FEDERAL COURT OF AUSTRALIA

QB4 Capital Pty Limited v Guardian Securities Limited [2022] FCA 262

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth), the whole of the proceedings be referred to mediation to be conducted by a Registrar of the Court in person and, to the extent the mediator considers it desirable, without the presence of lawyers, with such mediation to take place within 28 days.

2.    In the event other orders resolving the dispute cannot be agreed at the mediation, within seven days of the conclusion of the mediation, the parties file an agreed minute or competing minutes of order to reflect these reasons.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 53A of the Federal Court of Australia Act 1976 (Cth), the whole of the proceedings be referred to mediation to be conducted by a Registrar of the Court in person and, to the extent the mediator considers it desirable, without the presence of lawyers, with such mediation to take place within 28 days.

2.    In the event other orders resolving the dispute cannot be agreed at the mediation, within seven days of the conclusion of the mediation, the parties file an agreed minute or competing minutes of order to reflect these reasons.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

LEE J:

A    INTRODUCTION

1    This is a complex matter concerning, in very broad terms, the propriety or otherwise of certain payments made from trust property under a registered managed investment scheme, The Guardian Investment Fund (TGIF). Although a dramatis personae would identify numerous actors, the underlying dispute revolves around two protagonists and their agents: Guardian Securities Ltd (Guardian), the responsible entity of the TGIF; and QB4 Capital Pty Ltd (QB4), the fund’s former investment manager.

2    The matter involves a long and almost impenetrable procedural history, attributable in no small part to the parties’ approach to litigation across numerous proceedings, which is difficult to reconcile with the overarching purpose of civil proceedings in this Court. The applicants, including QB4, seek equitable compensation and declaratory relief in relation to expenses charged to the trust by Guardian, along with orders appointing a replacement trustee. In addition to the applicants’ various claims, the respondents have filed a cross-claim in each proceeding seeking, among other things, the necessary relief which would permit them to be reimbursed from the trust funds for outstanding invoices and legal costs charged to the trust.

3    As will become clear, in the process of litigating these issues, considerable fees have been spent. One question that falls for the Court to decide is who ultimately is to settle the bill.

B    BACKGROUND

4    Before turning to the relevant factual background, it is useful to detail at the outset the context surrounding the confined issues that now fall for determination. As I indicated above, the procedural history of this matter is byzantine. Although the only proceedings that remain are NSD470/2020 and NSD99/2021, the matter (to use that word in its Constitutional sense) has involved the following proceedings:

(1)    proceeding NSD415/2020 (Pre-action Relief Application);

(2)    proceeding NSD470/2020 (Principal Proceeding);

(3)    proceeding QUD226/2020 (Judicial Advice Proceeding);

(4)    proceeding QLD3617/2020 (Queensland District Court Proceeding); and

(5)    proceeding NSD99/2021 (Legal Costs Proceeding).

5    Upon the commencement of the hearing on 4 May 2021, I raised with the parties the difficulties with the tsunami of issues that appeared to arise from the miscellany of pleadings and written submissions, the most obvious of which was that it was unclear to me, and perhaps also to the parties, what precisely it was that the Court was being asked to determine: T2.19–26. Accordingly, I directed the parties to identify each of the issues that remained relevant and to provide an agreed list of issues for determination. I made clear that this document would replace, or at least refine, the pleadings to the extent the pleadings identified the issues to be resolved. Apart from anything else, such a course was desirable because some issues raised in the pleadings plainly relate to positions that have long since been abandoned or neglected, including, for instance, that the applicants sued in a representative capacity under r 9.21 of the Federal Court Rules 2011 (Cth).

6    Although that initial list was provided on 5 May 2021, its relevance was fleeting. A series of procedural developments, to which I will return below, led to a significant reformation of the applicants’ case and, therefore, a new suite of issues for determination. Accordingly, it was not until 17 August 2021 that the parties provided a final agreed list of outstanding issues for determination, in respect of which the Court expressly noted, by consent, the following:

The balance of the issues in proceeding NSD 470/2020 and proceeding NSD 99/2021 are reflected in the agreed list of issues for determination dated 17 August 2021 and marked as MFI18 (Agreed Issues) and represent the entirety of the balance of the matters required to be determined in both proceedings.

(Emphasis in original).

7    Those issues are as follows:

Proceeding NSD 470/2020

1.    Is Guardian Securities Limited (Guardian) liable to pay equitable compensation in respect of amounts alleged to have been paid or accrued in breach of trust?

1a.    Do the QB4 Parties (and in particular the Migunovs) have standing to seek equitable compensation against Guardian for the pleaded breaches?

In that regard, who is / are the beneficiaries of FT1 and FT2?

1b.    Did Guardian relevantly commit a breach or breaches of trust?

1c.    If no to 1b, were the expenses properly incurred by Guardian as trustee?

In respect of that issue, a relevant implied issue is whether Guardian validly terminated the Investment Management Agreement, having accepted the termination of the Responsible Entity Agreement by QB4 Capital Pty Ltd (QB4 Capital) on 16 March 2020?

1d.    If no to 1b and yes to 1c, are the expenses within the scope of Guardian’s right of indemnity from the PIF and ELF under cll 22, 23.7, 23.12 and/or 23.13 of the Constitution of TGIF, s 6 of the PDS of the PIF, s 7 of the PDS of the ELF and/or s 72 of the Trusts Act 1973 (Qld)?

1e.    If there was a breach or breaches of trust, is Guardian entitled to be relieved from liability under s 76 of the Trusts Act 1973 (Qld) or entitled to a just allowance for time, energy, work, skill and judgment?

2.    Are the QB4 Parties entitled to declaratory relief in respect of amounts alleged to have been paid or accrued in breach of trust?

3.    Is QB4 Capital liable to repay the amounts it received under cl 5.1 of the Settlement Deed?

3a.    Is there a liability in contract to repay the amounts under cl 10.1 of the Settlement Deed?

3b.    If no to 3a, is Guardian entitled to restitutionary relief?

3c.    If repayment is required, to whom is payment to be made?

4.    Is the remedy of set-off available to Guardian?

[5.    Is QB4 Capital liable to Guardian for damages for breach of the provisions pleaded in the SCC at [17]?]    

5a.    Did QB4 Capital breach the provisions pleaded in the SCC at [17]?

5b.     Is QB4 Capital liable to Guardian for damages for breach of any of the above provisions pleaded in the SCC at [17]?

If so, what damages?

6.    To what extent is Guardian entitled to recover outstanding invoices from Fundus Trust No 1 and Fundus Trust No 2 for invoices issued before and after the appointment … of Receivers accrued in the accounts?

7.    Is Fundus liable to make payment of $135,000 plus interest to VentureCrowd Property Australia Pty Ltd under the loan agreement dated 16 November 2020? If so, is Fundus precluded from having recourse to the assets of FT1 and FT2 to satisfy that liability?

8.    What costs orders should be made in the proceedings generally, including the costs reserved in paragraph 6 of the orders of Lee J made on 13 August 2020? In the context of costs of the proceeding, given that Guardian has accepted as valid, the termination of the [RE Agreement] by QB4 Capital, was its termination of the [IM Agreement] valid? – refer also 1c above?

9.    Should Mr Maarbani, as a non-party, be jointly and severally liable for the costs of QB4 from the event which led to the termination of the settlement deed?

10.    What orders should be made in respect of the future of Fundus Trust No 1 and Fundus Trust No 2?

10a.    Should QB4 Capital Asset Management Pty Ltd be appointed as replacement trustee of Fundus Trust No 1 in place of the Receivers and, if so, what consequential orders should be made?

10b.    If not, what orders should be made? In particular, should orders be made to cause the receivers to realise the assets of Fundus Trust No 1 and distribute the net proceeds rateably to unitholders of the ELF?

10c.    What form of order should be made in respect of Fundus Trust No 2?

10d.    Should the Receivers be required to apply to pre-fix their remuneration for the purposes of any such orders with respect to ELF and PIF?

Proceeding NSD 99/2021

1.    Is Guardian Securities Ltd entitled to the declaratory relief sought in the Second cross-claim?

2.    What costs orders should be made in the proceedings?

8    It is worth noting again: the express agreement of the parties was that this list constituted the universe of issues the Court was required to resolve. Despite their length, the determination of the agreed issues can be relatively confined to the legitimacy or otherwise of certain payments, made from, or charged to, the trust property, along with various other payments and costs that have arisen. To provide context to these issues, however, it is necessary first to outline the background to this extensive dispute. This, itself, is no easy task.

9    The approach I propose to take in this segment of the judgment is to outline a condensed timeline of events and the uncontroversial facts relevant to the determination of the agreed issues. In doing so, I do not consider it necessary or desirable to wade into what I might describe as the deluge of allegations raised in the submissions as to the history leading up to this matter, the breakdown in the relationships between the parties (mainly, QB4 and Guardian), and the subsequent conduct of the parties; nor do I consider that the determination of the agreed issues requires such an approach. Rather, to the extent that any facts are disputed, it will be necessary to return to them only where relevant to the determination of the agreed issues.

B.1    The Guardian Investment Fund

10    The nature of a managed investment scheme was outlined by McKerracher J in Saker, in the matter of Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation) [2010] FCA 1080; (2010) 190 FCR 501 (at 503 [5]):

Under [a managed investment scheme (MIS)] people contribute funds to have an ‘interest’ in the MIS. When money is pooled with other investors for the common enterprise, it is on the basis that a ‘responsible entity’ [(RE)] will operate the MIS. The investors leave the day to day operation of the scheme to the RE. For this arrangement to be functional, schemes must be registered with the Australian Securities and Investments Commission (ASIC) before they can operate. An RE under a scheme capable of being registered with ASIC must be a registered Australian public company and must hold an Australian financial services licence authorising it to operate the scheme. An MIS must have a constitution as defined by s 601GA of the Corporations Act 2001 (Cth) (the Act) which will be examined further below. It must also have a compliance plan as defined under the Act and a statement signed by the directors of the proposed RE that the scheme’s constitution complies with s 601GA and s 601GB and that the compliance plan complies with s 601HA. These documents are detailed but the resolution of the dispute arising as to the proper ownership of funds in an account conducted by the RE on retirement or removal of the RE is to be determined by application of the Scheme documents (and their predecessors) as well as consideration of statute and authority.

(Emphasis in original).

11    The TGIF is a managed investment scheme registered with the Australian Securities and Investments Commission in accordance with Part 5C.1 of the Corporations Act 2001 (Cth) (Corporations Act). Relevantly, the TGIF constitution was contained in a “Replacement Constitution” made on 27 April 2016, and subsequently amended on 22 May 2019 (TGIF Constitution).

12    Guardian is the trustee and responsible entity of the TGIF: see s 601FC(2) of the Corporations Act. As the trustee and the responsible entity of the TGIF, Guardian holds the assets of the scheme on trust for the members of the scheme (unitholders), subject to the standards applicable to the trust under the Corporations Act and the provisions of the TGIF Constitution itself.

13    There are several separate classes of units within the TGIF. Those presently relevant are the two classes of units known as the Enhanced Land Fund (ELF) and the Premium Income Fund (PIF). In accordance with Pt 7.9 of the Corporations Act, the TGIF discloses any offers in terms of a Product Disclosure Statement (PDS). The PDS of the ELF is dated 9 June 2017 and the PDS of the PIF is dated 29 August 2018.

14    The ELF was promoted as an investment in land sites suitable for property investment. The relevant projects related to the ELF include the Yamanto Property and the Lawnton Property. The PIF was promoted as a vehicle for investors to have exposure to property developments as an equity interest via preference shares. Funds were invested in special purpose vehicles that were responsible for the property development. The relevant projects related to the PIF include the Griffin Mews Project, the Wattlebird Project, and the Pimpama Project.

15    Until 2 December 2020, the assets of the ELF and PIF were held on trust, via a custodian, by Fundus Management Pty Ltd (Fundus). Specifically, the assets ultimately referable to the ELF are held in Fundus Trust No 1 (FT1) and the assets of the PIF are held in Fundus Trust No 2 (FT2). The ELF unit class within the TGIF is the only investor in FT1 and the PIF unit class is the only investor in FT2: see ELF PDS Part 2 at [7]; PIF PDS Part 2 at [15].

16    In respect of the above, it is important to foreshadow that there is some dispute concerning the identities of the proper beneficiaries of FT1 and FT2. The QB4 Parties submit, on various alternative bases, that the proper beneficiaries of FT1 and FT2 are, respectively, the unitholders of the ELF and PIF. In contrast, the Guardian Parties submit that Fundus in its capacity as trustee of FT1 and FT2 holds all of the assets within those two trusts solely for the benefit of Guardian in its capacity as the responsible entity and trustee of the TGIF. It will be necessary to return to this dispute below (at Section C).

