Wang v Cai

[2021] NSWSC 1162

Supreme Court

New South Wales

Medium Neutral Citation:

Wang v Cai [2021] NSWSC 1162

Hearing dates:

12 and 13 August 2021

Date of orders:

15 September 2021

Decision date:

15 September 2021

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Order that within 21 days, the seventh defendant (Giant) provide to the plaintiffs access for inspection (and permit the plaintiffs at their expense to take a copy of) all books and records of the Everspring Develop Group Unit Trust in its possession (and of any such books and records in the possession of any agent of the seventh defendant of which the seventh defendant is entitled to call for production from that agent and which on request are produced to it); noting for the avoidance of doubt that the expression “books and records” of the trust bears the meaning explained in these reasons.

2. Liberty to the plaintiffs to identify within 14 days a specific list of company books and records of the eighth defendant (VIP Sale) (being documents with which the plaintiffs have not already been provided), access to which is sought pursuant to s 247A of the Corporations Act.

3.   Direct the eighth defendant to notify the plaintiffs within 7 days of the provision of any such list pursuant to Order 2 above whether there is a dispute as to production of those documents.

4.   If there remains a dispute as to production of the documents listed in accordance with Order 2 above, liberty to the plaintiffs to apply for the matter to be listed before me for determination of the dispute as to access at an appropriate time.

5.   Otherwise dismiss the notice of motion filed 13 April 2021.

6.   Reserve the question of costs.

Catchwords:

CIVIL PROCEDURE — Discovery — Practice Note SC Eq 11

CIVIL PROCEDURE — Discovery — Whether necessary for resolution of real issues in dispute — Preliminary discovery

CIVIL PROCEDURE — Interrogatories — Application for — Necessity

CORPORATIONS — Management and administration — Application to inspect books

EQUITY — Trusts and trustees — Beneficiaries — Access to trust documents — Where claimed by reference to general administration suit — Whether trustee obliged to provide information or an account of trust dealings

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 57, 58, 59, 60, 61

Companies (Queensland) Code, s 265B

Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, s 4

Corporations Act 2001 (Cth), ss 9, 197, 203AB, 232, 233, 247A, 286

Court of Chancery Procedure Act 1852 (UK)

Property and Stock Agents Act 2002 (NSW), ss 10, 11

Supreme Court Act 1970 (NSW)

Uniform Civil Procedure Rules 2005 (NSW), Pts 5, 22; rr 5.3, 5.4, 22.2, 46.2, 54.3

Cases Cited:

Aetna Pacific Securities Ltd v Hongkong Bank of Australia Ltd (unreported, 29 April 1993 in proceedings 1991/50586)

Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1; [2014] WASC 102

AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503

AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Ltd [2015] NSWSC 216

Alexiou v Alexandra White and Ors t/as HWL Ebsworth Lawyers [2021] NSWSC 485

Ali v Khan [2015] NSWSC 1961

Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd [2012] NSWSC 393

Aspar Autobarn Co-Operative Society v Dovala Pty Ltd (1987) 16 FCR 284

Attorney-General v Gaskill (1882) 20 Ch D 519

Austal Ships Pty Ltd v Incat Australia Pty Ltd (No 3) [2010] FCA 795

Australian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 218 ALR 302; [2015] VSCA 9

Australian Breeders Co-operative Society Ltd v Jones and Others (1997) 50 ALR 488

Australian Competition and Consumer Commission (ACCC) v Cornerstone Investment Aust Pty Ltd (No 2) [2017] FCA 393

Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; [1995] FCA 1663

Avanes v Marshall (2007) 68 NSWLR 595; [2007] NSWSC 191

Barrack Mines Ltd v Grants Patch Mining Ltd [1988] 1 Qd R 606

Biala Pty Ltd v Mallina Holdings Ltd [1990] WAR 371

Blair v Martin [1929] NZLR 225

Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWCA 199

Budgen v Tylee (1856) 21 Beav 544; 52 ER 970

Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115; (1991) 9 ACLC 1333

Chong v Nguyen [2005] NSWSC 588

Clarke v Earl of Ormonde (1821) Jac 108; (1821) 37 ER 791

Contour Building and Construction Pty Ltd v Kerr [2008] NSWSC 883

Daly v The Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25

DIF III Global Co-Investment Fund LP v Babcock & Brown International Pty Ltd [2019] NSWSC 527

Doss v Doss (1843) 3 Moo Ind App 175; (1843) 18 ER 464

Downey v Pryor (1960) 103 CLR 353; [1960] HCA 49

Edman v Ross (1922) 22 SR(NSW) 351

El-Sayed v El Hawach (2015) 88 NSWLR 214; [2015] NSWCA

Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303; [2013] HCA 46

Fane v Fane (1879) 13 Ch D 228

Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198

Gray v BNY Trust Company of Australia Ltd (formerly Guardian Trust Australia Ltd) (2009) 76 NSWLR 586; [2009] NSWSC 789

Hancock v Reinhart (2015) 13 ASTLR 1; [2015] NSWSC 646

Hancock v Rinehart (Trust Documents) [2018] NSWSC 1684

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405

Hayim v Citibank NA [1987] AC 730

Hilliard v Eiffe (1874) LR 7 HL 39

Hocking v Director-General of the National Archives of Australia (2020) 94 ALJR 569; [2020] HCA 19

Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247

Iacullo v Murr (unreported, 3 September 2010, in proceedings 2010/257118)

In Re Tillott [1892] 1 Ch 86

In the matter of Combined Projects (Arncliffe) Pty Ltd [2018] NSWSC 649

In the matter of Gerard Cassegrain & Co Pty Ltd – Cassegrain v Gerard Cassegrain & Co Pty Ltd [2011] NSWSC 241

In the matter of Idyllic Solutions Pty Ltd; ASIC v Hobbs [2012] NSWSC 1276

In the matter of Style Ltd, Merim Pty Ltd v Style Ltd [2009] FCA 314; 255 ALR 63

In the matter of the Bird Charitable Trust (2012) (1) JLR 62

Intercapital Holdings Ltd v MEH Ltd (1988) 13 ACLR 595

Jordan v Goldspring [2021] NSWSC 7

Juul v Northey [2010] NSWCA 211

Management Service Australia Pty Ltd v PM Works Pty Ltd [2017] NSWSC 1743

McDonald v Ellis [2007] NSWSC 1068

McLean v Burns Philp Trustee Co Pty Ltd and Others (1985) 2 NSWLR 623; (1985) 9 ACLR 926

Mesa Minerals Ltd v Mighty River International Ltd (2016) 241 FCR 241; [2016] FCAFC 16

Minors v Battison (1876) 1 App Cas 428

Morris v Morris (1993) 9 WAR 150

Morton v Nylex Ltd [2007] NSWSC 562

Mulherin v Quinn Villages Pty Ltd [2007] QSC 231

Murray v Wheeler [2013] NSWSC 137

Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133

Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435; [2008] FCAFC 133

Perpetual Trustee Co v Watson (No 1) (1927) 28 SR (NSW) 39

Pharmacy Guild of Australia v Ramsay Health Care Ltd [2019] NSWSC 1045

Potters Sulphide Ore Treatment Ltd v Sulphide Corp Ltd (1911) 13 CLR 101

Powell & Thomas v Evan Jones [1905] 1 KB 11

Power v Ekstein [2010] NSWSC 472

Praetorin Pty Ltd v TZ Ltd (2009) 76 ACSR 236; [2009] NSWSC 1237

Rafferty v Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) [2017] WASC 18

Ramage v Waclaw (1988) 12 NSWLR 84

Randall v Lubrano (unreported, 31 October 1975, NSWSC)

