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Eumeralla Estate Pty Ltd v Chen

Eumeralla Estate Pty Ltd v Chen

Case [2022] VSCA 78 2 May 2022

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0055

EUMERALLA ESTATE PTY LTD	First Applicant
CHI YUNG CHAN	Second Applicant
v
ZHIYING CHEN	First Respondent
XIUFENG CHEN	Second Respondent

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JUDGES:	MAXWELL P, KENNEDY and WALKER JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	16 March 2022
DATE OF JUDGMENT:	2 May 2022
MEDIUM NEUTRAL CITATION:	[2022] VSCA 78
JUDGMENT APPEALED FROM:	[2021] VCC 453

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TRUSTS – Joint venture – Funds advanced to company for exclusive purpose of developing land – Company incorporated solely for exclusive purpose – Failure of purpose following termination of sale contract – Sole director and shareholder withdrew funds for other purposes – Whether funds impressed with trust – Where no direct evidence of intention that company not to receive funds beneficially – Requisite intention to create trust inferred in all the circumstances, considered objectively – Company was merely a vehicle – Legal Services Commissioner v Brereton (2011) 33 VR 126; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, distinguished.

EVIDENCE – Burden of proof – Trial judge referred to one aspect of competing accounts as 'wildly improbable' – Whether trial judge felt actual persuasion as to respondents’ account – Reasons considered in context demonstrated that trial judge was satisfied on balance of probabilities – Rhesa Shipping Co SA v Edmunds [1985] 2 All ER 712, discussed.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr D R Diaz	Hiways Lawyers
For the Respondents	Mr N Paterson	Jem Lawyers

MAXWELL P
KENNEDY JA
WALKER JA:

Introduction

The second applicant, Chi Yung Chang (known as ‘Jeff’), and his wife, Bo Xuan (‘Bo’), are in a dispute with the respondents, Zhiying Chen (known as ‘Jessica’) and her brother in law, Xiufeng Chen (known as ‘Lance’). The facts giving rise to the dispute are complex, and are set out in more detail below. In short, the trial judge held that Jessica and Lance had entered into a joint venture with Bo and Jeff to purchase a property in Templestowe and then develop the property. His Honour rejected Bo and Jeff’s claim that they had entered into an ‘on-sale’ arrangement, whereby Bo would purchase the property and then sell it to Jessica.

Bo had entered into a contract to purchase the property, and she paid $39,000 by way of deposit. Jessica and Lance paid $120,000 towards the deposit. Legal title to the property was to be held by the first applicant, Eumeralla Estate Pty Ltd (‘Eumeralla’), which was incorporated for that purpose. Jeff was the sole director of Eumeralla and its sole shareholder was another company owned by Jeff.

All parties accepted at trial that Jessica and Lance had paid $430,000[1] into Eumeralla’s bank account, for the future development of the property. Ultimately, the sale did not proceed. The trial judge held that the money Jessica and Lance had paid to Eumeralla was held by Eumeralla on trust for them. However, that money was transferred out of Eumeralla’s account by Jeff — by cash withdrawals and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Eumeralla Estate Pty Ltd v Chen

Details

AGLC: Eumeralla Estate Pty Ltd v Chen [2022] VSCA 78
Case: [2022] VSCA 78
Decision Date: 2 May 2022

CaseChat Overview and Summary

Eumeralla Estate Pty Ltd, a developer, brought an action against Chen, who was the sole director and shareholder of a company, seeking the return of funds that were advanced to the company for the exclusive purpose of developing land. The dispute came before the Supreme Court of Victoria. The key legal issue before the court was whether the funds advanced to the company were impressed with a trust, such that the company held them on trust for the plaintiff.

The court held that the funds were held on trust for the plaintiff. Despite the lack of direct evidence of an intention that the company should not receive the funds beneficially, the court inferred the requisite intention to create a trust from the circumstances of the case. The court reasoned that the company was merely a vehicle through which the plaintiff intended to develop the land, and that the funds were advanced for the sole purpose of achieving this objective. The court distinguished cases where a purpose trust was held to be unenforceable, noting that in this case, there was no failure of purpose, as the company had not been formed for an unlawful purpose. The court was satisfied that the plaintiff had discharged the onus of proof, and that the trial judge had correctly found that the respondent’s account of the events was “wildly improbable.”

The court’s decision was based on an objective assessment of all the circumstances, and the conclusion that the company was a mere vehicle through which the plaintiff intended to develop the land. The court rejected the respondent’s argument that the trial judge had felt actual persuasion as to the respondent’s account, holding that the reasons given by the trial judge demonstrated that he was satisfied on the balance of probabilities that the plaintiff’s account was correct. The court found that the funds were held on trust for the plaintiff, and ordered the return of the funds to the plaintiff.

Orders