New South Wales Supreme Court CITATION : Evalena Pty Ltd v Rising Sun Holdings Pty Ltd [2003] NSWSC 622 HEARING DATE(S) : 14/05/03; 15/05/03; 16/05/03; 03/06/03 JUDGMENT DATE : 11 July 2003 JURISDICTION: Equity Division JUDGMENT OF : Young CJ in Eq DECISION : The plaintiffs' suit is dismissed. The cross claim for debt must also fail as a loan that must be paid "within 10 years" is not due and payable until the ten year period has concluded. CATCHWORDS : EQUITY [35]- Fiduciary duties- Accountant for Japanese investor- Alleged gift of capital to fiduciary- Fiduciary producing documents on which to base claim- No independent advice- Claim fails. EQUITY [109]- Trust- Whether trust exists- On facts held no. WORDS & PHRASES- "Within"- (within 10 years). Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Earl of Morton's Trustees; Douglas v Macdougall [1944] SC 410 Ghana Commercial Bank v Chandiram [1960] AC 732 Haywood v Roadknight [1927] VLR 512 Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 701 In re Hofmann 14 Weekly Notes of Cases 563 (Pa) CASES CITED : Jampco Pty Ltd v Cameron (1985) 3 BPR 9487 Phipps v Boardman [1967] 2 AC 46 Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 Reg v IRC; Ex parte Knight [1973] 3 All ER 721 Reynolds v Reynolds [1941] VLR 249 Town of Alexandria v Clark County 231 SW (2d) (Mo) 622 Ward v Walton (1989) 99 FLR 21 Young v Queensland Trustees Ltd (1956) 99 CLR 560 Evalena Pty Limited (P1) Devlon Pty Limited (P2) Rising Sun Holdings Pty Limited (D1) PARTIES : Brian Muir (D2) Kaoru Hamasaki (D3) Ronald Bentley Brown (D4) Yoshiko Hamasaki (D5) MLC Nominees Pty Limited (D6) FILE NUMBER(S) : SC 1192/03 R N Gye (P) COUNSEL : F M Douglas QC and A I Tonking (D3 & 5) S A Benson (for Liquidator and Receiver of the Trust - written submissions) SOLICITORS : Greg Judd & Associates (P) Matthews Folbigg Pty Ltd (D3 & 5) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Friday 11 July 2003 1192/03 – EVALENA PTY LTD v RISING SUN HOLDINGS PTY LTD JUDGMENT 1 HIS HONOUR: The first defendant, now in the course of being wound up, was between 23 December 1994 and 10 April 2001 the registered proprietor of the land on which the Colosseum Hotel at Kings Cross stands as well as being the proprietor of that Hotel. 2 The land and hotel business were sold in April 2001. The proceeds were paid into a bank account of Rising Sun Holdings at the National Bank at Broadbeach, Queensland, then transferred to an account in the name of the third defendant, Mr Kaoru Hamasaki. They were then withdrawn by him from that account to the credit of two superannuation accounts, one in the name of himself and one in the name of his wife, the fifth defendant. 3 The plaintiffs say that the land and Hotel were held by Rising Sun Holdings as trustee of what they call the Colosseum Hotel Trust. That Trust, they say, is a unit trust of which the third defendant, or a company controlled by him holds 60% of the units, the first plaintiff (a trustee for the Family Trust of Brett Chapple) 20%, and the second plaintiff (the trustee of the Family Trust of Yuki Ishida) 20%. 4 The defendants deny this utterly. 5 Various mareva orders were made at an interlocutory stage of these proceedings which meant that the case has been considered in the expedition list. 6 The first plaintiff is a company which claims to be the trustee of the Chapple Family Trust. The second plaintiff is a company which claims to be the trustee of the Ishida Family Trust. The paterfamilias of those respective Family Trusts are respectively Brett Anthony Chapple and Yuki Ishida. Both of these gentlemen were directors of the first defendant from 22 August 1994 to 4 July 1997. 7 To eliminate excess verbiage in these reasons, I will use the word "plaintiffs" loosely as comprehending the corporate plaintiff and Messrs Chapple and Ishida unless I indicate otherwise. The defendants referred to are the third and fifth defendants, Mr and Mrs Hamasaki. 8 I should note that there are other defendants. Mr Brown, the liquidator of the first defendant and the person who is also the fourth defendant as the receiver of the Colosseum Hotel Trust, was excused attendance. I should note that the liquidator was appointed as a result of the non-payment of an independent debt rather than as a result of the activity of any of the parties to the present proceedings. I excused Mr Brown from attendance at his request. The proceedings were settled between the plaintiffs and the second defendant, Mr Muir, who at one time acted as Mr Hamasaki's solicitor. 9 At the hearing, Mr R N Gye appeared for the plaintiffs and Mr F M Douglas QC and Mr A I Tonking for the third and fifth defendants. The hearing commenced before me on 14 May 2003 and continued on 15 and 16 May and concluded on 3 June when I reserved my decision. 10 The plaintiffs seek various orders against the third and fifth defendants. These depend on the answer to the principal question as to whether the Hotel is owned beneficially by Rising Sun Holdings or whether it is held in the Colosseum Hotel Trust. 11 There is another, collateral, question, and that is, whether the balance of a loan of $830,000 made by Mr Hamasaki to Mr Ishida repayable "within 10 years" of 14 November 1994 is repayable now or only after 14 November 2004. 12 The Hamasaki interests seek orders under their cross claim that the plaintiffs are guilty of breaches of fiduciary obligations towards them and should have to pay equitable compensation of over $1.5 million. 13 The plaintiffs' case as ultimately formulated was that the first defendant, Rising Sun Holdings Pty Ltd, was incorporated as trustee of the Colosseum Hotel Trust. That Trust was established as a unit trust by deed dated 23 November 1994 in which a Mr Voo was the settlor. The unit holders were the third defendant, or his company as to 60%, the first plaintiff as to 20% and the second plaintiff as to 20%. 14 The best method of approach, after dealing with preliminary matters, is to pose the following questions: (1) The principal question, that is, who is the beneficial owner of the proceeds of the sale of the Hotel? (2) The question of the Ishida loan; (3) The consequences of my answers to questions (1) and (2). 15 The remaining matters depend on how the principal question is answered. 16 As I have noted, the Hamasaki interests seek orders against the plaintiffs under a cross claim which they have filed. Again, with one exception, whether those orders are to be made depends on the answer to the principal question. The one exception is whether there is a debt owing by Mr Ishida to Mr Hamasaki of some $199,000 (the balance of the $830,000 after some repayments). 17 First I should sketch some background facts and note the respective contentions. 18 On 24 November 1994, Rising Sun Holdings agreed to purchase the land on which the Colosseum Hotel stood for $3,500,000.00. On 28 November 1994, a meeting of the unit holders was purportedly held and further units were issued in the Trust to provide the purchase monies for the Hotel. [I say this on the basis that the Trust actually existed at this time]. Also on 24 November 1994, the first defendant agreed to buy the fittings and fixtures of the Hotel for $2 million. 19 The plaintiffs' case is thus that the land and business were purchased by the first defendant as trustee of the Colosseum Hotel Trust and accordingly the proceeds of its sale are held on those trusts. The defendants say that the third defendant paid the whole of the purchase price for the land and Hotel: Mr Chapple was simply his accountant. The third defendant, Mr Hamasaki, at no time ever consciously gave 40% of his substantial investment away to either the first or second plaintiffs. The defendants further say that the documentation prepared by Mr Chapple is quite inconsistent with known independent documents and shows that some of the key documents were created by Mr Chapple after the date they bore, or were inconsistent with the agreements between the parties. 20 Furthermore, they say, that the plaintiffs resigned from the enterprise in July 1997, were not involved further with it after that date and made no claims at all on the capital of the Hotel until after they became aware that the Hotel was sold in the year 2001. 21 The evidence shows that Mr Ishida was a travel agent who had had some dealings with Mr Hamasaki from 1991. In 1994, Mr Hamasaki was in the happy position of having about 15 million Australian dollars as the result of the sale of his family's private company or business in Japan. Mr Hamasaki, who had been spending his time in Japan or Hawaii desired to move to Australia permanently. He contacted Mr Ishida. Mr Ishida recommended Mr Chapple, who was then an accountant carrying on a small private practice. Mr Hamasaki did not meet Mr Chapple until about July 1994. 22 Mr Hamasaki was also put in touch by Mr Ishida with Goldsmiths, Solicitors, a firm of solicitors who were able to correspond with their clients in both English and Japanese. 23 Mr Hamasaki asked Mr Chapple and Mr Ishida to find some business for him, it would seem, at least in part, so that he could obtain the special visa allowing permanent residence in Australia for people with a business here. It is in connection with what Mr Chapple and Mr Ishida did in establishing those businesses that the present dispute has occurred. 24 I will come straight to the core issue. That is, whether the Hotel and the proceeds of its sale are part of the Colosseum Hotel Trust. The plaintiffs say that it is and that the Hamasakis should be ordered to pay back the monies paid out to them in June 2001 to the receiver of the Trust. 25 (1) It is hard to understand why a person such as Mr Hamasaki who, as is common ground, supplied the whole of the purchase price for the Colosseum Hotel, at least $5.5 million (he says nearer $8 million when one looks at all the other monies he spent in connection with the project), would give away 40% to the plaintiffs. 26 This difficulty is increased by the fact that at T20 Mr Chapple in cross examination agreed that at no stage in the discussions up to August 1994 was there ever any suggestion that there would be a gift of at least $1.2 million to himself and Mr Ishida. 