Rapid Metal Developments (Aust) Pty Ltd v Rosato [1971] Qd R 82

Rattigan v Hanly [2020] NSWSC 1722

Re Augold NL [1987] 2 Qd R 297

Re Burrage; Burningham v Burrage (1890) 62 LT 752

Re Butt (deceased); Butt v Kelson [1952] 1 All ER 197

Re Chapman; Freeman v Parker (1894) 72 LT 66; 11 TLR 177

Re Cowin (1886) 33 Ch D 179

Re Donaldson (1912) 12 SR (NSW) 148

Re Furness (Viscount) [1943] Ch 415

Re Hydrosan Ltd [1991] BCLC 418

Re Londonderry’s Settlement [1965] Ch 918

Re Simersall (1992) 35 FCR 584; (1992) 108 ALR 375

Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484; [1999] SASC 181

Sabre Corporation Pty Ltd v Russ Kalvin’s Haircare Co (1993) 46 FCR 428

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709

Seidler v John Fairfax & Sons Ltd [1983] 2 NSWLR 390

Sharpe v Goodhew (unreported, 11 December 1992, in proceedings FED Q16/1989)

Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597

Smith v Barnes (1865) LR 1 Eq 65

Soar v Ashwell [1893] 2 QB 390

Spellson v George (1987) 11 NSWLR 300

Spellson v Janango Pty Ltd (unreported, 8 December 1987, NSWSC)

SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 2) (2006) 155 FCR 150; [2006] FCA 931

St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147; [2004] FCA 1360

Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808

TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68

Talbot v Marshfield (1865) 2 Drew & Sm 549; 19 LT 223

Target Holdings Ltd v Redferns (a firm) [1996] AC 421

Tiger v Barclays Bank Ltd [1952] 1 All ER 85

Tiver v Tiver [1960] SASR 40

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1

Unity APA Ltd v Humes Ltd (No. 2) [1987] VR 474

WA Pines Pty Ltd v Bannerman [1980] FCA 79

Wellington Capital Ltd v Australian Securities and Investments Commission (2014) 254 CLR 288; [2014] HCA 43

Wentworth v De Montfort (1988) 15 NSWLR 348

Wright v Stevens [2018] NSWSC 548

Wynne v Humberston (1858) 27 Beav 421; 54 ER 165

Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15

Texts Cited:

Campbell, J, “Access by Trust Beneficiaries to Trustees’ Documents Information and Reasons” (2009) 3 Journal of Equity 97

D’Angelo, N, “The trust as a surrogate company: The challenge of insolvency” (2014) 8 Journal of Equity 299

Finn, P, Fiduciary Obligations (1977, Lawbook Co)

Halsbury’s Laws of Australia, vol 430

Heydon, JD and MJ Leeming, Jacobs’ Law of Trusts, (8th ed, 2016, LexisNexis Butterworths)

Practice Note SC Eq 11

Ritchie’s Uniform Civil Procedure NSW, vol 1 

Underhill, A, Underhill’s Law relating to trusts and trustees (13th ed, 1979, LexisNexis Butterworths)

Category:

Procedural rulings

Parties:

Xiaobo Wang (First Plaintiff)
Haixin Australia Pty Ltd (Second Plaintiff)
Wan Hao Cai (First Defendant)
Yun Xia Fang (Second Defendant)
Yi Guang Zhang (Third Defendant)
Mayland Australia Pty Ltd (Fourth Defendant)
Ozjian Trading Pty Ltd (Fifth Defendant)
Aqua Blu Swimwear Pty Ltd (Sixth Defendant)
Giant Project Group Pty Ltd (Seventh Defendant)
VIP Sale Pty Ltd (Eighth Defendant)
Diamond Bay Developments Pty Ltd (Ninth Defendant)
PJE918 Pty Ltd (Tenth Defendant)

Representation:

Counsel:
DA Smallbone with A Smythe (Plaintiffs)
J Williams SC (1st, 3rd, 4th, 6th Defendants)
J Mee (2nd & 5th Defendants)
PR Hudson (Solicitor) (7th Defendant)

