ian, the misuse of power involved the sale of the Sydenham Property and Lot 202 in circumstances where ‘he knew that cash received from the sale of the properties was to be used in defence of litigation which Frank anticipated’ and where he ‘exercised his powers as a director for the improper purpose of conferring substantial and direct personal benefits upon his parents’.[396]
[396]Ibid [520]–[521].

In these circumstances, I am satisfied that the evidence compels a finding that Frank, Lynn and Ian, through Lumarkye, engaged in ‘an underhand scheme designed to cheat another’.[397] Lumarkye through Lynn had knowledge of the conduct and was used and was involved as an instrument of the fraud.
[397]Macquarie Bank Ltd v Sixty Fourth Throne Pty Ltd [1998] 3 VR 133, 143.

Accordingly, Lumarkye cannot avail itself of the indefeasibility provisions of s 42 of the TLA.

It follows that, as a knowing recipient of the Sydenham Property and Lot 202, Lumarkye holds those properties on constructive trust for Ying Mui.

Question 23:
If no to 22, is the First Plaintiff entitled to relief against Lumarkye:
23.1by way of equitable compensation or alternatively an account of profits (with the quantum of any such compensation or the amount of any account to be determined at the hearing of the quantum stage of the proceeding)?
23.2alternatively to 23.1, is the Plaintiff entitled to equitable relief against Lumarkye in the form of rescission and ancillary relief thereto including an order that Lumarkye transfer Lot 202 and the Sydenham properties to Ying Mui?

In the light of my finding above, there is no need to answer these questions.

Executive Summary of Second Tranche Findings

Question 1:
Did Frank owe a fiduciary duty to the other Joint Investors not to pursue his interests in conflict with the interests of the Joint Investors (the No Conflict Rule)?

Frank owed to George and to Robert (later Han) a fiduciary duty not to pursue his interests in conflict with those of George and Robert (later Han).

Question 2:
Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the Ying Mui Trust? If so, should Frank’s purported appointment be set aside?

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

It follows that his appointment as appointer of Ying Mui Trust should not be set aside.

Question 3:
Did Frank breach the No Conflict Rule by purporting to appoint himself to the office of appointor of the Amore Trust? If so, should Frank’s purported appointment be set aside?

Frank did not breach the No Conflict Rule by simply purporting to appoint himself to the office of appointor of the Amore Trust.

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

Question 4:
From July 2010, did Frank, with the knowledge and approval of Pooi, Lynn and Ian, decide to: (a) Procure the sale by Ying Mui of certain of Ying Mui’s property assets; (b) Distribute the proceeds of sale of those assets to himself, his family or to entities controlled by him or his immediate family or at their direction, or in any event, to the exclusion of George, Han and Maureen; and (c) Otherwise transfer the assets of Ying Mui and Amore to entities controlled by him or his immediate family or at their direction, or in any event to the exclusion of George, Han and Maureen (the Asset Sale and Distribution Decision)?

The property sales programme was undertaken with the knowledge and approval of Pooi, Lynn and Ian. It involved the following principal elements and followed a decision taken in the period from July 2010 to effect the following things (the ‘Asset Sale and Distribution Decision’):

(a) Procuring the sale by Ying Mui of certain of Ying Mui’s property assets;
(b)Distributing the proceeds of sale of those assets to himself, his family or to entities controlled by him or his immediate family, or at their direction, or in any event, to the exclusion of George, Han and Maureen; and
(c)Otherwise transferring the assets of Ying Mui and Amore to entities controlled by Frank or his immediate family, or at their direction, or in any event to the exclusion of George, Han and Maureen.

Question 5:
Did Frank breach the No Conflict Rule in entering into the Impugned Ying Mui and Amore Agreements? If so, should the Impugned Ying Mui Agreement be set aside?

In executing the Impugned Ying Mui and Amore Agreements, Frank breached the No Conflict Rule. His conduct, in executing the Impugned Ying Mui and Amore Agreements behind the backs of George and Han and in pursuit of his self-interest, constituted a breach of the fiduciary duty he owed to George and Han not to pursue his interests in conflict with those of George and Robert (later Han).

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

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

Question 6:
Did Frank breach any fiduciary or statutory duties to Ying Mui or Amore by arranging, authorising or facilitating the Impugned Ying Mui and Amore Payments? If so, are any of the pleaded equitable defences established and/or should Frank be relieved from liability pursuant to s 1318 of the Corporations Act?

