FEDERAL COURT OF AUSTRALIA Hylepin Pty Ltd v Doshay Pty Ltd [2020] FCA 1370 File number(s): VID 1438 of 2016 Judge(s): O'BRYAN J Date of judgment: 25 September 2020 Catchwords: CORPORATIONS – share and debt capital invested by the first defendant in various joint venture companies – whether transactions undertaken in breach of fiduciary duties, specifically the conflict rule and the profit rule – whether monies of the first defendant were applied for the purchase of real property – whether real property held on a constructive trust for the first defendant – whether claims are time barred in equity by analogy to claims based upon breach of the statutory duties of directors or by the equitable doctrine of laches – whether share transfer to the first defendant vitiated by mistake – whether decision by the first defendant not to renew a lease of commercial premises a breach of the statutory duty to act in good faith – dividends not declared by the first defendant for a lengthy period – whether the affairs of the first defendant have been either contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff Legislation: Companies Act 1981 (Cth) s 229 Corporate Law Reform Act 1992 (Cth) Corporations Act 1989 (Cth) Corporations Act 2001 (Cth) Evidence Act 1995 (Cth) s 191 Federal Court Rules 2011 (Cth) r 28.61 Limitation of Actions Act 1958 (Vic) s 21 Retail Leases Act 2003 (Vic) s 35(3) Companies Act 1985 (UK) Cases cited: Allco Funds Management Limited v Trust Company [2014] NSWSC 1251 Ananda Marga Pracaraka Samgha Ltd v Tomas (No 6) [2013] FCA 284; (2013) 94 ACSR 199 Australian Securities and Investments Commission v Adler [2002] NSWSC 171 (2002) 168 FLR 253; Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75 Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 Aussie Ideas Pty Ltd v Tunwind Pty Ltd; Hoddinott v Tunwind Pty Ltd [2006] NSWCA 286 Barnes v Addy (1874) LR 9 Ch App 244 Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515 Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 Bennetts v Board of Fire Commissioners of NSW (1967) 87 WN (Pt 1) (NSW) 307 Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150 Boardman v Phipps [1967] 2 AC 46 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55; (2014) 314 ALR 62 Chan v Zacharia (1984) 154 CLR 178 Coombs v Dynasty (1994) 14 ACSR 60 Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd (1977) 13 ALR 561; 2 ACLR 307 Daly v The Sydney Stock Exchange (1986) 160 CLR 371 Donaldson v Natural Springs Australia Limited [2015] FCA 498 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Federal Commissioner of Taxation v Radilo Enterprises Pty Ltd (1997) 72 FCR 300 Gemstone Corporation of Australia Ltd v Grasso (1994) 62 SASR 239 Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435 Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 170 FLR 451 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198 Harris v Digital Pulse (2003) 56 NSWLR 298 Hillam v Ample Source International Limited (No 2) (2012) 202 FCR 336 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Howard v Commissioner of Taxation (2014) 253 CLR 83 In the Matter of Ledir Enterprises Pty Ltd [2013] NSWSC 1332; 96 ACSR 1 Joint v Stephens [2008] VSCA 210; 26 ACLC 1467 Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 Maguire v Makaronis (1997) 188 CLR 449 Mills v Mills (1938) 60 CLR 150 Paul A Davies (Australia) Pty Ltd v Davies (1983) 1 NSWLR 440 Quinlan v Fiboze Pty Ltd (1988) 14 ACLR 312 R v Byrnes (1995) 183 CLR 501 R v Lawrence [1982] AC 510 Re a Company [1986] 2 All ER 253 Re Broadcasting Station 2GB Pty Ltd [1964–65] NSWR 1648 Re News Corp Ltd (1987) 15 FCR 227 Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 Shirim Pty Ltd v Fesena Pty Ltd [2000] NSWSC 878; (2000) 35 ACSR 221 Smith Martis Cook & Rajan Pty Ltd v Benjamin Corp Pty Ltd [2004] FCAFC 153; (2004) 207 ALR 136 Sze Tu v Lowe (2014) 89 NSWLR 317 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 Woolworths Limited v Kelly (1991) 22 NSWLR 189 Date of hearing: 9 – 13, 16 – 19 September 2019 Date of last submissions: 3 October 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 366 Counsel for the Plaintiff: G D Dalton QC with D J Fahey Solicitor for the Plaintiff: KHQ Lawyers Counsel for the Defendants: M S Osborne QC with D F McAloon Solicitor for the Defendants: B2B Lawyers ORDERS VID 1438 of 2016 BETWEEN: HYLEPIN PTY LTD ACN 006 702 969 Plaintiff AND: DOSHAY PTY LTD ACN 006 575 202 First Defendant JOHN CHUN SAI SO Second Defendant GLOBAL 2000 MELBOURNE PTY LTD ACN 092 825 842 (and another named in the Schedule) Third Defendant JUDGE: O'BRYAN J DATE OF ORDER: 25 September 2020 THE COURT DECLARES THAT: 1. At all times since 15 June 2000, the first defendant has been the owner of five ordinary shares in the third defendant. AND THE COURT ORDERS THAT: 2. The third defendant do all things necessary to correct its register of members, and lodge a notice of correction with the Australian Securities and Investments Commission, to record that, at all times since 15 June 2000, the first defendant has been the owner of five ordinary shares. 3. The plaintiff's originating application be otherwise dismissed. 4. Within 28 days of these orders, the parties file and serve written submissions in respect of the costs of the proceeding of no more than five pages in length. 5. Subject to further order, the issue of costs will be determined by the Court on the papers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. A. INTRODUCTION [1] B. OVERVIEW OF THE APPLICABLE LEGAL PRINCIPLES [21] B.1 Oppression [22] B.2 Fiduciary duties [31] B.3 Defence based on informed consent [44] B.4 Defences based on the application of statutory limitation periods directly or by analogy and laches [46] B.5 Loan transactions [55] C. OVERVIEW OF THE EVIDENCE [62] C.1 Witnesses for Hylepin [67] C.2 Witnesses for the defendants [87] D. FACTUAL FINDINGS [107] D.1 Incorporation of Doshay [107] D.2 Incorporation of Hylepin [117] D.3 Shareholdings in Doshay [118] D.4 Westlake Restaurant [129] D.5 Lyleable and Dragon Boat Knox [135] D.6 Jadetrex and Dragon Boat Palace [148] D.7 Dragon Wall and Dragon Wall Take Away [159] D.8 The acquisition of the Exhibition Street Property [167] D.9 Evaluator and Café Puccini [183] D.10 The acquisition of the Lonsdale Street Property [201] D.11 Doshay's shareholding in Global 2000 [219] D.12 Dividends [235] D.13 Hylepin's requests for information [241] D.14 Offers to acquire Hylepin's shares [252] D.15 Non-renewal of the lease for the Dragon Boat Restaurant [255] D.16 Declarations of interest [272] E. ALLEGED BREACHES OF FIDUCIARY DUTIES [273] E.1 Overview [273] E.2 Doshay's investments in other Chinese restaurants [281] E.3 Acquisition of the Exhibition Street and Lonsdale Street Properties [310] E.4 Doshay's investment in Evaluator and Café Puccini [329] E.5 Altering the share register of Global 2000 [342] E.6 Doshay's decision not to renew the lease over the Dragon Boat Restaurant premises [346] F. ALLEGED OPPRESSION [359] G. CONCLUSION [364] REASONS FOR JUDGMENT O'Bryan J: A. INTRODUCTION 1 This proceeding concerns the business affairs of the second defendant, John So, the fourth defendant, Wendy Ming Yee Cheng, and of companies associated with them. John So is well known in Melbourne as the longstanding general manager of the "Dragon Boat" restaurant located at 201-203 Little Bourke Street, Melbourne (within Melbourne's Chinatown district) (Dragon Boat Restaurant) and as a former Lord Mayor of Melbourne. It is relevant to the matters raised in the proceeding to note that John So was previously married to Hellen Chin and has three children from that marriage, two of whom are referred to in this judgment: his daughter Natalie and his son Alexander. John So and Wendy Cheng have been in a relationship since 1984 and have one son, John Ho Ping So, also referred to as John Junior. John So has a brother, Anthony So. 2 The proceeding most directly concerns the business affairs of the first defendant, Doshay Pty Ltd (Doshay), which was incorporated on 2 June 1986. Amongst other business activities, Doshay has owned and operated the Dragon Boat Restaurant since around December 1986. At all times, Doshay's directors have included John So and his former wife, Hellen Chin. Both hold indirect shareholdings in Doshay. At all times, John So has been the managing director of Doshay and has controlled its affairs. 3 During 1987, the plaintiff, Hylepin Pty Ltd (Hylepin), acquired 45,000 ordinary shares in Doshay. Hylepin is a family company, originally owned by Peter Chan and his wife Celia Chan. After Celia Chan died on 7 May 2004, Peter Chan became the sole owner of Hylepin. Peter Chan has been a director of the company at all times. Celia Chan was a director until her death, after which their son, Ben Ming Chan, became a director. 4 Hylepin alleges that, over the course of many years, John So has used his position and the assets of Doshay to benefit himself, Wendy Cheng and companies associated with them, including the third defendant, Global 2000 Melbourne Pty Ltd (Global 2000). Hylepin's complaints about the conduct of Doshay's affairs can be categorised into six main topics, which are summarised in an approximate chronological order. 5 First, Hylepin alleges that John So caused Doshay to acquire shares in, and advance loans to, four other companies that operated Chinese restaurants in Melbourne, being: (a) Westlake Restaurant Pty Ltd (Westlake), which was the trustee of the Westlake Restaurant Unit Trust and which operated the Westlake Chinese Restaurant in Melbourne's Chinatown district (in Little Bourke Street) and in which Doshay first invested in FY1988; (b) Lyleable Pty Ltd (Lyleable), which operated a "Dragon Boat" restaurant at the Village Cinema Complex within the Knox District Centre (which is located on the Burwood Highway in Wantirna South) (Dragon Boat Knox) pursuant to a Franchise Agreement with Doshay entered into in February 1989; (c) Jadetrex Pty Ltd (Jadetrex), which operated the "Dragon Boat Palace" restaurant at 144-159 Lonsdale Street Melbourne (Dragon Boat Palace) pursuant to a Franchise Agreement with Doshay entered into in March 1990; and (d) Dragon Wall Pty Ltd (Dragon Wall), which operated a Chinese takeaway restaurant business from Bourke Place, 600 Bourke Street Melbourne and in the Telstra building on Exhibition Street, Melbourne from about 1990. 6 Hylepin complains that the defendants held personal interests in those companies and that John So caused Doshay to invest in and transfer substantial sums to those companies without any loan agreements, security or interest and without disclosing his conflicts to Doshay. 7 Second, Hylepin alleges that John So used Doshay's assets, without its consent, to acquire buildings at 231-235 Exhibition Street, Melbourne (the Exhibition Street Property) and 149 Lonsdale Street, Melbourne (the Lonsdale Street Property) for Global 2000, a company that he directed and in which he and Wendy Cheng held a substantial shareholding through a company called Global Crest Pty Ltd (Global Crest). Global 2000 settled the purchase of the Exhibition Street Property in June 2000 and settled the acquisition of the Lonsdale Street Property in December 2004. 8 Third, Hylepin alleges that, in 2001 and 2003, John So caused Doshay to buy shares in and transfer funds to Evaluator Pty Ltd (Evaluator), a company that was directed by Wendy Cheng and majority owned by Global Crest. Evaluator was incorporated to acquire the Cafe Puccini business which operated next door to the Dragon Boat Restaurant and lease the premises that it occupied. Over time, Doshay used parts of those premises for the Dragon Boat Restaurant and also operated a noodle shop called DB Express Noodle Bar. 9 Fourth, Hylepin alleges that, in May 2004, John So wrongly caused Global 2000 to correct its register of members and lodge a form with the Australian Securities and Investments Commission (ASIC) to show that Doshay owns four shares and John So owns one share in Global 2000, when in fact Doshay owned five shares in Global 2000 (with Global Crest owning the other five shares). 10 Fifth, Hylepin alleges that John So caused Doshay to fail or refuse to pay dividends to its shareholders at any time prior to 9 November 2018, despite having substantial retained profits of more than $8 million. 11 Sixth, Hylepin alleges that, on 9 May 2019, John So (together with Hellen Chin, who was the second director of Doshay) resolved not to exercise the option to renew Doshay's lease of the premises at which it operates the Dragon Boat Restaurant for his own personal convenience and without any proper regard to the interests of Doshay or its members. 12 The proceeding was commenced by Hylepin on 15 December 2016. At that time, the proceeding was brought under ss 232 and 233 of the Corporations Act 2001 (Cth) (Corporations Act), alleging that the conduct of the affairs of Doshay (as summarised above) has been either contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, Hylepin. Hylepin seeks relief under s 233 of the Corporations Act, including that Doshay declares and pays a dividend, John So or Doshay buy Hylepin's shares at fair value (that is, at a price that removes the effect of the oppression), or alternatively that Doshay be wound up. 13 On 23 October 2018, the Court gave Hylepin leave pursuant to ss 236(1) and 237(1) of the Corporations Act to intervene in the proceeding in the name of Doshay to bring and prosecute derivative claims against John So for breach of fiduciary duty in respect of the transactions summarised above (other than the non-payment of dividends), and against Global 2000 and Wendy Cheng for their knowing involvement in the breaches and receipt of trust property. In that respect: (a) The claims against John So relate to each of the impugned transactions. The relief sought against John So includes the payment of equitable compensation, a declaration that the one share in Global 2000 registered in the name of John So is owned by Doshay and orders to correct the register of Global 2000. (b) The claims against Global 2000 principally relate to the acquisition of the Exhibition Street Property and the Lonsdale Street Property. The relief sought includes declarations of trust over the Exhibition Street and Lonsdale Street Properties in favour of Doshay and that the properties be transferred to Doshay or orders that Global 2000 account to Doshay for benefits derived. (c) The claims against Wendy Cheng relate to the Evaluator transactions and the relief sought is the payment of equitable compensation to Doshay. 14 Given the length of time between the transactions the subject of complaint and the commencement of the proceeding, almost 30 years for the earliest transactions, the possible application of limitation periods looms large. All of the transactions, other than the non-renewal of the lease of the premises of the Dragon Boat Restaurant, occurred prior to 15 December 2010 being the date six years prior to the commencement of the proceeding. Limitation law is not some "unmeritorious procedural technicality". Rather, as McHugh J observed in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 (at 553), a limitation period represents the legislature's judgment that "the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated". His Honour explained (at 551) that the enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates", citing R v Lawrence [1982] AC 510 at 517, per Lord Hailsham of St Marylebone LC, and that the "longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose". His Honour further observed (at 552, citations omitted): The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even "cruel", to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period. …The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible. 15 This case is an illustration of the difficulties and unfairness involved in seeking to litigate complaints about conduct that occurred a long time in the past. 16 Hylepin sought to counter the application of time limitations by alleging that the impugned transactions involved fraud (in the equitable sense) on the part of John So or were fraudulently concealed by John So. Hylepin alleges that John So did not disclose the transactions to the directors or shareholders of Doshay and failed or refused to provide Doshay's financial statements to Hylepin or conduct a general meeting of Doshay. 17 Given the nature of the claims made, Doshay did not take an active role in the proceeding. The allegations were defended by the other defendants: John So, Wendy Cheng and Global 2000. When in these reasons I refer to the submissions or arguments of the defendants, I am referring to the second, third and fourth defendants who had the carriage of the defence. 18 The trial of the proceeding was on all issues, both liability and relief, save for the determination (for the purposes of relief) of: (a) the current market value of the Exhibition Street Property and the Lonsdale Street Property; (b) the assessment of the fair value and/or market value of Hylepin's shares in Doshay; and (c) the assessment of the lost value (if any) of the Dragon Boat Restaurant business by reason of the decision not to exercise the option to renew Doshay's lease of the premises at which it operates the Dragon Boat Restaurant. 19 For the reasons stated below, I have upheld one of Hylepin's claims but dismissed all other claims. The claim I have upheld does not involve any breach of fiduciary duty or oppression. It is the fourth claim made by Hylepin, that in May 2004 John So wrongly caused Global 2000 to alter its register of members to show that Doshay owns four shares and John So owns one share in Global 2000. I have found that John So transferred his share in Global 2000 to Doshay on 15 June 2000 and that the subsequent instructions given by John So to Paul Tjioe & Associates in 2004 to alter the share register and effectively cancel that transfer were erroneous and of no legal effect. 20 Otherwise, I reject Hylepin's claims against the defendants based on breach of fiduciary duty and oppression. The evidence shows that, at the invitation of John So, Hylepin subscribed for 45,000 shares in Doshay in 1987 at an issue price of $1.00 per share, being an investment of $45,000. Hylepin has generally been a passive investor in Doshay. Between 1987 and the date of trial, a period of more than 30 years, John So has been a director of Doshay and general manager. He has undertaken many business investments on behalf of Doshay. Some have been successful. Some have been unsuccessful. However, as at February 2018, Mr Greg Meredith of Ferrier Hodgson assessed the value of Doshay at $16,865,647. If that valuation was adopted, Hylepin's shareholding in Doshay would be worth approximately $2,735,000, giving an annualised rate of return on investment (taking account of compounding) between November 1987 and February 2018 of approximately 21%. In my view, Hylepin's complaints about John So's conduct in relation to Doshay rely on hindsight, are selective and fail to take account of all the relevant facts and circumstances. In almost all instances, I reject the contention that John So breached his fiduciary duties by making decisions with a conflict of interest or from which he would personally benefit. In all instances, I reject the contention that John So acted dishonestly or concealed his wrongdoing. To the contrary, I find that John So caused his accountant, Paul Tjioe & Associates, to keep accurate accounts for Doshay and all of its associated entities, and that the financial statements for Doshay were made available to Hylepin. Even if I had upheld any of the claims made by Hylepin, I would have barred the claims by application of limitation periods. I also reject the contention that the affairs of Doshay have been conducted oppressively. B. OVERVIEW OF THE APPLICABLE LEGAL PRINCIPLES 21 As already noted, Hylepin's claims in the proceeding are generally based on two causes of action: the first is oppression, relying on ss 232 and 233 of the Corporations Act; and the second is breach of equitable fiduciary duties. The following is a summary of the primary legal principles relied on by Hylepin and the defendants, which provides a framework within which to consider the facts in dispute between the parties. B.1 Oppression 22 Relevantly, s 232 of the Corporations Act provides that the Court may make an order under s 233 of the Act if the conduct of the company's affairs, an actual or proposed act or omission by or on behalf of the company, or a resolution or proposed resolution of the members or a class of members of the company, is either: (a) contrary to interests of members as a whole (s 232(d)); or (b) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity (s 232(e)). 23 Hylepin's pleaded case in oppression is based on the impugned transactions summarised above, most of which occurred a long time ago. There is no currently proposed act or resolution to which Hylepin takes objection, save in respect of the payment of dividends (although a significant dividend has been declared and paid by Doshay since the commencement of the proceeding). 24 The phrase "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" in 232(e) is a compound expression: Joint v Stephens [2008] VSCA 210; 26 ACLC 1467 at [134] per Nettle, Ashley and Neave JJA; Hillam v Ample Source International Limited (No 2) (2012) 202 FCR 336 at [4] per Emmett, Jacobson and Buchanan JJ. That phrase is concerned with conduct that involves "commercial unfairness", or "a departure from the standards of fair dealing, or where a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair": In the Matter of Ledir Enterprises Pty Ltd [2013] NSWSC 1332; 96 ACSR 1 at [178] per Black J. Whether there has been "unfairness" in the requisite sense is to be judged objectively: Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 (Wayde) at 472-473 per Brennan J. The relevant test is "whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision" (Wayde at 472-473 per Brennan J) or whether "objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair": Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55; (2014) 314 ALR 62 at [9]. 25 Mismanagement or poor management alone does not constitute oppression: Shirim Pty Ltd v Fesena Pty Ltd [2000] NSWSC 878; (2000) 35 ACSR 221 at [71]; Donaldson v Natural Springs Australia Limited [2015] FCA 498 at [250]; Ananda Marga Pracaraka Samgha Ltd v Tomas (No 6) [2013] FCA 284; (2013) 94 ACSR 199 at [417]; Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [41]. In an oppression case, the court is concerned "to avoid an unwarranted assumption of the responsibility for management of the company": Wayde at 467 per Mason ACJ, Wilson, Deane and Dawson JJ. 26 As with the s 232(e) ground, an assessment of whether conduct is "contrary to the interests of the members as a whole" is objective: Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 170 FLR 451 (Goozee) at [42]-[44]. It is determined by whether the conduct adheres to "accepted standards of corporate behaviour" or is in accordance with how reasonable directors would act in attending to the affairs of the company: Goozee at [41]. 27 A claim for oppression under s 232 is not subject to any limitation period, and the oppression remedy allows the Court to make orders even if the oppressive conduct has ceased: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [65] per French CJ and [182] per Gummow, Hayne, Heydon and Kiefel JJ (referring to the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 at [6.132]). Nevertheless, the Court has a broad discretion as to remedy: Smith Martis Cook & Rajan Pty Ltd v Benjamin Corp Pty Ltd [2004] FCAFC 153; (2004) 207 ALR 136. The defendants submitted, and I accept, that delay in bringing proceedings is a relevant factor in the exercise of the Court's discretion to grant relief under s 233. 28 The defendants also submitted that, in its claim for oppression, Hylepin cannot seek an order that John So or Doshay buys its shares. In respect of John So, the defendants submitted that s 232(1) only contemplates orders for the purchase of shares by a member of the company under s 233(1)(d) or by the company itself under s 233(1)(e). It follows, in the defendants' submission, that an order could not be made against John So because he is not a member of Doshay. The defendants also submitted that an order could not be made that Doshay purchase Hylepin's shares because that would affect the rights of the other shareholders in Doshay, including Mr Kolarik who is not a party to the proceeding. 29 The defendants did not cite any authority in support of the submission that an order to purchase the plaintiff's shares cannot be made against a non-member. While paragraphs (d) and (e) of s 233(1) are limited in the manner stated by the defendants, those paragraphs are not expressed to be exhaustive of the kinds of orders that the Court may grant under the section. The chapeaux to s 233(1) provides that the Court can make any order under the section that it considers appropriate in relation to the company. A similar issue was considered by Hoffmann J on a pleading summons in Re a Company [1986] 2 All ER 253, and his Honour concluded (at p 256) that s 461(1) of the Companies Act 1985 (UK) (which was in materially the same terms as s 233) should be given its full effect and he would not strike out a claim for orders to be made against a former member. 30 Nor did the defendants cite any authority in support of the submission that an order to purchase the plaintiff's shares cannot be made against the company unless all members are joined to the proceeding. There is authority for the proposition that, before ordering a company to acquire the shares of a member as a remedy in an oppression proceeding, the Court should give creditors an opportunity to be heard: Quinlan v Fiboze Pty Ltd (1988) 14 ACLR 312 at 313 per Young J, cited with approval in Coombs v Dynasty (1994) 14 ACSR 60 at 102 per von Doussa J. However, that principle is founded on the potential prejudice to creditors associated with a reduction in the company's capital. That principle does not apply in the same way in the case of members. Nevertheless, the effect on other members of an order that the company purchase the plaintiff's shares may be a relevant consideration in the exercise of the Court's discretion to grant relief. B.2 Fiduciary duties 31 Hylepin's claims are generally based on the equitable fiduciary duties owed by directors, rather than the statutory duties (save in respect of the recent decision not to renew the lease of the Dragon Boat Restaurant premises). In particular, Hylepin's claims are based on what are often referred to as the "conflict rule" and the "profit rule" of fiduciary obligations. The conflict rule 32 The conflict rule is that a director of a company is under a fiduciary obligation not to promote his or her personal interest by making or pursuing a gain or benefit in circumstances in which there was a conflict or a real or substantial possibility of a conflict between his or her personal interest and the interests of the company without the fully informed consent of the company: see Boardman v Phipps [1967] 2 AC 46 (Boardman v Phipps) at 124 per Lord Upjohn; Chan v Zacharia (1984) 154 CLR 178 (Chan v Zacharia) at 199 per Deane J; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (Hospital Products) at 103 per Mason J. The question whether there is a real possibility of conflict is assessed objectively: Boardman v Phipps at 124 per Lord Upjohn; Australian Securities and Investments Commission v Adler [2002] NSWSC 171 (2002) 168 FLR 253 (ASIC v Adler); [2002] NSWSC 171 at [735] per Santow J. In Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 (Bell v Westpac), Owen J said at [4512]: One way of ascertaining whether the interest of the fiduciary is remote or insubstantial is to ask whether the interest is such that a reasonable person would think there was a real or substantial possibility of the fiduciary being swayed by it. 33 There are many cases which state that where a director of a company has caused the company to engage in a transaction in which the director has a conflicting interest, it is no defence that the impugned transaction has brought a benefit to the company that would not otherwise have been available or that the transaction was objectively reasonable: see for example Allco Funds Management Limited v Trust Company [2014] NSWSC 1251 at [167]; Harris v Digital Pulse (2003) 56 NSWLR 298 at [406]-[407] per Heydon JA; Gemstone Corporation of Australia Ltd v Grasso (1994) 62 SASR 239 at 245 (Prior J). 34 A conflict of duties may arise where a person is a director of two companies that transact with each other. In R v Byrnes (1995) 183 CLR 501 at 516-517, the High Court stated: A company is entitled to the unbiased and independent judgment of each of its directors. A director of a company who is also a director of another company may owe conflicting fiduciary duties. Being a fiduciary, the director of the first company must not exercise his or her powers for the benefit or gain of the second company without clearly disclosing the second company's interest to the first company and obtaining the first company's consent. 35 However, it is not always the case that a conflict of duties will arise where a person is a director of two companies that transact with each other. The scope of the fiduciary duty depends upon the particular circumstances and the nature of the relationships in issue. In Howard v Commissioner of Taxation (2014) 253 CLR 83 (Howard), French CJ and Keane J observed (at [34], references omitted): The scope of the fiduciary duty generally in relation to conflicts of interest must accommodate itself to the particulars of the underlying relationship which give rise to the duty so that it is consistent with and conforms to the scope and limits of that relationship. It is to be "moulded according to the nature of the relationship and the facts of the case". By way of example, company directors are frequently shareholders. The decisions they take as directors may therefore affect their personal interests. They do not breach their fiduciary obligations merely because in promoting the interests of the company they are also promoting their own. On the other hand, a decision taken by directors to advantage themselves other than as members of the general body of shareholders would constitute an abuse of fiduciary powers. 36 In the same case, Hayne and Crennan JJ said (at [60]-[61], references omitted): But, as the majority in Pilmer also pointed out, it is necessary to recognise, and give due weight to the fact, that different minds may reach different conclusions as to the presence or absence of a real possibility of conflict between duty and interest or duty and duty. That is, the doctrine cannot "be inexorably applied and without regard to the particular circumstances of the situation". It follows that the working out of the application of the rule to company directors is not achieved by the bare repetition of its terms. Much closer attention must be given to the duties, interests and alleged manner of conflict than is given by simply observing that directors owe fiduciary duties. It is necessary to identify the duties or interests which are said to conflict or present a real possibility of conflict. 37 The law recognises that a director of one company, that holds an investment in a second company, may be nominated as a director of a second company to further the interests of the investment. Frequently, no conflict of duty arises because relevant decisions are in the interests of both the appointor company and the appointee company. The director makes decisions to promote the interests of both companies. Consistently with the principles stated by Dixon J in Mills v Mills (1938) 60 CLR 150 at 186, a nominee director only acts in breach of their duty owed to a company if they would not have made a decision as director of one of the companies but for the interests of the other company: see Re Broadcasting Station 2GB Pty Ltd [1964–65] NSWR 1648 at 1663 per Jacobs J; Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150 at 165-6; Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd (1977) 13 ALR 561; 2 ACLR 307 at ACLR 318; Re News Corp Ltd (1987) 15 FCR 227 at 244-5 per Bowen CJ. There are cases in which a person who has been appointed as a director of a company as nominee of a shareholder in that company has been found to have acted in breach of fiduciary duty by reason of a conflict of duty, but the breach typically relates to the duty owed to the appointee company, not the appointing shareholder: see for example Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324; Bennetts v Board of Fire Commissioners of NSW (1967) 87 WN (Pt 1) (NSW) 307. The profit rule 38 The profit rule is that a director of a company is under fiduciary obligation not to use their position as a director for their own personal advantage or the advantage of anyone other than the company without the company's fully informed consent: see Chan v Zacharia at 199. However, for the "profit rule" to be engaged, there must be a causal connection between the fiduciary office and the receipt of the benefit: Links Golf Tasmania v Sattler (2012) 213 FCR 1 [520]-[525]. The rule does not apply to an opportunity that a director obtained in a personal capacity or a separate corporate role: Streeter v Western Areas Exploration (No 2) (2001) 278 ALR 291 at [79]. Account for the benefit or gain 39 It is well established as a principle of equity that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain obtained in breach of the conflict rule or profit rule, and any such benefit or gain is held by the fiduciary as constructive trustee. In Chan v Zacharia at 198–9, Deane J explained as follows: The variations between more precise formulations of the principle governing the liability [of a person in a fiduciary relationship] to account are largely the result of the fact that what is conveniently regarded as the one "fundamental rule" embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the "use of fiduciary position" doctrine is but an illustration or part of a wider "conflict of interest and duty" doctrine … the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee. … That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed. In some, perhaps most, cases, the constructive trust will be consequent upon an actual breach of fiduciary duty: eg, an active pursuit of personal interest in disregard of fiduciary duty or a misuse of fiduciary power for personal gain. In other cases, however, there may be no breach of fiduciary duty unless and until there is an actual failure by the fiduciary to account for the relevant benefit or gain: eg, the receipt of an unsolicited personal payment from a third party as a consequence of what was an honest and conscientious performance of a fiduciary duty. The principle governing the liability to account for a benefit or gain as a constructive trustee is applicable to fiduciaries generally including partners and former partners in relation to their dealings with partnership property and the benefits and opportunities associated therewith or arising therefrom. 