The responsible entity

17    As stated above, Guardian is the trustee and responsible entity of the TGIF. As the responsible entity of the TGIF, Guardian was required to operate the TGIF as a managed investment scheme and perform the functions conferred upon it by the Constitution and the Corporations Act.

18    Mr Guy Hasenkam has been a director of Guardian since 2003. Mr Hasenkam was also formerly the sole director of Fundus until February 2020.

19    On 22 January 2020, VentureCrowd Holdings Pty Ltd (VentureCrowd) acquired a controlling interest in Guardian. On 24 January 2020, following VentureCrowd’s acquisition of Guardian, Mr Maarbani became the managing director of Guardian. Mr Maarbani is also the chief executive officer and director of the following companies:

(1)    VentureCrowd;

(2)    VentureCrowd Nominees Pty Limited (VCNA);

(3)    VentureCrowd Property Australia Pty Limited (VCPA); and

(4)    VentureCrowd Services Australia Pty Limited (VCSA),

(together, the VentureCrowd Group).

20    Guardian, VentureCrowd, VCPA, and VCNA are the first to fourth respondents in the Principal Proceeding (Guardian Parties).

21    Australian Executor Trustees Limited (AETL) was the custodian of the ELF and PIF. Pursuant to a Deed of Novation of Custodian Agreement dated 18 December 2019, AETL retired and was substituted as custodian by Sargon CT Pty Ltd, later operating as Certes CT Pty Ltd (Certes).

Relationship with QB4

22    In May 2017, QB4 was appointed by Guardian to the roles of investment manager and corporate authorised representative. Specifically, QB4 was the investment manager of the ELF and PIF until, supposedly, 13 March 2020.

23    Mr Rod Mackay is a director of QB4 and CODA Asset Management Pty Ltd (CODA). Ms Charlotte Wong is a director and the sole shareholder of QB4, as well as a director of QB4 Capital Asset Management Pty Ltd (QB4CAM) and Griffin Mews No. 8 Pty Ltd. Mr Michael Wong is also a director of QB4CAM. Mr Alexander Migunov and Ms Elena Migunova are unitholders of both the ELF and PIF (Migunovs).

24    QB4, the Migunovs, QB4CAM, and CODA are, respectively, the first to fourth applicants in the Principal Proceeding (QB4 Parties).

25    Cloud Capital Pty Ltd (Cloud Capital) is a consulting firm that provides services to QB4 with respect to the investment management of the ELF and PIF. Mr Paul Duncan is the director of Cloud Capital.

26    On or around 19 May 2017, Guardian and QB4 entered into two separate agreements: (1) the Investment Management Agreement (IM Agreement); and (2) the Responsible Entity Agreement (RE Agreement).

27    Pursuant to cl 1.1 of the IM Agreement, Guardian appointed QB4 as the investment manager of unit classes of the TGIF which were to be established by agreement between them. Those unit classes were ultimately the ELF and PIF. By cl 7.1 of the IM Agreement, QB4 was entitled to charge “management fees” to Guardian and was required to pay “access fees”. On or around 13 November 2018, Guardian appointed QB4 as its authorised representative pursuant to the terms of a Corporate Authorised Representative Agreement (CAR Agreement).

28    On 22 January 2020, VentureCrowd acquired a controlling interest in Guardian. Following this, the board of Guardian was reconstituted and VCPA and VCSA, under the instruction of Guardian, completed a full review of the operation and management of the TGIF, including an assessment of each of its classes of units. In 2020, Guardian issued a number of invoices to Fundus relating to work that was said to have been undertaken by VCSA, VCPA, and Mr Maarbani on behalf of Guardian in conducting this full review of the ELF and PIF. These invoices are the subject of significant dispute.

29    On 12 March 2020, Guardian sent a letter to QB4 requesting copies of the periodic reports regarding the ELF and PIF, which were required to be sent to Guardian by QB4 pursuant to the IM Agreement. On 16 March 2020, QB4 responded by sending a letter to Guardian, attaching a formal notice of termination of the RE Agreement. On 18 March 2020, Guardian responded in kind by sending a letter accepting QB4’s termination of the RE Agreement, and giving notice of the termination of the IM Agreement and the CAR Agreement. It is unnecessary to detail here the motivations behind this correspondence and the events that followed. It suffices to say that the termination of these agreements, along with other details, were contested, and proceedings were subsequently commenced.

B.2    The Principal Proceeding

30    QB4 initially commenced proceedings on 9 April 2020 by filing an urgent application before the start of a proceeding seeking freezing orders in relation to the TGIF bank accounts and orders for the appointment of an interim receiver (that is, the Pre-action Relief Application). On 15 April 2020, Farrell J, in her Honour’s capacity as Commercial and Corporations Duty Judge, made orders including that QB4 is to commence any proceeding by 22 April 2020. Those proceedings were commenced on 28 April 2020 by originating application (that is, the Principal Proceeding) and, subsequently, the Pre-action Relief Application was finalised on 5 May 2020.

31    When the matter first came before me as Duty Judge, the applicants claimed that Guardian had breached the TGIF Constitution and its duty to invest, including its obligation to manage assets and perform other obligations. A claim was also made that Guardian’s purported termination of the IM Agreement was, in effect, invalid and unlawful and that Guardian remained liable to pay management fees to QB4. The applicants also sought what one might describe as a smorgasbord of both interlocutory and final relief. The final relief included:

(1)    declaratory relief as to various breaches by Guardian of the IM Agreement, RE Agreement, CAR Agreement, and the TGIF Constitution;

(2)    damages for the breach of the IM Agreement;

(3)    restitution of the fees paid or payable to Guardian under the RE Agreement during the relevant period;

(4)    equitable compensation by repayment of unauthorised investments into the relevant trusts (or an account of profits);

(5)    damages pursuant to s 12GF(1) of the Australian Securities and Investments Act 2001 (Cth) and/or s 601MA(1) of the Corporations Act for the loss and damage caused by the loss of the benefit of the opportunity of having the invested funds;

(6)    equitable compensation or an account of profits for the unauthorised management fees paid to Guardian under the TGIF Constitution and for Guardian’s breaches of the TGIF Constitution;

(7)    an order for specific performance of the RE Agreement; and

(8)    a mandatory injunction directed to Guardian requiring it to make payment of amounts said to be due and owing under a contract related to the Griffin Mews Project.

32    The range of interlocutory relief sought, including orders appointing an interim receiver and manager plus injunctions, were eventually resolved, at least on a temporary basis prior to the hearing, by the provision of undertakings.

The settlement deed

33    On 13 August 2020, after the matter had been docketed to me and, following a series of lengthy case management hearings, I indicated to the parties that the matter was crying out for a commercial resolution and made orders referring the Principal Proceeding to mediation prior to the commencement of the hearing under s 53A of the Federal Court of Australia Act 1976 (Cth) (FCAA). Pursuant to those orders, the parties attended a mediation on 18 September 2020, at which a heads of agreement was signed by the parties’ solicitors and a formal settlement deed was subsequently executed on 1 October 2020 (with the exception of the Migunovs, who later executed a counterpart) (Settlement Deed). At the time, it was the intention of the parties that this would resolve the issues in dispute and bring the proceedings to an end. Alas, this agreed resolution miscarried.

34    Clause 5.1 of the Settlement Deed provided:

By 1 October 2020:

(a)    the distributions presently owing and outstanding to unitholders in the PIF must be paid by cleared funds into the LACP Trust Account in the sum of $174,617.57;

(b)    the following must be paid by cleared funds into the LACP Trust Account:

(i)    payment of QB4’s outstanding management fees and invoices from Cloud Capital Group (as claimed in the Matter, (b)) for PIF in the sum of $488,744.89;

(ii)    payment of outstanding costs and expenses incurred in relation to the Griffin Mews Project in the sum of $865,686.55 as set out in Schedule B to this Deed, by way of monies to be held as described in clause 5.2 of this Deed for the purpose of the further subscription for shares in Griffin Mews No 8.

35    On 1 October 2020, pursuant to cl 5.1, Guardian caused or permitted Fundus (via the custodian, Certes) to pay a series of amounts from the assets of FT2 to the trust account of the QB4’s solicitor, Legal and Commercial Partners, for the benefit of QB4. The parties agree that those payments included:

(1)    $174,617.57 pursuant to cl 5.1(a) of the Settlement Deed for distributions to unitholders;

(2)    $488,744.89 pursuant to cl 5.1(b)(i) of the Settlement Deed, for allegedly outstanding QB4 management fees and invoices from Cloud Capital; and

(3)    $865,686.55 pursuant to cl 5.1(b)(ii) of the Settlement Deed, in respect of costs and expenses in relation to the Griffin Mews Project.

(together, the Settlement Payments).

36    Following Guardian’s payment of the Settlement Payments, the parties consented to orders to vacate the trial dates pursuant to cl 6.1 of the Settlement Deed, which provided:

6.    Dismissal of proceedings

6.1    Upon the execution of this Deed, and following the payment by 1 October 2020 of the monies due to be paid as set out in clause 5.1, the Parties will consent to orders to vacate the trial dates.

37    On 2 October 2020, I made self-executing orders dismissing the proceedings, with such orders to take effect on 18 January 2021, shortly after the final terms of the deed were scheduled to be performed. I also granted the parties liberty to relist the proceedings on notice to the Court prior to 17 January 2021.

38    Following this, a dispute arose as to Guardian’s supposed default of cl 6.3(b) of the Settlement Deed. Clause 6.3(b) provided as follows:

6.3    …

(b)    if, and to the extent that, the Respondents (other than Certes CT), have paid any of their legal costs from any of the funds mentioned in clause 6.3(a), then the Respondents (other than Certes CT) must reimburse those amounts to the relevant fund(s) by 9 October 2020.

39    A lengthy series of correspondence details QB4’s demands as to remedying the default and Guardian’s attempts to extend the time with which to comply with cl 6.3(b). As of 13 November 2020, however, Guardian was still in default as to its obligation to reimburse the relevant funds, and the QB4 Parties wrote to the Guardian Parties terminating the Settlement Deed by reason of Guardian’s default. The letter of termination included the following:

In these circumstances:

1.    QB4 Capital and the Migunovs (as defined in the Settlement Deed) hereby accept the Respondents’ (other than Certes CT) repudiation of the Settlement Deed;

2.    The Settlement Deed has come to an end;

3.    QB4 Capital and the Migunovs (as defined in the Settlement Deed) elect to continue with their rights as if the Settlement Deed had not existed.

40    The QB4 Parties provided an ex parte interlocutory application to my Associate for an urgent listing, seeking, among other things, to restrain Guardian, Fundus, and Certes from accessing the Fundus bank accounts, which I heard later that day. I considered that it was appropriate that I give the parties who would be affected by the proposed orders the opportunity to be heard in relation to it, and so I stood the application down until later that day. However, given those parties were not able to secure counsel for the urgent listing, I made orders vacating the self-executing orders made on 2 October 2020, adjourning the interlocutory hearing until 23 November 2020, and, to preserve the status quo in the meantime, restraining Guardian, Fundus, and Certes from making transfers or withdrawals from the Fundus bank accounts for administrative costs, management fees, responsible entity fees, and legal fees or legal costs.

41    To cover Fundus’ legal fees, on 16 November 2020, VCPA (as the lender) entered into a loan agreement with Fundus (as the borrower) for the amount of $135,000 to be transferred from its bank to the trust account of CE Lawyers at the direction and for the benefit of Fundus with a term of 30 days (Loan Agreement). On 17 November 2020, VCPA paid the amount of $135,000 to CE Lawyers, in accordance with the Loan Agreement. That amount has not been repaid by Fundus to VCPA and remains an issue of dispute.

The receivers’ reports

42    Following further interlocutory hearings, orders were made, eventually by consent, on 2 December 2020 appointing Messrs Sean Wengel and Michael Brereton as receivers and trustees of the property of Fundus, including the trust property of FT1 and FT2 (Receivers). Those orders expressly provided that the Receivers’ expenses and remuneration would be payable from the assets of the ELF and PIF.

43    The consent orders made on 2 December 2020 required the Receivers to do the following:

5.     The Receivers must, within 60 days of the date of this Order, provide to the Court and the parties a report as to the receivership of Fundus Management, including:

(a)    the identification of the assets and liabilities of Fundus Management;

(b)    accurate profit and loss statements for the period 1 January 2020 to date;

(c)    accurate balance sheets as at the date of the report;

(d)    the costs and expenses (including but not limited to legal costs, disbursements and the payments identified at paragraph 272 of the Further Amended Statement of Claim) charged by, and paid to or at the direction of, the first to fifth respondents in relation to the ELF and the PIF during the period 1 April 2020 to the date of these Orders.