Frank breached his duty to Ying Mui and Amore by arranging, authorising and facilitating the Impugned Ying Mui and Amore Payments.

Frank breached his duty in two ways:

(a) He failed to exercise his relevant powers for a proper purpose; and
(b) He failed to act in good faith in the best interests of the relevant companies.

Frank is not able to avail himself of the equitable defences of:

(a)fully informed consent in respect of the Impugned Ying Mui and Amore Payments; or
(b)any waiver on the part of Ying Mui or Amore of their rights and/or any release of Frank in respect of his obligations.

Frank did not act honestly in the relevant sense.

Frank ought not be fairly to be excused under s 1318 of the Corporations Act and the discretion to grant relief in his favour, even if it is enlivened, fails.

Question 7:
Did Lynn breach any fiduciary or statutory duties to Ying Mui by executing the Impugned Ying Mui Agreement? If so, should Lynn be relieved from liability pursuant to s 1318 Corporations Act? Are Frank or Pooi liable for knowingly assisting, or being involved in, any breaches?

Lynn breached fiduciary duties and statutory duties owed to Ying Mui by executing the Impugned Ying Mui Agreement. She did so in two ways:

(a) She failed to exercise her relevant powers for a proper purpose; and
(b) She failed to act in good faith in the best interests of the company.

Lynn did not act honestly in the relevant sense.

Lynn ought not be fairly to be excused under s 1318 of the Corporations Act and the discretion to grant relief in her favour, even if it is enlivened, fails.

By reason of the matters not being pleaded by the Plaintiffs, I will make no findings on the allegations as framed by the Plaintiffs in their submissions in relation to Question 7(3), namely that ‘Frank, Pooi, Lynn and Ian acted in concert to implement the asset sale process, which was a dishonest and fraudulent design, intended to covertly misappropriate the assets of the Ying Mui Trust and [the] Amore Trust for the benefit of Frank and his immediate family and to the exclusion of George, Han and Maureen’. It is not a question which arises on the pleadings.

Question 8:
Did Pooi breach any fiduciary or statutory duties to Amore by executing the Impugned Amore Agreement? If so, should Pooi be relieved from liability pursuant to s 1318 of the Corporations Act? Are Frank or Lynn liable for knowingly assisting, or being involved in, those breaches?

Pooi acted in breach of fiduciary and statutory duty to Amore by executing the Impugned Amore Agreement.

In the circumstances of her executing the Impugned Amore Agreement, Pooi ought not be excused under s 1318 of the Corporations Act.

Frank and Lynn are liable for knowingly assisting, and being involved within the meaning of s 79 of the Corporations Act, in Pooi’s breaches of fiduciary and statutory duty in executing the Impugned Amore Agreement on behalf of Amore.

Question 9:
Did Frank, Lynn, Pooi or Ian breach any fiduciary or statutory duties to Ying Mui or Amore by voting in favour of resolutions that Ying Mui and Amore be authorised to pay the Impugned Ying Mui and Amore Invoices? If so, should any of them be relieved from liability pursuant to s 1318 of the Corporations Act?

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

They should not be relieved of liability under s 1318 Corporations Act.

Question 10:
In receiving the Impugned Ying Mui and Amore Payments, whether pursuant to the Impugned Ying Mui and Amore Invoices or otherwise, did Lokit or Lynn knowingly receive trust property? If so, are Lokit or Lynn: (a) liable as constructive trustees with respect to the Ying Mui and Amore Payments; or (b) liable to pay compensation to Ying Mui and Amore?

Frank had sufficient knowledge of the contravening conduct such that, when properly imputed to Lokit, rendered Lokit liable as a knowing recipient.

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

Lokit is liable as a knowing recipient, and holds the Impugned Ying Mui and Amore Payments as a constructive trustee.

In addition, following any necessary election to be made by the Plaintiffs, Lokit is liable to pay equitable compensation to Ying Mui and Amore, plus interest.

Question 11:
Was Frank and/or Lokit entitled to fair and reasonable remuneration in respect of the services they provided to Ying Mui and Lokit? (with quantum to be determined later)

In the exercise of the Court’s equitable jurisdiction neither Frank nor Lokit are entitled to any remuneration in respect of any of the services they provided to Ying Mui or Amore or Ying Mui Trust or the Amore Trust.

