Melbourne Yifang Group Pty Ltd v Guangao a Group Pty Ltd
[2023] VSC 428
•26 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2022 02771
BETWEEN:
| MELBOURNE YIFANG GROUP PTY LTD (ACN 625 091 616) | Plaintiff |
| v | |
| GUANGAO A GROUP PTY LTD (ACN 622 458 806) & ORS (according to the attached Schedule) | Defendant |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 July 2023 |
DATE OF RULING: | 26 July 2023 |
CASE MAY BE CITED AS: | Melbourne Yifang Group Pty Ltd v Guangao A Group Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2023] VSC 428 |
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PRACTICE AND PROCEDURE – Discovery – Application for particular discovery – Whether documents sought relevant to an issue in the proceeding – Whether privileged waived over documents sought – Application dismissed – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 29.08.
EVIDENCE – Legal professional privilege – Waiver of privilege – Whether privilege waived by a pleading – Waiver not established – Evidence Act 2008 (Vic), s 122 – Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd (2015) 321 ALR 191 distinguished.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms G Costello K.C. Mr T Staindl | Verge Legal |
| For the Defendant | Mr A Rodbard-Bean | Aitken Partners |
| For the Second Defendant by 1st Counterclaim | Mr W Rimmer | Pauline Madden Conveyancing – Legal |
TABLE OF CONTENTS
Introduction................................................................................................................................... 1
Background.................................................................................................................................... 2
Relevant legal principles.............................................................................................................. 6
GAG’s submissions....................................................................................................................... 8
Consideration.............................................................................................................................. 10
Conclusion.................................................................................................................................... 13
HIS HONOUR:
Introduction
Melbourne Yifang Group Pty Ltd (MYG) commenced a proceeding seeking relief in relation to a property transaction.
This ruling relates to the defendant’s, Guangao A Group Pty Ltd (GAG), amended summons by which it sought discovery from MYG.[1]
[1]GAG’s amended summons also sought discovery of documents from the second defendant by counterclaim, Nevas Pty Ltd. At the hearing of the summons GAG abandoned this aspect of its summons.
GAG sought discovery of the following categories of documents:
(a) Documents demonstrating MYG’s ability or inability to complete settlement under the contract of sale of the property situated at 742–766 Greigs Road, Thornhill Park, Victoria, described in Certificate of Title Volume 09330 Folio 2329, Lot 1 on Plan of Subdivision 130094 (the A Land) as at 24 November 2021;
(b) All correspondence or records of meetings or conferences between Mr Yangdong Xu, Mr Liyong Yang and Mr Junyi Huang concerning the purchase of the A Land and proposed funding (or raising of funds) for the purchase of the A Land;
(c) Phone call records, Wechat voice call records, Wechat messages and text messages between Mr Max Qi and Mr Yangdong Xu from 1 October 2020 to 16 July 2021;[2] and
(d) Documents relating to instructions given and advice received by MYG from Verge Legal in relation to the drafting and the subsequent signing of the Variation Deed of Contract of Sale of the A Land dated 16 July 2021.
[2]At the hearing of the amended summons GAG’s counsel informed the Court it no longer sought any orders in relation to this category of documents.
GAG’s application was opposed by MYG.
For the reasons that follow I have refused GAG’s application for particular discovery from MYG.
Background
The proceeding concerns a dispute between MYG and GAG as to who is the rightful end purchaser of the A Land. Nevas Pty Ltd (Nevas) is the current registered proprietor and vendor of the A Land. There is a further dispute between MYG and Nevas involving a claim for restitution of installment money paid, however this aspect of the dispute is not relevant to the determination of GAG’s amended summons.
On 20 October 2017, Nevas entered into a contract to sell the A Land to GAG for the sum of $13,100,000 plus GST (Contract). The Contract did not stipulate a settlement date at the time of execution.