6.    For the purpose of preparing the report identified at Order 5 above, and in particular that part of the report that addresses the matters identified at Order 5(d) above, the Receivers are at liberty to engage the assistance of experts in the field of managed investments schemes and/or legal costs consultants as they in their discretion see fit.

44    At that time, it was the consensus between the parties that the Receivers were appointed, as officers of the Court, not only to resolve the contentious issue of ongoing control, but also to make inquiries and report to the Court upon payments made by or from the trust property held by Fundus while it was under the control of Mr Maarbani. Furthermore, there was a consensus among those appearing that the appointment of the Receivers was likely to quell the dispute concerning the relevant costs and charges. As a consequence of this, the Receivers were not appointed as referees pursuant to s 54A of the FCAA to inquire into and report upon specific issues.

45    Consistently with the orders made by the Court, the Receivers retained Mr Scott MacKenzie, a director of William Buck (the Receivers’ firm), with extensive knowledge of managed investment schemes to assist their investigations. On 29 January 2021, the Receivers filed their first report (First Receivers’ Report). In the report, the Receivers indicated (at 3) that they had “serious concerns regarding the large quantum of fees and costs applied to Fundus Trust No. 1 and Fundus Trust No. 2 by the Responsible Entity”. It was further contended that the records provided to the Receivers to substantiate certain fees and charges were insufficient to explain properly all the tasks completed and charged to the trust. The Receivers’ reviews identified transactions, processed through the Fundus bank accounts and financial statements during the review period totalling almost $4.4 million which, according to the Receivers, required further analysis to determine who was responsible for bearing the cost. This included a costs assessment by a legal costs assessor, to determine precisely what each charge related to and whether it was reasonably incurred.

46    On 8 April 2021, orders were made requiring the Receivers to complete an analysis regarding the reasonableness and propriety of costs and expenses charged by and paid to or at the direction of, the Guardian Parties, in relation to the ELF and PIF during the period of 1 April 2020 to 2 December 2020. To assist the Receivers in the review of the costs, and for the purposes of engaging with experts, a formal request was sought to obtain information relating to costs incurred. The Receivers engaged Cowell Clarke Commercial Lawyers (Cowell Clarke) to assist them in determining whether certain costs incurred by the Guardian Parties were permissible with regard to relevant legislation and managed investments. Further, the Receivers engaged Global Billing Legal Costs Consultants (Global Billing) to conduct a costs assessment of the legal costs charged by the Guardian Parties’ solicitors, AG Edwards Solicitors (AG Edwards), during the relevant period and further sought advice from Mr MacKenzie.

47    On 16 April 2021, the Receives filed their second report (Second Receivers’ Report). Relevantly, the conclusions of the Second Receivers’ Report included the following (at 6–7):

(1)    Guardian is entitled to be indemnified from the PIF and the ELF for the legal expenses incurred by AG Edwards, however, those costs should be reduced from $169,941.69 to $146,193.69.

(2)    It was appropriate for Guardian to use funds from the PIF to satisfy the ELF costs in instances where the cost incurred were not specific to either fund, in accordance with the TGIF PDS.

(3)    Guardian is entitled to charge management fees respectively to the PIF and the ELF which are calculated as a percentage of the Gross Asset Value of each fund. Guardian charged and/or was paid a total of $495,524.02 for management fees from 1 April 2020 to 2 December 2020.

(4)    The basis of Guardian’s calculation of its management fees is flawed as it relies on improper calculations of the Gross Asset Value, thereby misstating the management fees charged. It is not feasible to recalculate an accurate Gross Asset Value on a daily or monthly basis as required by the relevant PDS so the Receivers have estimated a discount rate to be applied to historic calculations. In applying the discount rate and methodology detailed in this report, the Receivers determine Guardian is entitled to be indemnified $269,728.48 in respect to those costs.

(5)    Guardian is entitled to be indemnified from the ELF and PIF for expenses incurred as the responsible entity, however, it must provide evidence to substantiate those expenses. Guardian charged the PIF for unbilled management fees and fund expenses totalling $149,384.57, of which fund expenses were charged as 1% of the Gross Asset Value of the fund (as calculated by Guardian). Guardian did not provide any evidence to substantiate that those expenses were properly incurred and therefore is unable to claim such expenses.

(6)    Guardian is entitled to be indemnified for the costs incurred by PKF International Limited (PKF) in completing the audit of the TGIF, however, the apportionment of the liability between the sub-funds of the TGIF has been improperly calculated and therefore the amounts invoiced to each of the PIF and the ELF, being $3,855.39 and $2,514.48 respectively, are misstated. The misstatement is likely immaterial and because Guardian is entitled to be indemnified for those costs to some extent, the costs claimed may be allowed.

(7)    Upon acquiring a controlling interest in Guardian in January 2020, VentureCrowd (under the instructions of Guardian) completed a review of the operations and management of the TGIF including an assessment of the investments of each fund to form a conclusion regarding their feasibility. Additionally, in response to the termination of the RE Agreement in March 2020, Guardian completed a review of the various constituent and investment documents to determine its legal obligations to the PIF and the ELF.

(8)    The costs incurred by VentureCrowd and Guardian in completing these reviews totalled $626,134.22; while Guardian is entitled to be indemnified for these costs, due to the lack of detailed, itemised records for the work undertaken, the Receivers are unable to determine the reasonableness of the quantum of such costs.

48    On 29 March 2020, I made further orders which required the Receivers to complete an analysis concerning the reasonableness and propriety of the costs and expenses charged or incurred at the direction of QB4 and Cloud Capital in relation to the ELF and PIF. That further analysis was the subject of a third report dated 22 April 2021 (Third Receivers’ Report), in which the Receivers concluded:

(1)    QB4 engaged the consultancy services of Cloud Capital to support investment management services, which it was entitled to do. Amounts paid to QB4 and Cloud Capital have been paid via Guardian in its role as the responsible entity.

(2)    Only the responsible entity provides directions to the custodian of the bank accounts of FT1 and FT2 to make payments. It is incumbent upon the responsible entity to review the management fee calculations and expense claims submitted by the investment manager (QB4) for accuracy, reasonableness and relevance to the TGIF Constitution and the PDS.

(3)    Insufficient documentation was provided by QB4 to Guardian to substantiate the reasonableness and relevance of the majority of fees and expenses claimed.

(4)    Guardian has, by way of payment of invoiced amounts to QB4 or by way of entering the Settlement Deed, provided the invoices claimed by QB4 and Cloud Capital for payment.

(5)    Guardian is required to satisfy itself that the management fees and expenses it approves and pays are reasonable and in accordance with the TGIF Constitution and the PDS in order to be reimbursed for these approved fees and expenses from the scheme assets.

(6)    The Receivers have not been provided with sufficient supporting documentation to evidence that Guardian was sufficiently satisfied that all of the management fees and expenses paid to QB4 and Cloud Capital were reasonable and in accordance with the TGIF Constitution and the PDS.

(7)    QB4 and Cloud Capital is entitled to issue invoices for management fees to Guardian, in accordance with the IM Agreement, which are to be calculated as a percentage of the Gross Asset Value of each fund.

(8)    The basis of QB4 and Cloud Capital’s calculation of management fees is flawed as it relies on an improper calculation of the Gross Asset Value, thereby misstating the management fees charged.

(9)    It is not feasible to recalculate an accurate Gross Asset Value on a daily or monthly basis as required by the relevant PDS, so the Receivers have estimated a management fee to be applied to historic calculations.

(10)    QB4 and Cloud Capital are entitled to be reimbursed by Guardian for expenses incurred, however, it must provide evidence to substantiate those expenses.

(11)    Insufficient evidence was produced to demonstrate that Guardian took steps to satisfy itself that some expenses were properly incurred and therefore is unable to claim reimbursement of such expenses from the scheme assets.

(12)    The Receivers are not aware of any related party relationship between Guardian and QB4/Cloud Capital.

(13)    The Receivers have determined that a portion of the management fees and expenses paid by Guardian to QB4 is unclaimable as against the assets of the PIF and the ELF, as follows:

49    It was by this very lengthy series of events, and the receipt of the three reports (together, the Receivers’ Reports) that one came to a conclusion of the process that had been commenced in December 2020, whereby the Receivers were to report on the total costs incurred across both the ELF and PIF.

50    It is worth pausing here to address the parties’ reception of the Receivers’ Reports. Given the consistent methodology applied across the three reports, it is fair to say that the Receivers’ conclusions produced something of a double-edged sword that has prevented either party from weaponising any favourable conclusions in the Receivers’ Reports without similarly reducing the quantum of their own claims. It is, perhaps, for this reason that an issue was raised as to the extent that the conclusions of the Receivers’ Reports ought to be accepted by the Court. In their written submissions, the Guardian Parties surprisingly contend that there has been no process for the parties to be heard as to the extent to which findings in the Receivers’ Reports should be accepted, as would be afforded in respect of the report of a referee. Accordingly, Guardian submits that it would be procedurally unfair for the Court to proceed on the basis that the views of the Receivers provide evidence or conclusive determinations.

51    Although I agree that the conclusions of the Receivers are not determinative as a matter of law, I reject the premise of these submissions. It is ahistorical and does not reflect what occurred. I recognise that the Receivers were not appointed as referees and I have set out above the reasons why this did not occur. However, the purpose of the appointment of the Receivers was initially identified by Mr Campbell QC for the Guardian Parties at the interlocutory hearing on 2 December 2020 (at T113.46–114.5):

[W]e think that isolating [the incurred costs] and reporting on them separately, as though the receiver was a referee, would be useful because the actual issues would be identified. Our concern is that the powers of the receiver at the moment are, really, to … identify assets and liabilities and to prepare a profit and loss statement, effectively. And we think that the receivers should be a little bit more detailed than that and for the purpose of determining a resolution between the parties.

52    Accordingly, when making the orders for the appointment of the Receivers, I indicated my views as to the role of the Receivers to the parties as follows (at T116.46–117.08):

[HIS HONOUR]: I think I am inclined for there to be … one report which deals exclusively with the issue of the expenses incurred by Guardian from a particular date. And in respect of that, [the Receivers] are directed by me to obtain such expert assistance they think is necessary or appropriate for the purposes of preparing that report, say, without notice to the parties. A bit like the power [a] referee has to make such enquiries as he regards as appropriate in order to provide a report to the Court. So I think I will just beef up the report order, in order to provide that …

53    In any event, the orders appointing the Receivers were made by the consent of the parties, with the whole point of this exercise being to ensure that the controversy that had been agitated concerning the ELF and PIF would be resolved. That included an analysis regarding the reasonableness and propriety of costs and expenses charged by and paid to or at the direction of, Guardian, in relation to the ELF and PIF during the period 1 April 2020 to 2 December 2020, which was produced in the Second Receivers’ Report. At the hearing on 5 May 2021, the Guardian Parties sought an order pursuant to s 136 of the Evidence Act 1995 (Cth) limiting the use of the Receivers’ Reports as evidence of the state of mind, findings and analysis of the Receivers. Although I made a s 136 limitation, I further clarified the position as to the Receivers’ Reports at follows (at T133.0–6):

HIS HONOUR: Well, unless there’s any evidence adduced to the contrary, though, aren’t I going to proceed on the basis that’s what’s stated in the receiver’s report as accurate?

MR LIVINGSTON: Not necessarily, your Honour. No. But only, obviously, in relation to matters that your Honour receives submissions about.

54    This issue was raised again at the hearing on 21 June 2021, this time by Mr Douglas QC when seeking leave to amend the QB4 Parties’ pleadings (at T243.43–244.15):

MR DOUGLAS: And I raised it, and your Honour said that could be easily dealt with. We will have a report as to whether those expenses are properly incurred.

HIS HONOUR: Yes.

MR F. DOUGLAS: Now, we have received a report from the – which goes part of the way, I think, towards outlining what was properly incurred and what was not properly incurred, but my recollection – and again, I’m just – there are just a few integers which have not clicked into place from the last hearing to this hearing, but the – is it for – our figures largely coincide with the figures the receivers have come to, except that we take a different view to how you determine a remuneration that they were entitled to because their report is based on their view about net assets, not gross assets, and is based upon an interpreted view as to what management fees -

HIS HONOUR: Yes, because I thought the parties had pragmatically agreed, effectively, to leave this to an independent person to come to assess on what was regarded as reasonable, and this is the problem because you’re seeking to have you cake and eat it, too, because I put in place that the receiver did the work, has now come back with the assessment of what is – including what is reasonable for the work, a subjective view, and now you’re seeking to revisit that issue again?