Question 12:
Did Frank, Lynn, Pooi and/or Ian breach any fiduciary or statutory duties to Ying Mui by arranging, authorising and facilitating the sale of the Docklands Property, Unit 10, or Lot 201 to third parties? If so, should any of them be relieved from liability pursuant to s 1318 Corporations Act?

Frank, Lynn, Pooi and Ian each breached their fiduciary and statutory duties owed to Ying Mui in arranging, authorising and facilitating the sale of the Docklands Property, Unit 10 and Lot 201.

Frank, Lynn, Pooi and Ian should not be relieved from liability pursuant to s 1318 of the Corporations Act.

Question 14:
Did Ying Mui and/or Frosthollow act in breach of trust by making the 2011, 2012, 2013 & 2014 Distribution Payments? If so, did Frank, Lynn or Ian knowingly assist those breaches of trust?

Frank, Lynn and Ian knowingly procured Ying Mui to make the 2011 Distribution Payments in breach of trust and thereby knowingly assisted in this breach of trust.

Lynn knowingly procured Frosthollow to make the 2012–2014 Distribution Payments in breach of trust and thereby knowingly assisted in these breaches of trust.

Question 15:
In receiving the 2011, 2012 & 2013 Distribution Payments, did Lokit knowingly receive trust property? If so, is Lokit: (a) liable as a constructive trustee with respect to the 2011, 2012 & 2013 Distribution Payments; or (b) liable to pay compensation to Ying Mui?

In receiving the 2011, 2012 and 2013 Distribution Payments, Lokit knowingly received trust property.

Lokit:

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

(b) is liable to pay compensation to Ying Mui.

Question 16:
What duties did Frank owe as appointor of the Ying Mui and Amore Trusts and did he breach those duties by removing Ying Mui and Amore and appointing Frosthollow as trustee of those trusts? If so, is the appointment of Frosthollow as trustee of the Ying Mui and Amore trusts invalid or liable to be set aside?

Frank, in removing Ying Mui and Amore and appointing Frosthollow as trustee of the relevant trusts, owed a fiduciary duty to the beneficiaries of the trusts to act in their best interest interests and not for a collateral purpose, for his own benefit or with any ulterior purpose.

Frank breached those duties by removing Ying Mui and Amore and appointing Frosthollow as trustee of those trusts.

It is appropriate to grant a declaration that the appointment of Frosthollow as trustee of the Ying Mui and Amore trusts was and remains invalid, and consequently should be ordered to be aside.

Question 17:
Did Frosthollow and Olrey act in breach of trust by executing the Impugned Frosthollow and Olrey Agreements? If so, did Frank or Lynn knowingly assist those breaches of trust?

The Plaintiffs have not established that the execution of the management fee agreements being the Impugned Frosthollow and Olrey Agreements were undertaken in breach of trust.

Given the finding that the Impugned Frosthollow and Olrey Agreements were not executed in breach of trust, there is no need to consider this matter further.

Question 18:
Is it expedient for the Court to remove Frosthollow as trustee of the Ying Mui and Amore Trusts and/or Olrey as trustee of the FRG Investments Trust and appoint independent trustees, Ying Mui or Amore as trustee of those trusts?

It is expedient for an independent trustee of the FRGIT to be appointed.

The identity of the new trustee will have to await a further hearing.

Question 19:
Is Ying Mui entitled to an indemnity out of the assets of the Ying Mui Trust in respect of the First Loan and Second Loan?

No limitation period has been pleaded in respect of the loans in question, and no application has been made to amend any pleading to plead a limitation defence. Accordingly, this element of the case will be determined on the basis of the framework of the case as it was presented.

Ying Mui is entitled to an indemnity out of the assets of the Ying Mui Trust in respect of its liability to repay the loans comprising the First Loan and the Second Loan, upon demand.

Question 22:
Is proprietary relief available against Lumarkye in light of s 42 of the Transfer of Land Act 1958 (Vic) (with the terms of such proprietary relief to be determined at the quantum stage of the proceeding)?

Lumarkye cannot avail itself of the indefeasibility provisions s 42 of the TLA.

It follows that, as a knowing recipient of the Sydenham Property and Lot 202, Lumarkye holds those properties on constructive trust for Ying Mui.