On 18 February 2021, GAG nominated MYG as the purchaser of the A Land and GAG and MYG executed a deed of nomination (Nomination Deed) the same day. It was a term of the Nomination Deed that GAG would do all things reasonably required by MYG to give effect to the nomination. Clause 2.20 of the Nomination Deed provided that:
No later than 45 days prior to the settlement date under the Contract MYG must provide to GAG documentary evidence (for example bank statements, loan approvals) satisfactory to GAG (acting reasonably) of its ability to pay all amounts required to be paid at settlement including, but not limited to, the remainder of the purchase price, GST and adjustments (if any).
On 16 July 2021, MYG and Nevas entered into a deed of variation of the Contract (Variation Deed). The recitals to the Variation Deed included the following statement:
Pursuant to the Contract, there is no particular date fixed for the final settlement of the sale of the [A Land]. However, through previous communications between Nevas and GAG, there was an intention (between those parties) to fix the settlement on 24 November 2021.
Clause 1 of the Variation Deed provided for an extension of the settlement date under the Contract to 24 November 2023, in consideration for which MYG agreed to pay various sums at specified intervals to Nevas. MYG paid the sums in accordance with the Variation Deed.
MYG claims that GAG, in breach of its obligations under the Nomination Deed, has failed to consent to the settlement date being 24 November 2023.
On 26 October 2021, GAG provided a letter to MYG purporting to be a notice of breach of the Nomination Deed (Breach Notice). In the Breach Notice GAG asserted that settlement of the Contract was due on 24 November 2021 and that MYG had breached the Nomination Deed by failing to provide evidence of its ability to settle, due on 10 October 2021. The Breach Notice provided MYG with seven days to remedy the asserted breach, failing which GAG reserved its rights to terminate the Nomination Deed.
On 24 November 2021, GAG served MYG with a recission notice (Recission Notice). MYG claims the Recission Notice is ineffective because, among other reasons, at the time of the Breach Notice and Recission Notice MYG had not breached its obligations under the Nomination Deed because the settlement date was not in fact 24 November 2021.
Relevantly, MYG does not dispute that it did not provide GAG with evidence of its ability to settle the Contract in October 2021.
In this proceeding, MYG makes a contingent claim against Nevas in the event the Recission Notice was effective or the Nomination Deed was terminated. MYG’s contingent claim seeks restitution of money MYG had paid Nevas under the Variation Deed.
Relevant to GAG’s amended summons, MYG pleaded the following:
RESTITUTION
18B. At the time of:
18B.1 entry into the Variation Deed; and
18B.2payment and receipt of the amounts in accordance with the Variation Deed;
MYG and Nevas were under the mistake that:
18B.3 MYG was the substitute purchaser under the Contract;
18B.4alternatively, the Variation Deed was otherwise effective to fix the date for settlement under the Contract on 24 November 2023.
Particulars
MYG refers to clause 1 of the Variation Deed which provides that the payments were to be made in consideration for the variation to the settlement date.
MYG otherwise refers to the fact that the conduct of both Nevas and MYG in entering into the Variation Deed and the making and accepting of payment thereunder from MYG to Nevas is consistent only with Nevas and MYG proceeding on the basis that the Variation Deed purported to effect a novation of the Contract from GAG to MYG thereby substituting MYG as purchaser in lieu of GAG under the Contract.
18C Either or both of the mistakes identified in paragraph 18B caused:
18C.1MYG to pay the amounts to Nevas in accordance with the Variation Deed; and
18C.2Nevas to accept the amounts paid by MYG in accordance with the Variation Deed.
18D By reason of the payments referred to in paragraph 13:
18D.1 Nevas has obtained a benefit from MYG; and
18D.2 MYG has suffered a detriment.
18EIn the circumstances, MYG is entitled to restitution by Nevas in the amount paid referred to in paragraph 13.
Nevas denies paragraph 18B of MYG’s claim. Nevas pleaded that at the times referred to in subparagraphs 18B.1 and 18B.2:
(a) MYG and Nevas were under no mistake that MYG was the substitute purchaser, as MYG had indeed been nominated by GAG as substitute purchaser in accordance with general condition 18 to take a transfer of the land at settlement in lieu of MYG (sic) as the purchaser; and
….