55    Having considered the way in which the Receivers’ Reports were received by the Court and their content, I am satisfied that, although not conclusive or determinative, nor without their own errors, unless disturbed by other evidence, the Receivers’ Reports are prima facie cogent and persuasive reflections of their analysis and opinion and, on the basis of this opinion evidence, ought to be accepted as highly relevant as to the propriety of the costs incurred (in the absence of countervailing evidence I accept). This is because the analysis of the Receivers appears generally to be persuasive. Consistently with the s 136 limitation made, I have not used the contents of the Receivers’ Reports as evidence of the underlying truth of factual assertions contained in the reports. Further, I should note that the parties have not been constrained from adducing any evidence to the contrary, and it is simply wrong to assert that any issue arises as to procedural fairness.

56    Further to the above, the Receivers’ costs were also hotly contested, particularly by the QB4 Parties. On 21 June 2021, I gave ex tempore reasons determining the issues raised as to the remuneration of the Receivers, in which I noted that it was ultimately the QB4 Parties that sought the appointment of the Receivers. One of the reasons why receivers are regarded by the Courts traditionally as a relatively drastic remedy is that there is always a chance, even with the best will in the world, that the costs undertaken during the course of a receivership will be significant and disproportionate to any amount in dispute. It suffices to say that, although the costs incurred by the external legal representatives of the Receivers and the Receivers’ own costs were much higher than, I think, the parties would have contemplated (and certainly much higher than I had contemplated at the time of making the orders), the extent of the costs was explained by Mr Wengel appropriately. I ordered that the Receivers’ outstanding remuneration and disbursements be indemnified out of the assets of the ELF and PIF in accordance with the orders made on 2 December 2020. My views on this issue, upon reflection, have been reaffirmed. The Receivers’ Reports have provided significant clarity to the extensive, and sometimes ill-defined, issues in this case and have been of great assistance.

The parties’ claims

57    When I gave my ex tempore reasons regarding the remuneration of the Receivers, I indicated to the parties that it was initially my intention to resolve all of the outstanding issues that day and bring this matter to an end. Unfortunately, this was not possible.

58    On 1 July 2021, the QB4 Parties filed their further amended originating application and fourth further amended statement of claim (4FASOC), in which they seek equitable compensation in respect of various invoices charged to the funds, declaratory relief that Guardian is not entitled to payment in respect of those sums (amongst others), orders for the appointment of QB4 as trustee of FT1 and CODA as trustee of FT2, and further orders as to the management of the ELF and PIF assets.

59    On 13 July 2021, Guardian and VCPA filed a cross-claim in the Principal Proceeding against QB4, Fundus, and the Receivers (First Cross-Claim). By way of a broad summary, Guardian and VCPA seek the following relief in the First Cross-Claim:

(1)    an order that QB4 repay the Settlement Payments, with interest, to Guardian, Fundus, or the trustee of FT2;

(2)    a declaration that Guardian is entitled in equity to set-off the amount of $1,529,049 against any amount otherwise payable by it in respect of the claims in the Principal Proceeding for breach of the RE Agreement, the IM Agreement, and/or the CAR Agreement;

(3)    orders that the trustee of FT1 and FT2, or alternatively, Fundus, pay to Guardian the amounts specified in a series of outstanding invoices issued to Fundus for work Guardian claims it completed in connexion with the ELF and PIF or, alternatively, an amount representing reasonable remuneration for the services the subject of the outstanding invoices; and

(4)    an order that Fundus pay to VCPA the amount of $135,000, pursuant to the Loan Agreement dated 16 November 2020, together with interest on the Loan calculated at the rate of 10% per annum pursuant to clause 4.2 of the Loan Agreement.

60    On 17 August 2021, as I have outlined above, the agreed outstanding issues for determination were amended to reflect the substantive changes to each party’s case. Ultimately, the hearing of these outstanding issues did not conclude until 10 September 2021.

61    On the afternoon of the final day of the hearing, however, the QB4 Parties responded to criticism of their claim for equitable compensation, and indicated their intention to seek leave to amend their further amended originating application and 4FASOC. In substance, of course, this amounted to an application to augment the agreed issues the Court was required to resolve. It will be necessary to return to this issue below.

B.3    The Legal Costs Proceeding

62    The Legal Costs Proceeding has its genesis in the Queensland District Court Proceeding commenced on 18 December 2020 by CE Lawyers, relevantly concerning its claim for amounts owing under a costs agreement it had with the Guardian Parties (and Fundus) and a deed of acknowledgment of debt.

63    This was an extraordinary state of affairs. On 22 December 2020, CE Lawyers served the originating application and statement of claim that it had filed in the Queensland District Court Proceeding on Fundus at its registered office. It is not clear why CE Lawyers did not serve these documents on the Receivers, despite being aware that the Receivers had been appointed in the Principal Proceeding. Nor is it clear why this proceeding was commenced in the District Court of Queensland, given that it involved costs that were the subject of the Principal Proceeding and sought against the trust which was subject to the control of the Receivers. It was only when the QB4 Parties noted the issue, sought the proceeding to be relisted, and drew it to my attention that remedial steps could be taken in order to resolve the issue. However, in the meantime, and upon becoming aware of the Queensland District Court Proceeding, the Receivers neglected to file a defence to the claim. For reasons that are unnecessary to canvass, default judgment was then entered.

64    The Queensland District Court Proceeding was later superseded by the Legal Costs Proceeding commenced by QB4 and the Migunovs, against CE Lawyers and the solicitor with carriage of the matter, Ms Alyce Corbutt. QB4 sought an array of declaratory relief that, in essence, sought to undo the effects of the Queensland District Court Proceeding. The Guardian Parties and Fundus were later joined to the Legal Costs Proceeding.

65    On 3 March 2021, CE Lawyers filed a cross-claim against the Guardian Parties and Fundus, seeking the relief that was initially claimed in the Queensland District Court Proceeding. This notice of cross-claim was subsequently amended on 6 April 2021, removing the claim regarding the deed of acknowledgment of debt. On 7 April 2021, the Guardian Parties filed a cross-claim (Second Cross-Claim) against CE Lawyers, QB4, and the Migunovs, seeking, by way of a broad summary, declaratory relief that it be entitled to be indemnified for “all past, current and future legal costs incurred by Guardian” in the various proceedings on a full indemnity basis.

66    On 21 June 2021, I made the following orders:

2.     Judgment in favour of the cross-claimant (CE Litigation Lawyers) against the first cross respondent (Guardian Securities) in respect of the First Cross-claim filed on 6 April 2021 (First Cross-claim) in the amount of $32,614.68.

3.     Judgment in favour of CE Litigation Lawyers against the first to fifth cross-respondents (Guardian Parties) in respect of the First Cross-claim in the amount of $151,390.46.

4.    Orders 2 and 3 be stayed until determination of the Second Cross-claim, or further order of the Court, subject to the Guardian Parties providing security for the amount set out in orders 2 and 3, together with interest pursuant to the Federal Court of Australia Act 1976 (Cth) from the date of these orders, by providing to the solicitors for CE Litigation Lawyers, within 7 days of the date of these orders, a bank guarantee from an Australian trading bank in the amount of $190,000 (Bank Guarantee), where:

(a)     the beneficiary of the Bank Guarantee is CE Litigation Lawyers; and

(b)     the Bank Guarantee will not expire before 21 June 2022.

67    The effect of these orders was to order judgment in the favour of CE Lawyers, with that amount pending the resolution of the outstanding issues in the Second Cross-Claim, which fall for determination in this judgment.

C    EQUITABLE COMPENSATION

68    I first turn to consider the QB4 Parties’ claim for equitable compensation for the amounts paid or accrued by Guardian from the trust, which are said to have been incurred in breach of trust. By way of an overview, those amounts fall into two categories:

(1)    fees paid or accrued to Guardian in respect of invoices issued by it to Fundus in relation to the ELF and PIF (Guardian Invoices); and

(2)    amounts comprising various legal fees paid from the assets of the ELF and PIF to AG Edwards and CE Lawyers (Legal Invoices).

69    The Guardian Invoices are itemised in the 4FASOC as follows (at [18]):

70    One does not need a calculator to realise that there are issues with the total amount represented in this table. Guardian ultimately clarified, however, that a number of those invoices include disbursements from VCPA and VCSA for work said to have been performed on behalf of the trust as part of their review of the TGIF, as follows:

(1)    invoice 0419 includes charges for work done by Mr Maarbani and a disbursement from VCPA (invoice 0699);

(2)    invoice 0434 includes charges for disbursements from VCPA (invoice 0735) and VCSA (invoice 0026); and

(3)    invoice 0451 includes a disbursement from VCPA (invoice 0777) and a charge in the amount of $65,786.60 for work said to have been completed by Mr Maarbani.

71    Relevantly, therefore, the Guardian Invoices include invoices 0419, 0434, and 0451. Invoices 0419 and 0434, which amount to $548,971.50 and have been paid, are the subject of the claim for equitable compensation, and all three invoices are the subject of the claim for declaratory relief, to which I will return below.

72    The Legal Invoices are comprised of various legal fees paid from the assets of the PIF to AG Edwards and CE Lawyers totalling $509,941.69. The relevant invoices issued by AG Edwards identified in the 4FASOC are as follows (at [21A]):

73    The amounts paid to CE Lawyers are described in the 4FASOC (at [21B]):

CE Lawyers’ costs which total of $550,000 (incl GST) and that, by the Orders of Lee J dated 21 June 2021 in NSD99/2021, Guardian Securities is to pay and of which $190,000 is unpaid and is to be secured by way of bank guarantee provided by Guardian Securities.

74    Based on this, the AG Edwards legal costs ($169,941.69 (inc GST)) and the paid legal costs of CE Lawyers (said to total $340,000 (inc GST)) are the subject of the QB4 Parties’ claim for equitable compensation, and the total amount is the subject of the claim for declaratory relief.

75    The QB4 Parties submit Guardian is liable to pay to FT2 by way of equitable compensation, the amounts of these invoices, which are alleged to have been paid or accrued by Guardian in breach of trust for work that was not done “within the spirit of its powers as trustee.” This argument is developed by reference to the authority of Walker v Stones [2001] QB 902, in which Sir Christopher Slade stated (at 916):

It is true that the powers of investment and charging trust assets conferred by the trust deed are very wide. However, the mere fact that a trustee is acting within the letter of his powers does not necessarily absolve him from a charge of breach of trust. Subject to the operation of any exemption clause contained in the trust deed, his powers must be exercised reasonably and in good faith and for the purposes for which they were created; he must exercise them in a proper way for the legitimate purposes of the trust: Halsbury’s Laws of England, 4th ed, vol 48 (1995), pp 452–453.

(Emphasis added).     

76    It is necessary to address two issues as to this claim immediately. The first is that the issues as agreed by the parties, although encompassing the issues in dispute, are somewhat misleading. Specifically, issues 1b and 1c are as follows:

1b.    Did Guardian relevantly commit a breach or breaches of trust?

1c.    If no to 1b, were the expenses properly incurred by Guardian as trustee?

(Emphasis added).

77    The issue with this drafting is that issues 1b and 1c are, in effect, the same issue: whether Guardian relevantly committed a breach or breaches of trust by improperly incurring expenses as alleged. This issue requires an analysis as to whether the specified costs fall within the scope of Guardian’s right of indemnity. Whether this issue is raised in relation to the rights of indemnity, or in relation to the somewhat vague submission as to the “spirit of the trust”, the resulting analysis is the same. This has always been my understanding as to the breach of trust case, which was not disputed on the final day of the hearing: see T453.40–454.43. What, at the end of the day, is being disputed is the propriety of the Guardian Invoices and the Legal Invoices. This was the subject of the Receivers’ Reports, much of the evidence, and central to the Principal Proceeding. This issue, which has generated so much controversy, must be resolved pragmatically.

78    The second issue is that the claim for equitable compensation has deficiencies, not the least of which is an issue as to whether the QB4 Parties have the necessary standing to bring the claim. Although the issue as to standing was raised promptly by the QB4 Parties, and expressly identified in the agreed issues for determination by the consent of the parties, the consequences of the standing issue were only confronted by the QB4 Parties on the final day of the hearing, after which the QB4 Parties’ sought to amend their pleadings by introducing an alternative derivative claim. Accordingly, as I understand it, I am left with three alternative bases upon which the QB4 Parties, specifically the Migunovs, are said to have standing to bring the claim for equitable compensation: (1) as beneficiaries of FT1 and FT2 (Beneficiary Case); (2) as beneficiaries of a co-extensive trust under s 601FC(2) of the Corporations Act (Statutory Trust Case); or (3) by means of a derivative claim, which is the subject of the application to amend (Alternative Beneficiary Case).