Solicitors:
Sunfield Chambers (Plaintiffs)
Corrs Chambers Westgarth (1st, 3rd, 4th, 6th Defendants)
Jurisbridge Legal (2nd & 5th Defendants)
Hudson Law (7th Defendant)

File Number(s):

2020/00233849

Publication restriction:

Nil

Judgment

1. HER HONOUR: By notice of motion filed on 13 April 2021, the plaintiffs (Ms Xiaobo (Bonny) Wang and her company, Haixin Australia Pty Ltd (Haixin) seek a variety of orders for the production of documents and information from the respective defendants (who are identified below). Those orders seem primarily to be sought invoking principles relating to the administration of trusts and fiduciary obligations of disclosure; but resort is also had to the processes for discovery or preliminary discovery in the conduct of proceedings in this Court, as well as statutory means of access by members of a company to the books and records of the company.

2. The underlying dispute between the parties relates to the plaintiffs’ investment, through Haixin, in a property development at Burwood (the Burwood Development), being the construction of a twin tower mixed commercial, retail and residential development on adjacent blocks of land situated on Burwood Road and Burleigh Street, Burwood. The Burwood Development is not yet complete.

Background

3. I summarise below the background to the present dispute. In so doing, I emphasise that I am here making no findings as to factual disputes, the determination of which must necessarily await the final hearing. Indeed, much of the complaint made by those of the defendants in the substantive proceeding who are also the respondents to the notice of motion (and who have taken an active role in opposition to the present application) is that the plaintiffs’ submissions raise disputed questions of fact that should not be determined on an interlocutory application such as the present (as to which I say more in due course).

Parties

4. The first plaintiff (Ms Wang) is the sole director of the second plaintiff (Haixin), a company described by the plaintiffs as an investment vehicle through which (and this appears not to be disputed) the plaintiffs have invested around $5.7 million in the Burwood Development.

5. The first, third, fourth and sixth defendants (to whom I will refer, collectively, as the Zhang defendants) comprise two individuals (the first defendant, Ms Wan Hao (Michelle) Cai; and the third defendant, Mr Yi Guang (Joseph) Zhang), who are related by marriage (being sister-in-law and brother-in-law, respectively) and the respective companies associated with those two individuals (the fourth defendant, Mayland Pty Ltd (Mayland), of which Ms Cai is the sole shareholder and director; and the sixth defendant, Aqua Blu Swimwear Pty Ltd (Aqua Blu), of which Mr Zhang is a director and the sole shareholder). (I pause here to note that Ms Cai’s name is spelt variously in the plaintiffs’ submissions as Ms Cai and Ms Çai. I have adopted in these reasons the spelling on the Sale Process Side Deeds dated 10 June 2021 and 21 July 2021 – see below, as that seems to be the spelling used by Ms Cai herself.)

6. The second and fifth defendants (to whom I will refer, collectively, as the Fang defendants) are Ms Yun Xia (Angela) Fang and the company of which she is the sole director and shareholder, Ozjian Trading Pty Ltd (Ozjian).

7. At the time of the transactions which are the subject of the underlying dispute, Ms Cai was (as I understand it) a licensed real estate agent, working in Burwood using a licensee corporation (Leader Properties Investment Pty Ltd). The plaintiffs say that Ms Fang held at those times a certificate of registration as an assistant agent under s 10 of the Property and Stock Agents Act 2002 (NSW) and was required by s 11 of that Act to be employed and supervised by a licensed real estate agent. The plaintiffs say that Ms Fang was employed in Ms Cai’s office.

8. The Zhang defendants and the Fang defendants are separately represented in the proceeding and on the present application; and are the only active defendants on this application.

