AUSTRALIA Law and Practice Contributed by: Joachim Delaney and Ranjani Sundar, HFW
• wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; and • knowledge of circumstances which would indicate the facts to an honest and reasonable person. Further, the Farah decision has created uncertainty surrounding the requirement that the breach be one that amounts to a “dishonest and fraudulent design” in the context of “knowing assistance”. Whereas the Western Australian Court of Appeal in Westpac Bank- ing Corporation v Bell Group Ltd (No 3) [2012] WASCA 157 (“ Bell ”) adopted a more relaxed test, the court in Hasler v Singtel Optus Pty Ltd (“ Hasler ”); Curtis v Sing- tel Optus Pty LtdSingtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609 clarified that the Bell decision did not intend to broaden the class of breaches of fiduciary duty in the context of “knowing assistance”. Notwithstanding this, in Hasler , the court found that the relevant conduct was caught within the meaning of “dishonest and fraudulent design” on any view. The Victorian Court of Appeal case, Harstedt Pty Ltd v Tomanek [2018] VSCA 84 (“ Tomanek ”), has recently provided guidance as to the liability of parties who assist or facilitate another’s fraudulent acts. In a case where a party has, by reason of a breach of fiduci - ary duty or fraudulent activity, received or otherwise profited from misappropriated funds, that party may become liable in the following ways: • “knowing assistance” in the breach – where a per - son knowingly assists with a dishonest and fraudu - lent scheme; • “knowing inducement” or immediate procure - ment of the breach – a third party may be liable as an accessory if they induce or otherwise procure fraudulent conduct or a breach of fiduciary duty; • corporate alter ego – a company will be fully liable for the profits derived as a result of fraudulent con - duct or the breach of fiduciary duty if the company is the wrongdoer’s “corporate creature or vehicle”; and • trustee de son tort – a party may be held liable as a “trustee de son tort” or “of his own wrong” where they are not a trustee but presume to act as a trustee and then commit a breach of trust or fraudulently profit from their position.
In Tomanek , the Court of Appeal held that, while the respondent (being the company secretary of the trustee company) had knowledge of the trustee company’s dishonest and fraudulent scheme, such knowledge of itself did not equate to assistance with the breach of trust. The applicant company failed to establish any “active involvement” on the part of the respondent. However, in the recent case of Lin v Chu [2025] FCAFC 130, the appellant directors of the trus - tee company were found to have negotiated, execut - ed and implemented loans that constituted breaches of trust. The Full Federal Court (at [186]) unanimously agreed that directors who intentionally cause a trus - tee company to engage in conduct in breach of trust can be personally liable for knowing assistance or knowing inducement where they acted in their own personal interest and contrary to the interests of the company. With respect to breach of fiduciary duty and knowing assistance claims, a question that may arise is wheth - er a plaintiff is entitled to obtain both the remedies of equitable compensation and an account of profits from multiple wrongdoers. In Xiao v BCEG Interna- tional (Australia) Pty Ltd [2023] NSWCA 48, the New South Wales Court of Appeal recently determined that although a plaintiff cannot obtain both equitable compensation and an account of profits from a single defendant, where multiple defendants are involved, a plaintiff is entitled to make a “split election” seek - ing different remedies from different wrongdoers. This is because the liability of the knowing recipient (who profited from their own misconduct) is different in nature and extent from the liability of the fiduci - ary (who made no profit from the default), particularly given that the knowing recipient does not owe a duty of loyalty to the principal. For this reason, seeking “a gain-based remedy from a knowing recipient is not inconsistent with a compensation remedy against the defaulting fiduciary” (at [69]). This principle was also confirmed in DC Rd DC Pty Ltd v Zhang (Trial Judg - ment) [2026] FCA 16 (at [259]). 1.4 Limitation Periods At the federal level, fraud offences have the following limitation periods:
13 CHAMBERS.COM
Powered by FlippingBook