27 The plaintiffs attempted to surmount that fundamental difficulty in their case by suggesting that as the plaintiffs were to be the active partners in the business and Mr Hamasaki a sleeping partner, the equity was to be part of their remuneration package. 28 Indeed, Mr Gye, in his closing address, went further. He said that Mr Chapple had a thriving accounting business which he had to give up in order to concentrate on Mr Hamasaki's business interests. However, there was just no evidence at all that Mr Chapple did have a thriving accounting business, or that he sold it in any sacrificial way or that he devoted his time entirely to Mr Hamasaki's business interests. 29 Furthermore, it would not seem that Mr Chapple had any particular skills in doing what Mr Hamasaki wanted to have done. The monies were invested in a hotel. Mr Chapple had no experience with hotels, or at least he did not tell me that he had any. In fact, the management of the Hotel was placed under contract with Empire Group Pty Ltd though Mr Chapple drew a "management fee" of $7,000 a month for what Mr Douglas QC called "the most over-managed hotel in Australia". 30 The fundamental difficulty in the plaintiffs' case was never really surmounted. One really cannot think of any reason why a business man who was virtually a stranger, would want to give either Mr Chapple or Mr Hamasaski, something like $1.6 million each. 31 I should note that Mr Hamasaki says that the real arrangement between the parties which was documented by Mr Chapple, was that he was to loan Rising Sun Holdings the money to buy the Hotel, that Messrs Chapple and Ishida were to be involved in the management of the Hotel and were to receive 20% of the profits each. As I will mention shortly, this proposition is completely in opposition to what is disclosed in the documents, including documents signed by Mr Hamasaki, documents that in some cases were prepared by Mr Conolly of Goldsmiths and which were transmitted with at least a covering letter in both English and Japanese to their Japanese clients. 32 However, it must also be said that the instructions for preparation of the documents and sometimes the preparation of the documents themselves, were given or done by Mr Chapple rather than Mr Hamasaki. 33 Before coming to the documents, I should deal with the key conversations on which the plaintiffs rely to establish their case. 34 The chronology shows that Mr Hamasaki initially visited Australia between 11 and 21 June 1994. During that visit he was introduced by Mr Ishida to Mr Chapple. Mr Hamasaki returned to Australia between 17 and 21 August and again between 27 September and 3 October and 10 and 23 November. Rising Sun Holdings was acquired by the parties on 22 August, Messrs Hamasaki, Ishida and Chapple becoming its directors. On 30 September Mr Chapple wrote to Mr Hamasaki telling him that he had identified the Colosseum Hotel as being available for acquisition at a cost of about $5 million. In October, Mr Hamasaki established a yen account with the National Australia Bank. He made a substantial deposit of 300 million yen into that account. He later paid more money into that account. From this account, monies were withdrawn and paid into the account of Rising Sun Holdings in order to purchase the Hotel. 35 Mr Chapple says that on 20 August 1994, he met with Messrs Ishida and Hamasaki at his home in Wallumatta Road Newport. 36 Mr Chapple says in his affidavit of 22 April 2003 that Mr Hamasaki put to him a business and partnership arrangement and said: Hamasaki: "With you and Yuki doing the work and me putting in the capital we can make a good partnership owning a few different types of businesses. First we should buy a property that includes a business. This will give us a strong base for the partnership and then you and Yuki can make some new businesses. You could especially look at businesses between Australia and Japan. Yuki can handle the Japan side and you could look after the Australian side. If you agree I'll put in $7 million to $8 million to the business and give you and Yuki 20% each." Chapple: "That's a very generous offer although with $8 million capital we'd be looking at a fairly big operation that is probably going to demand most of our time. When you say you'll give Yuki and I 20% each I assume this means that for any business or property that the partners decide to invest in you will put in the money needed for all of the capital and you will receive a 60% interest and Yuki and I will receive a 20% interest each without us having to put in any funds?" Hamasaki: "Yes, that's right. For your 20% you will be doing the work to find and run the businesses. In Japan when we make a business relationship we make it to be long lasting so it is important that you own a share of the business right away. Then you will work hard for the future of the business. This is good for me as well as for you." 37 In that affidavit, Mr Chapple then said that he and Mr Ishida discussed that proposal between themselves and agreed to talk further with Mr Hamasaki several days later. 38 However, later he changed this evidence to say that the second meeting was on the same day at a karaoke bar at Neutral Bay. It was put to Mr Chapple that the reason that he had changed his evidence was that he now knew that Mr Hamasaki had gone back to Japan on 21 August. 39 Mr Chapple says that "During several further conversations with Mr Hamasaki about his proposal, I recall words to the following effect being said". Chapple: "You've proposed that Yuki and I will receive 20% each of any property or business that we all decide to invest in. What exactly would you expect of Yuki and I for this?" Hamasaki: "Like I said you and Yuki would not have to put any money in. I will put in the capital and I'll own 60%. For your 20% each you and Yuki should look for the businesses and do the work to check each business and arrange to invest in it if we all agree. Then you and Yuki look after running our businesses and work to grow them and also look for new ideas. You would also have to set up and run an office for our partnership to work from and to arrange for all things like bank accounts and tax and accounts to be done." There was then conversation about Mr Hamasaki being a silent partner. Mr Chapple said he agreed to the proposal and then said: "I'll arrange for a new company to be set up with you owning 60% of the shares and Yuki and I owning 20% each. The directors will be the three of us and I will act as the company secretary if you agree. When we're ready to start investing and we know how much is involved then we can issue new shares to capitalise the full value of the investment." Hamasaki: "Yes that's good. Thank you." 40 Mr Ishida says that he introduced Mr Hamasaki to Mr Chapple. He further says that on 20 August 1994, he went to a meeting with Mr Hamasaki at Mr Chapple's Newport home. Mr Ishida says that at that meeting Mr Hamasaki asked whether he and Chapple would be prepared to come into business with him, Mr Chapple said he was happy to talk about it, Mr Hamasaki said he would put in 6-7 million dollars capital, maybe more, depending on what the business was, that Chapple and Ishida would do the work. Mr Hamasaki asked Mr Ishida what his, Hamasaki's share, should be, and Ishida said 60% whereupon Hamasaki said to Ishida, I agree, I will have 60% and you and Mr Chapple have 20% each. 41 What I have just related took place in Japanese. Mr Ishida then said to Mr Chapple: "We are just discussing this, Mr Hamasaki has 60% and you and I can get 20% of the share of the company each. Is that okay with you?" to which Mr Chapple replied: "Yes that is fine provided we don't have to put any money in. Mr Hamasaki is the silent partner and he puts in the capital." 42 Mr Ishida then says that either at the same or another meeting shortly thereafter there was a conversation in which Mr Chapple said: "You've proposed that Yuki and I will receive 20% each of any property or business that we all decide to invest in. What exactly would you expect of Yuki and I for this?" Mr Hamasaki replied: "You and Ishida San would not have to put any money in. I put in the capital. I will own 60%. For your share and Ishida San's share you both must run the business. You and Ishida San must also look for new ideas. …". He then gave similar evidence to Mr Chapple. 43 Mr Hamasaki said that he visited Australia between 17 and 21 August 1994. He denied in his affidavit that he ever visited Mr Chapple's home at Newport, though in some further examination in chief at T198 it would seem to me that he had mellowed a little and thought that he might have gone to Mr Chapple's home at Newport at some stage. He said that he had been to various karaoke bars in Australia and could not particularly remember any at Neutral Bay. 44 However, Mr Hamasaki denied both in his affidavit and in oral evidence that he ever offered the plaintiffs a 40% interest in his business. He says that the amount of money involved was not mentioned until March 1995 after the Rising Sun company was established and the Hotel was to be purchased. He says that in March 1995, the following conversation took place: "After I arrived in Australia in March [1995] …. I went to the office and had a number of discussions with Messrs Chapple and Ishida. They included the following: Mr Chapple: 'We have now purchased a company … we made the shareholdings in the $100 company as 60% to you, 20% to each of us. We thought 20% each was reasonable as we will have to give up certain positions, and coming in to work probably full time on the hotel business.' " 45 Mr Hamasaki said he replied: "OK, it is common in Japan for senior managers to share in some of the profits. I can understand this. So that means you are aiming for a big profit to make a good dividend payout 60/20/20?" He says that both Chapple and Ishida said: "Yes we want to make good money." Mr Hamasaki said he then asked if the money used to purchase the Hotel was a loan to the company and both Chapple and Ishida said "Yes". He asked who owns the Hotel and was told it was Rising Sun Holdings. Mr Hamasaki said he then said: "My money is borrowed by Rising Sun Holdings to purchase everything, the property and the business." There was an affirmative reply and Mr Chapple added: "Because the running of the business and the maintenance of the hotel needs more money, why doesn't the company borrow $7.5 million in total from you? The company will pay, say 6% interest to you Mr Hamasaki. It will also pay a salary to Mr Hamasaki, to Ishida and myself and you, Mr Hamasaki will also receive the interest, and as well when the company makes a profit we can have a dividend." 