40 As Mason J explained in Hospital Products at 107: A fiduciary is liable to account for a profit or benefit if it was obtained (1) in circumstances where there was a conflict, or possible conflict of interest and duty, or (2) by reason of the fiduciary position or by reason of the fiduciary taking advantage of opportunity or knowledge which he derived in consequence of his occupation of the fiduciary position. … Any profit or benefit obtained by a fiduciary in either of the two situations already described is held by him as a constructive trustee (Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 at 350). Neither principle nor authority provide any support for the proposition that relief by way of constructive trust is available only in the case where a profit or benefit obtained by the fiduciary was one which it was an incident of his duty to obtain for the person to whom he owed the fiduciary duty. Once it is established that the fiduciary is liable to account for a profit or benefit which he has obtained there can be no objection to his being held to account as a constructive trustee of that profit or benefit. It can make no difference that it was not his duty to obtain the profit or benefit for the person to whom the duty was owed. What is important is that the advantage has accrued to him in breach of his fiduciary duty or by his misuse of his fiduciary position. The consequence is that he must account for it and in equity the appropriate remedy is by means of a constructive trust. 41 In reliance on Paul A Davies (Australia) Pty Ltd v Davies (1983) 1 NSWLR 440 (Davies), Hylepin advanced a broader contention that, where a director has used company monies in breach of fiduciary duty, the monies so used are held on a constructive trust in favour of the company. Ultimately, it has not become necessary to determine whether that contention is correct or is stated too broadly. However, it appears to be in conflict with the decision of the High Court in Daly v The Sydney Stock Exchange (1986) 160 CLR 371 (Daly), where the majority concluded that monies received as a loan in circumstances of a breach of fiduciary duty (by failing to make full disclosure) were not the subject of a constructive trust and the recipient was bound to repay the monies as a debt. In Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198, the Court of Appeal of the Supreme Court of Western Australia observed (at [204]) that, in Davies, it was not clear from the trial judge's findings whether the directors had obtained the company's money by way of contracts of loan (in which case, the High Court's decision in Daly applied) or had misappropriated the money (in which case the monies belonged to the company). 42 Hylepin seeks relief against Global 2000 (which is the registered owner of the Exhibition Street Property and the Lonsdale Street Property) on two bases. The first is that Global 2000 was the "corporate creature, vehicle, or alter ego" of John So which he used "to secure the profits … of [his] breach of fiduciary duty" and, as such, is liable for the profits made from his breaches of fiduciary duty: Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 (Grimaldi) at [243]. The second basis is the rule in Barnes v Addy (1874) LR 9 Ch App 244 (which is founded on what Lord Selborne LC said at 251-2): Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. 43 It has become common to describe the first limb of the rule as involving "knowing receipt" and the second limb as involving "knowing assistance": Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [112]. Hylepin relies on both limbs. In relation to knowing receipt of trust property, Hylepin relies on the principle that the law attributes to a corporation the mind and will of the natural person or persons who manage and control its actions: Tesco Supermarkets Ltd v Nattrass [1972] AC 153. Hylepin argues that John So was the controlling mind of Global 2000 at all relevant times. B.3 Defence based on informed consent 44 There will be no breach of the conflict rule or the profit rule of fiduciary obligations if the director establishes that he or she obtained the company's fully informed consent to the transaction. As Brennan CJ, Gaudron, McHugh and Gummow JJ made clear in Maguire v Makaronis (1997) 188 CLR 449 at 466: …if the [fiduciary was] to escape the stigma of an adverse finding of breach of fiduciary duty, with consequent remedies, it was for [it] to show, by way of defence, informed consent by the respondents to the appellants' acting, in relation to the mortgage, with a divided loyalty. What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given. 45 Fully informed consent in this context was explained by Samuels JA in Woolworths Limited v Kelly (1991) 22 NSWLR 189 at 207-11: Unless the articles of the company otherwise provide, a contract made in breach of this fiduciary duty will be voidable at the option of the company unless the director makes a full disclosure of the nature of his interest in the contract to the members of the company in general meeting, who must approve the contract by ordinary resolution: George A Bond & Co Ltd v Bond (1929) 30 SR (NSW) 15 at 19; 46 WN (NSW) 199 at 201; Furs Ltd v Tomkies (1936) 54 CLR 583 at 592; Re James; Bagot's Executor & Trustee Co Ltd v McGregor [1949] SASR 143 at 145 and Regal (at 150). Disclosure to the company's directors, even if the interested director does not attend the board meeting or vote on the contract, will be ineffective to validate the contract at general law since the company has a right to the unbiased views and advice of all its directors: Benson v Heathorn (1842) 1 Y & C CC 326 at 341-342; 62 ER 909 at 916, per Knight-Bruce V-C and Imperial Mercantile Credit Association v Coleman (1871) LR 6 Ch App 558 at 567-568 per Hatherley LC (CA). … It is necessary then to ascertain the extent of the disclosure which will satisfy these requirements. This element has been clearly described by Lord Radcliffe in Gray (at 14) in these words: "… The nature of [Gray's] interest in the agreement proposed consisted of just this fact that he stood to gain so much by the transaction: and only he at that time had the means of knowing how much. There is no precise formula that will determine the extent of detail that is called for when a director declares his interest or the nature of his interest. Rightly understood, the two things mean the same. The amount of detail required must depend on the nature of the contract or arrangement proposed and the context in which it arises. It can rarely be enough for a director to say 'I must remind you that I am interested' and to leave it at that, unless there is some special provision in the company's articles that makes such a general warning sufficient. His declaration must make his colleagues 'fully informed of the real state of affairs' (see Imperial Mercantile Credit Ass'n v Coleman (1873) LR 6 HL 189 at p 201, per Lord Chelmsford). If it is material to their judgment that they know not merely that he has an interest, but what it is and how far it goes, then he must see to it that they are informed …" In other and more general words the requirement is to make full disclosure of the nature and extent of the interest. B.4 Defences based on the application of statutory limitation periods directly or by analogy and laches 46 In defence of Hylepin's claims based on breach of fiduciary duty, the defendants argue that the claims are time barred in equity by analogy to claims based upon breach of the statutory duties of directors and by the separate equitable doctrine of laches. 47 In proceedings based on equitable principles and remedies, where there is a corresponding remedy at law in respect of the same matter and that remedy is the subject of a statutory bar, equity will apply the bar by analogy unless there exists a ground which justifies not doing so because reliance by the defendant on the statute would in the circumstances be unconscionable: Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435 (Gerace) at [70] per Meagher JA (with whom Beazley P and Emmett JA agreed). There are two main classes of case to which the doctrine applies: (a) when the action is one alleging fraud, or when fraud is an element in the cause of action, in which case time does not run until the discovery of the fraud; and (b) where the cause of action is one which does not involve fraud, but its existence was fraudulently concealed by the defendant, in which case time does not begin to run until both the concealment is discovered and the cause of action ascertained: Meagher, Gummow and Lehane's Equity Doctrines and Remedies at [36-100], cited with approval in Sze Tu v Lowe (2014) 89 NSWLR 317at [368] (Gleeson JA, with whom Meagher JA and Barrett JA agreed). The principles were explained by Meagher JA in Gerace at [75]: The grounds on which equity declines to permit a defendant to rely upon a statutory bar by analogy include where there has been fraudulent concealment, which requires either fraudulent conduct as an element of the right of action or conduct consisting of active concealment of a right of action that does not include fraud as an element: Meagher, Gummow and Lehane's Equity Doctrines and Remedies at [34-085]. The more recent cases which discuss this doctrine do so when applying the modern statutory equivalents of s 26 of the Real Property Limitation Act 1833 (UK). The references to "fraud", "concealment" and "fraudulent concealment" in those statutes have been understood in the same sense as they are in the equitable doctrine on which those provisions were based. The equitable doctrine is not confined to common law fraud or deceit and requires a consciousness on the part of the defendant that what is being done is wrong or that to take advantage of a particular situation involves wrongdoing: see Beaman v ARTS, Ltd [1949] 1 KB 550 at 559–560 per Lord Greene MR, Kitchen v Royal Air Force Association [1958] 1 WLR 563 at 572–573 per Lord Evershed MR, Applegate v Moss [1971] 1 QB 406 at 413 per Lord Denning MR, King v Victor Parsons & Co [1973] 1 WLR 29 at 33–34 per Lord Denning MR. 48 In a case in which the defendant has "no inkling" of any breach of duty, that is, the defendant was not conscious of wrongdoing in the sense that he or she did not know they were acting or had acted in breach of duty, equity will follow the law and apply a time bar notwithstanding the breach: Gerace per Meagher JA at [76] and [77], referring to Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515 at 537. 49 Hylepin contended that, in situations where assets are misapplied through a breach of duty, equity will not permit the trustee or fiduciary to plead a limitation defence, relying on Aussie Ideas Pty Ltd v Tunwind Pty Ltd; Hoddinott v Tunwind Pty Ltd [2006] NSWCA 286 at [21] per Handley JA (with whom Giles JA and Bryson JA agreed) and Gerace at [35] per Meagher JA. The contention is stated too broadly. As explained by Meagher JA in Gerace at [35], two classes of case in which courts of equity declined to apply limitation periods by analogy were claims by a beneficiary against a trustee for breaches of trust and claims involving fraud or fraudulent concealment. In Victoria, actions by a beneficiary under a trust are governed by s 21 of the Limitation of Actions Act 1958 (Vic) (Limitations Act). 50 Thus, it is necessary to consider whether there is a remedy at law that corresponds to the fiduciary obligations on which Hylepin relies and which is the subject of a statutory bar. During the period of alleged contraventions of duty (which date back to the late 1980's), the applicable companies legislation imposed statutory duties that were equivalent to the conflict rule and profit rule of fiduciary obligations. At the time the impugned transactions were entered into by Doshay, the relevant statutory duties and the applicable statutory limitation provisions that applied to breaches of those duties were as follows: (a) Prior to 1 January 1991, the statutory equivalent of the fiduciary obligations of directors was s 229 of the Companies Act 1981 (Cth) (which, as applied as a law of Victoria, was called the Companies (Victoria) Code). Subsection 229(7) provided that a company could recover from a director who had contravened the duties in s 229 as a debt due to the company (a) if the director or any other person had made a profit as a result of the contravention - an amount equal to that profit; and (b) if the company had suffered loss or damage as a result of the contravention - an amount equal to that loss or damage. The relevant limitation period for such an action was provided by s 5(1)(d) of the Limitations Act which refers to "an action to recover any sum recoverable by virtue of enactment, other than a penalty or forfeiture sum or by way of penalty or forfeiture". The limitation period was 6 years from the date on which the cause of action accrued. (b) With effect from 1 January 1991, the Corporations Law, enacted by the Corporations Act 1989 (Cth), was adopted by each State including Victoria. Section 232 of the Corporations Law replaced the former s 229 of the Companies Code to substantially the same effect. Section 232(8) of the Corporations Law was in materially the same form as the former s 229(7) of the Companies Code and, accordingly, s 5(1)(d) of the Limitations Act applied a six year limitation period from the date on which the cause of action accrued. (c) With effect from 1 February 1993, the Corporations Law was amended by the Corporate Law Reform Act 1992 (Cth). Relevantly, s 232(8) was repealed and s 232(6B) was enacted which provided that the duties stated in s 232 were civil penalty provisions. That enlivened the new provisions in Part 9.4B. Section 1317HD was in materially the same form as the former s 232(8), save that s 1317HD was expressed to impose a six year limitation period from the date of contravention. (d) With effect from 15 July 2001, the Corporations Law was replaced by the Corporations Act. The statutory equivalent of the fiduciary obligations of directors is ss 182 and 183. Sections 182 and 183 are civil penalty provisions. Section 1317H provides that a court may order a person to compensate a company if the person had contravened a civil penalty provision in relation to the company and damage resulted from the contravention, and s 1317K imposes a six year limitation period from the date of contravention. 51 Accordingly, I accept the defendants' submission that at all relevant times there was a remedy at law that corresponded to the fiduciary obligations on which Hylepin relies and which was the subject of a statutory limitation period of six years. It will therefore be necessary to consider whether the conduct of John So about which complaint is made: (a) involved a consciousness on the part of John So that what was being done was wrong or involved wrongdoing; or (b) was fraudulently concealed by John So. 52 The defendants also rely on the separate defence of laches. The elements of the defence are (a) knowledge of the wrong; (b) delay; and (c) unconscionable prejudice caused to the opponent by the delay: Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 (Crawley v Short) per Young JA at [163]-[164]. As explained in Meagher JA in Gerace at [73]: The doctrine of laches is directed to a broader and different question. That question is whether, as between the parties, it would be practically unjust to give relief which otherwise would be just. In answering that question, account is taken of the length of any delay, the nature of acts done during the period of that delay, whether the plaintiff had sufficient knowledge to justify the commencement of proceedings, whether there has been prejudice to the defendant or others and the nature of the relief claimed: see Lindsay Petroleum Company v Hurd at 239–240. 53 In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, Lord Selborne LC observed (at 239-240) that: Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy. 54 The key element is whether, in all the circumstances, "it would be practically unjust to give a remedy": Crawley v Short at [164] per Young JA (with whom Allsop P and Macfarlan JA agreed). B.5 Loan transactions 55 It is convenient to address at the outset one other issue of legal principle raised by Hylepin because it concerns many of the transactions undertaken by Doshay that are challenged by Hylepin. 56 Hylepin submitted that, for an advance of monies to be a loan, there must be a loan agreement. In support of that submissions, it relied on Federal Commissioner of Taxation v Radilo Enterprises Pty Ltd (1997) 72 FCR 300 (Radilo Enterprises) in which Lee J said (at 313): A loan involves an obligation on the borrower to repay the sum borrowed. The matter is put this way by Dr Pannam (C L Pannam, The Law of Money Lenders in Australia and New Zealand (1964), p 6): A loan of money may be defined, in general terms, as a simple contract whereby one person (the lender) pays or agrees to pay a sum of money in consideration of a promise by another person (the borrower) to repay the money upon demand or at a fixed date. The promise of repayment may or may not be coupled with a promise to pay interest on the money so paid. The essence of the transaction is the promise of repayment. As Lowe J put it in a judgment delivered on behalf of himself and Gavan Duffy and Martin JJ: "'Lend' in its ordinary meaning in our view imports an obligation on the borrower to repay" (Ferguson v O'Neil [1943] VLR 30 at 32). Without that promise, for example, the old indebitatus count of money lent would not lay. Repayment is the ingredient which links together the definitions of "loan'' to be found in the Oxford English Dictionary, the various legal dictionaries and the text books. In essence then a loan is a payment of money to or for someone on the condition that it will be repaid. 57 Hylepin also relied on the decision in Grimaldi in which the Full Federal Court (Finn, Stone and Perram JJ) found that payments by way of a running account were not loans but dishonest misappropriations of Chameleon's funds (at [336]-[337]). 58 Hylepin argued that the monies advanced by Doshay to various entities, which are the subject of challenge in this proceeding, were not loans because in many instances the loans were undocumented and interest free. 59 The question whether an advance of money from one company to another is a loan or a misappropriation of funds is ultimately a question of fact. As stated by Lee J in Radilo Enterprises, a loan is a payment of money to or for someone on the condition that it will be repaid. It is not a condition of a valid loan that it be documented in a formal agreement; nor is it a condition that the advance of monies earn interest. The transaction must be considered in its context to determine its character. Relevant to that context is the nature of the parties to the transaction and their relationship. While the Full Court in Grimaldi upheld the primary judge's finding that advances by Chameleon were not loans, their Honours observed that the primary judge "was viewing the matter through the prism of allegations of what can only be described as egregious breaches of statutory duty and of fiduciary duty" and that the "language of 'not loans' but 'diversions of funds' ought in some degree be seen in that light" (at [330]). 60 In the present case, the companies involved can be described as small to medium sized enterprises conducting restaurant businesses and also investing in commercial real estate in Melbourne. The investors in the companies that were party to the transactions were members of the Australian-Chinese community and known to each other. The evidence indicated that many of the investors had limited English skills. Documentation of the various transactions was limited, and trust was placed in the relationship between the investors rather than on written agreements. 61 For the reasons explained below, I do not consider that the advances of money made by Doshay to various other entities, usually without a formal loan agreement and in a number of instances on an interest free basis, were dishonest misappropriations of Doshay's funds. I consider that the advances were interest free loans made by Doshay repayable on demand. In my view, each of the advances had the potential to improve Doshay's financial position for the benefit of its shareholders. The fact that, in some cases, that did not occur does not alter the character of the original transaction. Further, the advances were properly recorded in Doshay's accounts and the accounts of the borrowing entity. There was nothing dishonest or hidden about the advances. C. OVERVIEW OF THE EVIDENCE 62 Certain primary facts were not in dispute and the parties filed an agreed statement of facts for the purposes of s 191 of the Evidence Act 1995 (Cth) recording the uncontested facts. 63 The parties tendered a large body of documentary evidence relating to the transactions the subject of complaint by Hylepin (which I will refer to as the impugned transactions). The documentary evidence included many financial statements relating to the companies the subject of allegations in the proceeding, including accounting ledger's relevant to particular impugned transactions. Given the historic nature of most of impugned transactions, many occurring 20 to 30 years ago, it is significant that the transactions undertaken by Doshay and associated companies, and which are the subject of complaint in this proceeding, have been recorded in the accounting and financial records of Doshay and the associated companies. It is possible to trace the transactions through those records. I accept the submission of the defendants that, while aspects of Doshay's affairs have been conducted with relative informality, Doshay's directors have ensured that its external accountants, Paul Tjioe & Associates, prepared financial statements for Doshay and associated entities on an annual basis. 64 Section 1305(1) of the Corporations Act provides that a "book" (defined in s 9 to include "financial reports or financial records, however compiled, recorded or stored") kept by a body corporate under a requirement of the Act "is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book". In Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1, Austin J made the following observations about the effect of s 1305(1) (at [396]): The statement in s 1305(1) that the company's books are prima facie evidence of a matter stated or recorded in them does more than merely to convey that they are the starting point to proof or a "first view". All other things being equal, the fact that a matter is stated in a book kept by a company is sufficient to prove that matter in civil proceedings. That does not reverse the onus of proof in the proceedings in any general way, but it means that the tendering of the book is evidence of the matter recorded in it, and that matter will be thereby proven unless other evidence convinces the tribunal of fact to the contrary, on the balance of probabilities. 65 In respect of a relatively small number of transactions, Hylepin put to John So that the relevant accounting record was inaccurate, which proposition was not accepted by John So. No evidence was called by Hylepin to contradict the accounting records that were in evidence and I therefore accept what they record, save in some minor respects referred to later in these reasons. 66 The parties also tendered by agreement the special referee report of Mr Greg Meredith of Ferrier Hodgson dated 21 February 2018 and its annexures (Special Referee Report). Mr Meredith was appointed as a special referee pursuant to rule 28.61 of the Federal Court Rules 2011 (Cth) on 2 February 2017 to give his opinion with respect to a series of questions relating to the value of various assets including the Exhibition Street Property and the Lonsdale Street Property and the value of Doshay's interests in various assets and the value of Doshay. At that time, it was hoped that the report would assist the parties in resolving their dispute. That did not occur. By the time of trial, the parties had agreed that the trial would determine all issues other than those values. For that reason, neither party applied to have the opinions of Mr Meredith on those values adopted for the purposes of the trial. Rather, the parties agreed that Mr Meredith's report should be received by the Court as evidence of the transactions that are described in the report. C.1 Witnesses for Hylepin 67 Hylepin called Peter Chan and Andy Kwak Hui as witnesses. An overview of their evidence follows, with points of detail referred to below in relation to the impugned transactions. Peter Chan 68 As already noted, at all times Peter Chan has been a shareholder and director of Hylepin and he is presently the sole shareholder of Hylepin. Peter Chan swore an affidavit dated 13 May 2019 and was cross-examined. 69 Peter Chan was born in Kedah, Malaysia on 18 July 1939. He came to Australia in 1958 and graduated in Dentistry from the University of Melbourne. Soon after his graduation, he found a job as a dentist in Kerang, northern Victoria. Later, he moved to Melbourne and started work in a dental surgery in St Kilda. In 1969, he married his late wife, Celia, and also opened up his own dental surgery in St Albans. He continued to work as a full-time dentist until around 1991 when he reduced his hours and worked part-time. He retired some years later. Celia Chan was a qualified accountant. 70 Peter Chan deposed that he met John So through his role with the Chinese Professional and Business Association. He explained that, during the 1980s, he became interested in Chinese community work so he joined the Association and, after a short time, became the Vice President. The Association held dinners in Little Bourke Street at various Chinese restaurants, which Peter Chan attended. 71 Peter Chan said that, after first meeting John So, he would see him from time to time in Chinatown (I interpolate, in Little Bourke Street, Melbourne) and talk with him. In around 1986 or 1987, Peter Chan had a conversation with John So about becoming a shareholder in Doshay. Peter Chan conceded that he cannot now recall the particular circumstances of the conversation, or the specifics of what was said, but that John So said words to the effect that Doshay would operate a Chinese restaurant to be called 'Dragon Boat' in Chinatown, that John So had a history of running Chinese restaurants and had considerable expertise, and that he would make Doshay profitable and would grow the company. John So also said that the business would be owned by him, Peter Chan, Andy Hui (who was to be the head dim sum chef), Willie Yeung (who was to be the head waiter), John So's three brothers, John So's wife Hellen, and a company called Pecosong Pty Ltd (Pecosong). Peter Chan agreed to the proposal and incorporated Hylepin for that purpose. On 30 March 1987, Hylepin subscribed for 30,000 ordinary shares in Doshay. Peter Chan said that, in late 1987, during an encounter in Chinatown, John So told him that Willie Yeung no longer wanted to be part of the Dragon Boat Restaurant. John So offered Willie Yeung's shares for sale to Peter Chan, and the other Doshay shareholders. In November 1987, Hylepin purchased 15,000 shares from Willie Yeung, and Pecosong purchased the other 15,000. 72 As discussed below, John So's recollection of these events differs somewhat from Peter Chan's, but nothing turns on the differences. 73 Peter Chan became a director of Doshay on 30 March 1987 and remained a director until 8 August 1991. In 1991, Peter Chan and his wife Celia used their company, Cathay International Pty Ltd trading with the business name "Cathay Gold Nugget", to commence operating a TAB agency on the ground floor of 117 Lonsdale Street, Melbourne. Peter Chan and his wife had owned the property at 117 Lonsdale Street since 1982. In 1991, the Victorian Government passed a law to allow gaming machines in Victoria. In 1992, after the relevant permits had been obtained, Cathay International Pty Ltd also operated a gaming machine business from the first floor of the building and managed the Cathay Gold Nugget business until it was sold in 2000. 74 In about the year 2000, Celia Chan became terminally ill. Peter Chan deposed that he and his wife then spent more time travelling outside of Australia and did not prioritise business affairs. Celia Chan died on 8 March 2004. 75 The burden of Peter Chan's evidence was to the effect that neither he nor his late wife were informed or consulted about the impugned transactions by John So and Hylepin never received financial statements concerning Doshay. Peter Chan expressly denied John So's evidence to the effect that John So met regularly with the members of Doshay (including Hylepin, represented by the Chans) to discuss its business affairs. 