Question 23:
If no to 22, is the First Plaintiff entitled to relief against Lumarkye:
(23.1) by way of equitable compensation or alternatively an account of profits (with the quantum of any such compensation or the amount of any account to be determined at the hearing of the quantum stage of the proceeding)?
(23.2) alternatively to 23.1, is the Plaintiff entitled to equitable relief against Lumarkye in the form of rescission and ancillary relief thereto including an order that Lumarkye transfer Lot 202 and the Sydenham properties to Ying Mui?

In the light of the finding above, there is no need to answer these questions.

Conclusion

I will hear the parties on these matters, and what further questions need to be addressed, if any, in the next tranche of questions to be dealt with in this sequential trial.

I repeat what was said by this Court in Ying Mui and Ors v Frank Hoh and Ors (Ruling No 1):[398]
[398][2016] VSC 519 [3]–[5].

[3]       Hoh Senior passed away on 21 April 1988. Before his death, Hoh Senior delivered instructions for his will which included the following prayer:
These are my last instructions to my children, grand-children and their descendants and it is my sincere wish that they will be faithfully carried out.
...
It is my deepest and dearest wishes that my children and descendants will continue to love and help each other when I am gone. Take heed of the old saying “Harmony within the Family promotes prosperity”. The way to achieve such harmony as taught by ancient sages is to cultivate the virtues of filial piety and brotherly love.
[4]       It is tragic for the Hoh family that these wishes of Hoh Senior have not to date been fulfilled, culminating in the present litigation of Wagnerian proportions and cost – not only in financial terms, but also in exacerbating the strains within the family which have driven it to this point.
[5]       However, it is never too late. No dispute, however seemingly intractable, is incapable of resolution by the agreement of the parties, provided the conditions are in place which encourage them to commit to finding a solution to their problem.
[Emphasis added]

These observations have as much cogency today as when they were made by this Court more than one year ago on 31 August 2016. A great deal of money has been expended by the parties since that time, and there will be much more money expended on this litigation before it is finally concluded if the parties are unwilling to heed the sage advice of the late Hoh Senior.

The sequential trial model of hearing has been specifically designed to assist the parties resolve the real issues in dispute by agreement, in accordance with the overarching obligation provided for by s 7 of the Civil Procedure Act 2010 (Vic). The parties are exhorted to achieve a resolution of the proceeding by resolving the matter by agreement before any further costs are expended to the detriment of future generations.

This would be a most unfortunate legacy for the present litigants to leave behind them.

Finally, I am reminded of the plight of Gloster J (as her Ladyship then was) in determining the epic judgment in Berezovsky v Abramovish (Rev 1).[399] Like her Ladyship, I make no apologies for the length of this judgment and quote Blaise Pascal in saying that ‘it is only so long because I have not had the leisure to make it shorter’.[400]
[399][2012] EWHC 2463 (Comm).
[400]Blaise Pascal, Lettres Provinciales, 16th Letter, 4 December, 1656: ‘Je n’ai fait celle-ci plus longue que parce que je n’ai pas eu le loisir de la faire plus courte’.

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George	Frank
Maureen (George and Frank’s sister)	Pooi (Frank’s wife)
Han (Robert’s son and George’s nephew)	Lynn (Frank’s daughter)
Ian (Frank’s son)
Dominic (Lynn’s husband)

Lumarkye Pty Ltd (the sixth named defendant)
Incorporated:	12/06/2008
Current directors:	Dominic Low (appointed 09/09/2011) You Keun Hoo (Vgene) (appointed 09/09/2011)
Former directors:	Not relevant
Current shareholders:	River Ventures Pty Ltd – 100 shares (since 09/09/2011) Dominic Low – 100 shares (since 09/09/2011)
Former shareholders relevantly include:	FKIL Pty Ltd – 25 shares (ceased 09/09/2011) Linjoshan Pty Ltd – 25 shares (ceased 09/09/2011)
River Ventures Pty Ltd
Incorporated:	29/06/2011
Current director:	Frank Hoh (appointed 29/06/2011)
Former directors:	None
Current shareholders:	Teck Keun Ho – 100 shares (from 29/06/2011) Chok Keun Hoo – 150 shares (from 29/06/2011) You Keun Hoo (Vgene) – 150 shares (from 29/06/2011) Pei Leng Siew – 100 shares (from 29/06/2011)

[2017] VSC 730

15 DECEMBER 2017