46 Mr Hamasaki said that he was quite prepared to agree to those arrangements. He said he had asked Mr Ishida on many occasions about Mr Chapple and was told "He is a chartered accountant. He is very trustworthy." Accordingly Mr Hamasaki said he felt he could trust Mr Chapple and that Messrs Chapple and Ishida were prepared to help him establish a new life in Australia by finding a suitable business, assuming day to day responsibility for managing it. However, he says it was never his intention to make a gift of any portion of his capital to anyone. He further says that at no time during the discussions was there any mention of the establishment of a trust fund or of Rising Sun Holdings being a trustee. 47 Mr Chapple said in evidence (T13) that Mr Hamasaki's English was not too bad, "I could understand him quite clearly. He appeared to understand me". On the other hand, Mr Hamasaki and Mr Ishida gave evidence that Mr Hamasaki had very little English. 48 There was quite a long cross examination of Mr Hamasaki on this point. None of this led me to take the view that Mr Hamasaki's English was "not too bad". However, on day three, when the Japanese interpreter showed herself not really to be at the top of her profession, Mr Hamasaki did become a bit frustrated and did answer some questions directly or before translation, and occasionally corrected the interpreter's translation. However, even assuming that his understanding of English in 2003 is better than he would have me believe, this merely goes to credit: it does not demonstrate that Mr Hamasaki could speak passable English in 1994. 49 Returning to August 1994, Mr Chapple kept no note of the Newport meeting. He was cross examined at T14-15 on this meeting. It was put to him that it was strange that at one of the most important meetings of his life, Mr Chapple, a professional chartered accountant, did not make any notes. It was put to Mr Chapple further that there was nothing in his affidavit as to any agreement reached as to how much he, Chapple, was to be paid for his services and for what reasons. Mr Chapple said that those matters were in fact discussed between the parties and not put in the affidavit because he did not believe it was relevant to insert them there. It was then put that Mr Chapple thought it was fair that he should both be paid for his services and receive an amount of capital on behalf of his services to the company. Mr Douglas QC kept putting to Mr Chapple that his decisions were being made on behalf of Mr Hamasaki but were partly for his own benefit, to which Mr Chapple consistently answered by saying that he was negotiating on behalf of "the three of us". 50 Jumping ahead, there was another significant piece of cross examination at T46-47. 51 Page 273 of the bundle purports to be a meeting of unit holders of the Colosseum Hotel Unit Trust held on 29 September 1996 at Suite 701, 161 Walker Street, North Sydney. There was minuted that there were present at the meeting three companies represented by respectively Messrs Hamasaki, Ishida and Chapple. The minutes record a decision to amend clause 16(e) of the Colosseum Hotel Unit Trust Deed to allow the trustee to provide a guarantee and indemnity to a bank in respect of Australian Sealand Exports Pty Ltd. This was another venture of the parties. 52 Mr Douglas QC asked Mr Chapple about the meeting and he said that he was in no doubt at all that the meeting was held at Walker Street, North Sydney in Rising Sun's office. He recalled it very clearly, though he did not think that Mr Ishida was actually present. The cross examination then proceeded as follows: "Q. You couldn't be mistaken about the meeting being held 29 September at North Sydney? A. No, I don't believe so. Q. You have no doubt a discussion there recorded took place? A. Yes, correct. Q. In North Sydney at that time? A. Yes, that is correct. Q. Go to your diary note 270 there is an extract, that is an extract from your diary? A. Yes it looks like it. Q. It says Sunday 29 September 1996. A. I see that. Q. You were in Japan weren't you? A. Correct. Q. So this meeting which you say took place on 29 September, that minute must be a fabrication mustn't it? A. The date may be wrong but I don't understand how. Q. I suggest that it is just a fabrication. A. Certainly not a fabrication." 53 I should note here that my impressions of all the main witnesses was unfavourable. It may be that the serious illness from which Mr Chapple is suffering affected his evidence. I would discard an alternative view, and that is that he was not careful enough in making his affidavits and did not check dates etc before he swore them, because (a) he is a chartered accountant whose nature is to be cautious; and (b) his evidence is contrary to the documents. 54 It may also be that language difficulties affected the evidence of Messrs Ishida and Hamasaki. Mr Ishida did not give evidence through an interpreter, but I felt from time to time that he did not act responsively to cross examination but that may be because of his imperfect English. Mr Hamasaki could speak better English than he made out. He had the advantage of an interpreter (though the interpreter on the last day was of much more assistance than the previous interpreter), and had the advantage of a little more time to think about the question than the other witnesses. His evidence came out so naively in parts that it was difficult to relate that to a successful Japanese businessman. 55 It may be that I am jumping to a conclusion here as the evidence really did not make it clear whether Mr Hamasaki's wealth was inherited or earned through his own efforts. The Court just does not know exactly what Mr Hamasaki's activities were before his private company in Japan was sold. It may well be that the value of the company was made by his parents rather than himself. 56 However, even if Mr Hamasaki was an experienced businessman in Japanese surroundings, he was clearly not familiar with the Australian scene. I accept his evidence that concepts such as trusts and companies as they are administered in Australia were not familiar to him. 57 Because of my concern about the accuracy of the oral evidence, it is necessary to look closely at the documentary evidence. The plaintiffs relied very heavily on this. 58 It is true that the documentary evidence supports the plaintiffs' position to a great degree and there is no documentary evidence supporting the defendants' case. However, on the defendants' case all the documents were prepared by Mr Hamasaki's accountant who was in a fiduciary position. Over and over again in cross examination Mr Hamasaki said "I trusted him". It almost became a mantra. However, the fact remains that on any story, Mr Chapple was entrusted by Mr Hamasaki to prepare the documents. I was not at all impressed by his response that he, Chapple, was preparing the documents on behalf of the three people. It was all Hamasaki's money and Hamasaki was the principal in the transaction. I will come back to this point. However, for the moment I need to deal with the documentary evidence, and then consider how subsequent dealings of the parties, particularly what occurred in July 1997 when Messrs Chapple and Ishida resigned as directors of Rising Sun Holdings. 59 A trust deed was prepared by Goldsmiths, Solicitors, which deed is dated in typescript 23 November 1994. The settlor was Richard Voo, who was an accountant in association with Mr Chapple. The deed sets up a unit trust and there is no need to go into details on this aspect of it. The schedule sets out that the trustee is Rising Sun Holdings Pty Ltd, ACN 066 150 669, and that the original unit holders are 60 units for Linsel Pty Ltd (ACN 065 894 644) as trustee for the Hamasaki Family Trust, 20 units for Devlon Pty Ltd (ACN 066 776 869) as trustee for the Ishida Family Trust and 20 units for Chapple & Co Pty Ltd as trustee for the Chapple Family Trust. Chapple & Co Pty Ltd was later renamed Evalena Pty Ltd and is the first plaintiff in these proceedings. 60 Mr Voo gave evidence that he could remember handing over two $50 notes in his office and knows that the deed was signed on 23 November. He was not shaken in cross examination but the other evidence made it improbable that this evidence was correct. Mr Conolly, solicitor, gave evidence that from 1992 until 1996 he was an employed solicitor with Goldsmiths. He says that he received instructions from Mr Chapple. He caused trustee companies on behalf of the Ishida and Hamasaki Family Trusts to be established by purchasing shelf companies, and he also prepared and drafted the unit trust deed. 61 He says that on either 30 October 1994 or 30 November 1994 he had a conference at which Mr Ishida, Mr Chapple and Mr Barrie Goldsmith, the principal solicitor of the firm, were present. He says that on 24 November 1994, the contracts for the sale of land were exchanged for the purchase of the Hotel between Rising Sun Holdings Pty Ltd and Axtean Pty Ltd, the then proprietor. He said that he was never told that Rising Sun Holdings was going to borrow money from Mr Hamasaki or any other person, and he was not instructed to prepare any loan agreements. Had he been told that there was a loan he would have advised Mr Hamasaki to retain separate and independent lawyers. He never remembers seeing Mr Hamasaki face to face. 62 At T32 Mr Douglas QC cross examined Mr Chapple on whether the $100 was ever paid by Mr Voo. He said yes it was paid and was paid in cash, but he agreed he never deposited it in the bank account of the company. It possibly went into petty cash of Rising Sun Holdings. Again, this is not the way in which an accountant would normally deal with a trust fund. 63 Mr Tonking cross examined Mr Conolly. Mr Conolly said he surmised that the relevant meeting must have taken place on 30 October and that the date of his note of it, 30 November, was an error. This belief was reinforced by his conclusion that the meeting must have been before the contract for the purchase of the Hotel was exchanged because he knew the stamp duty implications if the trust deed was not executed before that date with the minimal amount in the trust fund. However, having been reminded that 30 October 1994 was a Sunday, and knowing that he never held such meetings in his office on a Sunday, he conceded that the meeting must have taken place on 30 November. 