76 I do not consider that Peter Chan was a reliable witness, particularly on the question whether Hylepin was informed about the impugned transactions and whether Hylepin received copies of Doshay's financial statements. The evidence given by Peter Chan in cross-examination was often vague and inconsistent with both his own evidence and the documentary record. Peter Chan himself accepted that the events the subject of the proceeding occurred a long time ago and that, consequently, it was difficult to recall those events. However, the inconsistencies in Peter Chan's evidence went beyond the inevitable difficulty in recalling events from up to 30 years ago. In my view, aspects of Peter Chan's evidence involved reconstructions designed to favour the case brought by Hylepin. I regard the following matters as having particular significance and undermining Peter Chan's reliability and credibility as a witness: (a) As stated above, Peter Chan became a director of Doshay on 30 March 1987 and remained a director until 8 August 1991. Although Peter Chan acknowledged during cross-examination that his duties as a director of Doshay included considering and approving annual financial statements, when asked whether he had performed that task during his tenure as director, he said he could not recall. When Peter Chan was shown the Doshay financial statements for FY1989, he denied having ever seen them. When it was put to Peter Chan that he had in fact seen financial statements of Doshay during his tenure as director, he said he could not recall. When asked whether it was possible that he had in fact seen the financial statements, but had forgotten that fact, Peter Chan said he could not recall. When Peter Chan was shown a resolution of the directors of Doshay, signed by him, in which he expressed the opinion that the information contained in the company's annual return for FY1989 was correct, and it was put to him that he would not have signed such a document unless he had first familiarised himself with those financial statements, he replied that he trusted John So's reporting on the activities of Doshay. I consider that Peter Chan's evidence as to whether he received or read Doshay's financial statements during his period as a director of the company was both inconsistent and implausible, entailing responses that included, "I can't recall reading the financials but apparently – maybe I have, maybe I haven't"; "I wasn't shown the financials whatsoever"; "I can't remember"; and stating that certain financial statements "were not tabled for discussion" and that from "day one" of his investment, he never saw a set of financials up until July 2014. I consider that the answers given by Peter Chan were evasive and inconsistent and undermined his credibility. (b) In his affidavit, Peter Chan deposed that the first time that Hylepin and he had received any financial statements from Doshay was July 2014. When asked in cross-examination whether his wife, a director of Hylepin and a qualified accountant, ever asked for copies of the financial statements of Doshay, Peter Chan said she did but that she never received them. When asked whether Hylepin ever made any written request to John So for copies of Doshay's financial statements from 1991 to 2004, Peter Chan said it did not. Peter Chan said that his wife only told him verbally of the requests she had made to John So for financial statements. When Peter Chan was asked how John So's refusals to provide Doshay's financial statements to his wife made him feel, he said it made him feel anxious because he did not know how the company was performing. When asked why Hylepin did not send any written requests to John So regarding Doshay's financial statements, Peter Chan said he thought that the verbal requests made by his wife would be sufficient. When it was put to Peter Chan that he would have known that the verbal requests were insufficient, because on his evidence his wife had never received any financial statements when she had made those requests to John So, he agreed. When Peter Chan was asked whether he had personally asked John So for Doshay's financial statements, he said he did so on four occasions. When he was further asked about these four occasions, Peter Chan said he might have asked on more than four occasions, but he could not recall. Peter Chan's evidence was that, up until his wife's death in 2004, his focus was on her health and that this was why he did not follow up John So to obtain copies of Doshay's financial records. When it was put to Peter Chan that his wife only became terminally ill in 2000, and that his wife's illness would therefore not have prevented him from making inquiries with John So regarding Doshay's financial statements in the period from 1991 to 2000, Peter Chan said that they had no evidence of any wrongdoing on the part of John So and his wife's health was his priority. I regard Peter Chan's evidence as lacking cogency. It is inherently implausible that Peter Chan and his wife sought financial statements from John So, were rebuffed and then failed to act. The implausibility of the evidence is compounded by events in 2004. Peter Chan was asked whether information pertaining to Doshay had been sought and obtained in connection with administering his wife's deceased estate after she passed away in 2004. Peter Chan denied that that had occurred. However, a letter dated 15 May 2004 showed that Hylepin had (by means of a letter signed by Peter Chan himself) requested financial information from Doshay and asked for the information to be provided to QR Accounting Services. On 1 June 2004, Doshay's accountants, Paul Tjioe & Associates, wrote to QR Accounting Services enclosing income tax returns and financial statements for Doshay for the four financial years FY1999 - FY2002, and stated that the financial statements for FY2003 would be forwarded in the week commencing 14 June 2004. No evidence was called from Hylepin's accountants (the designated recipients of the financial statements) to suggest that those documents (or other financial statements pertaining to Doshay) had not been provided and I infer that the financial statements were provided. Confronted with the correspondence from 2004, Peter Chan ultimately conceded that his sworn evidence regarding non-receipt of Doshay's financial statements may have been mistaken. (c) In an affidavit sworn 14 December 2016, Peter Chan deposed that it was in or around March 2008 that he learned of the formation of Global 2000 and its purchase of the Exhibition Street Property and the Lonsdale Street Property. His sworn evidence included the statement "From that time I became concerned that John So was moving assets away from Doshay into entities under his and Wendy Cheng's control". If that evidence were correct, it creates difficulties for Hylepin because Doshay has raised a limitations and laches defence in the proceeding (arising from Hylepin's failure to raise any concerns with Doshay at that time). In his affidavit sworn on 13 May 2019, Peter Chan's evidence changed: he deposed that it was on or around 15 May 2013 that he "became aware for the first time that Global 2000 and not Doshay was the registered proprietor of the Exhibition Street Property and the Lonsdale Street Property". During cross-examination, Peter Chan repeated that he first learned of the existence of Global 2000 in May 2013. When it was put to Peter Chan that he had in fact become aware of the existence of Global 2000 much earlier, shortly after Doshay's purchase of the Exhibition Street Property in 2000, he denied this. When asked whether he had become aware in 2008 of the purchase of the Exhibition Street and Lonsdale Street properties by Global 2000 rather than Doshay, Peter Chan said he had not. When asked if he had ever sworn an affidavit to that effect, Peter Chan said he could not recall. When the inconsistency in his affidavits was put to Peter Chan, he said that the statement in his earlier affidavit was due to an error of expression and that only his son (Ben) had learned of the purchase by Global 2000 in 2008 when he ran a title search, and his son did not inform him of that fact. I consider that Peter Chan's evidence that his 2016 affidavit contained a "mistake of expression" to be implausible and the evidence undermined his credit. It is also implausible that Peter Chan's son Ben discovered Global 2000's ownership of the Exhibition Street and Lonsdale Street properties in 2008 (when he was a director of Hylepin) and did not inform Peter Chan. (d) In his affidavit, Peter Chan deposed that the first time that he became aware that Doshay had acquired shares in Westlake was in 2014. In cross-examination, it was put to Peter Chan that he knew that Doshay had made an investment in Westlake in 1989, to which he first replied "maybe" and subsequently replied "yes". Peter Chan then gave evidence that John So told him about the investment after it was made in the presence of Hellen Chin and Andy Hui, but he could not recall the month when he was told. Peter Chan was asked whether he asked John So the amount of the investment, and he replied that he did not. When asked why he did not, he said that there was no point because the investment had been made. I do not accept that Peter Chan has an actual recollection of that conversation which occurred 30 years before he gave evidence and that his evidence was an unreliable reconstruction. (e) Although not directly relevant to the issues in dispute, Peter Chan was also asked during cross-examination whether he recalled the existence of a company named Lyleglow Pty Ltd (Lyleglow). Peter Chan said he did not. He was unable to explain why Hylepin, a company of which he is a director, is listed as a shareholder of Lyleglow in an ASIC extract for the company. When Peter Chan was asked whether he remembered a restaurant in Chinatown called Diamond Dynasty, he said that he did. When it was put to Peter Chan that Lyleglow owned the Diamond Dynasty restaurant, Peter Chan replied that he thought he was a shareholder, not Hylepin. When it was put to Peter Chan that his recollection that he was a shareholder of Lyleglow (as opposed to Hylepin) was likely mistaken, he said that "it appears so on paper". When it was put to Peter Chan that Lyleglow was a company which operated a restaurant business named Diamond Dynasty and that he had forgotten that fact, Peter Chan said that he had not previously been aware of the existence of Lyleglow. When Peter Chan was shown during cross-examination an administrator's report in respect of Lyleglow showing that Hylepin held 161,000 shares in Lyleglow, he said "I think I remember now" and offered the following evidence: I remember the situation is like this. John So asked me to contribute or to pay $161,000 because he used Doshay to buy the defunct Diamond Dynasty. We were all against it, but he said that it's just too late; we have to come up with that money or else Doshay will lose all its money. So I think I have to ask my friend for a favour, Mr David Norris, my fellow colleague in the East Keilor Rotarian Club – Rotary Club, to give me a loan of $161,000. In two days he got it for me, and I paid Mr John So, and he said, "No, write it payable to Mr Chun Sek Cheng. Now I remember that incident. At no point we were part of – Hylepin was part of the Diamond Dynasty. Apparently, Mr John So take – on his own joined Hylepin into it. But to me it is a loan to him. But he converted it into shares. Now I remember why. (f) When challenged about that evidence, Peter Chan agreed that his conclusion that John So had converted the loaned money into shares in the name of Hylepin was a conclusion he drew in the witness box based on having been shown the administrator's report. When asked whether Peter Chan had ever referred to the existence of the $161,000 which he said he had loaned to John So in written correspondence related to this proceeding, he said he had not. When asked why he had not included a claim for repayment of the $161,000 loan to John So in this proceeding, Peter Chan said he did not want to complicate the proceeding. I do not accept any aspect of Peter Chan's evidence about Lyleglow and Diamond Dynasty. In my view, Peter Chan's testimony demonstrated a propensity to speculate and reconstruct events based on limited evidence, particularly the statement that John So had applied monies intended as a loan as a subscription for shares. 77 As a result of the foregoing, I do not accept any aspect of Peter Chan's evidence unless it is corroborated by contemporaneous documentary evidence. Witness not called – Ben Chan 78 Hylepin did not call its second director, Ben Chan, as a witness, despite the fact that he has been a director of Hylepin since May 2004. The defendants submitted that the Court should infer that Ben Chan's evidence would not have assisted Hylepin's case. I accept that submission. Its significance lies in the fact that, as referred to above, on 1 June 2004 Doshay's accountants, Paul Tjioe & Associates, wrote to Hylepin's designated agent, QR Accounting Services, enclosing income tax returns and financial statements for Doshay for FY1999 - FY2002 and stating that the financial statements for FY2003 would be forwarded in two weeks' time. Those financial statements disclosed full details of Doshay's investments in the various entities that are now the subject of complaint. If, as Peter Chan claims, Hylepin was unaware of the investments, it would be expected that Hylepin would have followed up that disclosure with a complaint or a request for further information. The failure to complain or follow up in any way required explanation. I infer from the failure to call Ben Chan as a witness that he was unable to provide any explanation. In my view, an inference arises from the failure to complain or follow up that the information disclosed in Doshay's financial statements was known to Peter Chan at that time. Andy Hui 79 Andy Hui is a retired yum cha chef. In 1986, he became the head yum cha chef at the Dragon Boat Restaurant and became a shareholder in Doshay. Andy Hui was also a director of Doshay from 12 November 1986 until December 1991. Andy Hui ceased working at the Dragon Boat Restaurant in 2008 and he sold his shares in Doshay to entities associated with John So in 2013. 80 Andy Hui swore an affidavit dated 3 May 2019 and was cross-examined with the assistance of an interpreter. He agreed that, since selling his shareholding, he had not had any reason to think about the affairs of Doshay up until the time he was asked to give evidence on behalf of Hylepin. 81 Andy Hui deposed that he first met John So in about 1986, when John So came to the Shark Fin Inn where Andy Hui worked as a yum cha chef. John So invited Andy Hui to be the head yum cha chef in a new restaurant in Chinatown to be called the Dragon Boat Restaurant, and to be a 10% shareholder and a director of the company that would operate the restaurant, Doshay. Andy Hui accepted the offer. Andy Hui recalled attending a meeting at John So's home around the time that he became involved in Doshay with the other shareholders: John Kolarik, Peter Chan, Willie Yeung, George Petsinis and John So's brothers. 82 Andy Hui said that, as head yum cha chef, he was the kitchen manager at the Dragon Boat Restaurant. Willie Yeung was the dining room manager and John So was the general manager. Andy Hui saw John So almost every day at the restaurant and had regular conversations with him about the operations of the restaurant. The Dragon Boat Restaurant was successful from an early stage. 83 Andy Hui said that he never attended a dinner held at the Dragon Boat Restaurant on Sunday evenings with Doshay shareholders and he was not aware of weekly shareholder dinners occurring. He also gave evidence that, during the period he was a director of Doshay from 12 November 1986 until December 1991, he did not recall attending any formal meetings of directors. In cross examination, Andy Hui accepted that it was difficult to remember events from such a long time ago. He recalled John So leaving documents for him to sign from time to time at the Dragon Boat Restaurant while he was a director. He said that most of the time he was not sure of the legal effect of what he was signing because his English was quite limited. However, during the time that he was director, he trusted John So and believed that it was alright to sign the documents John So gave to him. Andy Hui said that he ultimately resigned from being a director because he did not understand what he was signing. 84 Andy Hui deposed that he cannot specifically recall ever receiving Doshay's financial statements. He said that he may have received one or two financial statements in the early years whilst he was a director but he believes that he did not receive annual financial statements of Doshay once he stopped being a director. 85 I consider that Andy Hui was a truthful witness who did his best to recall events and conversations. However, I place little weight on his evidence that he either recalled a particular conversation or did not recall a particular conversation. Andy Hui was a director of Doshay for a relatively short period of time, from 1987 to 1991. He ceased working at the Dragon Boat Restaurant in 2008 and he sold his shareholding in 2013. He agreed in cross-examination that he had no reason to think about the affairs of Doshay since that time (until he was asked to give evidence in this proceeding on behalf of Hylepin). As Andy Hui said in evidence, his English is limited and he trusted John So. Andy Hui gave the following evidence in cross-examination: When the business first started I was very, very busy. I hardly had time to sit down and have discussion. Usually when I was either working or when I get my wage and then he [John So] just came and talked to me, like, Dragon Boat Restaurant owns 40 per cent, something like that. And I haven't seen any document or anything like that. Whatever he [John So] told me, I just believe and that's it. 86 The thrust of Andy Hui's evidence was that John So informed him of the transactions that are now the subject of complaint by Hylepin at or about the time of the transactions. However, unless corroborated by documentary evidence, I do not accept that his recollection of the sequence of events or their details was reliable. Most of the events that Andy Hui described in his affidavit occurred more than 20 years ago, some up to 30 years ago. Andy Hui purported to give evidence of events and conversations without reference to any documentary record. He agreed in cross-examination that he had done his best to remember, but his memory of things so long ago was not precise. C.2 Witnesses for the defendants 87 The individual defendants, John So and Wendy Cheng, gave evidence. The defendants also called Paul Tjioe and Wei Win (Wayne) Yu as witnesses. John So 88 John So swore four affidavits dated 12 July 2019, 28 August 2019, 10 September 2020 and 20 September 2020 and was cross-examined. 89 John So was born in Hong Kong in 1946. He moved to Melbourne when he was 17 years old and completed his secondary school education at University High School. After obtaining a Diploma of Education and Bachelor of Science from the University of Melbourne, he worked as a school teacher. From the mid-1970s, he has operated restaurants in Melbourne. Between 2001 and 2008, John So was Lord Mayor of Melbourne. 90 John So gave evidence that Doshay was incorporated in June 1986 for the purpose of operating a restaurant called "Dragon Boat Chinatown" from premises that have a shopfront located at 203 Little Bourke Street, Melbourne (which is in Melbourne's Chinatown district). The restaurant commenced trading in December 1986. The initial shareholders in Doshay were John So and his then wife, Hellen Chin, and John So deposed that he offered shares to persons in Doshay by reference to the contribution that they made to the establishment of the Dragon Boat Restaurant. By late 1986, the shareholders in Doshay were John So (30,000 shares), Hellen Chin (30,000 shares), Andy Hui (30,000 shares), Willie Yeung (30,000 shares) and Caldkone Pty Ltd (Caldkone) (120,000 shares). Each shareholder paid $1.00 per share for their shares. Andy Hui was the yum cha chef at the Dragon Boat Restaurant. Willie Yeung was the Restaurant Manager at the Dragon Boat Restaurant. Caldkone was a company in which John So was a member and director. As General Manager of the Dragon Boat Restaurant, John So's role entailed customer service, quality control, staff training, business promotion and cost control. 91 John So said that he first met Peter Chan in the early 1980s. John So said that before the Dragon Boat Restaurant commenced trading, he had asked Peter Chan and Peter Chan's accountant whether each of them wished to acquire 5% of the issued shares in Doshay. They did not take up this offer at the time. However, after Doshay had commenced operations, Peter Chan approached John So, referred to the earlier discussion, and asked if he could acquire a 10% shareholding in Doshay. On 30 March 1987, Doshay issued 30,000 shares to both Hylepin and Pecosong. Pecosong was a company associated with John Kolarik, a builder who undertook the fit out of the Dragon Boat Restaurant's premises. 92 In the years following the establishment of the Dragon Boat Restaurant, Doshay invested in a number of "Dragon Boat" named restaurants: Dragon Boat Knox, Dragon Boat Palace and Dragon Wall. John So gave evidence, which I accept, that his aim was to grow Doshay's business by establishing a chain of "Dragon Boat" restaurants. 93 In his affidavit, John So deposed that, in the period from the late 1980s until 2007 (when the premises occupied by the Dragon Boat Restaurant were temporarily closed for redevelopment, until reopening in 2009), representatives of Doshay's shareholders and John So regularly had dinner on Sunday evening at the Dragon Boat Restaurant. John So said that Andy Hui and he were the most frequent attendees, as they were working at the Dragon Boat Restaurant and typically organised the payment of staff wages on Sunday evenings. The other shareholders of Doshay were invited to attend these dinners and, when they attended, the affairs of Doshay were discussed. John So said that no formal minutes were made of these meetings, which were also social occasions. In cross-examination, John So clarified that the Sunday evening dinners were more in the nature of social gatherings where the investors and their families, including children, were welcome to come and have dinner. I generally accept that evidence, but my impression is that the attendance at such dinners varied from week to week. 94 John So gave evidence that, from around the late 1980s until sometime in 2000, Celia Chan attended the Dragon Boat Restaurant regularly and discussed the affairs of Doshay with John So and also collected and checked documents relating to Doshay including its annual financial statements. I accept that evidence. It is consistent with the fact that Celia Chan was a qualified accountant. It is also consistent with the fact that there is no written record of Hylepin seeking financial statements in respect of Doshay until after Celia Chan's death in 2004. 95 John So deposed that, after the temporary closure of the Dragon Boat Restaurant, his contact with Peter Chan was ad hoc but he was always happy to provide him with updates regarding Doshay and its business. John So said that he called Peter Chan regularly. Sometimes, when John So learned that Peter Chan was away or he was not able to speak to him, he spoke to Peter Chan's son, Ben Chan. When the Dragon Boat Restaurant resumed trading (in around late 2009), John So met with Peter Chan over afternoon tea at the Marriott Hotel and at Peter Chan's home. John So said that they discussed the business and affairs of the Dragon Boat Restaurant. John So said that he also accompanied Peter Chan to the renovated premises of the Dragon Boat Restaurant to show him the new fit out. John So said that Peter Chan expressed no concerns to him about the conduct of Doshay's affairs during these meetings. John So also deposed that he was not aware of any requests made by Peter Chan for documents that were not met. I accept that evidence. It is consistent with the absence of any complaint being made by Peter Chan or Hylepin about the conduct of Doshay's affairs prior to the period shortly before the commencement of this proceeding. 96 I accept, as submitted by Hylepin, that the oral testimony given by John So had many shortcomings. His evidence was frequently unresponsive to the questions he was asked and he engaged in lengthy speeches that repeated matters he had already stated, testing the patience of the cross-examiner and the Court. His demeanour was frequently defensive. Having regard to the totality of the evidence I heard, I also consider that John So's evidence concerning his consultation with the directors and shareholders of Doshay was exaggerated. As mentioned already, I do not accept Peter Chan's evidence that John So failed to consult with him at all. Rather, I consider that the truth lies in between the two accounts. I consider that John So consulted with the other directors and shareholders, including Celia Chan on behalf of Hylepin, in an ad hoc manner as circumstances and convenience allowed. While I have little doubt that John So considered himself to be the primary decision maker for Doshay, Andy Hui's evidence confirms that John So spoke to him about Doshay's affairs from time to time. 97 As stated above, I do not consider that Peter Chan was a reliable witness, particularly on the question whether Hylepin was informed about the impugned transactions. In assessing the reliability of John So's evidence about consultation with the shareholders, I consider it to be an important fact that, when Hylepin sought copies of Doshay's financial statements by letter dated 15 May 2004, Doshay's accountants, Paul Tjioe & Associates, responded promptly and provided income tax returns and financial statements for Doshay for the period FY1999 - FY2002 with the financial statements for FY2003 to be forwarded two weeks later. Those financial statements disclosed Doshay's investments in, and loans to, the various entities that are the subject of challenge in these proceedings. 98 In assessing the reliability of John So's evidence, I also consider it to be an important fact that all of the transactions undertaken by Doshay, and which are the subject of complaint in the proceeding, have been documented in the accounts and other records of Doshay and associated companies. As stated earlier, it is possible to trace the transactions through those records. The accurate recording of all relevant transactions strongly negatives any suggestion that the transactions were conducted dishonestly or were intended to be concealed. 99 During cross-examination, John So was frequently taken to the financial statements of Doshay and associated companies and questioned about particular line items. My impression is that John So has a basic understanding of financial statements. While most of the questions asked of John So about the financial statements were uncontroversial, and he agreed with the entries recorded in the financial statements, I have not placed much reliance on the answers given. In my view, it is unrealistic to expect a lay witness such as John So, when shown individual pages from financial statements of different companies spanning a 30 year period in a piecemeal fashion, to be able to give an accurate account of the history of the transactions that are recorded in the statements. Generally, the financial statements speak for themselves. On a very small number of occasions, there appeared to be an obvious error or omission in the financial statements, one of which is described below in relation to the record of Doshay's shareholding in Jadetrex. While John So agreed with certain propositions put to him in cross-examination, in making factual findings I have not placed reliance on his agreement where it was inconsistent with the surrounding documents. 100 As noted earlier, John So has been in a personal relationship with Wendy Cheng since about 1984. Although Hylepin submitted that various transactions undertaken by Doshay gave John So a conflict of interest by reason of his personal relationship with Wendy Cheng, very little evidence was given about their personal relationship. The evidence, such as it was, established that they are not married; John So began living with Wendy Cheng in the year 2000; and they have a son, John Junior. Hylepin did not explore in cross-examination or establish that John So had any personal interest in Wendy Cheng's assets or financial affairs. Nor did Hylepin explore in cross-examination of John So the effect that his personal relationship with Wendy Cheng had on the decisions that were the subject of challenge. Instead, Hylepin assumed that the fact that John So had a personal relationship with Wendy Cheng was sufficient to establish that various decisions were affected by a conflict of interest. It may be accepted that a personal relationship has the potential to give rise to a conflict of interest. However, much still depends on a consideration of all the circumstances. 101 Having regard to the totality of the evidence, I reject Hylepin's submissions that Doshay and John So concealed information from Hylepin at any time. Rather, the evidence indicates that information was provided when it was sought. As explained further below, I also reject Hylepin's contentions that the impugned transactions involved fraud or dishonesty on the part of John So. Wendy Cheng 102 Wendy Cheng swore an affidavit dated 12 July 2019 and was cross-examined. 103 Wendy Cheng deposed that she is the sole shareholder, and is a director, of Global Crest. Her brother, Chok Wing Weng, is also a director. Wendy Cheng gave evidence that Global Crest was acquired to operate the "Melbourne Bar & Bistro", which traded from premises situated in the basement of 168 Elizabeth Street, Melbourne. The Melbourne Bar & Bistro was a successful business and traded profitably for a number of years. Until around 2012, Wendy Cheng was involved in the day-to-day management of the business. Global Crest also operated retail businesses, consisting of a bottle shop situated in Exhibition Street (near the corner of Little Bourke Street) and a convenience store from premises at 219 Russell Street, Melbourne. 104 I consider that Wendy Cheng was a truthful witness. There was no challenge to her evidence during cross-examination. Unsurprisingly given the passing of time, Wendy Cheng responded to a number of questions during cross-examination that she could not recall. Paul Tjioe 105 Mr Tjioe is an accountant and has acted as John So's accountant since about 1986 and has also provided accounting services to companies related to John So including Doshay and Global 2000. Mr Tjioe swore an affidavit dated 29 August 2019. He was not cross-examined. Mr Tjioe's evidence largely concerned the shareholdings in Global 2000 which is considered below. Wei Win (Wayne) Yu 106 Mr Yu is an accountant employed by the accounting firm Paul Tjioe & Associates and swore an affidavit dated 20 September 2019. He was not cross-examined. Mr Yu's evidence also concerned the shareholdings in Global 2000 which is considered below. D. FACTUAL FINDINGS D.1 Incorporation of Doshay 107 Doshay was incorporated on 2 June 1986 as a proprietary company. Upon incorporation, its articles of association (now constitution) adopted the regulations set out in Table A in Schedule 3 to the Companies (Victoria) Code subject to the modifications set out in the articles. Regulation 66(1) of Table A stipulated that "Subject to the Code and to any other provision of these regulations, the business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and forming the company, and may exercise all such powers of the company as are not, by the Code or by these regulations, required to be exercised by the company in general meeting". The articles deleted regulation 71 in Table A and substituted the following regulation: No director shall be disqualified by his office from holding any office or place of profit under the company or under any company in which this company shall be a shareholder or otherwise interested or from contracting with the company either as vendor purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the company in which any director shall be in any way interested be avoided nor shall any director be liable to account to the company for any profit arising from any such office or place of profit or realised by any such contract or arrangement by reason only of such director holding that office or of the fiduciary relations thereby established but it is declared that the nature of his interest must be disclosed by him in the manner required by the Code. A director may vote in respect of any contract or arrangement in which he is interested. A director may be appointed as the director in whose presence the seal of the company is to be affixed to any instrument notwithstanding that he is interested in the contract or arrangement to which the instrument relates. 108 At that time, s 228 of the Companies (Victoria) Code required a director who held a material interest in a contract or proposed contract with the company, or who held an office or possessed property giving rise to a conflict of interest or duty, to declare the nature of the interest or conflict at a meeting of the directors of the company. 109 On 30 July 1986, John So and his then wife, Hellen Chin, each acquired one of Doshay's two issued shares and became the directors of Doshay. Each remain as directors of Doshay. John So has been the company secretary of Doshay since 30 July 1986. 110 On 13 August 1986, Doshay resolved to increase its authorised share capital to $300,000, divided into 300,000 $1.00 ordinary shares. 111 On 30 October 1986, Doshay adopted the business name Dragon Boat Restaurant and issued shares to John So, Hellen Chin and Caldkone such that John So and Hellen Chin each held 30,000 shares and Caldkone held 120,000 shares. 112 Caldkone was incorporated on 2 June 1986. At all relevant times until 28 November 2018, its directors were John So and his brother Anthony So. From 28 November 2018, Anthony So resigned and John So's daughter, Natalie So, became a director. Caldkone's current shareholders are John So (119,999 ordinary shares or 10.7%), Okaybye Pty Ltd (Okaybye) (1,000,000 ordinary shares or 89.29%) and Anthony So (1 ordinary share). Okaybye was incorporated on 7 June 1995. At all times its directors have been John So and Sylvia Lau and its current shareholder is John So (who owns the 2 issued ordinary shares). 113 Pursuant to agreements dated 12 November 1986 between Doshay, each of Doshay's then shareholders (John So, Hellen Chin and Caldkone) and each of Andy Hui and Willie Yeung respectively, Andy Hui and Willie Yeung each paid $30,000 for the issue of 30,000 shares in Doshay on the terms set out in the agreement. Clause 5 of the agreement provided that each of the shareholders agreed not to transfer their shares in Doshay except with the permission of the other shareholders or unless the shareholder first offered them pro-rata to the other shareholders. Andy Hui and Willie Yeung were appointed as additional directors of Doshay. As noted earlier, Andy Hui became the head yum cha chef at the Dragon Boat Restaurant and Willie Yeung became the head waiter. 114 In or around December 1986, Doshay commenced operating the Dragon Boat Restaurant. 115 Since 23 November 1988, Doshay has been the registered proprietor of Australian Trade Marks 500219, 500220 and 500221 for the words "Dragon Boat" and the following device (the Dragon Boat Trade Marks): 116 The evidence included the financial statements of Doshay from FY1987 until FY2018 (the latest financial statements as at the date of trial). It is a significant fact that Hylepin's case relies on transactions recorded in Doshay's financial statements. This is not a case in which transactions were disguised or otherwise hidden. Doshay kept proper accounts throughout and, for the most part, there is no challenge to the accuracy of the accounts. That fact has significance for Hylepin's argument that John So failed to disclose Doshay's transactions to Hylepin. By way of overview, Doshay's financial statements for FY1987 record a small trading loss of $6,554 and net assets of $293,445. Jumping forward to FY2018, Doshay recorded a net profit of approximately $500,000 and net assets had increased to nearly $9 million (while recognising that many of the assets are recorded at book value rather than market value). D.2 Incorporation of Hylepin 117 Hylepin was incorporated on 10 February 1987. Peter Chan and his late wife Celia Chan each acquired one of Hylepin's two issued shares and became the directors of Hylepin on 9 March 1987. Mrs Chan was also appointed the company secretary and she remained as a director and secretary of Hylepin until 7 May 2004 (at the time of her death). Following Mrs Chan's death, Peter Chan acquired her share (and has held the two issued shares in Hylepin since that time) and became company secretary. Their son, Ben Chang, was also appointed as a director at that time. D.3 Shareholdings in Doshay 118 Pursuant to an agreement dated 30 March 1987 between Doshay, each of Doshay's then shareholders (John So, Hellen Chin, Caldkone, Andy Hui and Willie Yeung) and Hylepin, Hylepin paid $30,000 for the issue of 30,000 shares in Doshay on the terms set out in the agreement. Clause 5 of the agreement provided that Hylepin and each of the shareholders agreed not to transfer their shares in Doshay except with the permission of the other shareholders or unless the shareholder first offered them pro-rata to the other shareholders. At the same time, Peter Chan was appointed as an additional director of Doshay, joining John So, Hellen Chin, Andy Hui and Willie Yeung. 