79    I will address each of these cases.

C.1    Beneficiary Case

80    As outlined above, Guardian submits that the QB4 Parties do not have standing to seek equitable compensation in respect of amounts alleged to have been paid or accrued in breach of FT1 and FT2, as they are not beneficiaries of any trust of which Fundus is a trustee.

81    The 4FASOC states (at [18]) that, on various dates, Guardian paid or accrued a series of sums, or caused them to be paid from the trust bank accounts. The QB4 Parties plead (at [20]) that those payments were:

(a)    made in breach of trust;

(b)    made in breach of undertakings to the Court;

(c)    … not payments that Guardian Securities was authorised to pay under the product disclosure statements of ELF and PIF; and

(d)    … made in breach of the fiduciary duty of the Guardian Securities owed to the unitholders because they were not reasonable in the circumstances.

82    However, the payments the subject of the claim for equitable compensation were made (or caused to be made) by Fundus as trustee of FT1 and FT2, not by Guardian. Since the unitholders of the ELF and PIF, including the Migunovs, are said not to be beneficiaries of any trust of which Fundus is the trustee, Guardian submits that they lack standing to bring a claim for equitable compensation against Guardian for the payments made by Fundus.

83    A trustee who has committed a breach of trust may be sued in respect of that breach either by a beneficiary (including someone representing his estate) or by a co-trustee or successor trustee: Young v Murphy; Swinbank v Murphy [1996] 1 VR 279 (at 281 per Brooking J). QB4 itself has no standing to bring an action to vindicate any relevant right given its relationship with the TGIF was purely contractual as the investment manager and corporate authorised representative in respect of the ELF and PIF. Any relationship it has with the ELF and PIF unitholders does not confer standing upon it to bring an action of this kind for their benefit. Therefore, the QB4 Parties’ claim for equitable compensation rests on the Migunovs having standing by reason of being beneficiaries of FT1 and/or FT2.

84    The FT1 and FT2 constitutions each provide a mechanism for the identification of the proper beneficiaries of the respective trust. Those constitutions are in relevantly identical terms and operate as follows:

(1)    Recital A states: “This Constitution establishes the Trust for the benefit of all Members.”

(2)    Clause 1.1 defines “Member” to mean “a person for the time being registered under the provisions of this Constitution as a holder of Units”.

(3)    Clause 7.1 obliges the trustee to keep and maintain, or cause to be kept and maintained, an up-to-date register of members.

(4)    Clause 7.3 states: “The Trustee is entitled to regard the Register as conclusive proof as to who is a Member at any given time. The Trustee is not required to recognise any beneficial interest held in any Unit.”

85    From this mechanism, it is clear that the proper beneficiaries of FT1 and FT2 are those persons identified in the register of members that the trustee is obligated to maintain. The trustees of FT1 and FT2, by reason of the orders I made on 2 December 2020, are the Receivers.

86    On 21 April 2021, the solicitors for the QB4 Parties emailed the Receivers, requesting copies of the register of members for each of FT1 and FT2. In response, on 22 April 2021, the Receivers sent the QB4 Parties’ solicitors the following email:

Please find attached unit registers for ELF and PIF which incorporate the discrepancies between the unit registers provided by QB4 and Guardian.

These have been compiled based on the information that we have been provided and we do not warrant the accuracy of same.

We also attach the unit registers provided by Guardian and QB4 for your reference.

Further, we note that these documents are confidential and request that they are not distributed to any party other than yourself and QB4.

87    Attached to the email were spreadsheets setting out the unitholders in the ELF and PIF. The QB4 Parties submit that this is “conclusive proof” that the unitholders in the ELF and PIF are the members of FT1 and FT2 and, therefore, the proper beneficiaries.

88    As is evident from the Receivers’ email dated 22 April 2021, there was an apparent misunderstanding between the Receivers and the solicitors for the QB4 Parties as to what was being requested. Despite the request for copies of the Register of Members for each of FT1 and FT2, the Receivers’ responded by sending an email attaching documents identified as the “unit registers for the ELF and PIF”. The attachments contain no reference to FT1 or FT2. Rather, the attachments reference the unitholders of the ELF and PIF, and contain unit holder reference numbers, all of which use a “TGIF code”. This indicates that the attached document records unit holdings in the TGIF, rather than unit holdings in FT1 or FT2. Mr Livingston, counsel for the Guardian Parties, provided the following explanation as to what occurred (at T445.17–30):

[MR LIVINGSTON: Y]our Honour will see that from the terms of the email from the receivers, which is properly quoted in paragraph 16 of my friend’s aide-memoire. What they attached were unit registers for ELF & PIF, and what those unit registers are on their face, clearly on their face, are the unit registers for 20 unit holdings in the TGIF, that is, the entire registered managed investment scheme, The Guardian Investment Fund.

…

And those registers make clear, which is common ground, that the ELF & PIF unit holders were unit holders in the TGIF, the registered managed investment scheme, and within that managed investment scheme, they held units within this subclass of that managed scheme, which is designated as ELF & PIF. That is, in a sense, the receiver has answered the wrong question.

89    It is clear the documents that the Receivers provided to the QB4 Parties are not copies of the register of members for each of FT1 and FT2 for the purposes of their respective constitutions. As Mr Livingston said, despite the QB4 Parties asking the right question, “the receiver has answered the wrong question”: T445.30.

90    The Guardian Parties claim that, as opposed to the ELF and PIF unitholders, Guardian is, in fact, the proper beneficiary of FT1 and FT2. In support of this submission, they rely on the evidence of Mr MacKenzie (which was relied upon in the Second Receivers’ Report) and the evidence of Mr Maarbani, who were both of the understanding that Guardian was the sole beneficiary of FT1 and FT2: see Mr Maarbani’s affidavit sworn 21 July 2021 (at [6]); First Receivers’ Report (at Annexure E). However, this evidence similarly does not support a finding as to the identity of the proper beneficiary of FT1 and FT2. The statements made in Mr Maarbani’s affidavit and the Receivers’ Reports are the subject of a s 136 limitation and are merely evidence as to their opinions as to the identity of the proper beneficiary.

91    Given the state of the evidence before me, I am not satisfied as to the identity of the proper beneficiary of FT1 and FT2. This conclusion, unfortunately, raises more questions than it answers. The first is whether there was a register of members for FT1 and FT2 that was kept and maintained for the purposes of the respective constitutions. The second question is: if those registers were kept and maintained, where are they now? The moving party bears the onus. At no stage have the QB4 Parties sought to obtain a copy of the relevant registers of members by way of subpoena or notice to produce, in order to tender the register, or to tender the process served (and called upon) as proof of the fact that the register does not exist. The evidence to which I was directed at the hearing is inconclusive on this point.

92    Despite the deficiencies as to this evidence, which were made clear on the final day of the hearing, if not earlier, the parties appeared content to proceed on the basis of it. There was no attempt to direct my attention to any further evidence as to the identity of the beneficiaries from within the mass of documents that I have been provided. Whatever else is unclear in this case, one thing is clear: these were highly complex commercial structures, and it is not to be assumed that all paperwork was accurate and complete. Therefore, although I have my suspicions, I am simply not in a position to be reasonably satisfied to the requisite standard, on the evidence to which I was taken, that the unitholders of the ELF and PIF are beneficiaries of any trust of which Fundus is the trustee; nor can I be satisfied that Guardian itself is a beneficiary of FT1 and FT2.

C.2    The Statutory Trust Case

93    In the alternative, the QB4 Parties propose that the Migunovs have standing to make a claim against Fundus because it was relevantly acting as an agent of Guardian under s 601FB(2) of the Corporations Act. This “Statutory Trust Case” first appeared in the QB4 Parties’ reply to the defence to the 4FASOC, which was filed on 6 August 2021 (Reply), and was detailed as follows (at [13(b)]):

(b)    say further that the applicants [sic] have standing to bring claims for breaches of trust and other breach of duty in respect of the trust constituted by FT1 and FT2, and that the proper defendant to any such claim is Guardian, because:

(i)     Guardian was, at all material times, and is the responsible entity of The Guardian Investment Fund (TGIF);

(ii)     the PIF and the ELF are classes of units in the TGIF;

(iii)    Guardian did and does, by s 601FC(2) of the Corporations Act 2001 (Cth) (Corporations Act), hold “scheme property” on trust for scheme members;

(iv)     the unitholders in the ELF and the PIF are, within the definition of “member” in s 9 of the Corporations Act, persons who hold an interest in the scheme;

(v)     the trust assets of FT1 and FT2 constituted “scheme property” within the meaning of that expression in s 9 of the Corporations Act because:

(i)     the moneys held by Fundus Management (by its custodian Certes) were and are either:

(A)     contributions of money to TGIF; or

(B)    money raised by Guardian for the purposes of TGIF; or

(C)     income derived, directly or indirectly, from such contributions or money raised;

(ii)     the other property held by Fundus Management was and is either:

(A)     property acquired, directly or indirectly, with, or with the proceeds of, such contributions or money raised;

(B)     property derived, directly or indirectly, from such contributions or money raised or such property acquired;

(vi)     in the premises, notwithstanding the trusts mentioned in paragraph 3(d) of the Defence, Guardian was, at all material times, trustee under a coextensive trust recognised by and under s 601FC(2) of the Corporations Act;

(vii)     the coextensive trust recognised by and under s 601FC(2) of the Corporations Act continued during such time as Guardian is the responsible entity of TGIF;

(viii)     the members of the TGIF, which include the unitholders of the ELF and the PIF, are included among the beneficiaries of the trust created and recognised by and under s 601FC(2) of the Corporations Act;

(ix)     Mr Maarbani, who was the sole director of Fundus Management at all material times, caused Fundus Management to engage in the conduct alleged against it;

(x)     Fundus Management, in engaging in such conduct, acted as the agent of Guardian as principal, insofar as such conduct was engaged in by Fundus Management (through Mr Maarbani) at the direction of Guardian for the purposes of the ELF and the PIF within the TGIF;

(xi)     in the premises, Guardian is the proper defendant to claims of breach of trust or other breach of duty in respect of that coextensive trust that subsists with respect to the trust assets of FT1 and FT2 because such trust assets are also “scheme property” of which Guardian was and is itself a trustee.

94    Although the Reply refers to the applicants generally, as I understood it, the QB4 Parties suggest the Migunovs have a direct claim for breach of trust against Guardian because Guardian charged, or purported to charge, those fees and expenses to FT1 and FT2 in breach of its obligations as trustee pursuant to the trust recognised under s 601FC(2) of the Corporations Act.

95    This argument was almost wholly undeveloped, in writing or orally. At present, I find the argument, at best, difficult to understand. The scope and terms of the “coextensive trust” and the property that is said to be subject to it are unclear. No authority is identified by the QB4 Parties for its approach.

96    Needless to say, a contravention of the duties of the responsible entity mentioned in s 601FC of the Corporations Act is a contravention of a civil penalty provision, by reason of s 601FC(5). Yet, no claim for statutory compensation is made. It seems to be suggested that there is some sort of freestanding equity floating around, arising upon breach of a statutory trust, allowing the Migunovs to seek monetary relief at general law (in circumstances where they would not otherwise have standing to seek equitable compensation). I raised my lack of understanding in respect of this case with the QB4 Parties, but the nature of the statutory/coextensive trust case remains obscure: T473.42–474.45.

97    Ultimately, I do not consider it necessary to deal with the Statutory Trust Case, at least at this time, given the approach that I propose to take as to the declaratory relief sought (as outlined in the following section). If these reasons and the findings contained in them do not allow the parties to formulate relief to resolve this controversy, it may be necessary to revisit questions of standing at the time I am resolving any contested questions of relief, but at present, it suffices to note that I do not understand the statutory/coextensive trust case.

C.3    The application to amend

98    It is now necessary to turn to what was characterised as the QB4 Parties’ application for leave to amend their further amended originating application and 4FASOC in the Principal Proceeding. Of course, as should already be clear, this was in substance an application to augment in some way the agreed issues which had been identified by the parties and had been reflected in an earlier consent order of the Court.

99    The amendment application is a further illustration of the focus by both parties, at times, on form rather than substance in this dispute.