64 Mr Conolly dealt with a provider of shelf companies known as Access Company Planners. On 30 November 1994, at 3.26 pm, Access Company Planners faxed Mr Conolly, notifying him that there were 11 companies on the shelf ready for purchase, including Devlon Pty Ltd and Linsel Pty Ltd. Mr Conolly was asked what explanation he could suggest for the Devlon and Linsel companies still being in the Access Company Planners stable on 30 November when he had already named them in the trust deed signed sealed and delivered on 23 November. He was unable to give a convincing explanation. 65 This evidence, together with the fact that it is very unusual to have a date typed in a pre-prepared document by solicitors makes me find that the trust deed was not signed on 23 November, but rather was signed after 30 November and that accordingly, Mr Voo's evidence cannot be correct. 66 It is now necessary to look at the documentation which followed this initial trust deed. 67 The next relevant piece of paper is a document which purports to be minutes of a meeting of 28 November 1994 of Rising Sun Holdings. The minutes say that the meeting was held at 11 am at 52 Atchison Street, St Leonards and Messrs Chapple and Ishida were present in person, and Mr Hamasaki by telephone link. The minutes record that Chapple proposed that in order to provide the required funding the trust should issue an additional 5,999,900 units of $1 each, that this proposal was agreed to so that in future the Hamasaki Family Trust would hold 3.6 million units, the Ishida Family Trust 1.2 million units and the Chapple Family Trust 1.2 million units. It is significant that the names of the trustees of these Trusts were not included in the minutes as this suggests those names were not known at that date. 68 Mr Hamasaki denied that he was ever told anything about trusts until 8 December. He denies that he ever saw anyone at Arthur Andersen with Messrs Ishida and Chapple. Mr Chapple was not sure which officers of Arthur Andersen he in fact saw. 69 Mr Ishida also says that there was a meeting with Arthur Andersen in mid-November 1994. He also agrees that during that conversation it was openly discussed that there would be a trust which would be buying the Hotel. He also says that at the meeting of 28 November 1994, he communicated with Mr Hamasaki by telephone link and translated what Mr Chapple had said, namely :"Now we have bought the Colosseum Hotel for $6 million. This hotel will be owned by the Trust. That means we need additional units so that they are increased to 6 million units altogether. Therefore automatically, Mr Hamasaki you get 60% of the units and Yuki and I get 20% each. Mr Hamasaki you're here for the Hamasaki Family Trust and Yuki is here for the Ishida Family Trust. I'm here for Evalena." 70 Of course, that could not have been right because Evalena did not come into existence for some months afterwards, but putting aside that as a mere anachronism, he corroborates what Mr Chapple says. 71 In cross examination it was put to Mr Ishida that it was rather uncanny that the conversations he had in his affidavit were almost word for word what was in Mr Chapple's affidavit as if some solicitor had put them in both. Mr Ishida could not explain how this occurred. It was not directly put to him that he had not put the November conversation to Mr Hamasaki, but the way the case was being conducted at that stage was that matters wholly at issue between the parties need not be specifically "Browne and Dunned". 72 I should interpolate here that the failure of Mr Chapple to remember details, such as whom he consulted at Arthur Andersen, his failure to take or keep notes, his obvious reconstruction of many events and apparent corroboration by Mr Ishida in affidavits using almost the identical words used by Mr Chapple in corresponding passages of his affidavit, all tell against me accepting Mr Chapple's evidence. Counsel endeavoured to take the blame for some of this. Whether that confession is accepted or not, the point remains good as a witness must swear on oath as to the conversation he actually had. 73 On 7 December 1994, Goldsmiths wrote to Mr Hamasaki in English and Japanese, reporting the completion of the purchase of the Hotel. On 8 December 1994, Goldsmiths also wrote a similar letter enclosing a discretionary trust deed signed by Mr Chapple as the founder, indicating "This deed remains to be executed by your family company, Devlon Pty Limited on page 26". 74 A third letter, also dated 8 December 1994 was sent by Goldsmiths to Mr Hamasaki, indicating that "As instructed by Brett Chapple, we have arranged the incorporation of an Australian company as your family company. The company is to be the trustee of the Hamasaki Family Trust. Both the company and the Trust have been established as part of the purchase structure for the Colosseum Hotel. If you have any questions in relation to this, would you please contact Brett Chapple or Christopher of our office. The name of the new company is Linsel Pty Ltd." The letter then asked for various forms to be signed and returned including consents to act as director. The documents were received back by Goldsmiths shortly before 20 December 1994 as that is when they were passed on to Mr Chapple. 75 Mr Hamasaki was cross examined on these documents. He said he did not understand the meaning of family company so he rang Mr Ishida and asked him. Mr Hamasaki stuck to his story that the money that he paid was a loan to Rising Sun Holdings. 76 Mr Gye thoroughly cross examined Mr Hamasaki as to whether, if it was a loan, why wasn't he paid interest and why wasn't the interest earned on the loan returned for tax purposes. All Mr Hamasaki would say was that his entitlement was to 6% on 7 and a half million and it was written down somewhere. 77 I now need to digress slightly. 78 Mr Ishida was purchasing a home and had no funds. Mr Hamasaki lent Mr Ishida the money and a document was generated to evidence the loan. I will need to refer to this document later when dealing with a collateral issue. The document is as follows: "LOAN AGREEMENT Mr Kaoru Hamasaki agrees to loan an amount of $830,000-00 to Mr Yuki Ishida on 01 December 1994 on the following terms: Interest rate: Nil % pa. Repayment terms: Principal to be repaid within 10 years of the date of this agreement. Dated 14 November 1994." For present purposes, the significance of the document is that such a document was generated for the loan of $830,000 at nil percent interest whereas no document was generated for the loan of $7.5 million at 6% interest. Mr Gye cross examined Mr Hamasaki at length on that matter. The only answer Mr Hamasaki gave was, "Because all three parties concerned knew very well that I give the money as a loan to the company." 79 Another interesting piece of evidence is p 228 of the court book (ie the bundle of documents prepared for ease of reference by the witnesses and the court) which is a document prepared by Mr Chapple shortly after 7 February 1995. It is headed "Rising Sun Holdings – Summary of Funds as at 7 February 1995" and has two columns, the first for Australian dollars and the second for yen. Underneath the typewritten figures is written in Mr Chapple's hand "Advance to Rising Sun 6,861,330.91". 80 Mr Chapple was cross examined on this at T41 and said that the document was a summary of the funds received from Japan, how they had been converted to Australian dollars and the use of the funds. Mr Douglas QC then asked: "Q. What you were there recording may I suggest to you is the amount which at that time had been advanced to Rising Sun in respect of the purchase of the hotel and the other matters set out in that document? A. Yes, that is correct. Q. You were there recording it, may I suggest to you, as at 7 February 1995 as a loan by Mr Hamasaki to Rising Sun? A. No I'm sorry, the amounts for the hotel and the various costs were not recorded as a loan. Those amounts were recorded as application for units in the trust. Q. Where do I see that? A. This summary does not seek to spell that out. Q. It is elliptical so far as that is concerned? A. Correct. The summary is just setting out the details of where the funds have gone to. … These are not the accounts of the company, these are just a summary of the funds." 81 Later on at p T42 Mr Douglas QC suggested that if the monies were advanced by way of capital to the trust "It would be quite inappropriate could I suggest as an accountant to describe monies so subscribed as being an advance to Rising Sun?" A. "Yes, you could be right." 82 Mr Douglas QC then took Mr Chapple to p 230 of the court book which was a summary as at 30 June 1995 which seems to note that $13,543,402.00 was received from Mr Hamasaki, $5,580,291.00 was transferred back to him, $279,382.00 was paid on his behalf including legal costs re immigration arrangements and insurance on a house, $830,000.00 was lent to Mr Ishida so that the funding by Mr Hamasaki to Rising Sun Holdings was $6,853,729.00. 83 Again, this piece of paper suggests that the transactions were loans rather than subscriptions of capital, and it is also instructive to see on the one piece of paper both so-called trust monies and personal monies of Mr Hamasaki being dealt with. The paper was clearly prepared by Mr Chapple. 84 The accounts for the year ended 1995 of Rising Sun Holdings are also in a strange form. If the accounts were for a company which was solely a trustee company, then one would have expected that they would have shown nil income and nil payments and all the business figures would be found in the accounts of the Colosseum Hotel Trust. However, this is not the case. There is no mention at all of Rising Sun Holdings business being as a trustee company, though there is a mention that the Colosseum Hotel Trust is owed $35,000.00. 