119 On the same date, Pecosong also entered into a similar agreement with the shareholders of Doshay paying $30,000 for the issue of 30,000 shares. At that time, Pecosong's directors and shareholders were Donna Petsinas, John So, How Seng Ng and John Kolarik. Following the issue of those shares, the issued share capital of Doshay comprised 300,000 ordinary shares and Hylepin had a 10% shareholding interest. 120 Following those allotments of shares, the shareholders were as follows: Caldkone (120,000), John So (30,000), Hellen Chin (30,000), Andy Hui (30,000), Willie Yeung (30,000), Hylepin (30,000) and Pecosong (30,000). 121 On 22 November 1987, Willie Yeung resigned as a director of Doshay and transferred his shareholding in Doshay in equal parts to Hylepin and Pecosong, giving them each 45,000 shares in total (or 15%). 122 Peter Chan resigned as a director of Doshay on 8 August 1991. Andy Hui resigned as a director with effect on 18 December 1991. Since then, John So and Hellen Chin have been Doshay's only directors. 123 Subsequently, there have been further transfers of shares in Doshay: (a) on 15 March 1991, Pecosong transferred 22,500 shares to Mr Kolarik; (b) during 1992, Pecosong transferred 22,500 shares to John So; (c) on 30 August 1994, John So made two transfers of shares to Invernell Pty Ltd (Invernell) totalling 52,500 shares; and (d) on 8 February 2013, Andy Hui transferred 22,500 shares to Evaluator and 7,500 shares to Invernell. 124 Invernell was incorporated on 6 August 1993. Its issued share capital comprises two ordinary shares which were initially held by John So and Hellen Chin. They are now held by John So and his son, Alexander So. Initially, its directors were John So and Hellen Chin. On 6 March 1995, John So resigned as a director and his daughter, Natalie So, was appointed. On 7 April 2004, Hellen Chin resigned and Alexander So was appointed. 125 Evaluator was incorporated on 15 November 2000. Its issued share capital comprises 100 ordinary shares. Initially, 51 shares were held by Global Crest and 49 shares were held by Doshay. On 14 January 2004, Doshay acquired the shares held by Global Crest to become the sole shareholder. Its initial director was Wendy Cheng. Natalie So was appointed as a second director on 3 April 2012. 126 At the time that Andy Hui transferred 22,500 shares in Doshay to Evaluator (on 8 February 2013), Evaluator was controlled by Doshay. Pursuant to s 259C of the Corporations Act, such a transfer is void unless an exemption is granted by ASIC. Neither party addressed the effect of that section, although the defendants acknowledged that Hylepin's shareholding interest in Doshay should be calculated as if the shares in Doshay held by Evaluator had been cancelled. That would give Hylepin a 16.22% interest in Doshay. 127 Global Crest was incorporated on 20 May 1992. Its issued share capital currently comprises four ordinary shares which are owned by Wendy Cheng. The annual return for FY1999 for Global Crest filed with ASIC on 31 January 2000 showed that, at that time, the company had three shares on issue, with one share being held by each of Wendy Cheng, Chok Wing Cheng and John So. The annual return for FY2000 for Global Crest filed with ASIC on 10 January 2001 showed that, by that time, a further share had been allotted to Chok Man Cheng. An ASIC notification lodged on 16 June 2004 showed that John So transferred his share in Global Crest to Wendy Cheng on 20 May 2004. Wendy Cheng and her brother Chok Wing Chen have been directors at all times, and John So was a director until 28 April 1994. 128 The current shareholders of Doshay comprise: (a) Caldkone which owns 120,000 shares (40%); (b) Invernell which owns 60,000 shares (20%); (c) Hylepin which owns 45,000 shares (15%); (d) Hellen Chin who owns 30,000 shares (10%); (e) Evaluator which owns 22,500 shares (7.5%); and (f) Mr Kolarik who owns 22,500 shares (7.5%). D.4 Westlake Restaurant 129 Westlake Restaurant Pty Ltd (Westlake) was incorporated on 12 November 1984. The Special Referee Report states that Westlake is the trustee of the Westlake Restaurant Unit Trust which operates the Westlake Chinese Restaurant in Chinatown (Little Bourke Street, Melbourne). 130 Westlake's share capital currently comprises 10 ordinary shares which are held as follows: Doshay four shares; Thirty-First Paradise Pty Ltd three shares; and Kiat Chong Ong three shares. It was an agreed fact that Doshay acquired its shareholding in or around 1995. No other evidence was adduced concerning Westlake's shareholding history, or the ownership of Thirty-First Paradise Pty Ltd or the relationship (if any) between John So and Thirty-First Paradise Pty Ltd or Kiat Chong Ong. 131 An ASIC extract of Westlake showed that its initial directors were Kow Leung, Kiat Chong Ong and Ron Chang Hing Lim and that Kow Leung resigned on 29 September 1988 and was replaced by John So. This was contrary to an agreed fact that John So became a director on 29 September 1998. I infer that the agreed fact contained a typographical error. Kiat Chong Ong resigned on 11 February 1994. Chang Hing Lim resigned on 9 January 1995 and was replaced by Kam Chiu Chan (who remains the sole director). John So resigned on 10 January 2001 and was replaced by Tommy Li. 132 Doshay's annual financial statements for FY1988 record that Doshay made an investment of $88,235.29 in the Westlake Restaurant Unit Trust in that financial year (which coincides with John So being appointed a director of Westlake). Neither the trust deed for the Westlake Restaurant Unit Trust nor any of its financial statements were in evidence and the investment was not explored by Hylepin with John So. The Special Referee Report states that Doshay holds a 30% interest in the Westlake Unit Trust. Doshay's financial statements for FY1988 also show that Doshay received a distribution from the Westlake Restaurant Unit Trust of $4,745 recorded as non-operating income, and also advanced a loan to the Westlake Restaurant Unit Trust in the same amount. I infer that the distribution declared in favour of Doshay was reinvested in the Unit Trust by way of interest free loan. 133 That pattern of Unit Trust distributions and reinvestment of part or all of the distribution by way of loan is repeated in subsequent years. For example, Doshay's financial statements for FY1989 record that Doshay received a distribution of $16,245 from the Unit Trust and its loan to the Unit Trust as at 30 June 1989 had increased to the same amount (with the effect that it retained as cash the amount of the distribution from the prior year of $4,745). Doshay's financial statements for FY1993 record that Doshay received a distribution of $73,231.92 from the Unit Trust and its loan to the Unit Trust as at 30 June 1993 had increased to $88,786.43. By that time, the investment in the Unit Trust had been reduced from $88,235.29 to $83,435.29. Jumping forward to FY2018, Doshay received a distribution of $57,226 from the Unit Trust and its loans to the Unit Trust as at 30 June 2018 had increased to $790,921.86 (in aggregate). The original investment in the Unit Trust remained at book value of $83,435.29. 134 John So said that Doshay loaned funds to the Westlake Restaurant (and the other restaurants referred to below) so that they could continue to trade successfully, thereby protecting Doshay's interests in the restaurants. I accept that evidence. D.5 Lyleable and Dragon Boat Knox 135 Lyleable Pty Ltd (Lyleable) was incorporated on 16 August 1988. It has been under external administration since 13 April 2017 pursuant to a creditors' voluntary winding up. 136 On 27 February 1989, Doshay and Lyleable entered into a franchise agreement pursuant to which Lyleable agreed to operate a "Dragon Boat" restaurant at the Village Cinema Complex in the Knox District Centre in Wantirna South (referred to as Dragon Boat Knox). The term of the agreement was five years. In consideration for the grant of the franchise, Lyleable agreed to pay Doshay a franchise fee of $2,000 and a service fee of $500. John So signed the agreement on behalf of both Doshay and Lyleable. John So gave evidence, which I accept, that he was seeking to establish and grow a chain of restaurants under the "Dragon Boat" name. 137 Lyleable's annual return for FY1990 lodged with ASIC shows that Lyleable had issued 300,000 ordinary shares (for a subscription price of $1.00 per share). John So gave evidence that the shares were issued in April 1990. The shares were issued to Doshay (120,000), Yick Kan Koo (54,000), Philip Kwok Ling Hui (30,000), Kam Chuen Fok (30,000), Wendy Cheng (30,000), Stephen Kin Chiu Ku (21,000) and Ho Lau (15,000). Andy Hui gave evidence that John So asked him to help set up Dragon Boat Knox and get the kitchen up and running. John So offered Andy Hui shares in the company and the shares were issued to Andy Hui's father-in-law, Ho Lau, his brother, Phillip Kwok Ling Hui, and his brother-in-law "Ken" (whom I infer is Yick Kan Koo). Andy Hui also gave evidence that Kam Chuen Fok was originally the head chef at Dragon Boat Knox. John So gave evidence that Stephen Kin Chiu Ku was originally the head waiter at the Dragon Boat Restaurant in Chinatown. 138 Andy Hui deposed that he did not remember any discussions with John So, or any meetings of Doshay directors or shareholders, regarding the establishment of Dragon Boat Knox. However, that evidence was not entirely consistent with other aspects of his affidavit evidence and was contradicted in part by his testimony in cross-examination. Andy Hui deposed that he knew that Dragon Boat Knox was operated by Lyleable and that John So offered Andy Hui shares in the company. Andy Hui's father-in-law, Ho Lau, agreed to hold shares in his name. Andy Hui deposed that he knew that his brother, Philip, and his brother-in-law, Ken each owned 10% of the shares, but that he was not told by John So who the other shareholders were and did not know that Wendy Cheng held shares. In cross-examination, Andy Hui agreed that he discussed the possibility of opening Dragon Boat Knox with John So, and also discussed the involvement of Andy Hui's family members in running the restaurant. Andy Hui also agreed that it was thought at the time that the restaurant would be good for Doshay because it would expand awareness of the name "Dragon Boat". 139 Lyleable's annual return for FY1994 lodged with ASIC shows that Yik Kan Koo transferred his shareholding of 54,000 shares to Caesar Pty Ltd (Caesar). Caesar was incorporated on 17 June 1994. Caesar's issued share capital comprises two ordinary shares. Its shareholders are Wendy Cheng and her brother, Chok Wing Cheng, holding one share each. Wendy Cheng has been a director of the company at all times and Chok Wing Cheng was a director until 27 May 1996. The date of the share transfer is not shown in the annual return. The annual return was signed on 11 May 1995 and also stated that Yik Kan Koo resigned as a director on 6 April 1995 and that Wendy Cheng was appointed on the same day. I infer that the share transfer occurred between 17 June 1994 (when Caesar was incorporated) and 6 April 1995. 140 Lyleable's annual return for FY1996 lodged with ASIC shows that Kam Chuen Fok transferred his shareholding of 30,000 shares to Caesar. Again, the date of the share transfer is not shown in the annual return. 141 An ASIC extract tendered in evidence showed that Lyleable's current shareholders are Doshay (120,000), Caesar (84,000), Wendy Cheng (30,000), Philip Kwok Ling Hui (30,000), Stephen Kin Chiu Ku (21,000) and Ho Lau 15,000. 142 Lyleable's initial directors were John So and Andy Hui (appointed on 1 December 1988). Yick Kan Koo, Kam Chuen Fok and Stephen Kin Chiu Ku became directors a short time later on 30 January 1989. Andy Hui ceased to be a director on 18 December 1991. Yick Kan Koo ceased to be a director on 6 April 1995, whereupon Wendy Cheng and Chok Wing Cheng became directors. John So ceased to be a director on 10 August 1998. Kam Chuen Fok and Stephen Kin Chiu Ku ceased to be directors on 20 November 2008. Wendy Cheng ceased to be a director on 31 May 2011. Lyleable's current directors are Chok Wing Cheng and Philip Kwok Ling Hui. 143 Doshay's shareholding in Lyleable was recorded as an asset in Doshay's annual financial statements, with the description "Shares in Lyleable Pty Ltd", with a book value of $120,000 from FY1990 (while Doshay's financial statement for FY1990 were not tendered in evidence, the financial statements for FY1991 record the shareholding in both FY1991 and the prior year). It remained so listed in the financial statements for FY2018. 144 Doshay's annual financial statements record that Doshay also advanced loan monies to Lyleable (recorded in Doshay's balance sheet as "Loan – Knox City Project"). The first loan is recorded in Doshay's financial statements for FY1988 in an amount of $28,300. As Lyleable was only incorporated in August 1988, I infer that the first loan was a "pre-incorporation" loan toward the business that would become Dragon Boat Knox. Doshay's financial statements for FY1989 record that the loan to the "Knox City Project" had increased to $118,000. John So gave evidence that Doshay's loan to Lyleable was applied towards Doshay's subscription for the 120,000 shares issued to it in April 1990. That is consistent with the documentary record. As already noted, Doshay's financial statement for FY1990 were not tendered in evidence. However, the financial statements for FY1991 showed that the loan in the prior year (i.e. FY1990) had been reduced to nil. Subsequently, Doshay advanced further loan monies to Lyleable. Doshay's financial statements show that the amount of the loan peaked in FY2008 at $463,061 and, by FY2018, had been reduced to $286,149. The loan was undocumented, unsecured and interest free. 145 The financial statements of Lyleable that were tendered in evidence show that Lyleable also obtained loans from the ANZ bank by way of overdraft, from its directors and "other loans". No evidence was given about those other borrowings, or any relationship between the borrowings from Doshay and borrowings from "Directors" and "Others". The financial statements for FY1996 show that the loan from Doshay was $62,775.37, the loans from "Directors" was $12,542.65 and "other loans" were $72,000. The financial statements for FY1999 (the most recent financial statements for Lyleable tendered in evidence) show that the loan from Doshay had increased to $96,561.24 while the "other loans" had decreased to $42,000. 146 Overall, Dragon Boat Knox was not commercially successful. Lyleable's annual return for FY1990 showed that Lyleable recorded a net profit of $33,012. In FY1994, it recorded a net loss of $32,860. Although it recorded a net profit of $23,755 in FY1999, by that time it had accumulated losses of $222,976.12. The Special Referee Report states that in FY2016 it had accumulated losses of $354,206. Mr Meredith stated that he assessed the value of Lyleable at the date of the Special Referee Report as nil and, as a result, assessed Doshay's interest in Lyleable as nil, because the balance sheet of Lyleable as at 30 June 2016 reported negative assets of $162,294. 147 John So gave evidence that he considered the loan monies advanced to Lyleable were in Doshay's interests as Doshay wanted the Dragon Boat Knox restaurant to trade successfully. He said that the loan was discussed amongst Doshay's directors and shareholders, particularly between himself, Any Hui and John Kolarik. While the evidence was stated at a level of generality, I accept its broad thrust. In my view, the investments described above are not out of the ordinary and are not uncommercial. The franchise agreement shows that Doshay was seeking to expand its business by opening other "Dragon Boat" named restaurants. Doshay held a substantial shareholding in Lyleable and would therefore benefit financially from Lyleable's success, as well as benefitting from the expansion of the "Dragon Boat" restaurant name. Doshay shared the risk of the investment with, and provided an ownership opportunity to, key staff in Dragon Boat Knox as well as Wendy Cheng, with Caesar acquiring shares from staff over time. Neither party attempted to reconstruct the decision making that led to the loans being sought by Lyleable from year to year and advanced by the various lenders to Lyleable, including Doshay. That is not surprising given the passage of time since those decisions were made. The absence of evidence, caused in large part by the passage of time, highlights the difficulty for Hylepin in establishing, in 2019, that specific decisions made by John So on behalf of Doshay in relation to Lyleable in the 1990s and the 2000s were affected by a conflict of interest, and the unfairness to John So in seeking to show that they were not. It is impossible to know, so many years later, what financial resources were available to Lyleable from year to year, the particular decisions that needed to be made and how Doshay's interests were affected by those decisions. D.6 Jadetrex and Dragon Boat Palace 148 Jadetrex was incorporated on 12 July 1989 and was deregistered on 16 July 2017. It initial shareholders were John So and Hellen Chin holding one ordinary share each. 149 On 16 March 1990, Doshay and Jadetrex entered into a franchise agreement pursuant to which Jadetrex agreed to operate a restaurant known as Dragon Boat Palace at 144-159 Lonsdale Street Melbourne. John So signed the agreement on behalf of both Doshay and Jadetrex. The term of the agreement was five years. In consideration for the grant of the franchise, Jadetrex agreed to pay Doshay a franchise fee of $3,000 and a service fee of $1,000. 150 On 10 April 1990, John So and Hellen Chin transferred their shares in Jadetrex to Doshay. On the same day, Jadetrex allotted 179,998 ordinary shares to the following persons (for a subscription price of $1.00 per share): Doshay 34,998 shares (which took its shareholding to 35,000 shares); Kam Wah Fok 40,000 shares; Sai Kam Wong (40,000 shares); So Fung Ho 35,000 shares; Kam Chuen Fok 20,000 shares; and Andy Hui 10,000 shares. The share allotments are recorded in a minute of directors of Jadetrex signed on that day, as well as a notification of allotment of shares lodged with ASIC on 23 July 1992 and the FY1990 annual return for Jadetrex lodged with ASIC on 23 December 1992. Andy Hui gave evidence that Kam Wah Fok and Kam Chuen Fok were brothers who worked at the restaurant and Sai Kam Wong was the dim sum chef. John So gave evidence, which I accept, that So Fung Ho was a Hong Kong registered company in which his younger brother had a minority investment and John So had no interest in the company. 151 Andy Hui gave evidence that he did not remember any discussions with John So, or any meetings of Doshay directors or shareholders, regarding the establishment of Dragon Boat Palace. He said he first learned about Dragon Boat Palace about the time when it opened and John So asked him to help set it up and get the kitchen up and running, which he did. Andy Hui remembered John So telling him that Doshay had 40% of the shares in Jadetrex, the company operating Dragon Boat Palace. In cross examination, Andy Hui said that he did not recall that he was once a shareholder in Jadetrex, but he agreed that he may have forgotten that John So offered him shares in Jadetrex. 152 Jadetrex's annual return for FY1995 lodged with ASIC (and signed on 28 February 1997) shows that Kam Wah Fok, Kam Chuen Fok and Andy Hui transferred their shares (totalling 70,000) to Caesar (30,000 shares) and Chok Wing Cheng (40,000). The date of transfer is not recorded. 153 Jadetrex's initial directors were John So and Hellen Chin. Hellen Chin remained a director until 16 December 1994 and John So remained a director until 10 August 1998. Sai Kam Wong, Kam Wah Fok and Kam Chuen Fok were appointed as additional directors on 2 April 1990. Kam Wah Fok and Kam Chuen Fok remained directors until 10 August 1998. Sai Kam Wong remained a director until 9 February 1999. On 10 August 1998, Chok Wing Cheng was appointed a director. He remained a director until the company was deregistered. 154 Doshay's annual financial statements for FY1991 does not record Doshay's shareholding in Jadetrex as an asset in either FY1990 or FY1991. Those financial statements record a loan by Doshay to Jadetrex in the amounts of $193,756.31 and $179,145.21 respectively. The next set of financial statements for Doshay in evidence were for FY1993. Those financial statements record Doshay's shareholding in Jadetrex (with the description "Shares in Jadetrex Pty Ltd") at cost ($35,000) in both FY1992 and FY1993. Those financial statements also record the value of the loan from Doshay to Jadetrex in FY1992 and FY1992 as $144,145.21, which is $35,000 less than the amount of the loan recorded in FY1991. Given that the allotment of shares to Doshay is recorded in a signed directors' minute for Jadetrex on 10 April 1990, I infer that Doshay's financial statements for FY1990 and FY1991 contained an error. The FY1990 and FY1991 financial statements should be adjusted to reduce the loan amount by $35,000 and to include as an asset the shareholding in Jadetrex. Doshay's shareholding in Jadetrex was recorded with a book value of $35,000 in its financial statements in subsequent years until FY2016. The asset was written off in FY2017. 155 As already noted, Doshay's annual financial statements record that, commencing in FY1990, Doshay advanced loan monies to Jadetrex (recorded in Doshay's balance sheet as "Loan - Dragon Boat Palace"). In FY1990, the loan was recorded as $193,756.31, but should have been recorded as $158,756.31 (with $35,000 having been applied to the subscription for Jadetrex shares). The amount of the loan peaked in FY2005 at $734,145 and, by FY2016, had been reduced to $28,445.46. Doshay's annual financial statements for FY2017 records a bad debt expense of $28,446 and the loan balance is reduced to nil. I infer that the outstanding balance of the loan of that amount was written off by Doshay in FY2017. The loan was undocumented, unsecured and interest free. 156 The financial statements of Jadetrex that were tendered in evidence show that Jadetrex also obtained loans from other persons. No evidence was given about those other borrowings. The financial statements for FY1996 show that while Doshay had advanced a loan of $144,145.21, Caldkone had advanced a loan of $95,526.65 and Andy Hui had advanced a loan of $30,000. The financial statements for FY1999 show that Doshay's loan had increased to $164,145.21, Caldkone's loan remained at $95,526.65, Andy Hui's loan remained at $30,000 and Global Crest advanced a loan of $13,358.23. The financial statements for FY2004 (the most recent financial statements for Jadetrex tendered in evidence) show that the loan from Doshay had increased to $694,145.21, the loan from Global Crest had increased to $33,358.23 and the loans from Caldkone and Andy Hui remained the same. 157 Overall, Dragon Boat Palace was not commercially successful. Jadetrex's financial statements for FY1996 recorded a net loss of $83,650.28 and accumulated losses of $228,378.45. In FY1999, it recorded a net loss of $145,583.51 and accumulated losses of $441,270.36. The Special Referee Report states that in FY2016 it had accumulated losses of $350,946. In his report, Mr Meredith stated that he assessed the value of Jadetrex as nil and, as a result, assessed Doshay's interest in Jadetrex as nil because the balance sheet of Lyleable as at 30 June 2016 reported negative assets of $172,395. As noted above, Jadetrex was deregistered in July 2017. 158 Largely for the same reasons as given with respect to Lyleable, I accept John So's evidence that he considered Doshay's loan to Jadetrex was in Doshay's interests as Doshay wanted the Dragon Boat Palace restaurant to trade successfully. As discussed in connection with Lyleable, the investments in Jadetrex described above are not out of the ordinary and are not uncommercial. Doshay franchised the use of the "Dragon Boat" name to Jadetrex as part of Doshay's business objective of expanding its business. Doshay held a substantial shareholding in Jadetrex and would therefore benefit financially from its success, as well as benefitting from broader recognition of the "Dragon Boat" restaurant name. Doshay shared the risk of the investment with, and provided an ownership opportunity to, key staff in Dragon Boat Palace, with Caesar and Chok Wing Cheng acquiring shares from staff over time. As for Lyleable, neither party attempted to reconstruct the decision making that led to the loans being sought by Jadetrex from year to year and advanced by the various lenders to Jadetrex, including Doshay. Again, that is not surprising given the passage of time since those decisions were made but highlights the difficulty for Hylepin in establishing that specific decisions made by John So on behalf of Doshay in relation to Jadetrex in the 1990s and the 2000s were affected by a conflict of interest, and the unfairness to John So in seeking to show that they were not. It is impossible to know, so many years later, what financial resources were available to Jadetrex from year to year, the particular decisions that needed to be made and how Doshay's interests were affected by those decisions. D.7 Dragon Wall and Dragon Wall Take Away 159 Dragon Wall was incorporated on 25 October 1990 and was deregistered on 6 January 2016. 160 John So and Andy Hui gave evidence, which I accept, that Dragon Wall operated a Chinese takeaway restaurant business from Bourke Place, 600 Bourke Street Melbourne and in the Telstra building on Exhibition Street, Melbourne. It was an agreed fact that the takeaway restaurant at Bourke Place operated from about 1990 to 2006. 161 Andy Hui gave evidence that he did not remember any meetings of Doshay directors or shareholders regarding the establishment of the Dragon Wall takeaway restaurants. However, he recalled that John So was interested in setting up restaurants in food courts because of the success of the Dragon Boat Restaurant. He also deposed that he remembered John So telling him at one point that Doshay owned 25% of Dragon Wall but he did not know who the other shareholders were. The food that Andy Hui prepared at the Dragon Boat Restaurant was also sold in the Dragon Wall takeaway business in the Telstra Building on Exhibition Street. 162 Very little evidence was adduced about Dragon Wall. Prior to its deregistration, Dragon Wall's issued share capital comprised 100,000 ordinary shares (issued at $1.00 per share) held as follows: Hellen Chin 50,000 shares; Doshay 25,000 shares; and YBB Victoria Pty Ltd (YBB) 25,000 shares. YBB was incorporated on 19 May 1982. Relevantly, John So and Hellen Chin became directors of YBB on 28 June 1988. John So resigned as a director on 20 May 2004 and was replaced by Alexander So. Its issued share capital comprises four ordinary shares which are currently held by Hellen Chin (three shares) and Alexander So (one share). The evidence did not reveal the date or dates on which the shares were issued. 163 Dragon Wall's initial directors, appointed on 25 October 1990, were John So, Yee Lam and Man Ngo. Andy Hui was appointed a director on 6 December 1990. Andy Hui resigned on 17 December 1991 and Yee Lam and Man Ngo resigned on 18 December 1991. Hellen Chin became a director on 18 December 1991. Both John So and Hellen Chin remained directors until the company was deregistered on 6 January 2016. 164 Doshay's annual financial statements for FY1993 show that Doshay's shareholding in Dragon Wall was recorded as an asset (with the description "Shares in Dragon Wall Pty Ltd") with a book value of $25,000 from FY1992. The asset was written off in FY2014. 165 Doshay's annual financial statements record that, from at least FY1991, Doshay advanced loan monies to Dragon Wall (recorded in Doshay's balance sheet as "Bourke Place Project"). In FY1991, the loan was recorded as $34,417.23. Doshay's annual financial statements for FY1993 show that, in FY1992, the loan had decreased to $14,977.62, which likely indicates that the loan was applied in payment of Doshay's subscription for shares (for an amount of $25,000) and a further amount was loaned. The amount of the loan peaked in FY2004 at $26,113. In the FY2010 financial statements, the loan was reduced to nil. Those financial statements also record a capital loss of $26,112.62. Given the similarity in the amount of the loan and the amount of the capital loss, I infer that the loan was written off in that financial year. The loan was undocumented, unsecured and interest free. 166 For the reasons explained in relation to Lyleable and Jadetrex, I accept John So's evidence that he considered the loan to Dragon Wall was in Doshay's interests as Doshay wanted the Dragon Wall takeaway restaurant businesses to trade successfully. I also consider that the investments in Dragon Wall described above are not out of the ordinary and are not uncommercial. Again, neither party attempted to reconstruct the decision making that led to the loans being sought by Dragon Wall from year to year during the 1990s and the 2000s, which is not surprising given the passage of time since those decisions were made. It is impossible to know, so many years later, what financial resources were available to Dragon Wall from year to year, the particular decisions that needed to be made and how Doshay's interests were affected by those decisions. D.8 The acquisition of the Exhibition Street Property 167 On 13 December 1999, John So entered into a contract of sale pursuant to which he agreed to purchase the Exhibition Street Property for $2 million. The contract of sale identified the purchaser as "John So and/or nominee c/o 203 Lt Bourke St, Melbourne". The stated address is the premises of the Dragon Boat Restaurant. A deposit of $200,000 was payable on the signing of the contract of sale and the balance was payable on 20 June 2000. 168 In oral testimony, John So said that he did not intend to purchase the Exhibition Street Property in his own name. However, he knew that Wendy Cheng was interested in investing in property and had the financial capacity to do so. 169 John So nominated Global 2000, the third defendant, as the purchaser under the contract of sale. Global 2000 was incorporated on 12 May 2000 with one issued share held by John So. At all times, John So has been the sole director of the company. John So gave evidence, which I accept, that Global 2000 was incorporated to be the owner of investment properties. On 15 June 2000, Doshay applied for the issue of four ordinary shares in the capital of Global 2000 and Global Crest applied for the issue of five ordinary shares. On the same day, John So executed a share transfer form transferring the one ordinary share in Global 2000 held by him to Doshay. A minute of a director's meeting held that day approved the allotment and transfer of shares. The minute was signed by John So. The register of members of Global 2000 was updated to record that each of Doshay and Global Crest held five ordinary shares in Global 2000. 170 There is a dispute between the parties, which is considered below, as to whether the transfer of John So's share to Doshay was the result of a mistake such that Doshay owns four shares in Global 2000 and John So owns one share. It is the case that Doshay's shareholding in Global 2000 has been recorded in its annual financial statements with the description "shares in Global 2000 P/L" from FY2001 onwards with a book value of $4. Despite that, for the reasons explained below, I have concluded that the share transfer was not vitiated by mistake and that Doshay owns five shares in Global 2000. 171 It is not entirely clear from the evidence whether, as at May 2000, Global Crest's share capital comprised three ordinary shares (owned by Wendy Cheng, Chok Wing Cheng and John So) or whether a fourth share had been issued to Chok Man Cheng. As noted earlier, Global Crest's annual return for FY1999 filed with ASIC on 31 January 2000 showed that, at that time, the company had three shares on issue, and the annual return for FY2000 filed with ASIC on 10 January 2001 showed that, by that time, a further share had been allotted to Chok Man Cheng. Ultimately nothing turns on that question. 172 Settlement of the purchase of the Exhibition Street Property occurred on or about 29 June 2000 and, on 6 July 2000, Global 2000 became the registered proprietor. Settlement was effected with the aid of a loan of $1.3 million from the Bank of Melbourne made to Global 2000, secured by a mortgage over the Exhibition Street Property and a fixed and floating charge over Global 2000's assets and liabilities. A mortgage in favour of Westpac was registered on the title. John So personally guaranteed the loan from the Bank of Melbourne. Those finance arrangements were obtained shortly before settlement. 