(b) MYG and Nevas were under no mistake that the variation deed was effective to fix the date for settlement under the contract on 24 November 2023 as:
….
(iii) both parties were represented by solicitors in the preparation, negotiation and execution of the variation deed, who would be taken to be aware of the effect of general condition 18 in the contract and the nomination form ….
MYG’s amended statement of claim seeks the following relief:
(a) A declaration that MYG is not in default of clause 2.20 of the Nomination Deed and was not in default of clause 2.20 as at the date of the Recission Notice, or the Breach Notice on 26 October 2021.
(b) An order that the Recission Notice dated 23 November 2021 that GAG served on MYG is ineffective and is set aside.
(c) An injunction, in accordance with clause 2.8 of the Nomination Deed, that GAG must not correspond or communicate with Nevas or Nevas’ lawyers in relation to the Contract, without MYG’s prior consent.
(d) An order that GAG pay MYG’s costs and disbursements of this proceeding.
(e) A declaration that the settlement date under the Contract is 24 November 2023.
MYG submits that the issues in dispute in the proceeding are:
(a) Did MYG breach the Nomination Deed by entering into the Deed of Variation with Nevas?
(b) Did MYG breach the Nomination Deed by not showing its capacity to settle on 24 November 2021 45 days prior to that date?
(c) Was the settlement date 24 November 2021 at the time in November 2021 when GAG says MYG breached the Nomination Deed by not showing financial capacity to settle?
(d) What is the settlement date under the Contract now?
(e) If MYG breached the Nomination Deed, did that breach entitle GAG to end the Nomination Deed?
(f) If MYG’s breach did entitle GAG to end the Nomination Deed:
(i) Did MYG pay money based on mistake?
(ii) What moneys need to be paid to whom as a consequence of the Court’s orders?
Relevant legal principles
Rule 29.08 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) provides:
Order for particular discovery
(1) This Rule applies to any proceeding in the Court.
(2)Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—
(a)whether that document or any, and if so what, document or documents of that class is or has been in that party’s possession; and
(b)if it has been but is no longer in that party’s possession, when the party parted with it and that party’s belief as to what has become of it.
(3)An order may be made against a party under paragraph (2) notwithstanding that the party has already made or been required to make an affidavit of documents.
The principles relevant to an application for an order for particular discovery are well established and were discussed by Matthews JR in Muchnicki v Avalanche Management Pty Ltd.[3]
[3] [2020] VSC 710, [77]–[79].
GAG makes its application for discovery of MYG’s legal instructions and advice, based on s 122(2) of the Evidence Act 2008 (Vic) (EvidenceAct), which provides:
(2)Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.
The exceptions contained in subsection (5) are not relevant to GAG’s application. Section 118 of the Evidence Act precludes evidence of confidential communications between a client and a lawyer or between two or more lawyers acting for the client, or the contents of a confidential document prepared by the client, lawyer or another person, for the dominant purpose of the lawyer providing legal advice to the client.
Section 122(2) of the Evidence Act applies to the giving of information or the production of a document, including discovery by operation of s 131A of the Evidence Act.
The Court of Appeal in Viterra Malt Pty Ltd v Cargill Australia Ltd (Viterra Malt)[4] examined the authorities in relation to the application of s 122(2) of the Evidence Act:
The above review of the cases makes it plain that there is a single test to be applied, being that in s 122(2) of the Evidence Act. Assistance in understanding and applying that test may be derived from Mann v Carnell and other authorities applying either the common law or the statutory provision. However, each case will depend on its own facts and circumstances and the drawing of general principles beyond the statement of the inconsistency test may risk departing from the terms of the statute.
Notwithstanding the need for caution on that account, it can be said that a pleading of reliance, without more, will not usually manifest inconsistency with the maintenance of client legal privilege in communications relevant to that state of mind. It can also be seen that the observation of Allsop J in DSE as to the circumstances in which privilege will be waived, while still a gloss on the statutory language, has commanded wide acceptance as a statement of the general operation of the principle.