100    The application to amend was raised on the final day of hearing during reply oral submissions when it became apparent to counsel for the QB4 Parties that their 4FASOC contained deficiencies as to their standing to bring a claim for equitable compensation (T475.1–3):

[MR F. DOUGLAS:] Your Honour, it seems to us, in light of what has been said, that we should avail ourselves of the opportunity to amend the claim to bring it into accordance with the evidence …

101    With some misgivings, I made orders on 10 September 2021 for the QB4 Parties to file and serve, before 15 September 2021, any proposed fifth further amended statement of claim (proposed 5FASOC) and any further amended originating application, together with any submissions and evidence in support of leave being granted, which was to be determined on the papers. By their application filed on 15 September 2021, the QB4 Parties sought leave to file a proposed second further amended originating application and a proposed 5FASOC. Unsurprisingly, this was opposed by the Guardian Parties, who filed their submissions and evidence on 22 September 2021.

The proposed amendments

102    By their application, the QB4 Parties seek to amend their originating application by adding the following new prayer for relief:

2A.     To the extent necessary, an order that the second applicants, the Migunovs, are granted leave nunc pro tunc to bring the proceedings to seek the relief claimed in Orders 1 and 2 [i.e. equitable compensation and declaratory relief].

103    The QB4 Parties further seek to amend their 4FASOC by:

(1)    adding the following new paragraphs:

7A.    At all material times, Steven Maarbani was the managing director of Guardian and the sole director of Fundus Management.

…

9A.     Further, or in the alternative, to paragraph 9 above, Guardian is the beneficiary of FT1.

…

10A.     Further, or in the alternative, to paragraph 10 above, Guardian is the beneficiary of FT2.

…

15A.     Further, or in the alternative, to paragraphs 14 and 15 above, in the premises of the further and alternative matters alleged in paragraphs 9A and 10A above:

(a)     Guardian, to the extent it is the beneficiary of FT1 and FT2, holds that beneficial interest on trust for the unitholders of ELF and PIF;

(b)     Guardian must exercise the rights attaching to that beneficial interest in the best interests of the unitholders of ELF and PIF;

(c)    it is in the best interests of the unitholders of ELF and PIF that any payments made or sought to be made from the trust bank accounts in breach of trust should be restored or replenished;

(d)     such allegations of breach of trust with respect to such payments involves and impugns both Fundus Management and Guardian;

(e)     Guardian has not sought to sue with respect to (and, to the contrary, has denied) such allegations of breach of trust;

(f)     in the premises, there are exceptional or special circumstances that warrant the Migunovs bringing the proceedings to claim relief for those alleged breaches of trust;

(g)     to the extent necessary, the Migunovs should be granted leave nunc pro tunc to bring the proceedings.

…

22A.     In the premises of paragraphs 1, 2, 3, 7 and 7A herein, the Migunovs have standing to bring claims for breaches of trust and other breach of duty in respect of the trust constituted by FT1 and FT2, and that the proper defendant to any such claim is Guardian, because:

(a)     Guardian did and does, by s 601FC(2) of the Corporations Act 2001 (Cth) (Corporations Act), hold “scheme property” on trust for scheme members;

(b)    the unitholders in ELF and PIF are, within the definition of “member” in s 9 of the Corporations Act, persons who hold an interest in the scheme;

(c)     the trust assets of FT1 and FT2 constituted “scheme property” within the meaning of that expression in s 9 of the Corporations Act;

(d)     in the premises, notwithstanding FT1 and FT2, Guardian was, at all material times, trustee under a coextensive trust recognised by and under s 601FC(2) of the Corporations Act;

(e)     the coextensive trust recognised by and under s 601FC(2) of the Corporations Act continued during such time as Guardian is the responsible entity of TGIF;

(f)     the members of the TGIF, which include the unitholders of ELF and PIF, are included among the beneficiaries of the trust created and recognised by and under s 601FC(2) of the Corporations Act;

(g)     Mr Maarbani, in his capacity as the sole director of Fundus Management at all material times, caused Fundus Management to engage in the conduct alleged against it;

(h)     Fundus Management, in engaging in such conduct, acted as the agent of Guardian as principal, insofar as such conduct was engaged in by Fundus Management (through Mr Maarbani) at the direction of Guardian for the purposes of ELF and PIF within the TGIF;

(i)     in the premises, Guardian is the proper defendant to claims of breach of trust or other breach of duty in respect of that coextensive trust that subsists with respect to the trust assets of FT1 and FT2 because such trust assets are also “scheme property” of which Guardian was and is itself a trustee.

(2)    amending the following paragraphs (as underlined):

18.     On various dates, Fundus Management or Guardian Securities paid or accrued the following sums or caused them to be paid from the trust bank accounts

…

24.     In the premises of paragraphs 18 to 22A herein, Guardian Securities is not entitled to payment of the amounts of $267,352.72 $267,352.72 accrued in the accounts of FT1 and FT2.

104    The QB4 Parties state that aspects of the proposed amendments are reflected in the QB4 Parties’ current pleadings. Specifically, the amendments made at [7A], [18], and [22A] of the proposed 5FASOC, are said merely to repeat the matters already alleged in [13(b)] of the Reply, and the other paragraphs allege uncontroversial facts in support of those matters, being the Statutory Trust Case.

105    The heart of the dispute, however, concerns the QB4 Parties seeking to introduce for the first time an application for leave for the Migunovs to pursue a derivative claim on behalf of the trustee of the TGIF, Guardian, against Fundus. The QB4 Parties submit that the amendments at [9A], [10A] and [15A] of the proposed 5FASOC, however, plead the “legal consequences that follow from the Guardian Parties’ case that Guardian is the sole beneficiary of FT1 and FT2” (that is, the Alternative Beneficiary Case).

Consideration

106    The principles are not in dispute, but the fact that the issues to be determined have long been identified by a document that sought to replace the joinder of issue on the pleadings is an important matter of context and must be taken into account in assessing the utility of amending the pleadings yet again.

107    The QB4 Parties submit s 22 of the FCAA is said to maintain the historical distinction between “the discretion of a court to allow a party to amend its pleading on that party’s motion and the requirement to make all such amendments as may be necessary to determine the real questions in controversy”: Aon Risk Services Australia Ltd v Australia National University [2009] HCA 27; (2009) 239 CLR 175 (at 185 [14] per French CJ). The power in s 22 of the FCAA is to be applied “on such terms and conditions as [the Court considers] just”: EPU19 v Minister For Home Affairs [2020] FCA 541 (at [56] per Steward J).

108    Although it may be the general approach that an application to amend a pleading should be granted so that the real questions between the parties may be tried, the Court now has power under s 37P(2) of the FCAA to fix upon a mode for identifying issues that require resolution and to ensure the real questions in controversy are solved. Such case management orders must be the course which best facilitates the overarching purpose: s 37M(3) of the FCAA. As I have been at pains to emphasise above, this was done, and throughout the course of these proceedings, I have attempted, with the assistance of the parties, to identify with precision those issues that I need to determine.

109    If leave were to be granted, the Guardian Parties contend they would be facing a different case to the one against which they have been required to defend. Such was the evidence of Mr David Hing, the solicitor with conduct of the proceedings on behalf of the Guardian Parties. To overcome this prejudice, it was said it was necessary to reopen the matter for further written submissions. Be that as it may, this claim for monetary relief has always been on the table, albeit not articulated with clarity or precision.

110    Given the procedure adopted for identifying the issues and the lateness and lack of utility of the amendment in identifying the real issues, I do not think the amendment proposed is necessary. However, my refusal to grant leave does not foreclose from determination what has always been a central issue under dispute; that is, the propriety and proper quantum of the Guardian Invoices and the Legal Invoices. I do propose to deal with the claim made for declaratory relief in relation to the Guardian Invoices and the Legal Invoices because to fail to do so would be to ignore the substance of an important aspect of the dispute that has long been understood by the parties to be squarely in the arena, notwithstanding any pleading deficiencies. If a point is taken when the parties bring in short minutes that declaratory relief is not an appropriate or available mode for resolving this important and underlying dispute between the contending parties, I will return to questions of standing and mode of relief at that time. At bottom, this is a commercial dispute between two “camps”, and I do not propose to allow form to triumph over the underlying justice of the case in granting relief as between those “camps” (if the terms of relief cannot be agreed between them in the light of these reasons).

D    DECLARATORY RELIEF

111    In their amended originating application, the QB4 Parties seek declaratory relief in the following terms:

A declaration that Guardian Securities Ltd is not entitled to payment in respect of the sums of $548,941.69 (incl GST) and/or $509,971.50 (incl GST) and/or amounts accrued in the sums of $77,162.72 (incl GST), $550,000 (incl GST) and $267,352.72.

112    The QB4 Parties’ 4FASOC further provides (at [34(2)]) that the relief sought includes the following declaration:

That Guardian Securities is not entitled to payment in respect of the sums of $548,941.69 and $509,971.50 identified above and sums accrued in the accounts identified in paragraphs 18 (f), 21 B and 24 above.

113    The declaratory relief sought is not a model of legal drafting. The amounts to which the declaration relate lack the necessary specificity and appear to overlap significantly. The identified amounts the subject of the claim for declaratory relief appear to relate to:

(1)    the Guardian Invoices ($548,941.69);

(2)    the Legal Invoices ($509,971.50);

(3)    invoice 0451 ($77,162.72);

(4)    the total amount of CE Lawyers’ costs ($550,000); and

(5)    the sum of the unpaid amount of CE Lawyers’ costs ($190,000) and invoice 0451 ($267,352.72).

114    Notwithstanding any deficiencies in the prayers for relief, s 21 of the FCAA confers a wide discretionary power on the Court as to the making of a declaration and the terms in which it should be framed: see, e.g., AWB Limited v Honourable Terence Rhoderic Hudson Cole (No 6) [2006] FCA 1274; (2006) 235 ALR 307 (at 308 [5] per Young J).

115    However, the vague terms of the declaratory relief as outlined in the 4FASOC place me in a difficult position. In relation to those payments that have already been made, absent some sort of sensible resolution between the parties, such a declaration would be of no practical effect without a properly framed claim for equitable compensation, or orders for the repayment of the amounts that are found not to have been properly incurred.

116    As noted above, despite the way the QB4 Parties have run this case, it is pellucid that the propriety of the Guardian Invoices and the Legal Invoices have always been in dispute. This was part of the reason why both parties fastened upon the Receivers’ Reports as a means by which the appropriateness of these amounts would be the subject of inquiry by the Receivers. Clearly, it is desirable that there should be an authoritative resolution of this aspect of the dispute presented to the Court, with any declarations made by the Court reflecting (as best one can) the final outcome of the case with certainty and precision: see AWB v Cole (at 308 [5] per Young J).

117    Accordingly, I propose to make findings as to the propriety of each of the relevant invoices in the context of dealing with the somewhat related claims of Guardian for relief as to indemnity.

118    To give effect to these findings (which are identified in Section E below), the parties are to provide an agreed minute or competing minutes of order.

E    INDEMNITY CLAIMS

119    As stated above, central to many of the agreed issues is the question of whether certain expenses were properly incurred for the purposes of the trust. As can be seen from the following, there is significant overlap as to the 4FASOC, the First Cross-Claim, and the Second Cross-Claim:

(1)    in the 4FASOC, the QB4 Parties seek declaratory relief to the effect that Guardian is not entitled to the amounts of the Guardian Invoices or the Legal Invoices;

(2)    in the First Cross-Claim, Guardian claims it is entitled to be repaid in respect of amounts specified in various outstanding invoices relating to responsible entity fees, audit fees for work undertaken by PKF, and invoice 0451 for services rendered by VCPA and Mr Maarbani (Outstanding Invoices); and

(3)    in the Second Cross-Claim, filed in the Legal Costs Proceeding, the Guardian Parties seek declaratory relief that Guardian be indemnified from the trust property for all past, current and future legal costs incurred in respect of each of the proceedings.

120    Before turning to each of these, however, it is first necessary to outline the rights of indemnity upon which Guardian relies.

E.1    Rights of indemnity

121    A registered investment scheme is required to have a constitution that makes adequate provision for the powers of a responsible entity in relation to dealing with scheme property in accordance with s 601GA of the Corporations Act. Relevantly, s 601GA provides:

601GA Contents of the constitution

(1)    The constitution of a registered scheme must make adequate provision for:

(a)    the consideration that is to be paid to acquire an interest in the scheme; and

(b)    the powers of the responsible entity in relation to making investments of, or otherwise dealing with, scheme property; and

(c)    the method by which complaints made by members in relation to the scheme are to be dealt with; and

(d)    winding up the scheme.