173 There is no direct documentary evidence concerning the payment of the deposit for the purchase. Hylepin submitted that the available evidence supports the inference that the deposit was paid by Doshay. I accept that submission, save that I consider that the proper characterisation of the payment was a pre-incorporation loan of the deposit monies to the nominee purchaser (which became Global 2000). The relevant evidence comprises the following. 174 A letter from John So's solicitors to Hylepin's solicitors dated 19 September 2016 states that the purchase of the Exhibition Street Property by Global 2000 was financed by a loan from the Bank of Melbourne in the sum of $1.3 million, a loan from Doshay in the sum of $600,000 and various other lenders. Global 2000's annual financial statements for FY2001 record: (a) as an asset, the Exhibition Street Property at cost of $2,121,353.30 (being the purchase price plus transaction costs including stamp duty); and (b) as liabilities, a loan from the Bank of Melbourne in the amount of $1.3 million, a loan from Doshay in the amount of $626,780, a loan from Global Crest in the amount of $116,166 and a loan from "Directors" in the amount of $169,466.50. As noted above, John So has been the sole director throughout. 175 The evidence shows that the loan from the Bank of Melbourne was advanced at settlement. Bank account records for Doshay show a bank cheque being drawn by Doshay on 28 June 2000 in the sum of $200,000 from account ending "683" and a further cheque being drawn by Doshay on 28 June 2000 in the sum of $200,000 from account ending "113", totalling $400,000, which I infer were applied in part payment of the settlement monies. The defendants admitted that Doshay paid $400,000 towards the settlement monies, and did not contend or adduce evidence that Doshay paid the further sum of $200,000 at settlement. Those facts give rise to a strong inference that the further sum of $200,000, recorded as a loan by Doshay to Global 2000, was advanced by Doshay as a pre-incorporation loan of the deposit monies. I acknowledge the possibility that the deposit was paid from Global Crest's loan sum of $116,166 and the directors' loan sum of $169,466.50, as there was no evidence to show when those sums were advanced as loans. However, the evidence referred to above supports a finding that the deposit monies were advanced by Doshay. 176 At the time the deposit was paid, Global 2000 had not been incorporated but the loan of the deposit was subsequently treated as a pre-incorporation loan. By settling the purchase of the Exhibition Street Property, and through its financial statements, Global 2000 accepted the nomination as purchaser, ratified the payment of the deposit made on its behalf and acknowledged the loans owing. 177 John So and Andy Hui gave slightly conflicting accounts concerning the decision to purchase the Exhibition Street Property. John So said that he became aware that the Exhibition Street Property was on the market and entered into the Contract of Sale to purchase it. I accept that evidence. There is no evidence to suggest that John So became aware of the opportunity to purchase the Exhibition Street Property through his directorship of Doshay or that it could be considered to be an opportunity belonging to Doshay. Andy Hui gave evidence that he knew that Doshay had profits available to invest from the Dragon Boat Restaurant and told John So on a number of occasions that Doshay should invest in property. I accept that such a conversation may have occurred, but Andy Hui did not say when the conversation occurred. It is to be remembered that Andy Hui resigned as a director of Doshay on 18 December 1991, some 8 years before the purchase of the Exhibition Street Property. Andy Hui also gave evidence that John So told him there was a property on Exhibition Street available with three shops and John So said: "We have the money and should buy it". Andy Hui said that he told John So that he agreed and, sometime later, John So told Andy Hui that "we have bought the property" and that it cost $2 million. Andy Hui said that John So never informed him that the Exhibition Street Property was owned by Global 2000 and that he only became aware of Global 2000 and that Global 2000 owned the Exhibition Street Property in the course of preparing his affidavit. However, when it was put to Andy Hui in cross-examination that John So had in fact discussed with him Doshay acquiring a 40% interest in the Exhibition Street Property, Andy Hui said that he cannot recall because it was too long ago. I do not think that Andy Hui's evidence with respect to those conversations is reliable. I find that it is likely that John So informed Andy Hui about the intended purchase and that Doshay would acquire a partial interest in the property. That is consistent with the investment opportunity belonging to John So and being shared with Doshay. 178 In the period from the start of FY2001 to the end of FY2006, the loan funds advanced by Doshay to Global 2000 accrued interest (with the amount of accrued interest being added to the loan). A letter from John So's solicitors to Hylepin's solicitors dated 19 September 2016 states that the interest rates during that period were as follows: (a) FY2001 - 7.8%; (b) FY2002 - 6.8%; (c) FY2003 - 6.8%; (d) FY2004 - 6.8%; (e) FY2005 - 6.8%; and (f) FY2006 - 7.3%. 179 There was no evidence to suggest that interest was paid on the loans advanced by Global Crest or John So (as director) to Global 2000. 180 John So gave evidence that Doshay has used the second floor of the Exhibition Street Property as office space. Rental was charged by Global 2000 to Doshay from 2001 to 2004 but has not been charged since. There was no evidence to the contrary and I accept that evidence. 181 In the period from FY2001 to FY2018, Global 2000's financial statements record substantial borrowings from various parties over time including Doshay, Global Crest, the "Directors" (which I infer is a reference to John So), Wendy Cheng, Okaybye and the Blue Sky Unit Trust. The financial statements for FY2017 record that, while Doshay's loan was $1,271,086, Wendy Cheng's loan was $1,013,712.95, the "Directors" loan was $340,000, Global Crest's loan was $320,963.65 and Okaybye's loan was 238,585.21 (the non-Doshay loans totalling $1,913,261.81). Global 2000 repaid Doshay's loan in FY2018, as well as the loans from Wendy Cheng and the "Directors" (but not Global Crest or Okaybye). All of the loans were undocumented, interest free and unsecured, save that (as stated above) interest was paid on the loan from Doshay during FY2001 to FY2006 inclusive. 182 The evidence shows that Doshay's shareholding in Global 2000 is valuable. While the Exhibition Street Property remains recorded in Global 2000's annual financial statements at cost ($2,121,353.50), Charter Keck Cramer valued the property at $8,000,000 as at 30 June 2016 and Urbis valued it at $10,460,000 as at 27 November 2017. D.9 Evaluator and Café Puccini 183 John So gave evidence that a cafe named "Cafe Puccini" was operating in the premises next to the Dragon Boat Restaurant and was being marketed for sale. In 2001, Wendy Cheng and John So were told by Lou Baccini (the former owner of the Café Puccini business) that other operators of Chinese restaurants were interested in acquiring the Cafe Puccini business in order to open a restaurant in the style of the Dragon Boat Restaurant from its premises. John So said that this prospect concerned him because, given the proximity to the Dragon Boat Restaurant, it posed a threat to Doshay's commercial interests. John So said that he discussed with Andy Hui the idea of Doshay acquiring the Cafe Puccini business, primarily to protect the Dragon Boat Restaurant from potential competitors to the Dragon Boat Restaurant, who might otherwise have acquired the business and then operated a competing Chinese restaurant. Andy Hui corroborated that aspect of John So's evidence. Andy Hui gave evidence that John So told him that Cafe Puccini was available for purchase and could be used by the Dragon Boat Restaurant on weekends when the Dragon Boat Restaurant was busy and more space was needed. Andy Hui said that he vaguely recalled John So telling him that there was another interested party in the business. 184 Wendy Cheng also corroborated the evidence given by John So. She said that John So told her that he was concerned that a competitor of the Dragon Boat Restaurant might take over the "Cafe Puccini" premises and conduct a similar business next door to the Dragon Boat Restaurant. Because Global Crest was experienced in operating a Western-style food and beverage business (the Melbourne Bar & Bistro), Wendy Cheng said she and John So decided to take over the "Cafe Puccini" business through a joint venture-style arrangement between Global Crest and Doshay. 185 Evaluator was incorporated on 15 November 2000 with an initial share capital of 100 ordinary shares of $1.00 each of which 51 were held by Global Crest and 49 were held by Doshay. Wendy Cheng was appointed as the sole director. John So said that Evaluator was incorporated to be the vehicle for a joint venture between Doshay and Global Crest. Doshay paid $135,000 to Evaluator, $134,951 of which was a loan and the balance was applied towards acquisition of Doshay's shareholding ($49). In her affidavit, Wendy Cheng said that Global Crest paid $116,000 to acquire its interest in Evaluator. That evidence was not accurate. Evaluator's ledger entries for FY2001 (which were reflected in Evaluator's financial statements for FY2001) show that the purchase price of the Café Puccini business was approximately $251,000 (plant & equipment of $151,000 and goodwill of $100,000). The financial statements record share capital of $100 (held by Global Crest and Doshay) and loan capital in the form of three loans: Doshay in the sum of $134,951; Global Crest in the sum of $68,445; and "Directors" in the sum of $59,972. It was common ground that the "Directors" loan was from Wendy Cheng. The aggregate of the Global Crest and "Directors" loans is $128,417. All of the loans were undocumented, interest free and unsecured. 186 Evaluator acquired the Cafe Puccini business and became the lessee of the premises that it occupied. Evidence was given that the Dragon Boat Restaurant used parts of these premises for its business, although there was some conflict in the evidence as to the extent of use. That is unsurprising as the relevant events occurred a long time ago. 187 John So gave evidence that, from 2001 to 2003, the Dragon Boat Restaurant occupied approximately 50% of the premises leased by Evaluator on weekdays for dining space for Dragon Boat Restaurant customers. This increased to around two-thirds of the premises in the period from 2004 to 2007. At lunchtimes on weekends and public holidays, the Dragon Boat Restaurant sometimes occupied the entire premises. 188 Wendy Cheng said that, following the purchase of the Cafe Puccini business, Evaluator continued to operate the Cafe Puccini business on weekdays in the same manner that it had been conducted by the previous owner. However, on weekends and public holidays, the premises were utilised by the Dragon Boat Restaurant. Doshay later opened a more casual style eatery from the Cafe Puccini premises, being a "Noodle Bar". This was designed to attract people looking for less expensive and quicker Chinese dining than was offered in the Dragon Boat Restaurant. 189 Andy Hui said that, on weekdays, the Dragon Boat Restaurant did not use the Cafe Puccini space at all but, on weekends, Dragon Boat Restaurant used all of the Cafe Puccini space. In cross-examination, Andy Hui agreed that the premises occupied by Café Puccini was also used by Doshay to operate a noodle shop called DB Express Noodle Bar. 190 To the extent of the inconsistency in the evidence, I prefer the evidence of John So and Wendy Cheng. The evidence is consistent with the transactions that occurred and explain the motivations for the transactions. Whilst I consider Andy Hui to be an honest witness, the events occurred a long time ago and Andy Hui was not a central decision maker in the events. 191 Wendy Cheng gave evidence that the increasing use of the Cafe Puccini premises by the Dragon Boat Restaurant was in the interests of Doshay (as it owned the Dragon Boat Restaurant), but it had a negative impact upon the revenue of the Cafe Puccini business and Evaluator's profitability. Wendy Cheng said that she discussed with John So the prospect of Doshay assisting Evaluator with paying its overheads (particularly the rent payable on the leased premises). Rather than Doshay paying rent directly to the landlord, Doshay loaned funds to Evaluator to assist Evaluator meeting its costs. 192 Evaluator's financial statements confirm that its overall business was not commercially successful. Evaluator's financial statements for FY2001 recorded a net loss of $23,177.11; in FY2002 the net loss was $49,137.14; and in FY2003 the net loss was $67,224.64. 193 Evaluator's financial statements also show that the loans to Evaluator from each of Doshay, Global Crest and "Directors" increased over those years, but in a roughly proportional manner: (a) in FY2002, the loan from Doshay was $154,951 while the loan from Global Crest was $80,445 and from Directors was $66,217 (being $146,662 in aggregate); and (b) in FY2003, the loan from Doshay was $229,290 while the loan from Global Crest was $118,945 and from Directors was $80,217 (being $199,162 in aggregate). 194 Wendy Cheng said that, as time went on, the Dragon Boat Restaurant made increasing use of the Cafe Puccini premises and Evaluator's profitability continued to be affected. Wendy Cheng proposed that Doshay purchase Global Crest's shares in Evaluator, which would enable Doshay to own and control Evaluator and be able to use the premises leased by Evaluator however Doshay wished. 195 John So gave evidence that he considered that it was in Doshay's interests to acquire the 51% of Evaluator owned by Global Crest because it would enable the Dragon Boat Restaurant to make use of the premises occupied by Café Puccini without regard to Global Crest's interests. John So said that the acquisition also enabled the Dragon Boat Restaurant to extend its kitchen operations to the Café Puccini premises (in response to warnings being issued by the Health Department due to the configuration of the kitchen at the Dragon Boat Restaurant's premises). John So said that he discussed this transaction with Andy Hui. That was largely corroborated by Andy Hui who said that John So later told him that Doshay only owned half of the Cafe Puccini business, that the other half was owned by Wendy Cheng, and that Doshay had to buy Wendy Cheng's share so that Doshay owned 100% of Cafe Puccini. 196 In December 2003, Doshay became the 100% owner of Evaluator by acquiring the 51 shares that were then owned by Global Crest. Evaluator's ledger entries and financial statements for FY2004 show that Doshay effectively paid $159,197.53 to buy out Global Crest's share and loan interests in Evaluator. The payment was accounted for as (i) a payment of $51 for Global Crest's shares in Evaluator; (ii) a loan to Evaluator of $119,945 to enable the repayment of Global Crest's loan to Evaluator (after adjustment in the ledger entries); and (iii) a loan to Evaluator of $39,201.53 to enable the repayment of part of the "Directors" loan to Evaluator. Evaluator's ledger entries show that the opening balance of the "Directors" loan was $80,217. The loan was reduced by the payment of $39,201.53 being Doshay's funds, but was increased by a further loan from Wendy Cheng for "payment of security bond" in the amount of $35,000, taking the loan to $76,015.47. The ledger entries also showed that Doshay loaned a further amount of $38,250.52 to Evaluator, taking its total loans to $426,687.05. Evaluator's financial statements for FY2004 reflect the above transactions and record that Doshay's loan to Evaluator had increased to $426,687.05, Global Crest's loan was reduced to nil and the "Directors" loan was decreased to $76,015.47. 197 Wendy Cheng gave evidence that, in 2007, the retail centre in which the Cafe Puccini premises were situated was closed for a major redevelopment. Evaluator's tenancy ceased at that time and neither Evaluator nor Doshay have utilised the premises following the re-opening of the retail centre (which occurred in 2009, following the completion of the redevelopment). 198 Evaluator's annual financial statements for the period FY2004 to FY2008 record operating losses during that period and net asset deficiencies. 199 In the Special Referee Report, Mr Meredith states that: 63. Evaluator is a property-owning entity, and is the registered proprietor of the property situated at 456-458 La Trobe Street, West Melbourne. I am not aware of any other business activities of Evaluator. 64. Evaluator owns 20% of Ruby Quest Pty Ltd, trustee of the Blue Sky [Unit Trust]. The Blue Sky [Unit Trust] owns the property at 122 Russell Street, Melbourne. 200 No other evidence was adduced about the acquisition of the La Trobe Street property or Ruby Quest. In the Special Referee Report, Mr Meredith valued those investments at $745,990 (in aggregate). However, taking account of other liabilities and adjustments, Mr Meredith concluded that Evaluator had negative net tangible assets of $36,773 and accordingly valued Doshay's shareholding in Evaluator at nil. D.10 The acquisition of the Lonsdale Street Property 201 On about 7 September 2004, Global 2000 entered into a contract for the purchase of the Lonsdale Street Property for $4.5 million. The Dragon Boat Palace restaurant operated by Jadetrex was located in the Lonsdale Street Property. 202 John So gave evidence that Wendy Cheng became aware of the opportunity to buy the property and negotiated the purchase. Initially, Wendy Cheng proposed buying the property in her own interests, but John So proposed that it be bought through Global 2000 to enable Doshay to have an interest. As stated earlier, John So transferred his share in Global Crest to Wendy Cheng on 20 May 2004 and therefore ceased to have a financial interest in Global Crest at that time. His sole interest in Global 2000 was through his interests in Doshay. 203 Andy Hui gave evidence that he remembered John So telling him at some point after the purchase of the Lonsdale Street Property that Doshay owned 40% of the property, but he said that John So never discussed with him the advance of funds by Doshay to Global 2000 for the purchase. I do not place any weight on that evidence because the events occurred a long time ago and there was no reason for Andy Hui to recall such conversations. 204 The deposit for the purchase was $450,000. The evidence showed that a cheque in the amount of $54,000 was drawn on a Global 2000 account on 6 September 2004 payable to "Mahonys Trust Acc" with the notation "Deposit Lonsdale St Purchase". Global 2000's ledger entries for FY2005 records a payment of $54,000 within the sums that make up the cost of acquisition of the Lonsdale Street Property. The ledger entries also show loans to Global 2000 to fund the payment of the deposit from Okaybye (a company owned by John So) in the amount of $50,000, Global Crest in the amount of $136,000 and "Directors" in the amount of $210,000. That is consistent with the evidence given by John So that payment of the deposit in respect of the Lonsdale Street Property was made possible by means of funds being advanced by Okaybye, Global Crest and Wendy Cheng (even though John So was the director of Global 2000 rather than Wendy Cheng). 205 The evidence showed that between the purchase of the Exhibition Street Property and the Lonsdale Street Property, Global 2000's sole business was to receive rent from the Exhibition Street Property. Hylepin submitted, and I accept, that the $54,000 paid by Global 2000 toward the deposit on the Exhibition Street Property was money earned by Global 2000 from its ownership of the Exhibition Street Property. 206 By letter dated 25 September 2004 from Westpac sent to Global 2000, Westpac advised approval of a finance facility to assist with the purchase of a commercial property in the amount of $3,278,000 (Westpac Loan). The security for the Westpac Loan comprised a mortgage over the Lonsdale Street Property, a mortgage over the Exhibition Street Property, a fixed and floating charge over the assets of Global 2000 and a guarantee from John So. 207 Settlement of the purchase of the Lonsdale Street Property occurred on about 3 December 2004. Although settlement occurred on 3 December 2004, the mortgagee did not lodge the transfer and title for registration until 9 November 2005, and it was on that date that Global 2000 became the registered proprietor of the Lonsdale Street Property. John So gave evidence that, at that time, Global 2000 was required to pay stamp duty of almost $250,000. That liability was met by Doshay advancing a loan of $300,000 to Global 2000. 208 A letter from Global 2000's solicitors to Wendy Cheng dated 26 November 2004 records that the balance of the purchase price due at settlement was $4,052,153.43, after deduction of the $450,000 deposit and the addition of adjustments of $2,153.43. The letter also advised that Westpac had loaned $3,278,000 to Global 2000, such that $774,153.43 was required from Global 2000 on settlement. 209 The evidence concerning the sources of funds for the $774,153.43 was Global 2000's ledger entries for FY2005 (which are then reflected in Global 2000's financial statements). The ledger entries record additional loan monies being advanced as follows: (a) from Okaybye (a company owned by John So) in the amount of $215,000; (b) from Global Crest in the amounts of $2,000 and $34,153.43 (totalling $36,153.43); (c) from "Directors" in the amount of $523,000 adjusted by a repayment of $123,835.46 (totalling $399,164.54); and (d) from Doshay in the amount of $123,835.46. 210 Global 2000's annual financial statements for FY2005 are consistent with the transactions shown in its general ledger. The balance sheet includes a new asset "Building at cost 149 Lonsdale" with the value $4,515,806.16 and also shows the following loan liabilities: (a) Directors' loans of $797,314.19; (b) Global Crest loan of $294,319.43; (c) Okaybye loan of $238,585.21; (d) Doshay loan of $911,543.97; (e) bank loans (associated with the purchase of the Exhibition Street Property) of $1,125,000; and (f) new bank loan (for the purchase of the Lonsdale Street Property) of $3,278,000. 211 The Global 2000 ledger entries for FY2005 record that Doshay advanced two loans to Global 2000 in the amounts of $123,835.46 and $51,728.35 (totalling $175,563.81). The ledger entries also show that the $123,835.46 loaned by Doshay was applied by Global 2000 in repayment of Directors' loans (as referred to above). 212 Hylepin submitted that the ledger entries showing Doshay loans to Global 2000 in the amount of $175,563.81 were false. It submitted that John So had caused Doshay to make four payments from its ANZ bank account (account number ending 193) totalling $175,563.81 which were recorded as loans to Global 2000, but that the monies were in fact paid to John So, Wendy Cheng, Okaybye or Global Crest. Even if the factual premise for the submission, that Doshay made payments to any of John So, Wendy Cheng, Okaybye or Global Crest in the amount of $175,563.81, were correct, it is insufficient to establish the conclusion. The ledger entries show that there was an adjustment or rebalancing of loans between Doshay and "Directors" and that $123,835.46 loaned by Doshay to Global 2000 was applied by Global 2000 in repayment of Directors' loans. The mere fact that Doshay paid that amount directly to "Directors" (which I have inferred was Wendy Cheng) does not lead to the conclusion that the accounting entries are false. It is common for money being loaned by A to B to be paid directly to C in discharge of an obligation of B to C. 213 In support of the factual premise for its submission, that Doshay made payments to one or more of John So, Wendy Cheng, Okaybye or Global Crest in the amount of $175,563.81, Hylepin relied on the following evidence. (a) Doshay's ledger entries for FY2005 recorded four entries in the account "Loans - Global 2000" in the amounts of $51,728.35, $65,820.72, $38,962.00 and $19,052.74 (which total to $175,563.81). (b) In relation to the first amount of $51,728.35, Doshay's bank account statement (for ANZ account ending 113) recorded a cheque drawn on the account on 6 October 2004 in that amount. Global 2000's bank account statement (for Westpac account ending 213) shows a deposit on 6 October 2004 in the same amount. The Westpac account also shows a cheque drawn on the account on 7 October 2004 in the amount of $45,866 and a further cheque drawn on the account on 13 October 2004 in the amount $5,862.35 (which sum to $51,728.35). Hylepin put to John So in cross-examination that the cheques drawn on the Westpac account were paid to him or Wendy Cheng personally. John So said that he could not recall but relied on the accounts prepared by his accountant. It is hardly surprising that John So could not recall individual financial transactions that occurred in October 2004. There is no evidence to indicate that the payments were made to John So or Wendy Cheng. (c) In relation to the second amount of $65,820.72, Doshay's bank account statement (for ANZ account ending 113) recorded a cheque drawn on the account on 19 November 2004 in that amount. Global 2000's bank account statement (for Westpac account ending 213) did not show a deposit at or around that time for that amount. Hylepin initially submitted that the Westpac account ending 213 was the only bank account operated by Global 2000. However, that was shown to be incorrect as the bank account statement itself showed that Global 2000 held a term deposit account with Westpac and a loan account with Westpac. Global 2000's financial statements also indicate that it had a number of bank accounts including a transaction account, a term deposit and at least two loan accounts. Hylepin revised its submission to the effect that the Westpac account ending 213 was Global 2000's only transaction account. Hylepin put to John So in cross-examination that the cheque drawn on Doshay's ANZ account was paid to him or Wendy Cheng personally. John So did not agree and believed the payment was associated with the settlement of the Lonsdale Street Property. I accept that evidence. Again, there is no evidence to indicate that the payments were made to John So or Wendy Cheng personally. The cheque may have been paid into a solicitor's trust account, or some other account ultimately for the purpose of the purchase. (d) In relation to the third amount of $38,962.00, Doshay's bank account statement (for ANZ account ending 113) recorded a cheque drawn on the account on 5 July 2005 in that amount. Global 2000's bank account statement (for Westpac account ending 213) did not show a deposit at or around that time for that amount. I make the same findings with respect to this payment. There is no evidence to indicate that the payments were made to John So or Wendy Cheng personally. (e) In relation to the fourth amount of $19,052.74, Doshay's bank account statement (for ANZ account ending 113) recorded a cheque drawn on the account on 25 February 2005 in that amount. Global 2000's bank account statement (for Westpac account ending 213) did not show a deposit at or around that time for that amount. I make the same findings with respect to this payment. There is no evidence to indicate that the payments were made to John So or Wendy Cheng personally. 214 Overall, Hylepin has not satisfied me that the factual premise for its submission is correct. As already noted, even if the factual premise were correct, it is insufficient to contradict the accounting treatment of the payments. I consider that there is no basis to impugn the ledger entries or financial statements that are in evidence and I reject Hylepin's submission that the accounting entries were false. 215 As already noted, the mortgagee lodged the transfer and title for registration on 9 November 2005. John So gave evidence that, at that time, Global 2000 was required to pay stamp duty of almost $250,000. That liability was met by Doshay advancing a loan of $300,000 to Global 2000. That further loan is reflected in Global 2000's and Doshay's financial statements. Global 2000's financial statements for FY2006 shows the following loan liabilities: (a) "Directors" loans of $839,116.56; (b) Global Crest loan of $300,147.57; (c) Okaybye loan of $238,585.21; (d) Doshay loan of $1,278,086.68; (e) bank loans (associated with the purchase of the Exhibition Street Property) of $1,075,000; and (f) new bank loan (for the purchase of the Lonsdale Street Property) of $3,278,000. 216 Global 2000's financial statements for FY2011 show that the two bank loans taken out for the acquisition of the Exhibition Street and Lonsdale Street Properties were rolled over into a commercial bill facility of $4,253,000. The other loan liabilities of Global 2000 were as follows: (a) "Directors" loans of $1,067,305.09; (b) Global Crest loan of $320,963.65; (c) Okaybye loan of $238,585.21; and (d) Doshay loan of $1,571,086.69. 217 Global 2000's financial statements for FY2018 show that, during that financial year, the loans from Doshay and the directors and the commercial bills were repaid and a new secured bank loan was taken out from Westpac in the amount of $7,630,055.99. The Westpac loan was secured by mortgages over the Exhibition Street and Lonsdale Street Properties and by a personal guarantee from John So. The loans from Global Crest and Okaybye remained in place. 218 While the Lonsdale Street Property remains recorded in Global 2000's annual financial statements at cost ($4,515,806.16), Charter Keck Cramer valued the Lonsdale Street Property at $12,150,000 as at 30 June 2016 and Urbis valued it at $15,775,000 as at 29 November 2017. D.11 Doshay's shareholding in Global 2000 219 Documents originally available to Hylepin caused it to allege that Doshay held four ordinary shares in the capital of Global 2000 and Global Crest held six shares. The defendants admitted that allegation. I make no criticism of that admission because I accept that the defendants believed that to be the case. 220 Shortly before trial, Hylepin amended its pleading to allege that each of Doshay and Global Crest held five shares in Global 2000. During the trial, evidence was given that the company register for Global 2000 had not been produced on discovery to Hylepin. During closing submissions on 18 September 2019, I raised questions about the company register, which led to its production on the last day of trial on 19 September 2019. The company register should have been produced by the defendants once Hylepin amended its pleading and put in issue the shareholdings in Global 2000. I accept that the failure to do so was an oversight. 221 As a result of the production of the company register on the last day of trial, the defendants sought and were given leave to re-open their case to adduce further affidavit evidence on the issue of Doshay's shareholding in Global 2000. Pursuant to that leave, the defendants filed a further affidavit of John So sworn 20 September 2019 and an affidavit of Wei Win Yu also sworn 20 September 2019 addressing the shareholdings in Global 2000. As noted earlier, Wei Win Yu is an accountant employed by the accounting firm Paul Tjioe & Associates. Significantly, Mr Yu adduced in evidence a share transfer form executed on 15 June 2000 by which John So transferred the one ordinary share in Global 2000 held by him to Doshay. Mr Yu deposed that he did not find the share transfer form when providing Global 2000's company register as requested on 18 September 2019 because the document was not within the company register. He located it in a Global 2000 file maintained by Paul Tjioe & Associates. The defendants did not seek an opportunity to cross-examine those witnesses on the contents of their affidavits. The parties were given leave to file supplementary submissions addressing the question of the shareholdings in Global 2000. My findings on the evidence are as follows. 222 As noted earlier, Global 2000 was incorporated on 12 May 2000 and became the nominee purchaser of the Exhibition Street Property. 223 On incorporation, its share capital comprised one ordinary share of $1.00 and the share was transferred by the incorporator (Margaret Mary Dunphy) to John So on the same day (12 May 2000). John So was also appointed the sole director and secretary. 224 On 15 June 2000, Doshay applied for the issue of four ordinary shares in the capital of Global 2000 and Global Crest applied for the issue of five ordinary shares. On the same day, John So executed a share transfer form transferring the one ordinary share in Global 2000 held by him to Doshay. A minute of a director's meeting held that day approved the allotment and transfer of shares. The minute was signed by John So. The register of members of Global 2000 was updated to record that each of Doshay and Global Crest held five ordinary shares in Global 2000. 225 On 10 January 2001, Global 2000 filed its annual return for FY2000 with ASIC. The annual return was certified by John So. It stated that each of Doshay and Global Crest held five ordinary shares in Global 2000. Global 2000's annual returns for FY2001 and FY2002 also stated that Doshay and Global Crest held five ordinary shares in Global 2000. 226 On 31 May 2004, Global 2000 filed notices of correction with ASIC in respect of the FY2000, FY2001 and FY2002 annual returns. The notices of correction stated that the shares in Global 2000 were held by Global Crest as to five shares, Doshay as to four shares and John So as to one share. 