Beyond that, however, the three alternative tests to which reference has been made may do little other than to explain the result reached in the particular cases in which they were applied. So, the language of ‘centrality’ was employed by Beaumont J in Telstra to explain why he considered that maintaining confidentiality in the relevant documents was not inconsistent with the pleading. The language of ‘all relevant communications’ was used in Vic Hotel to explain why permitting recourse to only some of the documents bearing on the pleaded issue was inconsistent with that pleading. The reference to documents ‘materially affecting or contributing to’ the party’s state of mind in DSE was a way of describing the documents which were held to be subject to inspection in Telstra.
In none of these instances was the language as originally used employed to propound a test for identifying when privilege was waived. It instead described the outcome of the application of the test to the case at hand. To the extent that the judge in the present matter might be interpreted as propounding an alternative test, such an approach should not be adopted. But the better reading of the reasons for judgment suggests that the judge was simply seeking to explain why mere relevance of the privileged communication to the pleaded issue is insufficient for a waiver.
The preferrable course is therefore not to apply any alternative test but the language of the statute.
[4][2018] VSCA 118, [72]–[76] (Whelan, Kyrou and McLeish JJA) (citations omitted).
The reference to Mann v Carnell[5] is a reference to the well-known statement of Gleeson CJ, Gaudron, Gummow and Callinan JJ:
What brings about the waiver is the inconsistency, which the courts, where necessary informed by the consideration of fairness, perceive, between the conduct of the client and the maintenance of confidentiality; not some overriding principle of fairness operating at large.
[5](1999) 201 CLR 1, 13 [29].
I take the first reference to Allsop J’s observations in DSE (Holdings) Pty Ltd v Intertan Inc[6] to refer to the following:
It is sufficient to understand, I think, that in most undue influence cases ….the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.
[6](2003) 127 FCR 499, 519 [58].
GAG’s submissions
GAG’s first category of documents sought documents demonstrating MYG’s ability or inability to complete settlement of the Contract on 24 November 2021.
GAG submitted that whether MYG was ever in a position to settle the A Land on the original date for settlement, 24 November 2021, is an issue in the proceeding and a relevant line of inquiry by GAG.
When asked to identify where that issue was raised on the pleadings, GAG’s counsel conceded it was not. However, GAG’s counsel submitted that whether MYG was in a position to settle on 24 November 2021 was a matter the Court would take into account in deciding whether to grant or refuse to make the declarations sought by MYG.
GAG also submitted evidence of MYG’s ability to settle in November 2021 was relevant to MYG’s assertions that MYG did not know the settlement date under the Contract was 24 November 2021 at the time it entered into the Nomination Deed (ie. 18 February 2021), or the Variation Deed (ie. 16 July 2021) or that the settlement date was ever part of the Contract.
GAG’s second proposed category of documents sought all correspondence or records of meeting or conferences between Mr Yangdong Xu, Mr Liyong Yang and Mr Junyi Huang[7] concerning the purchase of the A Land and proposed funding (or raising of funds) for the purchase of the A Land.
[7]GAG submitted that these individuals are the principals who stand behind MYG.
GAG’s counsel submitted these documents were also relevant to MYG’s assertions that MYG did not know the settlement date of 24 November 2021 at the time it entered into the Nomination Deed (ie. 18 February 2021), or the Variation Deed (ie. 16 July 2021) or that the settlement date was ever part of the Contract. Counsel submitted these documents were also relevant to the exercise of the Court’s discretion to make the declarations sought by MYG.
GAG’s counsel conceded that if GAG was unsuccessful in relation to the first category of documents it would also be unsuccessful on the second category because the second category was also aimed at evidence of MYG’s ability to settle on 24 November 2021.
GAG’s third category was no longer sought by the time of the hearing.
GAG’s fourth category sought documents relating to instructions given and advice received by MYG from Verge Legal in relation to the drafting and the subsequent signing of the Variation Deed.
