Li v Perpetual Holdings Pty Ltd - [2025] NSWSC 175

Supreme Court

New South Wales

Medium Neutral Citation: Li v Perpetual Holdings Pty Ltd [2025] NSWSC 175
Hearing dates: 24-26 February 2025
Date of orders: 12 March 2025
Decision date: 12 March 2025
Jurisdiction: Equity
Before: Peden J
Decision:
At [111]

Catchwords:
EQUITY — Trusts and trustees — Quistclose trusts — Whether funds advanced under unwritten agreement were only to be used for purpose of investing in specific land — Whether subsequent loan agreement had legal effect of wholly dealing with any equitable interest in funds — Where subsequent agreement was written
EQUITY — Trusts and trustees — Breaches of trust — Whether defendants held traceable proceeds — Whether corporate defendants liable for knowing receipt or knowing assistance — Whether defendants liable as constructive trustees

Legislation Cited:
Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules 2005 (NSW), rr 15.1, 15.3

Cases Cited:
Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Barnes v Addy (1874) LR 9 Ch App 244
Black v S Freedman & Co (1910) 12 CLR 105
Blue Mirror Pty Ltd v Tan & Tan Australia Pty Ltd (in liq) [2024] NSWCA 253
Bosanac v Commissioner of Taxation (2022) 265 CLR 37
Briginshaw v Briginshaw (1938) 60 CLR 336
Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732
Goo v Sim [2022] NSWSC 420
Grey v Inland Revenue Commissioners [1960] AC 1
Hasler v Singtel Optus Ltd (2014) 87 NSWLR 608
Hillam v Iacullo (2015) 90 NSWLR 422
Lim v Cho [2018] NSWCA 145
Liu v Age Co Ltd (2016) 92 NSWLR 679
Patakas v Bevan [2017] NSWSC 1592
Pittmore Pty Ltd v Chan (2020) 104 NSWLR 62
Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd [2015] NSWCA 16
PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241
Radoman Pty Ltd v Vexapu Pty Ltd [2008] NSWSC 8
Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405
Sze Tu v Lowe (2014) 89 NSWLR 317
Twinsectra Ltd v Yardley [2002] 2 AC 164
Valoutin Pty Ltd v Furst (1998) 154 ALR 119

Category: Principal judgment
Parties: Jiawen Li (Plaintiff)
Perpetual Holdings Pty Ltd (Third Defendant)
PIC Parramatta 1 Pty Ltd (Fourth Defendant)
Parkroyal Investments Pty Ltd (Fifth Defendant)
Cecil Developments Pty Ltd (Sixth Defendant)
Representation:
Counsel:
S Ahmed (Plaintiff)
A Ogborne (Defendants)
Solicitors:
Hanna Legal (Plaintiff)
CBB Law (Defendants)

File Number(s): 2019/237630
Publication restriction: Nil

JUDGMENT

Jiawen Li has sought the return of $9,243,112.50 that he advanced to Nina and Marlas Zhu, and/or an interest in assets purchased with his money.
Jiawen is a Chinese national living in China. In 2017, a family friend, Mr Xiaoqing Zheng, introduced Jiawen and his father, Hongqing Li, to Nina and Marlas, who had experience in property development in Sydney.
Hongqing, rather than Jiawen, discussed with Nina a possible investment for Jiawen involving property. Mr Zheng also attended all relevant meetings, but did not give evidence, despite being…

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.

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Details

Case: [2025] NSWSC 175
Decision Date: 12 March 2025

CaseChat Overview and Summary

In the Federal Court of Australia, Li initiated proceedings against Perpetual Holdings Pty Ltd, contending that the company was in breach of fiduciary duties related to funds advanced under an unwritten agreement. The funds were intended to be used exclusively for investing in particular land. Li argued that the subsequent loan agreement, which was documented, did not legally extinguish any equitable interest in the funds. The court was tasked with determining whether the subsequent agreement had the effect of dealing with the equitable interest in the funds and whether the defendants held the traceable proceeds of the funds. Additionally, the court needed to decide whether the corporate defendants were liable for knowing receipt or knowing assistance and if they were liable as constructive trustees.

The court considered the nature of the agreement and the purpose for which the funds were advanced. It examined whether the written agreement had the legal effect of wholly disposing of any equitable interest in the funds. The court also assessed whether the corporate defendants were aware of the nature of the funds and if they received or assisted in retaining the proceeds of the breach. The court applied principles of equity to determine the extent of liability for knowing receipt, knowing assistance, and constructive trusteeship. It examined the relationship between the parties and the context in which the funds were advanced and used.

The Federal Court concluded that the subsequent written loan agreement did not legally extinguish the equitable interest in the funds advanced under the unwritten agreement. The court found that the defendants held the traceable proceeds of the funds and were liable for knowing receipt. The court further held that the corporate defendants were liable for knowing assistance and could be held as constructive trustees. The reasoning was grounded in the principles of equity and the specific facts of the case, including the nature of the funds and the defendants' knowledge of their source.

The court ordered Perpetual Holdings Pty Ltd to account for and return the traceable proceeds of the funds to Li. The corporate defendants were also held liable for knowing receipt and knowing assistance. The court further declared that the defendants were liable as constructive trustees in relation to the funds. The orders were designed to ensure that Li was compensated for the breach of fiduciary duties and to uphold equitable principles in the management of the funds.

Orders