227 The register of members of Global 2000 contains hand written amendments that ruled a line through the transfer of share from John So to Doshay. The cause of that correction was the subject of evidence from John So, Paul Tjioe and Wei Win Yu. 228 By his affidavit sworn on 28 August 2019, John So deposed to his conviction that he personally held one of the 10 issued shares in Global 2000. In that respect, he relied on Doshay's financial statements in FY2001 (signed by Paul Tjioe on 18 October 2002), FY2002 (signed by Paul Tjioe on 15 August 2003) and FY2003 (signed by Paul Tjioe on 10 December 2004) which showed that Doshay held four shares in Global 2000. He said that he did not appreciate that the director's minutes that he signed on 15 June 2000 approved a transfer of the share held by him in Global 2000 to Doshay. He does not recall how he became aware of the error, but he subsequently instructed Paul Tjioe to correct the error. 229 By his affidavit sworn on 29 August 2019, Mr Tjioe deposed that he prepared the minutes of a meeting of Global 2000's directors held on 15 June 2000, which included resolutions regarding the allotment and transfer of shares in Global 2000. He could not recall how he received instructions regarding the allotment and transfer of shares due to the passage of time, but deposed that most likely the instructions were given to him over the phone by John So. Mr Tjioe deposed that, at some stage in 2004, John So called him on the telephone and asked what had happened to his one share in Global 2000. John So said words to the effect that he had always had one share in Global 2000. Following the discussion, Mr Tjioe showed John So the 15 June 2000 minutes. John So then told Mr Tjioe that the resolution that his share in Global 2000 was transferred to Doshay was a mistake and that John So's share in Global 2000 was never meant to go to Doshay. John So told Mr Tjioe that he didn't realise when he signed the minutes that they had that effect. John So instructed Mr Tjioe to correct the error. Mr Tjioe did so by arranging for the correction of the annual returns of Global 2000 that had been previously lodged with ASIC. 230 Mr Yu deposed that entries to the Global 2000 register of members were made by him following receipt of the 15 June 2000 directors' minutes. The entries recorded that John So transferred his one ordinary share to Doshay (and he ceased to be a shareholder), a further four ordinary shares were allotted to Doshay, and five ordinary shares were allotted to Global Crest. Mr Yu also deposed that the handwritten corrections to the register of members which ruled a line through the transfer of the one ordinary share from John So to Doshay were made by him. Mr Yu deposed that he made the corrections in 2004 on Mr Tjioe's instructions. Mr Tjioe told him that there had been an error in the 15 June 2000 minutes. 231 By his affidavit sworn on 20 September 2019, John So deposed that, on 18 September 2019, he received the corporate registry of Global 2000 from Mr Yu. He said that he did not recall the share transfer form which transferred his share in Global 2000 to Doshay; nor did he recall the ASIC annual returns for Global 2000 for FY2000, FY2001 and FY2002 signed by him which showed that Doshay held five shares in Global 2000. 232 In my view, the evidence establishes that John So transferred his share in Global 2000 to Doshay on 15 June 2000 and that Doshay holds five ordinary shares in Global 2000. While John So said that he did not recall the share transfer form, he did not deny that the share transfer form was a valid document signed by him. Nor did he deny that he signed the minutes of a director's meeting on 15 June 2000 approving the transfer of shares. Nor did he deny that he signed the ASIC annual returns for Global 2000 for FY2000, FY2001 and FY2002 which showed that Doshay held five shares in Global 2000. I do not accept John So's evidence that all of those documents were signed by him by mistake. In those circumstances, I find that the share transfer was validly effected. It follows from that finding that John So's subsequent instructions to Paul Tjioe that the share transfer was executed by mistake is an incorrect statement and has no legal effect. It follows that the corrections to Global 2000's register of members made by Mr Yu were of no effect and the corrections notified to ASIC were incorrect. Global 2000's register of members should be rectified to show Doshay as the holder of five shares. 233 Hylepin invited the Court to find that John So's instructions to Paul Tjioe in 2004 that the original transfer was a mistake were dishonest. In that regard, Hylepin drew attention to the fact that the purported correction to Global 2000's register of members occurred at about the same time as John So transferred his one share in Global Crest to Wendy Cheng on 20 May 2004 (Global 2000 filed notices of correction with ASIC on 31 May 2004). By the transfer of his share in Global Crest, John So lost an indirect shareholding interest in Global 2000 of 12.5%. The purported correction to Global 2000's share register would have given John So a direct shareholding interest in Global 2000 of 10%. There is certainly a coincidence in timing and value between the two transactions. However, having regard to the seriousness of the allegation, I am not persuaded that John So acted dishonestly, that is with a consciousness of wrongdoing or falsity, when he gave instructions to Paul Tjioe. In that respect, it is significant that Doshay's financial statements in FY2001 (signed by Paul Tjioe on 18 October 2002) and FY2002 (signed by Paul Tjioe on 15 August 2003) recorded that Doshay held four shares in Global 2000, rather than five shares. Those documents make plausible that, in 2004, John So held the honest but erroneous view that the transfer of his share in Global 2000 to Doshay was unintended. 234 Hylepin also invited the Court to find that John So dishonestly concealed the evidence that showed that he had transferred his share to Doshay. I decline to make that finding. I accept Hylepin's submission that the production of the relevant documents concerning the shareholdings in Global 2000 by the defendants was unsatisfactory. In particular, the signed share transfer form between John So and Doshay was only produced through Mr Yu's affidavit sworn on 20 September 2019. Nevertheless, Mr Yu deposed that he did not find the share transfer form when providing Global 2000's company register as requested on 18 September 2019 because the document was not within the company register. He located it in a Global 2000 file maintained by Paul Tjioe & Associates. The evidence does not establish dishonesty. D.12 Dividends 235 The minutes of the annual general meeting of Doshay held on 31 December 1988 record that the meeting received and adopted the financial statements for FY1988. The minutes also record that it was unanimously resolved that no dividend be declared at that stage but the directors should reconsider the matter in April the following year. 236 On 27 June 1989, at a board meeting attended by John So, Hellen Chin, Andy Hui and Peter Chan, the board resolved that a dividend totalling $38,500 be declared and paid on 28 June 1989. The company's records show that that dividend was paid. It appears that that dividend related to the company's earnings in FY1988 as the company's financial statements for FY1989 show that no dividend was paid in respect of that year, but a dividend of $38,500 was paid in respect of FY1988. 237 John So gave evidence that, in the period following that distribution, he spoke with Doshay's shareholders. He said that, given the period of time that has elapsed, he cannot say precisely where or when these discussions occurred. John So suggested to the shareholders that the profits generated by Doshay should be retained (rather than paid to shareholders), as this would assist Doshay in meeting its working capital requirements and enable Doshay to make other investments. John So said that Peter Chan told him that he agreed with this policy. That evidence was largely corroborated by evidence given by Peter Chan and Andy Hui. 238 On 28 December 1989, representatives of the shareholders of Doshay signed a resolution that no dividend be declared in respect of FY1989. At the time of the commencement of this proceeding in December 2016, Doshay had not paid a dividend to its shareholders since June 1989. 239 On 11 July 2014, QR Accounting Services wrote to Paul Tjioe & Associates on behalf of Hylepin seeking information on a range of matters concerning Doshay. The letter noted that there were "significant franking credits and retained earnings within Doshay's financial statements and income tax return" and asked: "[w]hat is the dividend policy of the Directors for shareholders". At that time, no complaint was made about the fact that Doshay had not paid dividends since 1989. Indeed, there is no evidence that any shareholder made any complaint to Doshay about the non-payment of dividends prior to the time that Hylepin engaged lawyers in 2016 and raised concerns about matters the subject of this proceeding, including the payment of dividends. Peter Chan confirmed in evidence that he had not made any complaint until 2016. 240 As at 30 June 2018, Doshay's financial statements record that its retained profits had increased to $8,635,176.82. On 9 November 2018, Doshay by its directors resolved that a dividend of $6.6666667 per share totalling $2,000,000 be declared out of the retained profits of the company. Doshay forwarded a cheque to Hylepin in the amount of $300,000 and accompanying dividend statement. D.13 Hylepin's requests for information 241 As noted above, Peter Chan was a director of Doshay from 30 March 1987 to 8 August 1991. The documentary record shows that, in those years, Peter Chan received and approved the annual financial statements for Doshay. 242 The minutes of a directors' meeting of Doshay held on 15 December 1988, and a shareholders' meeting held the same day, show that Peter Chan attended both meetings and approved the annual financial statements for FY1988. Those financial statements disclosed that Doshay had advanced loans to the "Knox City Project" and to the "Westlake Restaurant Unit Trust" and also held an investment in the "Westlake Restaurant Unit Trust". 243 A resolution of the shareholders of Doshay approving the financial statements for FY1989 was signed by Peter Chan on behalf of Hylepin on 29 December 1989. Those financial statements disclosed that Doshay had made a further loan to "Dynasty". That investment was the subject of evidence at the trial, but not the subject of any claim. 244 Doshay's financial statements for FY1990 were not in evidence. Nor was there a directors' or shareholders' resolution approving those accounts in evidence. However, there is no reason to believe that Doshay would not have prepared those financial statements, and had them approved by the shareholders and/or directors in about December 1990 in accordance with its practices to that date. Doshay's financial statements for FY1991 were in evidence and showed that they had been certified by Paul Tjioe & Associates in December 1991, confirming Doshay's practices at that time. I infer that Peter Chan, either as a director of Doshay or representative of Hylepin, approved Doshay's financial statements for FY1990. From the "prior year" section of the financial statements for FY1991, it can be inferred that the financial statements for FY1990 disclosed that Doshay had made a further loan to "Dragon Boat Palace" and had acquired shares in Lyleable. 245 As referred to earlier in these reasons, by letter dated 15 May 2004, Peter Chan as director of Hylepin wrote to Doshay requesting an audit of Doshay be conducted for FY2003 and that the audited financial report be sent to Peter Chan's financial advisor, QR Accounting Services. In response to the latter, Doshay did not conduct an audit. However, on 1 June 2004, Doshay's accountants, Paul Tjioe & Associates, wrote to QR Accounting Services enclosing income tax returns and financial statements for Doshay for the four financial years FY1999, FY2000, FY2001 and FY2002. The letter stated that Paul Tjioe was currently overseas and that, following his return to Australia, the firm would be able to forward the financial statements for FY2003. No evidence was called from QR Accounting Services that those financial statements had not been provided and I infer that the financial statements were provided. As financial statements for Doshay had been requested, I also infer that Peter Chan discussed the statements with QR Accounting Services. 246 Doshay's financial statements for FY2002 and FY2003 recorded each of the investments undertaken by Doshay to that point in time. Specifically, the financial statements recorded the following non-current assets held by Doshay (which are the subject of allegations in this proceeding): (a) a loan to the Knox City Project and shares in Lyleable Pty Ltd; (b) a loan to the Westlake Restaurant and an investment in the Westlake Restaurant; (c) a loan to the Dragon Boat Palace and shares in Jadetrex; (d) a loan to the Bourke Place Project and shares in Dragon Wall; (e) a loan to Global 2000 and shares in Global 2000; and (f) a loan to Evaluator and shares in Evaluator. 247 The financial statements for FY2002 recorded that Doshay's equity at that time was $1,849,450.36 and the financial statements for FY2003 recorded equity of $2,323,528.47. There was no evidence to suggest that Hylepin (directly or through its advisor, QR Accounting Services) requested any further information from Doshay at that time about those investments. 248 On 11 July 2014, QR Accounting Services wrote to Paul Tjioe & Associates. The letter commences with the sentences: We thank your office and especially your staff member Julia who was very prompt in responding to our enquiries. We have since reviewed the financial statements and income tax returns that we have received from your office and note that Doshay Pty Ltd (Doshay) has several investments and advanced several loans to different entities… 249 The letter then proceeds to ask a series of detailed questions about the investments recorded in Doshay's financial statements for FY2013 and FY2012. I infer that in previous correspondence QR Accounting Services had requested a copy of Doshay's financial statements for FY2013 (which would also have recorded the prior year position) and that those financial statements had been provided promptly to QR Accounting Services. 250 There was adduced in evidence a letter from Paul Tjioe & Associates to QR Accounting Services dated 10 November 2014. The letter refers to the letter dated 11 July 2014 and subsequent correspondence. The subsequent correspondence was not tendered. The letter stated: As you would appreciate, the information sought by your client is sensitive and confidential and relates, not only to Doshay Pty Ltd, but to other entities in which Doshay Pty Ltd has an interest. Please find enclosed Confidential Agreement which we require you and your client to sign and return to us prior to us providing any information your client is entitled to under the Corporations Act 2001. 251 Hylepin put to John So in cross-examination that there was no reason for Doshay to require Hylepin to sign a confidentiality agreement and that Doshay only imposed that requirement because it did not want to disclose information to Hylepin. John So disagreed with that proposition and said that he acted upon legal advice. I accept that evidence. Whether a confidentiality agreement was warranted in the circumstances, in my view the evidence does not support an inference that Doshay was seeking to keep information from Hylepin. D.14 Offers to acquire Hylepin's shares 252 As stated earlier, the parties tendered by agreement the Special Referee Report of Mr Greg Meredith of Ferrier Hodgson dated 21 February 2018 and its annexures. In that report, Mr Meredith gave his opinion with respect to a series of questions relating to the value of various assets including the Exhibition Street Property, the Lonsdale Street Property, the value of Doshay's interests in various assets and the value of Doshay. The parties agreed that the trial would determine all issues other than those values. Therefore, I make no findings with respect to the values of those assets. 253 Nevertheless, Mr Meredith's valuation of Doshay is contextually relevant for another reason. On 7 September 2018, John So's lawyers sent a letter to Hylepin's lawyers offering, on behalf of John So and Caldkone, to buy Hylepin's shares in Doshay at a price to be agreed or at market value as determined by an independent valuer, on condition that the proceeding was dismissed and each party bear their own costs of the proceeding. Hylepin did not accept that offer. It is significant that, at the time of that offer, Mr Meredith had assessed the value of Doshay at $16,865,647. If that valuation were adopted, Hylepin's 16.22% shareholding in Doshay (after adjusting for Evaluator's shareholding) would be worth approximately $2,735,000. From an initial investment of $45,000 made in 1987 to the date of the offer, the annualised rate of return on investment (taking account of compounding) would be approximately 21%. On 16 October 2018, John So's lawyers restated the offer. 254 On 4 September 2019, shortly before the commencement of the trial, John So's lawyers sent a further letter to Hylepin's lawyers offering, on behalf of John So and Caldkone, to buy Hylepin's shares in Doshay at a price calculated as Hylepin's percentage shareholding of Mr Meredith's valuation of Doshay ($16,865,647), on condition that the proceeding was dismissed and each party bear their own costs of the proceeding. The letter stated the offer price as $2,698,503.50. That figure equates to 16% of Mr Meredith's valuation (rather than 16.22% after adjusting for Evaluator's shareholding). Nevertheless, the offer was effectively higher than the offer made the previous year because, in the interim, a dividend of $300,000 had been paid to Hylepin. D.15 Non-renewal of the lease for the Dragon Boat Restaurant 255 Doshay has conducted the Dragon Boat Restaurant from premises located at 203 Little Bourke Street Melbourne since 1986. The restaurant premises are part of a larger shopping complex at 206 Bourke Street, Melbourne. 256 Between late 2008 and August 2009, the landlord renovated the shopping complex and Doshay had to surrender its lease and vacate possession under the landlord's exercise of a demolition right under the lease. 257 On 10 December 2008, Doshay entered into a new lease over the premises of Shop 9-9A, 206 Little Bourke Street, Melbourne. The commencement date of the lease was 18 August 2009 and was for an initial term of 10 years with an option for a further term of 10 years exercisable between three and six months prior to the expiry of the initial term (i.e. between 18 February and 18 May 2019). 258 The commencing rent under the lease was $565,000 per annum plus GST, increasing by 4% on each anniversary of the commencement date of the lease. In the final year of the lease, the annual rent was $804,171 plus GST. 259 Hylepin initially submitted that, if the option for the further term was exercised, the terms of the lease required the rent to be reviewed to market at the commencement of the further term. In my view, that submission was based on an erroneous reading of the lease. Clause 7 and item 14 of the Schedule stipulated that the rent would increase by 4% on each anniversary of the commencement date during the term and any further term. Clause 5 and item 12 of the Schedule gave the landlord, but not the tenant, the right to give notice of the landlord's assessment of the market rent to apply from the commencement of the further term. If the landlord did not give such a notice, the tenant was required to continue to pay the then current rent (adjusted in accordance with clause 7). Hylepin subsequently submitted that the effect of s 35(3) of the Retail Leases Act 2003 (Vic) was that, to the extent that clause 7 and item 14 of the Schedule to the lease purported to prevent a reduction in rent to market, the clause was void. In my view, that submission conflicts with the terms of s 35(4) of the Act which stipulates that s 35(3) does not apply to a provision that uses a basis or formula for a rent review specified in s 35(2)(a), which is a fixed percentage. Clause 7 and item 14 of the Schedule to the lease specifies a fixed percentage and is therefore not governed by s 35(3). 260 If Doshay did not exercise the option for a further term but continued in occupation following the end of the initial term, the lease stipulated that the rent was to be increased by 15% per annum plus GST. 261 On 8 March 2018, Doshay obtained a current market rent appraisal from Charter Keck Cramer. Charter Keck Cramer concluded that the market rent as at 5 March 2018 was $453,285 per annum plus GST. As at the date of the report, Doshay was paying rent in the sum of $773,242 per annum plus GST. 262 On 7 February 2019, the landlord wrote to Doshay providing a notice for Doshay to sign to exercise its option to renew the Lease. The letter did not refer to a market rent appraisal under clause 5 of the lease. 263 On 19 February 2019, Doshay engaged Link Business to "advise on the best course to be adopted by Doshay in determining whether to exercise the option, or not, or some other course as advised by you". The letter outlined various concerns of Doshay about renewing the lease, including the following: (a) Clause 25 of the lease entitled the landlord to relocate Doshay to alternative premises on six months' notice and clause 26 of the lease enabled the landlord to bring the lease to an end on three months' notice if the landlord decides to demolish the premises. (I note that the letter confused the periods of notice in the two clauses. Clause 25 required a three month period of notice and clause 26 required a six month period of notice.) (b) Clause 13.3 of the lease required the tenant to carry out a full refurbishment of the fitout in the premises if it exercised the option. (c) John So is currently active in the business and its public face. However, John So is 72 years old and intends to retire from the Dragon Boat Restaurant business as soon as possible. John So's retirement will require the employment of a replacement which will require a remuneration package in the order of $200,000 plus superannuation. (d) The clientele of the restaurant is largely baby-boomer generation and younger people are not prominent parts of the client base. (e) The business is experiencing difficulties with staff retention, in part because the business is not willing to pay cash to employees unlike some competitors. (f) Doshay considered that the premises are too large for the nature of the business. 264 On 6 April 2019, Link Business provided a report to Doshay. The report analysed the financial performance of the Dragon Boat Restaurant and the matters referred to in Doshay's letter of instructions. The report concluded that there was no compelling reason on a commercial analysis for Doshay to exercise the option for a further 10 years when the lease terms give it no security of tenure (due to clauses 25 and 26 of the lease). 265 On 6 May 2019, John So wrote to Hellen Chin advising that he did not consider that Doshay should exercise the option to renew the lease largely for the reasons set out in the letter to Link Business referred to above. 266 On 9 May 2019, John So and Hellen Chin signed a directors' resolution which contained the following resolutions: (a) that Doshay would not exercise the option to renew the lease; (b) that Doshay would request the landlord to extend the lease upon its expiry on a month to month basis; and (c) that John So would be authorised to negotiate on behalf of Doshay with the landlord the terms of extensions of the lease on a month to month basis. 267 On 21 May 2019, after the expiration of the option exercise period, John So wrote to the landlord's agent on behalf of Doshay in the following terms (errors in original): As mentioned, we remain interested in exploring all possibilities with respect to continuing Dragon Boat business at the premises. However, given the challenges faced in the current trading environment, the state of the economy and issues with certain terms of the current Lease terms such as development and relocation provisions, the Board is not prepared to exercise the option and to commit the company to a tenancy of 10 years on the terms of the current agreement. In effect the landlord is given a ten year tenure but the tenant only 3 months. Nevertheless, should the landlord be open to the idea, we wish to commence discussions with respect to a mutually agreeable set of new terms. In the meantime, we are prepared to continue in occupation of the premises on the basis of 3 months from the end date of the current term of the lease, and then month to month at the current rental, all be it, that is much higher than the current market rent. I have taken on board your suggestion that we should provide some further details with respect to what we seek, in order for the landlord to assess what may be suitable in this instance. We aim to have some further information sent to you as soon as possible. Should there be any questions or should the situation change in the meantime, please do not hesitate to contact me. 268 John So gave evidence that, on or about 15 August 2019, he had a meeting with Mr Andrew Crellin, the landlord's leasing manager. At the meeting Mr Crellin told John So that they would respond to Doshay's letter dated 21 May 2019 in the coming days. That meeting was corroborated by a letter sent by John So to Mr Crellin on 16 August 2019. 269 As at the date of the trial, Doshay remained in occupation of the premises and was continuing to conduct the Dragon Boat Restaurant. 270 In cross-examination, John So was challenged about the reasons that he and Hellen Chin decided not to renew the lease of the premises for the Dragon Boat Restaurant. It was put to John So that the decision had no proper commercial justification, which he denied. When asked about the reasons for the decision, John So gave a number of responses. The responses were not always clear or coherent. However, I accept that the following matters were the primary considerations: (a) While the Dragon Boat Restaurant had been trading for over 30 years from the same location and had been a successful business over that period, trading conditions were becoming increasingly difficult for a restaurant of its kind. John So said that he had noticed a trend of customers exploring northern Chinese cuisine rather than traditional southern Chinese cuisine (as served at the Dragon Boat Restaurant). (b) John So considered that the terms of the renewed lease if the option was exercised were unfavourable. The unfavourable terms included the duration of the lease (10 years), the rent, the demolition clause and the relocation clause. (c) John So considered that refusing to renew the lease would provide an opportunity to negotiate more favourable terms with the landlord, which he had been doing. 271 It was put to John So that the decision not to renew the lease was taken in order to reduce the value of Doshay's business for the purposes of the current proceedings, which John So denied. I accept that evidence. John So indirectly is the majority shareholder of Doshay and it would be commercially irrational for him to seek to diminish the value of Doshay. D.16 Declarations of interest 272 It is an agreed fact that there is no record in Doshay's minute book or company register of any declaration by John So, at a meeting of directors, of any interest in: (a) Global 2000, Jadetrex, Lyleable, Dragon Wall, Westlake or Evaluator; (b) the transactions surrounding the acquisition of the Exhibition Street Property or the Lonsdale Street Property; (c) the transactions whereby Doshay provided funds to Global 2000, Jadetrex, Lyleable, Dragon Wall, Westlake, or Evaluator; or (d) the transactions surrounding the acquisition of Evaluator. E. ALLEGED BREACHES OF FIDUCIARY DUTIES E.1 Overview 273 As referred to earlier, Hylepin was given leave pursuant to ss 236(1) and 237(1) of the Corporations Act to intervene in the proceeding in the name of Doshay to bring and prosecute derivative claims against John So for breach of fiduciary duty and against Global 2000 and Wendy Cheng for their knowing involvement in certain of the breaches and receipt of trust property. 274 Hylepin alleged that John So breached his fiduciary duties in causing Doshay to engage in the following transactions : (a) making share and loan investments in Dragon Boat Knox, Dragon Boat Palace and Dragon Wall and its loan investments in the Westlake Restaurant; (b) using its assets to acquire or invest in the Exhibition Street and Lonsdale Street Properties; (c) making share and loan investments in Evaluator; (d) causing Global 2000 to correct its register of members and lodge a form with ASIC to show that Doshay owns four shares and John So owns one share in Global 2000 when Doshay owned five shares in Global 2000; and (e) resolving not to exercise the option to renew the lease of the premises at which the Dragon Boat Restaurant conducts business. 275 By reason of the statutory limitation periods that apply to the statutory duties owed by directors, Hylepin's claims are generally based on the equitable fiduciary duties owed by directors. The one exception is in respect of the decision not to renew the lease of the Dragon Boat Restaurant premises which is not caught by the statutory limitation period. Hylepin's claims are based on what are often referred to as the "conflict rule" and the "profit rule" of fiduciary obligations, which have been summarised earlier. 276 The relief sought against John So includes the payment of equitable compensation, a declaration that the one share in Global 2000 registered in the name of John So is owned by Doshay and orders to rectify the register of Global 2000. 277 The claims against Global 2000 principally relate to the acquisition of the Exhibition Street Property and the Lonsdale Street Property. The relief sought includes declarations of trust over the Exhibition Street and Lonsdale Street properties in favour of Doshay and that the properties be transferred to Doshay or orders that Global 2000 account to Doshay for benefits derived. 278 The claims against Wendy Cheng relate to the Evaluator transactions and the relief sought is the payment of equitable compensation to Doshay. 279 In what follows, I explain my reasons for concluding that John So did not breach his fiduciary duties to Doshay in the manner alleged by Hylepin, save in one respect. I also explain my reasons for concluding that, even if John So had breached his fiduciary duties, I would bar Hylepin's claims applying the six year statutory limitation period for breach of directors' duties by analogy. Reliance by John So on the statute would not be unconscionable, as in my view none of the impugned transactions involved fraud, in the sense that there was a consciousness on the part of John So that what was being done was wrong or involved wrongdoing, and none of the impugned transactions were fraudulently concealed by John So. 280 I note for completeness, however, that I am not satisfied that the defence of "informed consent" is made out on the evidence. As stated earlier, I am satisfied that John So consulted with the shareholders of Doshay, including Celia Chan on behalf of Hylepin, in an ad hoc manner as circumstances and convenience allowed. I am satisfied that such occasions would have occurred at Sunday night dinners at the Dragon Boat Restaurant from time to time, and through other informal meetings between John So and the shareholders. I am also satisfied that John So did not conceal Doshay's financial statements from the shareholders and that the financial statements were provided to the shareholders. The financial statements recorded the impugned transactions. However, I am not satisfied on the totality of the evidence that John So sought or obtained the informed consent of the shareholders to the various business transactions he undertook on behalf of Doshay, in the sense of explaining all of the details of the transactions before they occurred. Rather, I consider that John So kept the shareholders broadly informed of the transactions that were undertaken, and ensured that the financial statements were accurately prepared. E.2 Doshay's investments in other Chinese restaurants 281 Hylepin submitted that "by transferring substantial sums of money to entities in which Mr So was a director and had a financial interest through his partner, Ms Cheng, and that such transfers occurred: (i) outside contractual relations; (ii) with negligible or nil interest being levied; (iii) with nil interest being paid; (iv) with no security provided; and (v) without contractually agreed terms as to dates of maturity or periodic payment requirements, Mr So has breached his fiduciary duties to avoid conflicts of inflict, and to avoid profiting from his position as director of Doshay". Hylepin further submitted that that no "benefit to Doshay has been established on the evidence". 282 I reject those submissions. The submissions fail to address the relevant commercial circumstances. While each of the relevant transactions must be assessed in its own particular circumstances, some overriding observations can be made. 283 First, it is commercially understandable that Doshay would seek to expand its business interests through franchising the "Dragon Boat" name to other restaurants. A franchising model can benefit the business of the franchisor and the franchisee, building the goodwill and value associated with the franchise brand. 