85 Mr Gye spent a considerable amount of time cross examining Mr Hamasaki on the obtaining of his Australian visa – his business visa. In the end this did not go very far, and indeed, I considered it was only relevant as things turned out to the question as to how fluent Mr Hamasaki was in the English language. 86 Perhaps Mr Gye's main point in cross examination was that Mr Conolly's letters of December made it perfectly clear that if Mr Hamasaki had any problems with the documents he should contact Mr Conolly of Goldsmiths. It is common ground he never did so. It is also clear that at least the letters written by Mr Conolly were written in Japanese so that there could be no excuse that at least that part of the message was not clearly conveyed to Mr Hamasaki. Mr Hamasaki relied on him not understanding what a company or a trust was and that he trusted Messrs Chapple and Ishida to do the right thing by him. 87 As I have said, Mr Hamasaki says that he did not understand what the December documents were for and he got his advice from Mr Ishida, though Mr Hamasaki says Mr Ishida said: "I do not really understand what they are for either". He said "I trusted Mr Chapple and thought he would provide an explanation when I arrived in Australia." He said that after he moved to Australia in March 1995 he said in Japanese to Mr Chapple which Mr Ishida translated "Brett, what are the documents that were sent to me by Goldsmiths; what is their purpose?" to which Mr Chapple replied: "They are to establish Linsel Pty Ltd as trustee of your Family Trust. They are just part of the way to reduce tax." Mr Hamasaki says Mr Chapple did not say anything about any other Trust and in particular did not refer to any Colosseum Hotel Trust. 88 The Hotel apparently never made any profit. 89 In about March 1995, Mr Hamasaki was handed a cheque by Mr Chapple payable to Linsel Pty Ltd and he asked what it was, to which Chapple replied, "Linsel is the Trustee of the Hamasaki Family Trust. The purpose of the Family Trust is to distribute income to family members and to have a tax benefit. Rising Sun Holdings has three trusts under the Chapple family name, the Ishida family and the Hamasaki family. Your family trust will receive $10,000 a month, and each of Ishida and I will be paid $7,000 a month by way of management fees." Mr Hamasaki then opened a bank account in the name of Linsel and deposited his regular cheques into that account. 90 I should note a collateral matter at this point and that is that Mr Chapple sold his accountancy practice to a Mr Poignand on 12 April 1995. At that stage, the company previously known as Chapple & Co Pty Ltd had its name changed to Evalena Pty Ltd and Mr Poignand commenced a new company, Chapple & Co Pty Ltd to run the practice. He says that he considered that the purchase was a financially good one for him. However, the evidence is not strong enough to enable a court to hold that Mr Chapple sold his practice at a sacrificial rate in order to work in a joint venture with Messrs Ishida and Hamasaki. 91 Mr Hamasaki received cheques from Mr Chapple for $200,000.00 and $300,000.00 during 1995-1996, but says he could never find out what was his entitlement. He kept asking for financial accounts from Mr Chapple, but never received them. 92 He became concerned that Mr Chapple was driving a BMW car which he considered was worth over $120,000.00. He was also concerned when he found out in February 1997 from Ms Hoshi of the National Australia Bank that the Hotel had been mortgaged to the St George Bank in order to obtain money for an associated enterprise of the parties Australian Sealand Exports Pty Ltd. He also knew that Rising Sun Holdings was carrying on some sort of money lending business. 93 He instructed a Mr Muir, solicitor, to act on his behalf. In early July 1997 Ishida and Chapple resigned as directors of Rising Sun Holdings voluntarily. 94 Mr Hamasaki recollects that on about 29 September 1996, he called at the office of Rising Sun Holdings and that Chapple put in front of him a document, or rather the first page of a document. Mr Hamasaki said he did not have his glasses on and he asked for a translation of the document, and a Ms Doi translated the first paragraph, but had difficulty and called Mr Chapple in for an explanation. He said "It is only making a small change to the arrangement with the Bank so you should sign it. It will not affect the company in any way." He signed the document which he later found was a request by the unit holders of the Colosseum Hotel Unit Trust for the trustee to provide St George Bank with a first registered mortgage over the Hotel. Furthermore, the unit holders agreed to amend the trust deed to allow the company to have power to do this. The deed was amended on 7 November 1996. Mr Hamasaki had to personally pay out the St George Bank by paying the Bank $1,516,453.49. 95 Mr Douglas QC also points to the correspondence between Mr Chapple and Mr Muir in 1997. Mr Muir wrote to Mr Ishida and Mr Chapple on 16 April 1997 asking for an explanation. Mr Muir said that at the meeting that was held between the parties on 3 April 1997, he understood it was acknowledged that Mr Hamasaki's then status was as a director of Rising Sun Holdings and also its principal creditor and his entitlement to full access to the books and records of the company. 96 In their joint reply of 28 April 1997, Mr Chapple and Mr Ishida acknowledge point for point made by Mr Muir referred to above, refer to the Hotel as being "Mr Hamasaki's asset", agree to transfer their shares and units in Rising Sun Holdings and the Hotel Trust (semble without consideration), will resign as directors and concentrate on Australian Sealand Exports. 97 In para 47 of his affidavit, PA03, Mr Chapple said that when he stated that the point was substantially correct he meant to say that it was substantially correct that Mr Hamasaki was looking for a return of 7% on his investment. This was not very convincing. 98 On 28 April 1997, Messrs Chapple and Ishida offered to transfer their interest in Rising Sun Holdings and resign as directors without any payment by Mr Hamasaki. Mr Muir prepared the appropriate transfers, but they were never ever signed by either Mr Chapple or Mr Ishida. Nonetheless, no claim was ever made by Mr Ishida that he had any interest in the company or in the trust from his resignation in 1997 until the commencement of these proceedings. Indeed, the proceedings only commenced when the Hotel was finally realised and a large amount of money received. 99 Mr Gye says that there is uncontradicted evidence from Mr Voo that the trust deed was signed on 23 November 1994, but even if it was not, there was no doubt that a trust deed was entered into in November 1994 providing for units to be issued to raise $6 million. Income tax returns were prepared and provided to Mr Hamasaki who also received all the documents and signed many of them. Mr Hamasaki never queried the documents. He signed them and returned them. Despite the fact that Goldsmiths wrote to Mr Hamasaki in Japanese and he had every opportunity to contact them and query the trust structure, he did not do so. His explanation that Mr Ishida was the person whom he called for advice is hard to accept as Mr Ishida said he did not understand the documents either. 100 Mr Gye says that Mr Hamasaki was an experienced businessman who could read accounts. He documented the loan of the relatively small amount of $830,000.00 lent to Mr Ishida, but he never ever documented the loan of $5.8 million. The documents in the case and Mr Hamasaki's inadequate answer to them, show that the Hotel was part of the trust property. 101 Mr Douglas QC, for Mr and Mrs Hamasaki, presents quite a different picture. He says it is plainly implausible to suggest that Mr Hamasaki would have given away in excess of $2 million to almost complete strangers. Although he had known Mr Ishida since 1991, he had only just been introduced to Mr Chapple. Furthermore, in addition to this gift, Mr Hamasaki was also making available $84,000.00 per year by way of remuneration and fringe benefits such as the BMW car for Mr Chapple and a Jeep for Mr Ishida (though it is not at all clear that Mr Hamasaki was agreeable to these benefits). It was not as though Mr Chapple and Mr Ishida were actually doing any work because the Empire Hotel Group were providing the management services for the Hotel at a charge of $42,000.00 per annum. Apart from Mr Chapple's assertions that he provided "business management services", there is no evidence that he provided any services to Rising Sun Holdings at all. For his money, Mr Ishida was a handy man or odd jobs man. 102 Mr Douglas QC submits that I should not accept Mr Chapple's scenario that he was committing six or more years of his life to the venture and had to sell his accountancy practice so that he could concentrate on the joint venture business. Indeed, there was never any requirement on Mr Chapple to do anything, and he could, as he accepted in cross examination, walk away after six months with the capital appreciation. 103 Mr Douglas QC also submits that the plaintiffs' case is a recent invention. Neither plaintiff made any claim between 1997 and 2003, and indeed, the second plaintiff's application for its units to be redeemed was only made after proceedings commenced. Indeed, the second plaintiff has been permitted to be deregistered. 104 Before assessing the evidence, I must digress and set out the facts relating to Australian Sealand Exports Pty Ltd. 105 Mr Hamasaki said (DA08/38): "At some time during my discussions with Mr Ishida and Mr Chapple in 1994, Mr Ishida had said words to the following effect: 'We are considering setting up a business to export frozen seafood to Japan. There is a process by which the seafood can be frozen so that it preserves its freshness. However we have not yet decided on the name of the company'." Mr Hamasaki said: "I did not hear anything more about this proposed company or venture until after I arrived in Sydney in March 1995. I have subsequently seen records which indicate that a company called Australian Sealand Exports Pty Limited was established on or about 22 February 1995 when I was still in Japan. I believe that I did not hear the name Australian Sealand Exports Pty Limited until sometime after my arrival in Australia in March 1995. The records show that I was appointed a director of that Company in February 1995. I did not sign any documents for that purpose and I was not informed by any person at the time that I had been appointed a director of that Company. When I found out about it after my arrival in Australia I asked for my name to be removed as a director, however apparently this was not done until February 1996." 