GAG’s counsel submitted that MYG had acted inconsistently with the maintenance of privilege by pleading that MYG and Nevas were operating under a mistake at the time of entering into the Variation Deed. GAG submitted that by this pleading MYG was putting in issue its state of mind at the time of entering into the Variation Deed and that MYG’s state of mind can only be understood as MYG’s understanding of the legal effect of the Variation Deed.
GAG’s counsel sought to rely on Nevas’ pleaded denial that neither MYG or Nevas were mistaken that MYG was the substitute purchaser, based in part, on Nevas’ assertion that both parties were legally represented in the negotiation and execution of the Variation Deed.
Consideration
I do not accept that MYG’s ability to settle the Contract on 24 November 2021 is an issue in the proceeding. So much was conceded by GAG’s counsel when he agreed the issue was not raised on the parties’ pleadings. MYG concedes that it did not provide GAG with any evidence of its ability to settle in October 2021. MYG’s counsel said it did not do so because in July 2021, months before October 2021, it had entered into the Variation Deed with Nevas to extend the settlement date to 24 November 2023.
I also cannot agree that whether or not MYG was able to settle in November 2021 would be a consideration relevant to the exercise of the Court’s discretion to make the declarations sought by MYG. MYG seeks two declarations:
(a) A declaration that MYG is not in default of clause 2.20 of the Nomination Deed and was not in default of clause 2.20 as at the date of the Recission Notice, or the Breach Notice on 26 October 2021.
(b) A declaration that the settlement date under the Contract is 24 November 2023.
As I have said, there is no factual dispute that MYG did not provide evidence of its ability to settle the Contract on 24 November 2021. It appears to me that the questions raised in the proceeding relevant to the declarations MYG seeks are legal questions about the validity of the Variation Deed and the Nomination Deed. In my view MYG’s actual ability to settle in November 2021 is irrelevant to the resolution of those questions.
I am also not satisfied that MYG has acted in a way that is inconsistent with it objecting to the adducing of the evidence because it would result in a disclosure of privileged documents.
First, Nevas, by its pleading, cannot waive MYG’s privilege. Nevas’ pleading that both MYG and Nevas were legally represented at the time of negotiating and entering into the Variation Deed is irrelevant to the question whether MYG has acted inconsistently with the maintenance of the privilege.
Second, MYG’s pleading of mistake does not either explicitly or implicitly put its legal advice in issue. MYG’s pleading does not refer to a reliance on legal advice as the source of the mistake. Indeed the source of the alleged mistake is unarticulated other than by inference, the terms of the Variation Deed. Even if it did, as the authorities indicate, mere pleading of reliance, without more, will not usually manifest the relevant inconsistency. The pleading of the terms of the Variation Deed by MYG is not implicitly inconsistent with the maintenance of privilege over any legal advice MYG obtained in relation to that deed.
Third, while GAG’s counsel submitted the Court must follow Dixon AJA’s decision in Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd (Vic Hotels),[8] the facts of this case are very different. In Vic Hotels, Dixon AJA stated:
The test for waiver is not whether the pleadings made any express or implied assertions about the content of the privileged communications, pleaded either as a material fact or as a particular to any material fact, which might be inconsistent with maintenance of the privilege. Rather, it is whether the privilege holder, DC Payments, by its conduct in its pleading the state of mind of Next Payments, acted in a way that was inconsistent with its objection to Next Payments adducing evidence that would result in disclosure of its knowledge of the privileged legal advice. Put another way, was DC Payments’ conduct in pleading a state of mind of Next Payments inconsistent with the maintenance of confidentiality in communications relevant to that state of mind.
It is the privilege holder’s conduct that affects waiver. Here, waiver is not the consequence of the privilege holder’s disclosure of confidential communications to the senior managers; it is the consequence of the issue that was pleaded. Where the privilege holder puts into issue the state of mind of another who is aware of the confidential communications, the waiver of the privilege is in relation to the issue. I doubt that it is open to another party to litigation to force waiver of a party’s legal professional privilege by making assertions about, or seeking to put in issue, that party’s state of mind, but that is not this case.
[8](2015) 321 ALR 191, 205 [34]–[35] (Mandie and Beach JJ agreeing) (citations omitted).