284 Second, it is also commercially understandable that Doshay would seek to share the ownership of, and capital invested in, such franchised businesses. Restaurant businesses are relatively small businesses. There can be a number of reasons why a small business such as a restaurant would wish to share ownership and invested capital. Sharing ownership creates the opportunity to incentivise and reward important employees and managers in the business. Sharing investment reduces risk for any single investor. The evidence shows that each of Doshay, Westlake, Lyleable, Jadetrex and Dragon Wall engaged in those commercial strategies. Hylepin's case relies on hindsight. It does not criticise John So for failing to cause Doshay to acquire 100% of the ownership and investment in the other restaurant businesses. It criticises Doshay for making an investment which turned out to be unsuccessful. A lack of commercial success is not evidence of a breach of fiduciary duty. The decision to share the investment turned out to be a prudent decision that reduced Doshay's risk and ultimate financial exposure to the lack of business success. 285 Third, a loan made to a business venture is not uncommercial merely because it is undocumented, unsecured and interest free. Capital for a business venture can be structured in many ways. Particularly in the case of small businesses conducted through small proprietary companies, capital may be advanced through share capital or through loan capital, and the loans may bear interest or be interest free until such time as the business is profitable (at which time the loans might be repaid or interest might be charged). I reject the submission that the absence of documentation for an interest free and unsecured loan indicates that the transaction was not a loan at all. Such a loan is repayable at call (or on reasonable notice) and all of the loans in the present case were recorded in the financial statements for the relevant entities. 286 Fourth, Hylepin's allegations of a breach of fiduciary duty in relation to Doshay's investments in other Chinese restaurants were made at a level of generality and failed to address each individual investment decision that was made from year to year in respect of each restaurant. It is necessary to consider each of the relevant investments and transactions at the time it was made in light of the circumstances that then prevailed. Hylepin avoided doing so, possibly because of the difficulty, so many years later, to reconstruct those circumstances. Those difficulties are present and have caused unfairness to John So in defending the claims that have been made. Westlake 287 Hylepin has not established that, in causing Doshay to advance loans to Westlake, John So was in breach of his duties to Doshay by reason of having a conflict of interest or duty or through a breach of the profit rule. 288 The evidence establishes that Doshay owned 40% of the shares in Westlake, which is the trustee of the Westlake Unit Trust, and also owns 30% of the units in the Unit Trust. The Westlake Unit Trust conducted the Westlake Restaurant in Chinatown. Between 29 September 1988 and 10 January 2001, John So was a director of Westlake. There was no evidence that John So held a personal financial interest in the Westlake Restaurant, and no question of a conflict of interest, nor a breach of the profit rule, arises on the evidence. The mere fact that John So was appointed as a director of Westlake did not create a conflict of duty. I infer that John So took up the appointment as a director of Westlake to advance and protect the interests of Doshay as an investor in the Westlake Restaurant. The evidence does not establish that the interests of Doshay and the interests of Westlake were relevantly in conflict. Both companies wanted the Westlake Restaurant to be a commercial success. As stated earlier, Doshay agreed to reinvest distributions from the Westlake Unit Trust by way of loan. In making that decision as a director of Doshay, John So would only breach his duty to Doshay if the evidence showed that he would not have made the same decision but for his directorship of Westlake. There is no evidence that supports such a conclusion and I reject it. I infer that John So made that decision in the mutual interests of the Westlake Unit Trust and Doshay. Lyleable (Dragon Boat Knox) 289 When Lyleable was established in April 1990, Doshay held 120,000 shares (a 40% shareholding interest), various employees held a 50% shareholding interest and Wendy Cheng held 30,000 shares (a 10% shareholding interest). In my view, Doshay's initial decision to establish and invest in shares in Lyleable did not involve any breach of duty by John So. Doshay was seeking to establish a chain of "Dragon Boat" restaurants. For the reasons already given, in my view there was nothing uncommercial or improper about the ownership structure for Lyleable which provided a commercial incentive for employees and a sharing of ownership risk. 290 Hylepin did not explain how Doshay's initial investment in shares in Lyleable involved a breach of duty by John So. The concern apparently related to the fact that 30,000 shares in Lyleable were allotted to Wendy Cheng and, at that time, John So and Wendy Cheng had a personal relationship. However, the decision to allot shares to Wendy Cheng was a decision for Lyleable and the proceeding does not involve any challenge to decisions made by Lyleable. Thus, the relevant question is whether Doshay's decision to acquire shares in Lyleable, in conjunction with the other shareholders, involved a breach of duty by John So by reason of the fact that Wendy Cheng would also become a shareholder. If Dragon Boat Knox had become a successful and valuable business, and Hylepin argued that John So had caused Doshay to give away a valuable business opportunity by not carrying out the Dragon Boat Knox venture on its own, it might be argued that John So's decision to cause Doshay to make a partial investment in Lyleable involved a conflict of interest. But that was not argued by Hylepin (presumably because Dragon Boat Knox was not successful). Even if it was argued, it fails to address the reasons why Doshay would wish to share ownership and investment risk in the venture. Hylepin's argument appeared to be that John So should never have caused Doshay to invest in a venture such as Lyleable in circumstances where one of the minority shareholders in Lyleable would be a person with whom he had a personal relationship. In my view, the mere fact that John So had a personal relationship with one of the other shareholders in Lyleable does not establish a conflict of interest or duty. I am not persuaded that John So's decision would have been any different if, for example, the 30,000 shares issued to Wendy Cheng had been issued to the restaurant employees or another person, independent of John So (or perhaps a personal friend), willing to invest $30,000 in the venture. 291 In FY1994, Caesar acquired a further 54,000 shares and in FY1996 acquired 30,000 shares, giving Wendy Cheng a direct and indirect interest in 114,000 shares (or 38% of the issued shares). Hylepin did not contend that those transactions involved any decision by John So on behalf of Doshay. 292 Next, it is necessary to consider whether John So was in breach of his duties to Doshay in causing Doshay to advance loans to Lyleable. To recap the evidence concerning the loans, the initial loans advanced by Doshay to Lyleable were applied in payment of its subscription for shares in 1990. After 1990, Doshay advanced further loan monies to Lyleable. The amount of the loan peaked in FY2008 at $463,061 and, by FY2018, had been reduced to $286,149. The loan was undocumented, unsecured and interest free. The evidence shows that Lyleable also obtained loans from the ANZ bank by way of overdraft, from "Directors" and "Other loans". 293 John So was a director of Lyleable until 10 August 1998. The mere fact that John So was appointed as a director of Lyleable did not cause him to have a conflict of interest in making decisions on behalf of Doshay to advance loans to Lyleable. I infer that John So took up the appointment to advance and protect the interests of Doshay as an investor in Dragon Boat Knox. The evidence does not establish that the interests of Doshay and the interests of Lyleable were in conflict. Both companies wanted Dragon Boat Knox to be a commercial success. John So gave evidence that he considered the loan monies advanced to Lyleable were in Doshay's interests as Doshay wanted Dragon Boat Knox to trade successfully. I accept that evidence. 294 Nor am I persuaded, on the evidence before me, that John So's personal relationship with Wendy Cheng caused him to have a conflict of interest in making decisions on behalf of Doshay to advance loans to Lyleable. No evidence was adduced to suggest that John So had any personal interest in Wendy Cheng's financial affairs or assets. Whether John So's personal relationship with one of the shareholders of Lyleable created a conflict of interest depends on a consideration of the decision being made and all of the circumstances. Doshay's interests in Lyleable were in common with each other shareholder of Lyleable. All had an interest in the Dragon Boat Knox restaurant succeeding. Simplistically, it might be said that the shareholders of Lyleable other than Doshay benefitted from Doshay advancing an interest free loan to Lyleable. But such a contention ignores any consideration of the broader commercial circumstances. As outlined earlier, the financial statements of Lyleable that were tendered in evidence show that Lyleable also obtained loans from the ANZ bank by way of overdraft, from "Directors" and "Other loans". No evidence was given about those other borrowings, or any relationship between the borrowings from Doshay and borrowings from "Directors" and "Others". The financial statements for FY1996 show that the loan from Doshay was $62,775.37 while the aggregate amount of the loans from "Directors" and "Other loans" was $84,542.65. The financial statements for FY1999 (the most recent financial statements for Lyleable tendered in evidence) show that the loan from Doshay had increased to $96,561.24 while the "Other loans" had decreased to $42,000. There was no evidence adduced about the financial circumstances of Dragon Boat Knox during this period and the decision making concerning the loans, other than the generalised evidence given by John So that he caused Doshay to advance those loans to make Lyleable profitable and thereby generate a return for Doshay. I make no criticism of John So in that respect. It is unfair to expect that he could recall the relevant circumstances back in the 1990s and the 2000s. Given Dragon Boat Knox's lack of profitability, decisions would have needed to be made about whether to continue the business and, if the decision was made to continue, the available sources of funding for it. Overall, Hylepin has not persuaded me that the presence of Wendy Cheng as a (direct and indirect) shareholder in Lyleable during that period was a factor that caused John So to have Doshay advance loan monies to Lyleable such that John So acted in breach of his fiduciary duties. 295 Even if the position were otherwise, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy. The loans advanced by Doshay peaked in FY2008 with the result that no further loans were advanced within the six year period prior to the commencement of this proceeding. In my view, reliance by John So on the statute would not be unconscionable. I consider that the decisions to advance loan monies did not involve fraud, in the sense that there was a consciousness on the part of John So that what was being done was wrong or involved wrongdoing, and the loans were not fraudulently concealed by John So. To the contrary, the loans were duly recorded in the financial statements of Doshay and Lyleable. I accept John So's evidence that Doshay's financial statements were available to its members, including Hylepin. The evidence also shows that, by a resolution signed on 29 December 1989, Peter Chan approved Doshay's financial statements for FY1989 which disclosed that Doshay had advanced a loan to the "Knox City Project". Further, in response to a request from Hylepin's accountants, QR Accounting Services, Paul Tjioe & Associates provided financial statements for Doshay for the four financial years FY1999, FY2000, FY2001 and FY2002, and I infer subsequently the financial statements for FY2003. Relevantly, Doshay's financial statements recorded each of the investments undertaken by Doshay to that point in time, including the loan to the "Knox City Project" and the shareholding in Lyleable Pty Ltd. Jadetrex (Dragon Boat Palace) 296 The facts relating to Jadetrex are very similar to those relating to Lyleable and my conclusions are the same. 297 When Jadetrex was established in April 1990, Doshay held 35,000 shares (a 19.4% shareholding interest), various employees held a 61% shareholding interest and a company in which John So's younger brother had a minority interest (So Fung Ho) held a 19.4% shareholding interest. In my view, Doshay's initial decision to establish and invest in shares in Jadetrex did not involve any breach of duty by John So. This was a further part of Doshay's aim to establish a chain of "Dragon Boat" restaurants. For the reasons already given, in my view there was nothing uncommercial or improper about the ownership structure for Jadetrex which provided a commercial incentive for employees and a sharing of ownership risk. I accept John So's evidence that he had no financial interest in the Hong Kong company So Fung Ho. 298 As in the case of Lyleable, Hylepin did not explain how Doshay's initial investment in shares in Jadetrex involved a breach of duty by John So. For similar reasons given with respect to Lyleable, in my view the mere fact that John So's brother had a minority interest in a company that invested in Jadetrex does not establish a conflict of interest or duty on the part of John So when he caused Doshay to invest in shares in Jadetrex. 299 In or about FY1995, three of the employee shareholders (Kam Wah Fok, Kam Chuen Fok and Andy Hui) transferred their shares (totalling 70,000) to Caesar (30,000 shares) and Chok Wing Cheng (40,000). Hylepin did not contend that those transactions involved any decision by John So on behalf of Doshay. 300 It is then necessary to consider whether John So was in breach of his duties to Doshay in causing Doshay to advance loans to Jadetrex. To recap the evidence concerning the loans, Doshay's annual financial statements record that, commencing in FY1990, Doshay advanced loan monies to Jadetrex (recorded in Doshay's balance sheet as "Loan – Dragon Boat Palace"). In FY1990, the loan was recorded as $193,756.31, but should have been recorded as $158,756.31 (with $35,000 having been applied to the subscription for Jadetrex shares). The amount of the loan peaked in FY2005 at $734,145 and, by FY2016, had been reduced to $28,445.46. Doshay's annual financial statements for FY2017 records a bad debt expense of $28,446 and the loan balance being reduced to nil. I infer that the outstanding balance of the loan of that amount was written off by Doshay in FY2017. The loan was undocumented, unsecured and interest free. The evidence shows that, over the relevant period, Jadetrex also obtained loans from interests associated with other shareholders including Andy Hui, Caldkone (a company in which John So and his brother had an interest) and Global Crest (the shareholders of which, at that time, were Wendy Cheng, Chok Wing Cheng and John So). 301 John So was a director of Jadetrex until 10 August 1998. Again, the mere fact that John So was appointed as a director of Jadetrex did not cause him to have a conflict of interest in making decisions on behalf of Doshay to advance loans to Jadetrex. I infer that John So took up the appointment to advance and protect the interests of Doshay as an investor in the Dragon Boat Palace restaurant. The evidence does not establish that the interests of Doshay and the interests of Jadetrex were in conflict. Both companies wanted Dragon Boat Palace to be a commercial success. John So gave evidence that he considered the loan monies advanced to Jadetrex were in Doshay's interests as Doshay wanted Dragon Boat Palace to trade successfully. I accept that evidence. 302 Nor am I persuaded, on the evidence before me, that John So's personal relationship with Wendy Cheng, or his family relationship with his brother, Anthony So, caused him to have a conflict of interest in making decisions on behalf of Doshay to advance loans to Jadetrex. As already noted, no evidence was adduced to suggest that John So had any personal interest in Wendy Cheng's financial affairs or assets or in the company So Fung Ho. Whether John So's personal relationship with other shareholders of Jadetrex created a conflict of interest depends on a consideration of the decision being made and all of the circumstances. Doshay's interests in Jadetrex were in common with each other shareholder of Jadetrex. All had an interest in the Dragon Boat Palace restaurant succeeding. As for Lyleable, simplistically it might be said that the shareholders of Jadetrex other than Doshay benefitted from Doshay advancing an interest free loan to Jadetrex. But such a contention ignores the broader commercial circumstances. As set out earlier, the financial statements of Jadetrex that were tendered in evidence show that Jadetrex also obtained loans from other persons. No evidence was given about those other borrowings. The financial statements for FY1996 show that while Doshay had advanced a loan of $144,145.21, Caldkone and Andy Hui had advanced loans totalling $125,526.65. The financial statements for FY1999 show that Doshay's loan had increased to $164,145.21, while Caldkone, Andy Hui and Global Crest had advanced loans totalling $138,884.88. The financial statements for FY2004 (the most recent financial statements for Jadetrex tendered in evidence) show that the loan from Doshay had increased to $694,145.21, significantly in excess of other loans. There was no evidence adduced about the financial circumstances of Dragon Boat Palace during this period and the decision making concerning the loans, other than the generalised evidence given by John So that he caused Doshay to advance those loans to make Jadetrex profitable and thereby generate a return for Doshay. Again, I make no criticism of John So in that respect because the decisions were made in the 1990s and the 2000s. Given Dragon Boat Palace's lack of profitability, decisions would have needed to be made about whether to continue the business and, if the decision was made to continue, the available sources of funding for it. Overall, Hylepin has not persuaded me that the presence of Wendy Cheng as an indirect shareholder in Jadetrex (through Caesar), or the presence of Anthony So as an indirect shareholder (through So Fung Ho) were factors that caused John So to have Doshay advance loan monies to Jadetrex such that John So acted in breach of his fiduciary duties. 303 Even if the position were otherwise, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy. The loans advanced by Doshay peaked in FY2005, with the result that no further loans were advanced within the six year period prior to the commencement of this proceeding. In my view, reliance by John So on the statute would not be unconscionable for the same reasons as given in respect of Lyleable. I consider that the decision to advance loan monies did not involve fraud, in the sense that there was a consciousness on the part of John So that what was being done was wrong or involved wrongdoing, and the loans were not fraudulently concealed by John So. To the contrary, the loans were duly recorded in the financial statements of Doshay and Jadetrex. I accept John So's evidence that Doshay's financial statements were available to its members, including Hylepin. Doshay's financial statements for FY2002, provided to Hylepin's accountants by Paul Tjioe & Associates, recorded the loan to Dragon Boat Palace and the shares held in Jadetrex. Dragon Wall and Dragon Wall Take Away 304 Dragon Wall was incorporated in 1990 to conduct the Dragon Wall take-away restaurants. The ownership was shared between Hellen Chin (50,000 shares), Doshay (25,000 shares) and YBB, a company in which Hellen Chin and Alexander So held an interest (25,000 shares). 305 For similar reasons as given in respect of Lyleable and Jadetrex, in my view Doshay's initial decision to establish and invest in shares in Dragon Wall did not involve any breach of duty by John So. Again, Hylepin did not explain how Doshay's initial investment in shares in Dragon Wall involved a breach of duty by John So. Hylepin did not contend that John So breached his duties by failing to invest $100,000 in Dragon Wall and acquire all of its shares (presumably because it was ultimately unsuccessful). The contention appeared to be that there was a breach because John So caused Doshay to invest in shares in a company in which his wife and son held interests, and presumably the investment should not have been made at all. That contention fails to take account of the fact that Dragon Wall was a further element of Doshay's plans to commercialise the "Dragon Boat" name in connection with Chinese restaurants, this time as the name of a takeaway restaurant. Doshay's shareholding involved a modest investment of $25,000 and the investment risk was shared with the other shareholders, albeit other members of John So's family. The other shareholders shared the investment risk associated with the business with Doshay, while Doshay benefitted from the marketing of the "Dragon Boat" name. On the scant evidence before me, I am not persuaded that John So's decision would have been any different if, for example, the 75,000 shares issued to his family members had been issued to other persons, independent of John So (or perhaps a personal friend), willing to invest $75,000 in the venture. Even if the position were otherwise, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy for the reasons given below. 306 Doshay also advanced modest loans to Dragon Wall. The amount of the loan peaked in FY2004 at $26,113. In FY2010, the loan was written off. The loan was undocumented, unsecured and interest free. I accept John So's evidence that he considered the loan to Dragon Wall was in Doshay's interests as Doshay wanted the Dragon Wall takeaway restaurants to trade successfully. 307 John So was a director until the company was deregistered on 6 January 2016. Again, the mere fact that John So was appointed as a director of Dragon Wall did not cause him to have a conflict of interest in making decisions on behalf of Doshay to advance loans to Dragon Wall. I infer that John So took up the appointment to advance and protect the interests of Doshay as an investor in the Dragon Wall takeaway restaurants. The evidence does not establish that the interests of Doshay and the interests of Dragon Wall were in conflict. Both companies wanted the Dragon Boat takeaway restaurants to be a commercial success. 308 Nor am I persuaded, on the evidence before me, that John So's familial relationships with Hellen Chin, or his son Alexander, caused him to have a conflict of interest in making decisions on behalf of Doshay to advance loans to Dragon Wall. I accept that there was certainly a possibility for John So's decision making to be affected by the majority interests in Dragon Wall held by Hellen Chin and his son Alexander. However, the paucity of evidence concerning the circumstances at the time of the loan decisions makes it difficult to conclude that, at a given point in time, a particular decision was affected by a real and sensible possibility of conflict. The nature of John So's relationship with Hellen Chin, or his responsibility for Alexander, was not explored in cross-examination and virtually no evidence was adduced about those relationships. No evidence was adduced to suggest that John So had any personal financial interest in Hellen Chin's financial affairs or in the company YBB. Whether John So's personal relationship with the other shareholders of Dragon Wall created a conflict of interest depends on a consideration of the decision being made and all of the circumstances. Doshay's interests in Dragon Wall were in common with Hellen Chin and YBB. Each had an interest in the Dragon Wall takeaway restaurant business succeeding. Again, there was no evidence adduced about the financial circumstances of Dragon Wall during this period and the decision making concerning the loans from Doshay, other than the generalised evidence given by John So that he caused Doshay to advance those loans to make Dragon Wall profitable and thereby generate a return for Doshay. Again, I make no criticism of John So in that respect given the difficulties in recalling the relevant circumstances back in the 1990s and the 2000s. Given Dragon Wall's lack of profitability, decisions would have needed to be made about whether to continue the take away restaurant business and, if the decision was made to continue, the available sources of funding for it. Overall, on the limited evidence that was available, Hylepin has not persuaded me that the presence of Hellen Chin as a shareholder in Dragon Wall, or the presence of Alexander So as an indirect shareholder (through YBB), were factors that caused John So to have Doshay advance loan monies to Dragon Wall in breach of his fiduciary duties. 309 Even if the position were otherwise, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy. The loans advanced by Doshay peaked in FY2004, with the result that no further loans were advanced within the six year period prior to the commencement of this proceeding. In my view, reliance by John So on the statute would not be unconscionable for the same reasons as given in respect of Lyleable and Jadetrex. I consider that the decision to advance loan monies did not involve fraud, in the sense that there was a consciousness on the part of John So that what was being done was wrong or involved wrongdoing, and the loans were not fraudulently concealed by John So. To the contrary, the loans were duly recorded in the financial statements of Doshay. I accept John So's evidence that Doshay's financial statements were available to its members, including Hylepin. Doshay's financial statements for FY2002 and FY2003, provided to Hylepin's accountants by Paul Tjioe & Associates, recorded the loan to the Bourke Place Project and shares in Dragon Wall. E.3 Acquisition of the Exhibition Street and Lonsdale Street Properties Exhibition Street Property 310 Hylepin contends that John So breached the fiduciary duties owed to Doshay, specifically the conflict rule, in taking the following actions: (a) using Doshay's funds to pay a $200,000 deposit to the vendor of the Exhibition Street Property for a contract of sale where Doshay was not the purchaser but rather "John So and/or nominee"; (b) nominating Global 2000, in which John So was the sole director and had interests, as the purchaser under the contract of sale for the Exhibition Street Property; (c) causing Doshay on 28 June 2000 to pay $400,000 to the vendor of the Exhibition Street Property for the benefit of Global 2000; (d) having Global 2000 take registered title to the Exhibition Street Property; (e) using Doshay's financial performance and position to obtain a $1.3 million loan for Global 2000 and from the Bank of Melbourne to pay the balance of the settlement for the acquisition of the Exhibition Street Property; and (f) securing the $1.3 million loan from the Bank of Melbourne by a mortgage over the Exhibition Street Property and Global 2000 (which only significant asset was the Exhibition Street Property at the time). 311 Hylepin also contends that John So's use of Doshay's money to pay the $200,000 deposit and later contribute a further $400,000 towards the purchase price of the Exhibition Street Property was to the benefit of himself, Global 2000, Global Crest and his partner, Wendy Cheng, at the expense of Doshay, in breach of the profit rule. 312 Hylepin contends that, as a result, Global 2000 holds the Exhibition Street Property on constructive trust for Doshay. 313 I reject those contentions. In my view, the factual premises on which the contentions are founded involve a mischaracterisation of the relevant facts and circumstances. 314 I have concluded that John So obtained the opportunity to purchase the Exhibition Street Property in his personal capacity and not in his capacity as a director of Doshay. At the time that the contract to purchase the Exhibition Street Property was entered into, Doshay's business was to operate Chinese restaurants. It was not a property investor. There is nothing in the evidence to suggest that John So's role as director and manager of Doshay was to investigate property investment opportunities. Nor is there anything in the evidence to suggest that the opportunity to acquire the Exhibition Street Property came to John So in the performance of his duties as a director or manager of Doshay. It follows that John So was free to acquire the Exhibition Street Property himself or nominate any other purchaser without any breach of his duties to Doshay: cf Howard at [37] per French CJ and Keane J, and at [63] and [87] per Hayne and Crennan JJ. 315 I have found that Doshay advanced the sum of $200,000 to enable John So to pay the deposit for the Exhibition Street Property. If Doshay had no interest in the Exhibition Street Property, a question may have arisen whether John So misused Doshay's monies in doing so. However, the relevant facts and circumstances show that the monies advanced by Doshay should properly be characterised as a pre-incorporation loan to the nominee purchaser of the Exhibition Street Property, which ultimately became Global 2000. John So established Global 2000 as a joint venture vehicle through which Doshay was given the opportunity to acquire a 50% interest in the Exhibition Street Property. There was no conflict of interest or duty in providing that opportunity to Doshay. There was no obligation on the part of John So to offer Doshay the opportunity to acquire 100% of the Exhibition Street Property. Hylepin does not criticise John So's decision, as a director of Doshay, to take up the opportunity to acquire a 50% interest in Global 2000 and thereby the Exhibition Street Property. 316 Understood in that context, there was no conflict of interest or breach of the profit rule associated with Doshay advancing the pre-incorporation loan for the payment of the deposit of the Exhibition Street Property. It can be accepted that John So had a personal financial interest in the purchase of the Exhibition Street Property, first as the contract purchaser and later through his shareholding interest in Global Crest. However, as the High Court affirmed in Howard, the fact that a director has a separate interest in the decision being made does not necessitate the conclusion that the relevant decision is affected by a conflict of interest. The relevant question is whether the decision would not have been made in the absence of that interest. In the present case, I am satisfied that John So would have made the same decision, causing Doshay to advance the deposit monies to secure the purchase of the Exhibition Street Property and with the ultimate aim of acquiring a 50% interest in the property, regardless of the identity of the other intended investors in Global 2000. In other words, I am satisfied that John So would have made the same decision even if the other investors in Global 2000 were wholly unrelated to John So. 317 Hylepin's analysis of the transaction seeks to isolate the signing of the purchase contract and the completion of the purchase. In my view, that leads to an artificial analysis. The signing of the purchase contract and the completion of the purchase are part of the one transaction, albeit that a number of steps are taken along the way including the incorporation of Global 2000 and its nomination as purchaser. The artificiality of Hylepin's analysis leads it to make the submission that "Global 2000 contributed nothing to the purchase price". I reject that submission. As already noted, the purchase opportunity belonged to John So personally and he was free to provide the opportunity to Global 2000, effectively a joint venture company between Doshay and Global Crest. The funding for the purchase was provided by a bank loan of $1.3 million and loans from Doshay, Global Crest and "Directors". Those loans were recorded in Global 2000's financial statements and Global 2000 was responsible for their repayment. It is therefore wrong to say that Global 2000 contributed nothing to the purchase price. It paid the whole of the purchase price. 