106 Mr Chapple says that the first meeting about Australian Sealand Exports took place in late 1995 where Mr Ishida said that there was an opportunity to get a business that would provide Australian food for export to Japan. Mr Hamasaki showed interest and Mr Ishida said: "Let's talk about if Rising Sun Holdings wants to invest in this business. The business will need several million dollars because the freezing equipment is very expensive. We would like to find a factory to fit out." 107 In mid-1996 Mr Chapple said he had a further discussion with Mr Ishida and Mr Hamasaki at North Sydney in which Mr Ishida said: "We can set up a company called Australian Sealand Exports Pty Ltd which will be owned as to one-third by Evalena, one-third by Devlon and one-third by Rising Sun Holdings. The directors will be Brett and me. We will all have to give guarantees to the bank to raise the funds. The company will need to borrow $2.5 million to set up the business. To do this we will need to use the Hotel for security and the directors will have to give guarantees." Mr Hamasaki said that it was good that he would not be a director because he did not want to give a guarantee. Mr Hamasaki said that he was really interested in the business, there would be a big cost in making the business but there would be a big return too. In early September 1996 Mr Chapple said he had a further meeting with Mr Hamasaki and Mr Ishida at which he said that the St George Bank gave the best rate of finance and that in addition to directors' guarantees the bank wanted a guarantee from the trust as owner of the Hotel and from Rising Sun Holdings in its own right. Mr Hamasaki said that that was okay. Mr Chapple then said: "As we talked about before, the trust will provide the Hotel as security for the loan. The bank requires the unit holders to have a meeting to make a change to the Trust Deed to allow for a mortgage over the property. I am waiting for the banks instructions on exactly what they want for this. I will let everyone know that this is available and we can have the meeting." He then says that after receiving the documents from St George, a meeting of unit holders was held on 29 September. He had drafted the document to record an agreement by all the unit holders to amend the trust deed to authorise borrowing for the purpose of the Hotel. Ms Doi, the office manager, was there and she translated the document into Japanese for Mr Hamasaki. He saw Mr Hamasaki sign the document. 108 ASIC's records show that Australian Sealand Exports Pty Ltd was acquired by the parties on 22 February 1995. The shareholders shown in the 1995 annual return were Evalena, 34 shares; Linsel, 33 shares; Rising Sun Holdings, 33 shares. The same is repeated in the 1996 annual return. The directors as at 22 February 1995 are Messrs Ishida and Chapple, Hamasaki and Miyazaki. Mr Hamasaki is shown as having ceased to be a director on 1 February 1996 and Mr Miyazaki on 15 August 1995. The company went into administration on 11 September 1997 and then into a creditors' voluntary winding up on 9 October 1997. 109 Interesting matters arising from the ASIC records are first, that the company was formed in early 1995 not late 1995 as Mr Chapple says and secondly, that Linsel, that is, Mr Hamasaki's company is shown as a shareholder, whereas one would have expected the shareholder to be Devlon, Mr Ishida's company (this may be yet another example of the documents just not reflecting what was happening on the ground). 110 A third interesting matter is that whilst the shareholdings of Evalena and Linsel are shown as not beneficial shareholdings, the shareholdings of Rising Sun Holdings are shown as being held beneficially. Thus there is not the slightest suggestion that Rising Sun Holdings holds its shares in Australian Sealand Exports as trustee for a trust. 111 Whichever way one looks at it, Mr Hamasaki had no obligation to pay Rising Sun Holdings $1,516,453.49 in order to bale it out from the demand made by the St George Bank. It would seem that he is entitled to be subrogated to the St George Bank's security in respect of what he paid under the principle in Ghana Commercial Bank v Chandiram [1960] AC 732. However, that is not a matter about which I have to make any decision. Mr Hamasaki's claim is that he suffered this loss because of a breach of fiduciary duty by Messrs Chapple and Ishida causing Rising Sun Holdings to mortgage the Hotel. 112 The Australian Sealand Exports business was, on any version of the facts, controlled by Messrs Chapple and Ishida. They each held 33% of the shares through their family trusts and also had 40% in Rising Sun Holdings, at least, so far as the legal interests in the shares of that company are concerned. Mr Chapple owed Mr Hamasaki fiduciary duties. Did they breach them? 113 The answer to this question depends on whether I accept Mr Hamasaki's version of how the document of 28 September 1996 was signed or the version of Mr Chapple. Ms Doi was not called. 114 In my view I should accept Mr Hamasaki's version. Mr Chapple's general presentation of the scenario is flawed because the dates that he sets out in his affidavit just cannot be correct. Mr Hamasaki was signing quite a number of pieces of paper as part of the general investment strategy and on anyone's story, there was neither adequate explanation nor independent advice as to why Mr Hamasaki should allow the Hotel to be mortgaged for the Australian Sealand business. It was a business controlled by Mr Chapple and Mr Ishida and Mr Chapple had an obligation not to profit from his fiduciary relation with his client Mr Hamasaki. 115 I have very great difficulty in assessing the evidence in this case. As I have said earlier, I was not confident that I could accept any of the oral evidence without reservation and, although the documentary evidence is plainly in favour of the case being made out by the plaintiffs, the documents were put together by Mr Chapple, Mr Hamasaki had some language difficulty and difficulty with the concepts of trusts and company in Australian law (I accept that much of his evidence). 116 Furthermore, whilst I would accept that Mr Hamasaki knew more English than he would have me believe in the latter part of 1994, and I accept that he trusted Mr Chapple to put things in order to an extent, he was an experienced Japanese businessman and it is very difficult to believe that he was as trusting as he says and would pay out such a very large sum of money blindly. 117 On the other hand, it is very difficult to explain why Mr Hamasaki would want to give $2 million capital away to Messrs Chapple and Ishida. The only explanation proffered by Mr Chapple is that they would be earning the money because of their work in the venture, but I agree with Mr Douglas QC that their work in the venture for which they were not otherwise paid was minimal, nor was it ever defined so as to amount to some sort of commitment. 118 I have taken the view that Mr Chapple's conversations with Mr Hamasaki related in his affidavits, and which often are reproduced word for word in Mr Ishida's evidence, are often reconstructions. However, as I have already noted that whilst in his affidavit Mr Hamasaki suggested that he had never been to the Newport home of Mr Chapple, in the evidence he gave on the last day of hearing he was much less certain; see T198. 119 Although it is a very difficult matter to decide for the reasons I have given earlier, my view of the facts is that Mr Hamasaki was not as experienced a businessman as it might have been expected by Mr Chapple and he was particularly unfamiliar with Australian commercial terms. He put trust in Mr Chapple to guide him. The evidence given by Mr Chapple about the various meetings in which Mr Hamasaki allegedly agreed with various propositions Mr Chapple put up, are to a great extent a reconstruction by Mr Chapple of what he thought happened. Mr Hamasaki's version is more likely to be correct. Mr Hamasaki thus thought he was lending money to the company, a company which was to be controlled by him. However, one where Messrs Chapple and Ishida were to receive 20% each of the profits. 120 Mr Chapple drew up the unit trust scheme in which Mr Hamasaki concurred to the extent that he thought it was some tax minimisation scheme which would not affect the general ownership of the capital. That scheme either never was fully consummated, or alternatively, was abandoned in July 1997, so that the full control of Rising Sun Holdings was vested in Mr Hamasaki. The Hotel was the property of Rising Sun Holdings beneficially. Mr Hamasaki was a creditor of Rising Sun Holdings, both for the initial monies which appear to be $6,861,380.91 (unsecured) as well as the $1,700,000.00 odd which was used to pay out St George Bank which may be secured. It would seem to follow that the distribution of $5.3 million made by Rising Sun Holdings to Mr Hamasaki in 2001 would probably be the repayment of loans, but that is a matter that I do not decide in these proceedings. 121 It is in my view of all the evidence more likely that the Hamasaki story is correct. The improbability of him making a gift outweighs any inferences I would draw from him meekly signing all the pieces of paper that were put in front of him without enquiry. 122 However, Mr Douglas QC says that I need not really go that far, because even if I accept the version put by the plaintiffs, the plaintiffs do not succeed. 123 Mr Douglas QC submits that there was no evidence to suggest that Mr Hamasaki ever intended to create a trust. He says on the plaintiffs' case the trust had not been part of the joint venture proposal in August 1994, but was the result of advice Mr Chapple says he received in November (see PA02/20-22). Mr Hamasaki's evidence was that he was not informed of that advice. 