In Vic Hotel DC Payments alleged that Next Payments induced Vic Hotel to breach their agreements with DC Payments by terminating those agreements before the expiry of the term and that Next Payments had engaged in conduct with the intention of inducing other merchants to breach their agreements with DC Payments. A number of senior managers of Next Payments were previously employees of DC Payments and were aware of the terms of the agreements between DC Payments and Vic Hotel. DC Payments pleaded that Next Payments had and used this knowledge and so knew that Vic Hotel would be in breach of the agreement if it terminated the agreement early. By its defence Next Payments pleaded that DC Payments had obtained legal advice about the enforceability of the agreements and was advised that the clause allegedly breached by Vic Hotels was unenforceable, with the result that Next Payments considered those terms not to be binding. Dixon AJA found that DC Payments’ claim that Next Payments intended to induce Vic Hotel’s breach of contract put in issue the state of mind of Next Payments and that implicit in this allegation about state of mind was the notion that the relevant terms of the agreements were capable of being breached because they were enforceable by DC Payments against Vic Hotel. Dixon AJA went on to state that the relevant state of mind would be that held by the actor when engaging in the conduct attacked by the pleading, ‘and it cannot be reasonably, or fairly, identified by reference to only part of the information that was available to the actor prior to the relevant time’.[9] Dixon AJA found that the state of mind put in issue by DC Payments concerned ‘an understanding of the legal rights, not simply knowledge of terms recorded in a contract’ and that on the enforceability of certain of those legal obligations ‘Next Payments had particular knowledge that determined its state of mind at the relevant time’.[10] Accordingly, Dixon AJA found that in pleading Next Payments’ state of mind, DC Payments had acted in a matter inconsistent with the maintenance of legal professional privilege in advice going to the enforceability of the agreements in question.
[9]Ibid [43].
[10]Ibid [46].
It is important to bear in mind the Court of Appeal’s reminder in Viterra Malt that there is only one legal test and that is the statutory test contained in s 122(2) of the Evidence Act. Each case falls to be considered and determined on its own facts. Merely pleading a state of mind is not sufficient, of itself, to constitute an act inconsistent with the maintenance of privilege. Nor is simply putting a party’s state of mind in issue. In this case, unlike the situation in Vic Hotel, MYG has pleaded mistake but it has not sought to rely on its legal advice as the source of its state of mind. In my view, Vic Hotel is not authority for the proposition that where a party puts its state of mind in issue and its legal advice may be relevant to that state of mind, it has acted inconsistently with the maintenance of privilege. Mere relevance of the advice to the party’s state of mind is not enough to constitute inconsistency under s 122(2) of the Evidence Act.
Conclusion
For the reasons above I will not order discovery of any of the categories of documents sought by GAG. Accordingly, I will dismiss paragraph 1 of GAG’s amended summons. As at the hearing GAG confirmed it no longer pressed paragraphs 2 and 3 of its amended summons. I will also dismiss those paragraphs.
I request that the parties confer on the question of costs of the amended summons. If the parties are unable to reach agreement on the terms of any costs order within seven days of this judgement, the proceeding will be relisted for an oral costs hearing.
SCHEDULE OF PARTIES
| S ECI 2022 02771 | |
| BETWEEN: | |
| MELBOURNE YIFANG GROUP PTY LTD (ACN 625 091 616) | Plaintiff |
| - v - | |
| GUANGAO A GROUP PTY LTD (ACN 622 458 806) | Defendant |
| GUANGAO A GROUP PTY LTD (ACN 622 458 806) | Plaintiff by 1st Counterclaim |
| MELBOURNE YIFANG GROUP PTY LTD (ACN 625 091 616) | First Defendant by 1st Counterclaim |
| NEVAS PTY LTD (ACN 116 459 539) | Second Defendant by 1st Counterclaim |
| | |
| | |
| | |
| GUANGAO A GROUP PTY LTD (ACN 622 458 806) | First Third Party – 1st Third Party Claim |
| MO CHEN | Second Third Party – 1st Third Party Claim |
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