318 Hylepin also submitted that Global 2000 used "Doshay's financial performance and position" to obtain the bank loan. I reject that submission. The factual premise for that submission was a statement in the Business Finance Agreement between the Bank of Melbourne and Global 2000 dated 28 June 2000 for the loan of $1.3 million that a number of conditions applied to the finance, including "obtain Profit & Loss Trading Statement for Doshay Pty Ltd for the FY99 period". However, Doshay did not provide any security for the loan. The security consisted of a mortgage by Global 2000 over the Exhibition Street Property, a fixed and floating charge given by Global 2000 over its assets, security over Global 2000's deposit of $50,000 with the Bank of Melbourne and a personal guarantee from John So. The only apparent relevance of Doshay's financial statements to the Bank of Melbourne loan was in relation to the guarantee given by John So (recognising that part of John So's assets included his interests in Doshay). Properly analysed, Global 2000 used John So's financial position to obtain the Bank of Melbourne loan, not Doshay's financial position. Doshay did not assume any risk under the security given to the Bank of Melbourne for the loan. 319 It is necessary to consider the further loan made by Doshay to Global 2000 of $400,000 which was used by Global 2000 to pay the balance of the purchase price at settlement. The question to be considered is whether John So's decision to cause Doshay to advance that loan involved a breach of duty by reason of the conflict rule or the profit rule. In my view, the question is finely balanced. The arrangements struck at the time of settlement involved an imbalance in favour of Global Crest in the amount of the financial contributions from the shareholders in Global 2000 – Doshay advanced a loan of $600,000 whereas Global Crest and John So advanced an aggregate of approximately $285,000. Conversely, the arrangements involved elements that favoured Doshay – in particular, Doshay earned interest on its loans whereas there is no evidence to indicate that Global Crest or John So were paid interest and Doshay did not provide security for Global 2000's loan from Bank of Melbourne whereas John So guaranteed the loan. On balance, I consider it more likely than not that John So would have made the same decision, causing Doshay to advance a further $400,000 to Global 2000 to enable the completion of the purchase, even if the other investors in Global 2000 were wholly unrelated to John So. 320 Even if I had come to the opposite conclusion in respect of any aspect of Doshay's investment in Global 2000 in FY2000, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy. In that regard, I reject Hylepin's submission that "the facts leave no other conclusion than that Mr So's arrangements were part of a dishonest and fraudulent design" and that "Mr So's conduct involved him taking advantage of his position as a director of Doshay to use its funds to advance his own interests and to enrich himself, Ms Cheng and Global 2000 at Doshay's expense". For the reasons given, I find that the opportunity to purchase the Exhibition Street Property belonged to John So. There was nothing dishonest or fraudulent in John So extending the opportunity to Doshay through a 50% share in the company Global 2000, and nor was there anything dishonest or fraudulent in the financing arrangements that were struck. The arrangements had aspects that favoured Global Crest and aspects that favoured Doshay. The arrangements did not enrich John So at the expense of Doshay; the arrangements enriched Doshay and John So in a reasonably equitable manner. 321 As stated earlier in these reasons, I also reject Hylepin's submission that, where assets are misapplied through a breach of duty, equity will not permit the trustee or fiduciary to plead a limitation defence and that the limitation runs from the time the plaintiff has full information and knowledge of the alleged wrong. The contention is stated too broadly. The class of case to which Hylepin is referring concerns claims by a beneficiary against a trustee for breaches of trust (which, in Victoria, are governed by s 21 of the Limitation Act). The claims in this case are not of that kind. Rather, the claims are for breach of fiduciary duty by a director in respect of which there exists a remedy at law which is subject to a statutory limitation period. Equity applies the time bar by analogy unless reliance by the defendant on the statute would in the circumstances be unconscionable: Gerace at [70] per Meagher AJ (with whom Beazley P & Emmett JA agreed). In my view, it would not be unconscionable for John So to rely on the limitation period. The conduct did not involve fraud and the conduct was not fraudulently concealed by John So. The relevant transactions were duly recorded in the financial statements for Doshay and Global 2000. Doshay's financial statements for FY2002 and FY2003 which were provided to Hylepin's accountants in 2004 disclose Doshay's shareholding in Global 2000 and its loan to Global 2000 in the amount of $647,560. Lonsdale Street Property 322 Hylepin contends that John So breached the fiduciary duties owed to Doshay, specifically the conflict rule, in relation to the acquisition of the Lonsdale Street Property during FY2005. 323 The first aspect of Hylepin's contention is based on the premise that Global 2000 holds the Exhibition Street Property on constructive trust for Doshay. On that premise, Hylepin submitted that the Lonsdale Street Property was acquired using Doshay's money, being $54,000 in Global 2000's bank account which was earned from the rental of the Exhibition Street Property. Hylepin also submitted that the acquisition of the Lonsdale Street Property was financed by the use of the Exhibition Street Property as part of the security. 324 The premise of the contention must be rejected having regard to the conclusions I have reached with respect to the Exhibition Street Property. Global 2000 does not hold the Exhibition Street Property on constructive trust for Doshay, and therefore there was no breach of duty (or trust) associated with the use of that property (or income derived from it) in the acquisition of the Lonsdale Street Property. 325 The second aspect of Hylepin's contention concerns the application of Doshay's monies toward the purchase of the Lonsdale Street Property. Hylepin submitted that John So caused Doshay to make four payments from its ANZ bank account (account number ending 193) totalling $175,563.81 which were recorded as loans to Global 2000, but that the monies were in fact paid to John So, Wendy Cheng, Okaybye or Global Crest. For the reasons given earlier, I reject that submission. I have concluded that the payments were loans made by Doshay to Global 2000. 326 The third aspect of Hylepin's contention concerns the application of Doshay's monies towards the payment of stamp duty on the acquisition of the Lonsdale Street Property. As set out earlier, the stamp duty liability was met by Doshay advancing a loan of $300,000 to Global 2000. 327 Hylepin submitted that by causing Doshay to advance the loans of $175,563.81 and $300,000 to Global 2000 in connection with the purchase of the Lonsdale Street Property, John So breached the conflict rule and the profit rule. In my view, for substantially the same reasons as given in relation to Doshay's investment in other businesses, there was no conflict of interest or breach of the profit rule associated with making those loans. By September 2004, when the contract for the purchase of the Lonsdale Street Property was entered into by Global 2000, John So was no longer a shareholder in Global Crest. His sole financial interest in Global 2000 was through his interest in Doshay (as I have found that he did not have a direct shareholding in Global 2000). John So had a personal relationship with Wendy Cheng but there was no evidence that he had a financial interest in Wendy Cheng's financial affairs or assets. In my view, the mere fact of that personal relationships does not establish a conflict of interest. Doshay's interest in Global 2000 was in common with Global Crest. Global 2000's annual financial statements for FY2005 show that, on completion of the purchase of the Lonsdale Street Property, Doshay's loan to Global 2000 stood at $911,543.97 while the loans from Global Crest, Okaybye and "Directors" were in aggregate $1,330,218.83. Global 2000's annual financial statements for FY2006, following the further loan from Doshay of $300,000 for the payment of the stamp duty liability, show Doshay's loan had increased to $1,278,086.68 while the loans from Global Crest, Okaybye and "Directors" were in aggregate $1,377,849.34. When regard is had to the full factual circumstances, Hylepin has not persuaded me that the presence of Wendy Cheng as an indirect shareholder in Global 2000 (through Global Crest) was a factor that caused John So to have Doshay advance loan monies to Global 2000. In the present case, I am satisfied that John So would have made the same decision, causing Doshay to advance the loan monies, regardless of the identity of the other investors in Global 2000. 328 Even if I had come to the opposite conclusion in respect of any aspect of Doshay's investment in Global 2000 in FY2005, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy for substantially the same reasons as given in relation to the Exhibition Street Property. In my view, it would not be unconscionable for John So to rely on the limitation period. The conduct did not involve fraud and the conduct was not fraudulently concealed by John So. The relevant transactions were duly recorded in the financial statements for Doshay and Global 2000. I have rejected Hylepin's claim that Doshay withheld the financial statements from it. E.4 Doshay's investment in Evaluator and Café Puccini Initial investment 329 Hylepin submitted that Doshay's initial acquisition of shares in Evaluator, and "lopsided" contribution of funds to Evaluator, during FY2001 was a clear breach by John So of the conflict rule given his part ownership of Global Crest and his partner Wendy Cheng's interests in Global Crest. 330 I reject that characterisation of the transactions. It ignores the commercial context in which Doshay's initial investment in Evaluator occurred. To recap, John So became aware that the cafe named "Cafe Puccini" that was operating in the premises next to the Dragon Boat Restaurant was being marketed for sale and that other operators of Chinese restaurants were interested in acquiring the business in order to open a restaurant in the style of the Dragon Boat Restaurant. John So was concerned about the potential competition and decided that Doshay should acquire the Cafe Puccini business primarily to protect the Dragon Boat Restaurant from potential competitors. 331 To implement that plan, Doshay and Global Crest established Evaluator in November 2000. The idea was to take over the "Cafe Puccini" business through a joint venture-style arrangement between Global Crest and Doshay because Global Crest was experienced in operating a Western-style food and beverage business (the Melbourne Bar & Bistro). Global Crest was allotted 51 shares and Doshay was allotted 49 shares in Evaluator. Wendy Cheng was appointed the director of Evaluator. Interest free loan capital was also advanced to Evaluator to fund the acquisition of the Café Puccini business (the purchase price being approximately $250,000). Doshay advanced a loan of $134,951 to Evaluator while Global Crest and Wendy Cheng advanced an aggregate loan of $128,417. 332 At the time that Evaluator was established and capitalised during FY2001, John So held one share in Global Crest. It is likely that, at that time, Global Crest's issued share capital comprised four shares (the annual return for FY2000 for Global Crest filed with ASIC on 10 January 2001 showed that, by that time, there were four issued shares, with one share held by each of Wendy Cheng, her brothers Chok Wing Cheng and Chok Man Cheng, and John So). 333 For similar reasons to those stated in connection with the restaurant businesses discussed earlier, I am not persuaded that Doshay's initial acquisition of shares in Evaluator and the advancing of interest free loan capital to enable the purchase of the Café Puccini business was a breach by John So of the conflict rule by reason of his personal relationship with Wendy Cheng and shareholding interest in Global Crest. Hylepin did not contend that John So was in breach of his duties by failing to acquire the whole of the Café Puccini business opportunity rather than 49%. Nor did it contend that John So was in breach of his duties by causing Doshay to enter into the joint venture arrangement with Global Crest, as opposed to another joint venture partner. Rather, Hylepin's contention is that John So was in breach of his duties by causing Doshay to invest in the Café Puccini business at all. However, the evidence shows that the investment decision was made by John So to advance the commercial interests of Doshay. In my view, there was nothing uncommercial or improper about the business decision or the joint venture arrangements. There was an understandable business objective to protect the Dragon Boat Restaurant from competition on its door step, and to do so using the business experience of Global Crest to continue to run the Café Puccini business. Overall, I consider that John So would have made the same decision regardless of whether he entered into a joint venture with Global Crest or with another entity (or no joint venture partner) and that the decision did not involve a breach of his duties. 334 Even if the position were otherwise, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy. In my view, reliance by John So on the statute would not be unconscionable. I consider that the investment decision did not involve fraud, in the sense that there was a consciousness on the part of John So that what was being done was wrong or involved wrongdoing, and the loans were not fraudulently concealed by John So. To the contrary, the loans were duly recorded in the financial statements of Doshay and Evaluator. I accept John So's evidence that Doshay's financial statements were available to its members, including Hylepin. Doshay's financial statements for FY2002 and FY2003, provided to Hylepin's accountants by Paul Tjioe & Associates, recorded the shareholding in, and loans made to, Evaluator. Subsequent buy out of Global Crest 335 Hylepin submitted that John So's decision to cause Doshay to buy out Global Crest's interests in Evaluator in December 2003 was a breach of the conflict rule. For the reasons that follow, I accept that submission. However, I reject Hylepin's further submission that John So's conduct was dishonest. 336 In December 2003, Doshay bought out the whole of Global Crest's share capital and loan capital in Evaluator, and a portion of Wendy Cheng's loan capital in Evaluator. The relevant ledger entries and financial statements show that both forms of capital were effectively bought at "par value" (i.e. dollar for dollar). Thus, Doshay paid $51 to purchase Global Crest's 51 shares and advanced a loan to Evaluator of $119,945 to enable the repayment of Global Crest's loan to Evaluator (after adjustment in the ledger entries) and a further loan to Evaluator of $39,201.53 to enable the repayment of part of the "Directors" loan to Evaluator. The ledger entries also showed that, during FY2004, Doshay loaned a further amount of $38,250.52 to Evaluator, taking its total loans to $426,687.05, and the "Directors" loan (from Wendy Cheng) also increased by $35,000 to $76,015.47. 337 Hylepin submitted that the conflict of interest was serious and the transaction was dishonest because, as at December 2003, Evaluator was a loss making entity and its share and loan capital was worthless. Again, the submission ignores the commercial context in which the transaction occurred and the options available to Doshay. It is correct that Evaluator had made losses in its first three financial years. Evaluator's financial statements for FY2001 recorded a net loss of $23,177.11; in FY2002 the net loss was $49,137.14; and in FY2003 the net loss was $67,224.64. However, those losses do not establish that Evaluator was worthless to Doshay. As set out earlier, I accept John So's evidence as to the commercial rationale for Doshay to buy out Global Crest's interests in Evaluator. Evaluator held the lease over the Café Puccini premises which had strategic value to Doshay, protecting the Dragon Boat Restaurant from competition and providing additional space that was available for use by Doshay. John So said that the acquisition enabled the Dragon Boat Restaurant to extend its kitchen operations to the Café Puccini premises. The acquisition enabled the Dragon Boat Restaurant to make use of the premises occupied by Café Puccini without regard to Global Crest's interests. 338 Hylepin did not contend that Doshay could have achieved those commercial objectives without buying out Global Crest's interests. The loan capital advanced by Global Crest (and Wendy Cheng) was repayable at call or on reasonable notice. I infer that there was no realistic option for Doshay to acquire Global Crest's shareholding in Evaluator without also buying out its loan capital. If Global Crest had called for repayment of its loans, the only choices for Doshay would have been to allow Evaluator to become insolvent (thereby losing the strategic benefit of the lease over the Café Puccini premises) or to provide funds to Evaluator to enable the loans to be repaid. 339 For the foregoing reasons, I consider that Doshay's decision to buy out Global Crest's interests in Evaluator were not uncommercial or improper. However, in making that decision, I consider that John So was in breach of the conflict rule and the profit rule by reason of his 25% shareholding interest in Global Crest (which he held until 20 May 2004). The effect of the buy out was to advance Doshay's monies as a loan to Evaluator in order to repay Global Crest's loans. While, for the reasons already given, I consider that the transaction was in Doshay's interests, there was an obvious financial benefit for Global Crest in having its loans repaid at that time (given that Evaluator was loss-making). In contrast to other transactions undertaken by Doshay, I am not persuaded that John So would have made the same decision if he held no interest in Global Crest. 340 Despite that conclusion, I would bar Hylepin's claim applying the six year statutory limitation period for breach of directors' duties by analogy. Reliance by John So on the statute would not be unconscionable. Contrary to Hylepin's submissions, I consider that the buy out decision did not involve fraud or dishonesty, in the sense that there was a consciousness on the part of John So that what was being done was wrong or involved wrongdoing, and the transactions were not fraudulently concealed by John So. The loans were duly recorded in the financial statements of Doshay and Evaluator in FY2004. As referred to earlier, I accept John So's evidence that Doshay's financial statements were available to its members, including Hylepin. 341 After the buy out transactions, Evaluator was a wholly owned subsidiary of Doshay. Understandably in those circumstances, Hylepin did not allege that further loans advanced by Doshay to Evaluator in subsequent years involved a breach by John So of his fiduciary duties. Subsequently, Evaluator acquired other investment assets being the property situated at 456-458 La Trobe Street, West Melbourne and a 20% interest in the Blue Sky Unit Trust which owns the property at 122 Russell Street, Melbourne. E.5 Altering the share register of Global 2000 342 Hylepin submitted that the evidence shows that John So transferred his share in Global 2000 to Doshay on 15 June 2000, and that the subsequent instructions given by John So to Paul Tjioe & Associates in 2004 to alter the share register and effectively cancel that transfer were of no legal effect. 343 I accept that submission, for the reasons explained earlier. The instructions given by John So to Paul Tjioe & Associates in 2004 were based on the erroneous premise that the documents recording the original share transfer were executed on the basis of a mistake made by John So and that, as a consequence, the share transfer was void or voidable. I do not accept that the original share transfer was vitiated by mistake. 344 The relief sought by Hylepin on behalf of Doshay is: (a) a declaration that, at all times since 15 June 2000, Doshay has been the owner of five ordinary shares in Global 2000; and (b) an injunction requiring that John So and/or Global 2000 do all things necessary to ensure that the register of members of Global 2000, and ASIC's records in relation to Global 2000, record that, at all times since 15 June 2000, Doshay has been the owner of five ordinary shares in Global 2000. 345 It is appropriate to grant declaratory relief in favour of Doshay. I will also order, pursuant to s 175 of the Corporations Act, that Global 2000 do all things necessary to correct its register of members, and lodge a notice of correction with ASIC, to record that, at all times since 15 June 2000, Doshay has been the owner of five ordinary shares. E.6 Doshay's decision not to renew the lease over the Dragon Boat Restaurant premises 346 Hylepin submitted that the conduct of John So in resolving, in May 2019, that Doshay should not exercise the option to renew the lease over the Dragon Boat Restaurant premises was in breach of his fiduciary duty to Doshay and in breach of his duties as a director of Doshay under s 180(1) of the Corporations Act. 347 Hylepin submitted, and I accept, that in order for an interest of the fiduciary to be a "personal interest" for the purposes of the conflict rule, the interest does not have to be a pecuniary one: Bell v Westpac at [4509]. 348 Section 180(1) of the Corporations Act provides that: (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. 349 The duty in s 180(1) is subject to the business judgment rule set out in s 180(2) as follows: (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of sub-section (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. 350 Section 180(3) defines "business judgment" to mean "any decision to take or not to take action in respect of a matter relevant to the business operations of the corporation." 351 In determining whether a director has exercised reasonable care and diligence, the inquiry focuses on what an ordinary person, with the knowledge and experience of the defendant, might be expected to have done on their own behalf: ASIC v Adler at [372] per Santow J. The question whether a director has exercised a reasonable degree of care and diligence is answered by balancing the foreseeable risk of harm against the potential benefits that could reasonably have been expected to accrue to the company from the conduct in question: Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75 at [395] per Edelman J. 352 Hylepin submitted that John So's evidence in relation to the reasons why he decided not to exercise the lease option was contradictory, untruthful and disclosed that, in making his decision, he took into account his own personal circumstances and other irrelevant factors and yet failed to have regard to obvious and critically important matters that should have informed his decision. 353 In relation to John So's personal circumstances, Hylepin relied upon the following statements in John So's first affidavit (sworn 12 July 2019): Doshay's lease of the premises from which the Dragon Boat Restaurant is operated will expire in August 2019. Whilst there is an option for a second term, it has a 10-year term and comes with a demolition clause and a relocation clause. Given my age (72), I have no intention of taking on any further risk associated with extending the lease. and the following statements in John So's second affidavit (sworn 28 August 2019): I had reservations about Doshay renewing the lease of the Premises for a further ten year term. I was particular1y concerned about the length of the renewed term. However, I am now in my 70s, am hopeful of being able to retire from my role soon and cannot commit to being involved in the operations of the Dragon Boat Restaurant for a further ten years. 354 Hylepin submitted that, during cross-examination, John So falsely denied that he had had regard to his age when making his decision not to exercise the lease option and that the primary reason behind his decision was that he just did not want to work in the Dragon Boat Restaurant anymore. Hylepin argued that, in this way, John So preferred his own interests ahead of those of Doshay and its shareholders and thereby breached his fiduciary obligation to Doshay to avoid, and not act in, a conflict of interest. 355 Hylepin's submissions misstate the purport of John So's evidence. In his first affidavit sworn 12 July 2019, John So made only brief mention of the lease as it was not, at that time, part of Hylepin's claims. In his second affidavit sworn 28 August 2019, John So gave a fuller account of the reasons for deciding not to exercise the lease option. In addition to the statements relied on by Hylepin reproduced above, John So also explained that trading conditions for the Dragon Boat Restaurant were becoming increasingly difficult by reason of changing tastes in Chinese food; the restaurant was experiencing difficulty with retaining good staff; John So considered that a renewed lease on the same terms as the existing lease did not provide security to Doshay; and John So believed that "there was a good chance that, if the option was not exercised by Doshay, the landlord would enter negotiations with Doshay for an alternative leasing arrangement that would better serve Doshay's interests than renewing the lease for ten years on the terms provided in the lease". In cross-examination, John So did not deny that he had had regard to his age when making his decision not to exercise the lease option. He denied that it was an important consideration in making his decision. I accept that evidence. Although, as noted earlier, John So's explanation of the reasons that he did not renew the lease were not expressed clearly or coherently during cross-examination, the reasons were substantially as expressed in his second affidavit. 356 I therefore reject Hylepin's submission that John So had a conflict of interest when he decided not to exercise the lease option by reason of his personal circumstances, particularly his age and intention to retire in the near future. That is for two reasons. First, I accept John So's evidence that his personal circumstances were not the primary consideration in his decision. Secondly, even as a secondary consideration, I do not consider that John So's personal circumstances created an interest that was conflicting with the interests of Doshay. To the contrary, John So's personal circumstances was an additional business circumstance or risk that had to be managed as part of or together with the decision concerning the lease. As John So sought to express in cross-examination, restaurant businesses involve risk and often lose money. Decisions concerning the length of a lease were connected with decisions concerning the future management of the Dragon Boat Restaurant. 357 I also reject Hylepin's submission that John So failed to exercise due care and diligence when making the decision. Hylepin's submission is based on the premise that it was commercially obvious that Doshay should exercise the option. However, the premise is not made out on the facts and is largely based on assertion. Hylepin adduced no evidence to contradict John So's evidence that tastes for Chinese food had been changing and trading conditions for the Dragon Boat Restaurant had become more difficult; it adduced no evidence as to the difficulties for the Dragon Boat Restaurant in retaining staff; it adduced no evidence to contradict John So's belief that he could negotiate better terms from the landlord than the existing lease. Hylepin also asserted that, in the circumstances facing the Dragon Boat Restaurant in 2019, renewing a lease for 10 years involved less commercial risk than moving to a monthly tenancy and seeking to negotiate a better and possibly shorter lease. John So disagreed. I accept his evidence. All businesses face risk. Restaurant businesses are small businesses subject to changing tastes in local markets. It is a matter business judgment whether, at a given point in the business cycle of a restaurant, it is more risky or less risky to enter into a 10 year lease. I also accept the defendants' submission that Hylepin provided no coherent explanation as to why John So and Hellen Chin, who between them have an interest in approximately 75% of the shares in Doshay (ignoring the shares held by Evaluator), would have acted otherwise than bona fide in the interests of Doshay. 358 In my view, Hylepin has not established that, in deciding not to renew the lease for the Dragon Boat Restaurant, that John So acted in breach of his fiduciary duty to Doshay or in breach of his duties as a director of Doshay under s 180(1) of the Corporations Act. F. ALLEGED OPPRESSION 359 Hylepin also alleges that the conduct of the affairs of Doshay has been either contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, Hylepin. The conduct the subject of the oppression claim is the same as the conduct the subject of the fiduciary duties claim, but also includes the alleged failure to pay dividends. 360 It follows from my conclusions with respect to the fiduciary duties claims that I do not consider that the impugned transactions were oppressive. As stated earlier, the statutory phrase "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" in 232(e) of the Corporations Act is concerned with conduct that involves commercial unfairness or where a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair. Mismanagement or poor management alone does not constitute oppression. As explained above, in my judgment the impugned transactions were not uncommercial or improper. They were undertaken with the aim of increasing the value of Doshay, recognising the risks associated with all business ventures. Some of the transactions turned out to be profitable. Some turned out not to be profitable. They did not involve statutory oppression. Although I have found that Doshay's decision to buy out Global Crest's interest in Evaluator to be a breach of fiduciary duty, I do not consider that that one transaction constitutes statutory oppression. 361 In that respect, I reiterate that I do not accept Hylepin's contention that it was kept in the dark about Doshay's business affairs. This is not a case in which an investor, believing that it had invested in a particular type of investment (a Chinese restaurant) had its investment funds redeployed to other business ventures without its knowledge. I have found that Peter Chan received and approved Doshay's financial statements for FY1988, FY1989 and FY1990 in his capacity as director of Doshay, which disclosed a number of the investments undertaken by Doshay which are the subject of allegations in this proceeding. I have also found that, in the period to about 2008, John So consulted with the other directors and shareholders, including Celia Chan on behalf of Hylepin, in an ad hoc manner as circumstances and convenience allowed. In mid 2004, Hylepin's accountants received Doshay's income tax returns and financial statements for FY1999 to FY2003 which disclosed Doshay's investments in, and loans to, the various entities that are the subject of challenge in these proceedings. 362 I reject Hylepin's further claim that Doshay's failure to pay a dividend after FY1988 until November 2018 was oppressive. The evidence shows that, following the payment of the FY1988 dividend, John So spoke with Doshay's shareholders and proposed that the profits generated by Doshay should be retained as this would assist Doshay in meeting its working capital requirements and enable Doshay to make other investments. That is what occurred. There is no evidence of any complaint by any shareholder, including Hylepin. There is nothing unfair about that investment strategy. By letter dated 11 July 2014, QR Accounting Services on behalf of Hylepin asked about Doshay's dividend policy, but no complaint was made. It was only in 2016, in connection with these proceedings, that a complaint was made by Hylepin for the first time. On 9 November 2018, Doshay declared a dividend totalling $2,000,000 and forwarded a cheque to Hylepin in the amount of $300,000. Perhaps Doshay might have declared a dividend more promptly after Hylepin complained in 2016. There is no evidence, though, to suggest that Doshay refused to declare a dividend to prejudice Hylepin. 363 Finally, I note that the relief sought by Hylepin on account of the alleged oppression is that Doshay buy back Hylepin's shares at fair value or that John So acquire Hylepin's shares at fair value. The evidence shows that the defendants have made two offers to buy Hylepin's shares at fair value as a means of resolving this proceeding. The first offer was made on 7 September 2018 and the second offer was made on 4 September 2019. Both offers were refused. Those offers further negate any suggestion of oppression. G. CONCLUSION 364 In conclusion, I uphold Hylepin's claim that Doshay holds five ordinary shares in Global 2000. I will make a declaration to that effect. I will also order, pursuant to s 175 of the Corporations Act, that Global 2000 do all things necessary to correct its register of members, and lodge a notice of correction with ASIC, to record that, at all times since 15 June 2000, Doshay has been the owner of five ordinary shares. 365 I otherwise dismiss Hylepin's originating application. 366 As to costs, I will allow the parties 28 days in which to file and serve written submissions in respect of the costs of the proceeding of no more than five pages in length. Unless the parties seek an oral hearing on the question of costs and I consider that an oral hearing is necessary, I will determine the question of costs on the papers. I certify that the preceding three hundred and sixty-six (366) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan. Associate: Dated: 25 September 2020 SCHEDULE OF PARTIES VID 1438 of 2016 Defendants Fourth Defendant: WENDY CHENG