124 Furthermore, the way the funds were administered tended to show there was no trust. Mr Hamasaki made payments into the Japanese yen account, an account which it was common ground, was established for Mr Hamasaki's benefit to allow him to take advantage of exchange rates differential. Out of this fund, $830,000.00 was released to Mr Ishida by way of loan. 125 Furthermore, the plaintiffs never claimed that the so-called trust was constituted before 23 November 1994. The trust deed on that date was a declaration of trust over the $100 that Mr Voo paid, or says he paid. The monies that had previously been paid by Mr Hamasaki on 5 October 1994 never became part of the trust fund. 126 At this point the submissions divide into two parts: (a) what the situation would be if the trust was constituted on 23 November 1994; and (b) if the trust was constituted on 30 November 1994. I have already set out the evidence on this point. On the balance of probabilities I am not satisfied that the trust deed was signed on 23 November 1994. Mr Voo's evidence, I believe, is merely based on him reading the date on the document. The note about the acquisition of the shelf companies and the meeting on 30 November, together with the other indications I have mentioned earlier, make me form the view that the trust was only constituted on 30 November 1994. I can thus pass over the submissions that are made on the basis of some other finding of fact. 127 In this eventuality, Mr Douglas QC puts that Rising Sun Holdings could not have entered into the contract for the purchase of the Hotel and chattels as trustee for the trust established by the deed, nor is it part of the plaintiffs' case that Rising Sun Holdings initially entered into the contract on its own behalf but subsequently declared a trust or sub trust and there is no evidence to this effect. Even if this were the case, the deed was not duly stamped. 128 Of course, the fact that the trust was constituted after the purchase of the Hotel is not necessarily fatal. There may be some cases such as Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 701, where all parties subsequently act on the basis that an asset is trust property even though it was acquired prior to the trust coming into existence and there is an operative estoppel. However, no estoppel has been argued in the instant case. Even if it had been argued, the clear evidence was that whilst Mr Chapple may have acted in accordance with the trust, there was not much by way of unequivocal acts to show that Mr Hamasaki did. 129 It is true that courts of equity are not over-technical when considering whether a trust relationship exists between people in respect of property. As Maddock, Treatise on the Principles and Practice of the High Court of Chancery 2nd ed (1820) says at p 437, that equity courts "will enter into the merits of the case, in order to come at Fraud, or to know the true and real Intention of a Trust or Use declared under Deeds." If equity can see that the real intention of all the parties was that a property was to be held under certain trusts, then the court will not be too tender to see that the technical rules that the trustee actually declared itself a trustee of the property have been observed. 130 The vehicle by which this is done is often the imposition of a constructive trust. 131 Accordingly, whilst the point being made has some support, it is not a matter which can be decisive. If all the actions of the parties show there was a trust, then, despite technicalities, equity would so find. 132 The next matters of defence are that Mr Chapple was in breach of his fiduciary duties owed to Mr Hamasaki. 133 Even though Mr Chapple kept repeating that he was acting on behalf of "the three of us", my view is that he was principally acting for Mr Hamasaki. Furthermore, I am satisfied on the evidence that even though Mr Hamasaki perhaps overstressed his trust of Mr Chapple, Mr Chapple was a person whom Mr Hamasaki trusted and in whom he reposed confidence to set up a business proposition for Mr Hamasaki in Australia. Moreover, as Mr Douglas QC points out in his written submissions, the introduction of Mr Chapple into Mr Hamasaki's affairs came about by Mr Ishida suggesting that Mr Chapple should be Mr Hamasaki's accountant; Mr Chapple advised Mr Hamasaki in relation to investments, in relation to a proposed purchase of a property at Belrose and he was instrumental in drawing up a loan agreement between Messrs Hamasaki and Ishida. 134 Mr Chapple at no time suggested to Mr Hamasaki that he obtain independent advice. In cross examination at T34 he said that that idea did not even occur to him in November 1994, but that in any event the trust was being "done by Goldsmiths" "and I expected Mr Hamasaki would speak to them." 135 When the transaction had proceeded a little further down the track it was put to Mr Chapple at T35 that it "must have been perfectly plain to you as a professional man at this time, bearing in mind that you were making a lot of money out of Mr Hamasaki by a payment in the nature of a gift, that he was badly in need of both legal and accounting advice of an independent nature." Mr Chapple agreed with that, but when Mr Douglas QC in the next question put: "Q. What I want to suggest to you is that knowing that, you took full advantage of him" - the answer was: "A. No. I disagree with that." 136 All the circumstances show that Mr Chapple was a fiduciary towards Mr Hamasaki. He was a person who had agreed to act on behalf of Mr Hamasaki. The fact that Mr Hamasaki agreed that Mr Chapple and Mr Ishida could have, on Mr Hamasaki's version of it, 20% of the income of the project each plus fees, does not convert the scenario into a situation where Mr Chapple was acting on behalf of the three of them, but even if it did, Mr Chapple would still owe fiduciary duties to Mr Hamasaki. 137 I do not for a moment think that Mr Chapple ever consciously intended to defraud Mr Hamasaki or to act dishonestly. However, Mr Chapple was presented with an extremely wealthy Japanese businessman who appeared to have a superfluity of cash and in fact Mr Chapple saw no problem in taking advantage of that situation by receiving not only a $7,000.00 a month payment and the use of a BMW car, but also $1 to $2 million worth of capital gift without seeing that Mr Hamasaki freely and voluntarily assented to all of that. 138 These fiduciary matters, if I can term them that, may have two possible effects. First, one can put them together with the evidence that I have set out earlier and say that the Court would not presume that Mr Chapple endeavoured to breach his fiduciary duties and accordingly, together with the evidence that I have already considered, the balance of probabilities are that there was no trust or that the trust was only to benefit Messrs Chapple and Ishida in so far as income was concerned, not capital. Alternatively, if there was a trust, then because a person cannot benefit from a situation whereby he takes advantage of a conflict of duty and interest, any benefit that would otherwise flow to Mr Chapple is held on constructive trust for Mr Hamasaki and his wife. So far as Mr Ishida is concerned, the same would follow under the principle of Haywood v Roadknight [1927] VLR 512. 139 A person occupying a fiduciary position is liable to account for profits which he has gained by the use of his position or a property or knowledge possessed by virtue of his position, and the fiduciary is not "entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person": Phipps v Boardman [1967] 2 AC 46, 105 and see Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373, 393. 140 Accordingly, whichever way one looks at it, the plaintiffs' claim fails. 141 Before dealing with the collateral claim, I should look at the pleadings and consider the orders that should be made in the light of the above findings. 142 The final version of the statement of claim seeks orders A to U. The majority of these are applications for declarations of which there is no utility in making. The orders that are sought for repayment of the monies received by Mr and Mrs Hamasaki back into the receiver's hands fail on the merits. 143 The amended cross claim, apart from the collateral matter, seeks an order that Messrs Chapple and Ishida account to Mr Hamasaki for the consequences of their breach of fiduciary duty together with a claim against Rising Sun Holdings. 144 In their written submissions, counsel for Mr Hamasaki seek a number of declarations, again which need not be made as they are merely steps along the way to the final result of the case. They seek that the mareva orders made by various judges in this Division be discharged, that there be an inquiry at the option of the Hamasakis as to whether the plaintiffs should pay the damages occasioned by the making of these orders, and a declaration that the plaintiffs hold their shares in the third defendant and their units in the Colosseum Hotel Trust on constructive trust for the third defendant. No further comment need be made about these as they would seem to follow from what I have said above. 145 However, two matters do call for further discussion: (A) The claim that the cross defendants (Chapple and Ishida) pay equitable compensation including compensation in respect of $1.5 million paid by Mr Hamasaki to Rising Sun Holdings for the purpose of discharging its obligations to the St George Bank, the question of quantum of compensation to be referred to the Master. (B) A claim for a declaration that the $5.3 million paid by Rising Sun Holdings to Mr Hamasaki on 29 June 2001 was made by it either as part payment of a debt or as trustee under a resulting trust. I will deal with these two matters in turn, and then deal with, Question 2, the collateral matter. 146 (A) I have already set out the contentions and my findings concerning Australian Sealand Exports Pty Ltd. In my view it follows from what I have already said that the Hamasakis are entitled to the orders that they seek. However, it may be that an inquiry before a Master is not necessary. 