(2)    If the responsible entity is to have any rights to be paid fees out of scheme property, or to be indemnified out of scheme property for liabilities or expenses incurred in relation to the performance of its duties, those rights:

(a)    must be specified in the scheme’s constitution; and

(b)    must be available only in relation to the proper performance of those duties;

and any other agreement or arrangement has no effect to the extent that it purports to confer such a right.

…

122    Any right of indemnity must satisfy the two requirements of s 601GA: it must be specified in the scheme’s constitution; and it must be available only in relation to the proper performance of those duties. Clearly, s 601GA(2) does not, in and of itself, create or confer any right of indemnity of a responsible entity out of scheme property. As McKerracher J observed in Great Southern Managers Australia Ltd (at 512 [44]):

The two requirements of s 601GA must be satisfied. The effect of s 601GA is to require a right to fees to be specified in the Constitution. It does not give the power to insert any new fees or a power of confiscation or some other benefit not already agreed between the parties. Any other amendments could only be made under the terms of the original Trust Deed and then under the strict terms of the Trust Deed by the Trustee joining with the Manager and not by the Manager alone.

123    The TGIF Constitution confers express rights of indemnity and reimbursement on the Manager of the TGIF. The TGIF Constitution was amended on 22 May 2019 and has been in force at all relevant times since that date. Accordingly, any rights of indemnity and reimbursement conferred by the TGIF Constitution remained constant throughout the relevant period. The relevant rights of indemnity are contained in cll 22.1, 22.6, and 23.7 of the TGIF Constitution dated 22 May 2019. They provide:

22.1 Indemnification

(a)    The Manager is indemnified out of the Trust for:

(i)    all expenses, losses, damage and liabilities (whether actual, contingent, prospective or otherwise) incurred, arising out of or in connection with acting in connection with the Trust or in connection with any of the matters listed in clauses 22.2.

(ii)    all liabilities incurred by it in relation to the proper performance of its duties or exercise of its powers as Manager under this Constitution (including, without limitation, in connection with any acts or omissions by the Manager in relation to clauses 4.3A, clause 28.3 or Schedule 1); and

(iii)    all other liabilities incurred by it in relation to the operation of the Trust other than liabilities incurred as the result of breach of trust, recklessness or fraud on the part of the Manager

(b)    This indemnity:

(i)    is without prejudice to any indemnity allowed by law;

(ii)    survives the termination of this document; and

(iii)    may be claimed from the assets,

but the indemnity is not available where the indemnity is not permitted under the Applicable Standards.

(c)    The Manager has a lien on and may use the Assets for the purpose of this indemnity and generally for the payment of all legal and other costs, charges and expenses of administering or winding up the Trust and otherwise properly performing its duties to the Trust.

…

22.6 Manager’s indemnity additional to those at law and is a continuing one

The indemnity under clauses 22.1 is:

(a)    in addition to any indemnity the Manager may have at law or in equity; and

(b)    a continuing indemnity and, subject to the Corporations Act, applies to the Manager after it retires or is removed as manager or responsible entity of the Trust.

…

23.7 Reimbursement of costs, charges and expenses

The Custodian (provided it is external and independent of the Manager) and the Manager must be paid or reimbursed on a full indemnity basis out of the Trust for all expenses and liabilities which they each incur in connection with the Trust or in performing their obligations or exercising their powers under this document including:

…

(d)    the acquisition, holding, management, maintenance, valuation or disposal or attempted or proposed acquisition or disposal of or any other transaction in relation to investments and the investigation and research of markets, including travel and accommodation expenses, investment or portfolio manager’s fees and advisor’s and consultants’ fees incurred in carrying out the functions of the Manager or the Custodian, taxes and rates;

…

(g)    establishing the Trust and any restructuring of the Trust including costs of preparation of this document and any supplemental deed and the cost of legal, accounting, tax, financial and other services;

…

(k)    any court proceedings, arbitration, or dispute and obtaining legal advice;

…

23.8 Payment to Associates

Payments under clauses 23.7 may be made to an Associate of the Manager or Custodian.

124    The QB4 Parties submit that, in respect of the various rights of indemnity in the TGIF Constitution, s 601GA of the Corporations Act is not satisfied. The basis for this submission is that if the purported right of indemnity is not “available only in relation to the proper performance of those duties”, then it is not a right of indemnity authorised to be given to the responsible entity, by way of specification in the relevant constitution, under section 601GA(2). That is, where any right of indemnity in a scheme’s constitution does not restrict its availability “only in relation to the proper performance of those duties”, the entire clause is of null effect and no right of indemnity, whether in relation to the proper performance of those duties or not, is conferred.

125    This submission should not be accepted. Section 601GA(2) does not prevent a responsible entity from relying on a broadly expressed right of indemnity clause in order to be indemnified for liabilities or expenses which it incurs “in relation to the proper performance of those duties”. The provision provides that “any other agreement or arrangement has no effect to the extent that it purports to confer such a right” (emphasis added). Similarly, where the constitution of an investment management scheme provides a right of indemnity that extends beyond that prescribed by s 601GA(2)(b), it will similarly be of no effect to the extent that it purports to confer such a right. The effect of s 601GA(2)(b) was discussed in Australian Corporation Law Principles & Practice (LexisNexis Australia, January 2022) (at [7.12.0075]):

The right to be paid such amounts is only available in relation to the proper performance of those duties and any other agreement or arrangement has no effect to the extent that it purports to confer such a right: s 601GA(2).

…

With respect to liabilities or expenses there is a question whether the section would be satisfied by a comprehensive clause indicating that the responsible entity is entitled to be indemnified out of scheme property for every liability or expense incurred in relation to the performance of its duties without limitation, or whether it is necessary to list in the constitution every type of expense which can be recovered. Although in practice not many fund managers have been brave enough to abandon the “listing” approach, it suffers from the serious defect that occasionally liabilities or expenses which otherwise might legitimately be claimed cannot be recovered because they fall outside the specific wording of the list. Even where the “listing” approach is adopted, the “list” usually includes a safety net provision expressed in wide terms to catch anything which might have been missed. The restriction under s 601GA(2) does not appear to prevent a responsible entity from being indemnified for liabilities or expenses which it incurs other than “in relation to the performance of its duties”. Even where the relevant liabilities or expenses are incurred in relation to the performance of its duties, if the right arises other than under an “agreement or arrangement”, for example, as a result of a court order or statutory right of indemnity, it would appear that s 601GA(2) would not prevent the responsible entity from recovering even if the expenses or liabilities were of a kind not specified in the constitution.

(Emphasis added).

126    Dealing with a similar issue in Bruce & Anor v LM Investment Management Limited & Ors (No 2) [2013] QSC 347, Dalton J stated (at [27]):

If, and in so far as cl 19.1 purports to allow the responsible entity of the FMIF an indemnity in circumstances where, short of negligence, fraud or breach of trust, it has acted improperly, or not for the purpose of the trust, then my view is that clause of the constitution does not so operate by reason of the provision at s 601GA(2)(b).

(Citations omitted).

127    Put simply, a clause that purports to indemnify the responsible entity of an investment management scheme for costs that were not incurred in relation to the proper performance of its duties will not operate to the extent that it purports to do so. It does not invalidate the conferred right to indemnity entirely.

128    Accordingly, in determining the issue of Guardian’s right to indemnity, it is necessary to determine whether the relevant costs were “properly incurred”. This expression has been the subject of much discussion and is in no way unique to managed investment schemes and s 601GA(2)(b) of the Corporations Act. The terms arise in the case law concerning a trustee’s right under general law to be indemnified for certain expenses, as well as the statutory recognition of the indemnity in s 59(4) of the Trustee Act 1925 (NSW) and its equivalents. Undoubtedly, s 601GA(2) is to be interpreted against the background of the place of the trust as an institution of equity, with nothing set out in s 601GA(2)(b) or the relevant terms of the scheme constitution modifying the pre-existing law: Saker, in the matter of Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liquidation) (No 2) [2011] FCA 958 (at [51] per McKerracher J); see also Re Gunns Finance Limited (in liq) (recs & mgrs apptd); and Re Gunns Plantations Limited (in liq) (recs & mgrs apptd) (No 2) [2013] VSC 365; (2013) 281 FLR 121 (at 148–151 [152]–[161], 152 [170] per Robson J).

129    From the outset, the Chancery principle was that only expenses that are “properly incurred” are the subject of a trustee’s indemnity: Re O’Donoghue [1998] 1 NZLR 116 (at 121 per Hammond J). In analysing the meaning of “properly incurred”, Lindley LJ observed in Re Beddoe [1893] 1 Ch 547 (at 558):

I entirely agree that a trustee is entitled as of right to full indemnity out of his trust estate against all his costs, charges, and expenses properly incurred: such an indemnity is the price paid by cestuis que trust for the gratuitous and onerous services of trustees; and in all cases of doubt, costs incurred by a trustee ought to be borne by the trust estate and not by him personally. The words “properly incurred” in the ordinary form of order are equivalent to “not improperly incurred.” This view of a right of a trustee to indemnity is in conformity with the settled practice in Chancery and with Turner v. Hancock, the latest decision on the subject.

(Citation omitted, emphasis added).

130    This passage was relied upon by Ormiston JA in Nolan v Collie Nominees Pty Ltd (in liq) [2003] VSCA 39; (2003) 7 VR 287, who stated (at 304–306 [46]–[47], [50], with whom Batt and Vincent JJA agreed):

46.    To my way of thinking the conventionally stated test as to expenses “properly incurred” is merely a convenient shorthand to describe those restraints applicable to trustees who would seek to look to trust funds for the payment of their expenses and other trust liabilities. It also has the advantage of succinctly expressing the notion of propriety as underpinning a trustee’s relationship with the trust estate and the beneficiaries. One must not forget, moreover, that in Re Beddoe, seen as one of the leading authorities, Lindley, L.J. explained that in cases of doubt the trust estate should bear the trustee’s costs, and that: “The words ‘properly incurred’ in the ordinary form of order are equivalent to ‘not improperly incurred’”. The proposition was converted by another respected judge, Bowen, L.J., who was perhaps more familiar with courts of common law, into “a proposition in which the word ‘properly’ means reasonably as well as honestly incurred”. His Lordship added that, while trustees ought not to bear expenses and liabilities personally “on account of mere errors in judgment which fall short of negligence or unreasonableness”, nevertheless “mere bona fides is not the test”. A.L. Smith, L.J. concurred with the other members of the Court.

47.    Re Beddoe or the principles stated therein have been cited and applied in Australia on numerous occasions. In the High Court it was used in National Trustees Executors & Agency Co. of Australasia Ltd. v. Barnes as the basis for Rich, A.C.J. and Williams, J. to support the proposition that a trustee is entitled to be indemnified out of the trust estate “against all his proper costs charges and expenses incident to the execution of the trust”. Starke, J., who approached the matter slightly differently, nevertheless espoused a proposition that a trustee had a right to be recouped as of right all that he had “expended properly” in that role. Subsequently, in a judgment in which Dixon, J. formed part of the majority, his Honour said in Vacuum Oil Co. that, where an executor has acted under appropriate authority, the executor had a “right to be indemnified out of the assets in respect of liabilities he has incurred in the proper performance of his duties or exercise of his powers”.

…

50.    Perhaps the rule will not pose difficulties where the issue relates merely to costs and expenses, although even in that area it has frequently been said that trustees should not be deprived of their right of reimbursement unless they have clearly been shown to have acted improperly, with the onus resting on those who seek to deny the right. But the rule relating to indemnification also applies to the incurring of liabilities and, by necessity, a considerable proportion of those must be incurred where in some way a trustee has been found to have acted in error.

(Emphasis added, citations omitted).

131    The following broad examples were also usefully outlined in Re O’Donoghue (at 121–122 per Hammond J):

The notion that a trustee must act “reasonably” is necessarily qualified in various ways. First, it has never been thought unreasonable for a trustee to hire a properly qualified person to carry out work which the trustee is not qualified to undertake. Second, the trustee does not have a limitless ability to resort to the law: his function is to assert the interest of the beneficiaries only to a point where there is a judicial ruling on something that is properly required, such as the construction of a fairly debatable point in an instrument, or whether the trustee ought to take a certain course. And, it has been said that a trustee has to have very good grounds before that trustee can justify an appeal, especially if costs were awarded against the estate in the Court below (see for instance Smith v Beal (1894) 25 OR 368). Third, a trustee is not entitled to expenses arising out of his own misconduct.

132    By reference to these principles, I now turn to determining whether, and to what extent, Guardian is entitled to rely on its rights of indemnity.