147 (B) This matter only came to the fore of my attention when I saw Mr Douglas QC's written submissions as to the orders he submits I should make. 148 The background facts are that the liquidator was only appointed to Rising Sun Holdings after these proceedings commenced for a third party debt which was thought to have been insured through the HIH group. The Colosseum Hotel was actually sold by Rising Sun Holdings when under the sole control of Mr and Mrs Hamasaki, usually acting by their then solicitor, Mr Muir. The Hotel was sold to The Vegas Hotel Pty Ltd in April 2001. The settlement took place in that month and two cheques were paid into the account of Rising Sun Holdings Pty Ltd in the National Australia Bank, Albert Avenue, Broadbeach account for $4,780,411.07 and $532,270.50. That $5.3 million was then withdrawn from the Rising Sun Holdings account and paid into an account with the same branch of the same bank in Mr Hamasaki's own name. On 29 June 2001 $5,838,500.00 was withdrawn from that bank account and deposited into two superannuation funds in the name of Mr Hamasaki and his wife. 149 Accordingly, all the evidence as to the reason why there was a "distribution" of $5.3 million from Rising Sun Holdings to the Hamasakis lies in the camp of the Hamasakis. There is no appropriate evidence before me as to why they made the "distribution" in 2001. 150 As little attention seems to have been given by any party as to whether the money paid to the Hamasakis in June 2001 by Rising Sun Holdings on the sale of the Hotel was paid as part payment of a debt or as a distribution to beneficiaries by a trustee, it seemed to me that I should ask whether the liquidator wished to make submissions. He did so by Mr S A Benson, his counsel. 151 Mr Benson's submissions were to the effect that if the monies were paid to the first defendant by the third defendant by way of loan, then there would be no priority over other creditors of the first defendant and the liquidator would wish to reserve his position with respect to an application to oppose the discharge of the mareva injunction because there might be an unfair preference to be avoided at the suit of the liquidator. 152 The response by counsel for the Hamasakis was that the so-called written submissions of the liquidator made no submission at all on the issues and merely made a series of vague suggestions. 153 Consideration of this issue was not fairly raised in the instant proceedings and its resolution is made more difficult because the liquidator justifiably thought he could withdraw at an early stage. Its determination may involve tender of more facts and also a consideration, if the Hamasakis were generally unsecured creditors, how far the payment to discharge the St George Bank mortgage gives them some status as secured creditors. 154 Although I have said that on the material before me the June 2001 payment appears to be in repayment of a loan, I am of the view that I should not determine this issue in these proceedings. If I were to make any declaration it would need to be after seeing all the necessary evidence as to how the payments were treated by the various entities at the time. 155 The Hamasakis actually have the money in their superannuation funds. It is up to the liquidator, if he considers it appropriate to seek to recover it for the creditors of Rising Sun Holdings. Mr Benson asks that the mareva orders should not be discharged at this stage even if the plaintiffs fail as the liquidator needs to see that the monies are safe whilst he makes a decision as to whether to make a claim. 156 Mr Douglas QC vigorously (and properly so) opposes this application. The liquidator has had time to formulate his claim and have it assessed as to whether it would support a mareva order and has not done so. However, justice probably requires that the mareva order not be discharged for four working days after the delivery of these reasons to give the liquidator a small window of opportunity to consider his position. 157 (2) I now turn to the collateral matter, and that is, the liability of Mr Ishida to repay the loan of $830,000.00 given to him to enable him to purchase a house. There is no dispute that that sum was advanced. The cross claimants accept that $620,434.34 has been repaid. There is an allegation by Mr Ishida that he paid an extra $20,000.00 on 6 August 1996, but there is no evidentiary material to support this assertion and as the onus of proving repayment is on the payer, Young v Queensland Trustees Ltd (1956) 99 CLR 560, I must take the amount owing to be $199,565.66. There is also a claim for interest on this amount. 158 There is no doubt, indeed it is admitted on the pleadings, that the loan was made for the sole purpose of permitting Mr Ishida to buy a particular house. There is also no doubt that the house has now been sold, that a demand for repayment has been made, part payment has been made, but the full payment has not been made. 159 Mr Gye submits that the proper construction of the document is that the loan is payable on demand after 10 years: it may be paid off by the borrower at any time within the 10 years, but he is not bound to pay it until the 10 years expires. Accordingly, as the 10 year period expires on 14 November 2004, the loan is not due and payable at the date of commencement of these proceedings or now. 160 At T185 Mr Hamasaki agreed with Mr Gye's question in cross examination that the loan was a no interest loan for 10 years repayable in 2004. Although the parties' evidence as to what they thought were the terms of the transaction is not conclusive, this evidence, admitted without objection, gives some weight to Mr Gye's submission. 161 No help is to be found in any of the decided cases on the word "within". The closest one gets is the old Pennsylvanian decision of In re Hofmann 14 Weekly Notes of Cases 563, 565, referred to in Volume 46 of the permanent edition of American Words and Phrases at p 84. In that case the Court held that where a mortgage uses the word "within" it means that the mortgagor has the option of paying off the loan at any time during the period of the mortgage and does not (as was the rule before the Conveyancing Act 1919) have to pay interest for the whole of the term. The contrary argument is that as the loan was for a particular purpose, the house was sold in August 1998, the loan was repayable in August 1998. 162 Both arguments have their problems. The word "within" must be given some semantic significance. Ordinarily, the word "within" delimits a period "inside which" certain events may happen: Reynolds v Reynolds [1941] VLR 249, 252. However, "within" is not a word of art with any one meaning but has a variety of meanings according to the connection in which it is used: Town of Alexandria v Clark County 231 SW (2d) (Mo) 622. It has been held that the words "within three years" can properly mean "not later than three years"; see Reg v IRC; Ex parte Knight [1973] 3 All ER 721. 163 Ex parte Knight was a decision of the English Court of Appeal. It followed the decision of the Scottish Court in Earl of Morton's Trustees; Douglas v Macdougall [1944] SC 410 and both of these cases were applied by the Northern Territory Court of Appeal in Ward v Walton (1989) 99 FLR 21. MH McLelland CJ in Eq took the same view in Plumor Pty Ltd v Handley (1996) 41 NSWLR 30, 34. See also my decision in Jampco Pty Ltd v Cameron (1985) 3 BPR 9487. 164 Accordingly the document in the instant case could mean that the loan is to be repaid at the option of the borrower not later than 14 November 2004. 165 The document appears to have been drafted by Mr Chapple on behalf of Mr Hamasaki, so that any contra proferentem runs against Mr Hamasaki. Further, it does not seem to me that the circumstance that the loan was for a particular purpose is sufficient for a court to imply a term that the loan was to be repayable at any time after that purpose ceased to be relevant. It may well have been, had the parties been asked as at the date of the loan what if Mr Ishida exchanges his present house for some other house and it could not be said that the parties would have replied "of course the loan has to be repaid" or "of course the loan will be continued on the new house". 166 Accordingly, I uphold Mr Ishida's submission that the loan is not due and payable. There should be a declaration accordingly. 167 (3) It is now necessary to consider the consequences flowing from what I have said. 168 It would seem, so far as costs are concerned, that the plaintiffs must pay the costs of the suit. As to the cross claim, the collateral issue occupied very little time: there might perhaps be a deduction of 5% in the costs order to take account for the fact that Mr Ishida was successful on that aspect of the matter. However, this cannot affect the costs order to be made against Mr Chapple. 169 I will publish these reasons and stand the matter over for short minutes. It would seem to me that, apart from dismissing the suit, on the cross claim I should, following para 49 of the Hamasakis' submissions, make orders 1 and 2, give the cross claimants the option of having an inquiry as to damages, not make declarations 4, 5, 6, 7, 8, 9, 10, make declarations 11 and 12, not make declarations 14, 15, make order 16 perhaps in a modified form, not make declaration 21, make order 22 in a modified form, not make declaration 24 and order that the cross defendants, being the Chapple and Ishida interests, pay the cross claimants' costs. I should also make a declaration in Mr Ishida's favour as to when the balance of his loan is repayable. 170 I will tentatively fix 22 July 2003 at 9.30 am for this purpose. However, if that date is inconvenient to counsel, so long as my Associate is notified the week before, it can be altered in chambers. If it is thought that discussion on the short minutes is going to take more than 10 minutes, then the parties should contact my Associate for a special day to be set aside to argue the ancillary matters. 171 However, it seems to me that in all the circumstances I should discharge the mareva orders as from the end of four business days from today. I so order. ************************ Last Modified: 07/14/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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