E.2    The Guardian Invoices

133    Upon its acquisition of a controlling interest in Guardian in January 2020, VentureCrowd was instructed by Guardian to complete a review of the operation and management of the TGIF, including an assessment of the investments of each fund to form a conclusion regarding their feasibility. Furthermore, following the termination of the RE Agreement in March 2020, Guardian completed a review of the various constituent and investment documents to determine its legal obligations to the ELF and PIF. This legal review appears to have been conducted predominantly by Mr Maarbani in his capacity as a director of VCSA and as a solicitor.

134    The costs incurred by Guardian, VCPA and VCSA in completing this review totalled $626,134.22. By way of a broad overview, those invoices, and their disbursements, were itemised as follows:

135    As explained above, these costs are the subject of the QB4 Parties’ claim for declaratory relief. Furthermore, in the First Cross-Claim, Guardian seeks orders for invoice 0451, which remains outstanding, to be repaid by trustees of FT1 and FT2 or, alternatively, by Fundus.

136    These invoices cause me considerable disquiet. Mr Maarbani’s affidavit evidence is said to explain the relevant work that was undertaken in relation to the Yamanto Property, the Griffin Mews Project, and the Wattlebird Project, and charged in the Guardian Invoices: Maarbani Affidavit 21 July 2021 (at [21]–[48]). By way of a broad overview of these invoices, Mr Maarbani states (at [52]):

As is apparent from the description I have provided above, much of the work under these three invoices involved review and consideration of legal documents, preparation of detailed correspondence in relation to Guardian’s rights (in its capacity as responsible entity of PIF and ELF) in respect of QB4 Capital and GM8, consideration of the provisions of the Corporations Act 2001 and preparation of notices of meetings and explanatory statements for unitholders.

137    The process for recording the work completed by the staff working at VCPA and VCSA (including Mr Maarbani) was to record their time spent on this work for the ELF and PIF on a centralised “Google Sheets” document in reference to specific “work streams”, such as “Audit Property Portfolio”, “Manage Security”, “Cashflow Management”, “Investor Management”, “Borrower Management”, and “General Admin”.

138    The Receivers reviewed these invoices, including the descriptions of the relevant work streams, and provided their findings in the Second Receivers’ Report. The Receivers stated the information available to them to assess the propriety of the Guardian Invoices was insufficient because “Guardian and VentureCrowd had not provided any substantive detail as to the time or costs incurred to undertake an assessment of these fees charged.” The deficiencies as to the information regarding the Guardian Invoices were identified in the Second Receivers’ Report (at 45–46) as follows:

There is insufficient detail on the invoices to support the work Guardian and VentureCrowd claim to have carried out. We have not been provided with detailed timesheets which explain in detail the work performed to accrue these fees.

The timesheets provided do not correspond with the invoices issues in respect to that time.

The timesheets provided to us simply set out:

•    Date work carried out;

•    Name and position of employee;

•    Which fund work was attributed to; and

•    Total weekly hours allocated to each of 6 categories comprising Audit Investment Management terms and Agreement, Manage Security, Cashflow Management, Investor Management, Borrower Management, and General Admin.

The level of detail provided by Guardian and VentureCrowd to evidence the work undertaken by their staff is not sufficient to appropriately assess:

•    The individual tasks performed within each of the 6 categories of work undertaken;

•    The time taken by each staff member to complete each individual task;

•    That staff with the appropriate level of seniority and expertise were allocated to undertake each individual task; and

•    That appropriate management oversight was provided to staff allocated to undertake the tasks performed.

While it is acknowledged that the work undertaken by Guardian and VentureCrowd is not considered professional legal or accounting services, there is no apparent time cost recording system or software used by Guardian or VentureCrowd to accurately record the units of time spent on particular tasks such as what would be expected of a professional service firm like a legal or accounting practice. …

Detailed timesheets, such as what would be produced by a legal or accounting practice, would allow for a thorough costs assessment process to be undertaken on the time spent. There is no possibility of conducting a costs assessment on the timesheets produced as they are grossly deficient for that purpose.

It is not clear that a time-based charging approach was the most appropriate method of charging for the work completed in the circumstances.

…

While the invoices provided do categorise the costs to broadly defined categories of services, sufficient information does not appear to exist to substantiate the time spent dealing with the tasks.

Whilst Guardian argue that the substance of the work performed may be gleaned from the numerous documents which were produced, any assessment on this basis would be far too objective [sic] to reasonably support the amount claimed. Further, in order to measure specific output from the service provided, it would need to be clear from the various documents provided by Guardian, how many of those were produced specifically by Guardian and VentureCrowd rather than just relied on to complete their assessment.

The value of the work undertaken by Guardian and VentureCrowd is unable to be assessed objectively.

It is unclear who benefited most from the work undertaken by Guardian and VentureCrowd, whether it is Guardian, VentureCrowd, QB4, or the Unitholders.

It is unclear whether Guardian should have been aware of all of the issues investigated in the due diligence review already, by virtue of its role as Responsible Entity of the funds.

We are not able to determine whether it might have been possible to obtain the services provided from an independent third party as there is no engagement documentation between Guardian and VentureCrowd and there is no detailed supporting documentation to evidence the actual tasks undertaken by Guardian and VentureCrowd when providing the services.

139    The Receivers concluded (at 45) that, although Guardian had an entitlement to recover fund expenses from the assets of the trust, due to the insufficient detail provided, the Receivers were unable to form a reasonable view of the services provided and whether they were properly incurred. I raised this at the hearing during the cross-examination of Mr Wengel (T139.46 –140.11):

HIS HONOUR: What do you mean by that? You have an insufficient basis upon the material that has been provided to you in order to form a view of whether they’ve been properly charged?---Yes, that’s right. There wasn’t sufficient evidence presented to me to satisfy me that these expenses had been properly incurred and were properly – and were completely justifiable.

So you asked them for the material?---I did.

But by the end of your report you formed the view that you had been provided with insufficient material to justify it; would that be a fair characterisation of your position?---That’s correct, yes.

All right, thank you?---And I did ask multiple times.

140    On this basis, the QB4 Parties argue that it is improper for Guardian to have not taken the opportunity to inform the Receivers properly of the matters to sustain any claim to the payments, and to hold back the necessary information to be dealt with now in relation to the Guardian Invoices. Alternatively, to the extent that, as Mr Maarbani’s evidence suggests, the materials provided to the Receivers were identical to that relied upon by Guardian to support its current indemnity claim, it is abusive for it to re-litigate the question before the Court.

141    This last submission makes no sense and can be put to one side. No question of re-litigation arises.

142    Returning to issues of significance, although written in a more expansive narrative form, it appears that much of the information contained in Mr Maarbani’s affidavit was also before the Receivers when drafting the Second Receivers’ Report, including the timesheets for the work that was undertaken by VSCA and VCPA. Perhaps this is why I have come to a similar view as the Receivers: it is not presently explicable on the evidence in Mr Maarbani’s affidavit (or in other evidentiary material) how the fees were properly incurred. For the following reasons, on the state of the evidence adduced, I am affirmatively satisfied that only a proportion of the claimed fees were claimed properly.

143    First, the evidence regarding the Guardian Invoices does not provide real insight into the work that was performed or its propriety. The Receivers indicated that they were unable to form a reasonable view of the services provided by VentureCrowd and Mr Maarbani and whether they were properly incurred because of the insufficient details as to the work that was performed, including the fact that there is no information as to the time that was spent on each task, the specific tasks that were performed, or whether staff at an appropriate level of seniority and expertise were allocated to undertake each individual task: Second Receivers’ Report (at 46). To my mind, given the nature of the work performed and the activities that one would expect to be undertaken, to the extent that the contents of Mr Maarbani’s affidavit do provide evidence that was not provided to the Receivers, it does not adequately address the deficiencies identified in the Second Receivers’ Report. Mr Maarbani’s description of the general nature of the work that was performed is merely a high-level summary and does not specify the tasks performed, the time spent on those specific tasks, or how that work relates to the amounts charged. It is exceedingly difficult to reconcile the work that is said to have been performed with the amounts charged. Although I note that when one calculates the hours worked by each employee at their individual hourly rate during the relevant periods in the timesheets, there appears to be some alignment between the amounts charged in the invoices and the hours recorded in the timesheet, much of the work that was charged for in the invoices that were issued (including the disbursements) does not correspond with the work that was recorded in the timesheets.

144    Secondly, there are unsettling inaccuracies between the amounts charged in the relevant invoices, the times recorded in the timesheets, and the evidence of Mr Maarbani. For example, Mr Maarbani’s affidavit provides that Mr Hasenkam, Mr Walker, Mr Walters, and Mr Withnall undertook work with assistance from VCSA staff that was the subject of the time charged in invoice 0451: see Maarbani Affidavit 21 July 2021 (at [46]–[48]). However, only Ms Taylor, Mr Walker and Ms Milne (all of whom are employees of VCPA) appear to have recorded any time during the relevant period and no charge is made for work performed by VCSA staff apart from that of Mr Maarbani. Furthermore, the timesheets do not record that Mr Maarbani worked any hours during the period of 28 September 2020 to 2 December 2020. Despite this, Mr Maarbani has charged for 159.5 hours (calculated based on his hourly rate of $375) in invoice 0451 for legal work undertaken by him from 28 September 2020 to 2 December 2020. Accordingly, the evidence upon which the fees were said to have been calculated appears obscure and, in some respects, inconsistent.

145    Thirdly, the amount being charged to the trust in the Guardian Invoices appears excessive when regard is had to the similar fees being charged to the ELF and PIF during the relevant period. In the Second Receivers’ Report, Cowell Clarke opined (at 8 [4.33]):

Given the substantial amounts of those invoices overall, the claim by [Guardian] for Management Fees for the same period and the related party nature of [Guardian] and VCPA, we consider that the invoices contain insufficient detail for [Guardian] to properly assess the services that is the subject of the invoices and the amounts claimed.

146    Further, given that Mr Maarbani’s work, and his hourly rate, were justified on the basis of his legal knowledge, there appears to have been a substantial duplication of the legal work performed and charged in the relevant invoices. At the time, AG Edwards was acting for Guardian and appeared to be performing substantive amounts of work relating to the charges in the Guardian Invoices at the instruction of Mr Maarbani: see, e.g. Affidavit of Mr Maarbani sworn 18 November 2020 (at [83]–[100]); Maarbani Affidavit 21 July 2021 (at [51]–[52]). It is also far from clear what overlap there was between the work charged for under the Guardian Invoices and other fees charged by Guardian during the course of discharging its duties as the responsible entity: see Second Receivers’ Report (at 46).

147    Fourthly, in addition to having little confidence in the affidavit evidence (such as it was), Mr Maarbani’s oral evidence to the extent it related to the issue of the work performed did not provide any further detail or leave me with any feeling of confidence that the amount charged reflected a proper scope of work or the time required to do the work. When cross-examined as to whether he saw a potential for a conflict of interest between Guardian and VCPA, Mr Maarbani stated “of course” (T60.26) and that they “were absolutely in a position of conflict” (T66.45–47) but nevertheless concluded that “at the end of the day we were best placed to do that work”: T60.38–39. I share the concern expressed in the Cowell Clarke report that insufficient detail was provided to Guardian to assess for themselves, at arm’s length, the services for which were being charged, given the substantial amounts of the Guardian Invoices overall, the claim by Guardian for management fees for the same period, and the related party nature of Guardian and VCPA. It is a significant concern that, despite multiple requests, sufficient detail was not provided to the Receivers or the Court to assess properly the services that are the subject of the Guardian Invoices and other fees charged.

148    There is one further issue to address regarding the Guardian Invoices. Both parties sought to deploy the termination of the IM Agreement in support of their case regarding the Guardian Invoices. For the reasons I will explain, I do not find either argument convincing.

149    First, the QB4 Parties submit that Guardian’s “purported” termination of the IM Agreement was unlawful and invalid and, as such, Guardian exposed itself to liability in damages and engaged in self-dealing by purporting to do the work formerly done by QB4 that QB4 was ready, willing and able to perform. In my view, this submission misses the point. The issue of whether the IM Agreement was validly terminated is something of a red herring. Whether QB4 was strictly in breach of the IM Agreement, and whether the IM Agreement was validly terminated, are issues between QB4 and Guardian. They do not relate to the relevant analysis; that is, whether the charges for the work performed were expenses that were properly incurred with respect to the interests of the beneficiaries. The fact that Guardian assumed the investment management role for itself, and shut QB4 out, does not, in and of itself, justify a conclusion as to the propriety of that work in relation to the Guardian Invoices.