9. The seventh defendant is Giant Project Group Pty Ltd (Giant). Giant was incorporated on 25 August 2015, with its then sole director being Mr Zhang. In September 2015, Mr Farah Elias (who is associated with other entities relevant to the present dispute, as I explain shortly), became a director of Giant. Mr Zhang ceased to be a director of Giant on 11 November 2020.

10. Giant is the trustee of the Everspring Develop Group Unit Trust (to which I refer below); the owner of the two sites in Burwood the subject of the Burwood Development (the Burwood Road Site and the adjacent Burleigh Street Site); and (in its capacity as trustee of the said Trust) the vehicle through which the Burwood Development is being conducted.

11. Giant was represented on the present application by its solicitor, Mr Hudson, but took no active role in the hearing of the application. Giant’s position is that it neither consents to nor opposes the relief here sought against it.

12. The eighth defendant is VIP Sale Pty Ltd (VIP Sale), the trustee of the Burwood 168 Unit Trust (to which I refer below). VIP Sale was incorporated in 2011 (by Mr Zhang and a relative of Ms Cai). Mr Zhang was, by 2 October 2015, the sole director of VIP Sale, and remains so. Ms Wang (at her request) was appointed a director of VIP Sale on 30 March 2020, but resigned as a director on 7 August 2020. Mr Zhang’s position is that he is unable to resign as a director of VIP Sale in the absence of any other person willing to assume the role (see s 203AB of the Corporations Act 2001 (Cth) (Corporations Act). I was taken to correspondence in which the Zhang defendants have suggested to Ms Wang that she nominate a candidate for directorship of VIP Sale, but it appears that she is not willing (or able) so to do. Ms Cai’s husband (Mr Xiang (John) Zhou) was the company secretary of VIP Sale from late 2015 through to 25 March 2020.

13. VIP Sale has taken no active role (and was not represented) on the present application and has filed a submitting appearance in the proceeding. It is said to be without funds to meet legal expenses and is therefore unable to take any role in the proceeding (see letter dated 24 December 2020 from its solicitors, Henry Williams Lawyers).

14. The two remaining defendants in the substantive proceeding (the ninth defendant, Diamond Bay Developments Pty Ltd (Diamond Bay) and the tenth defendant, PJE918 Pty Ltd (PJE918) are entities associated either with Mr Elias or a member of Mr Elias’ family. Those defendants were not joined as respondents to the 13 April 2021 notice of motion and have taken no role on the present application.

Trusts

15. As adverted to above, there are two unit trusts which feature in the present application: the Everspring Develop Group Unit Trust, through which the Burwood Development is being conducted; and the Burwood 168 Unit Trust (being the trust in which Haixin holds units and the investment vehicle through which Haixin and various of the defendants invested in the Burwood Development). It does not appear to be disputed that no business is carried on through the Burwood 168 Unit Trust, it being no more than the vehicle through which investments were made into the Everspring Develop Group Unit Trust for the purposes of the Burwood Development.

16. Pausing here, the plaintiffs have raised questions on the present application (and include such questions in the interrogatories they seek to administer) as to why the two-tiered investment structure was adopted in the first place (rather than introducing the plaintiffs directly into Giant and the Everspring Develop Group Unit Trust). The plaintiffs have postulated that this was to keep Haixin at arms’ length from the primary vehicle for the development and to enable the fourth to sixth defendants to leverage their investment off the plaintiffs’ contribution, as part of what they describe as a cynical deception of Ms Wang and her company, Haixin. The position of the Zhang defendants is that such speculation is inappropriate. Insofar as the plaintiffs in their submissions (which it must be said are expressed in rather emotive language) have characterised conduct of the defendants as dishonest or the like, the Zhang defendants say that such characterisations and assertions are disputed and that they depend upon questions of fact which are issues for, and can only be resolved at, trial. Subject to what I say in due course as to the application for discovery or the provision of an account of the dealings in relation to the trusts based on the general principles relating to administration of trusts, I broadly accept that proposition.

Everspring Develop Group Unit Trust

17. The Everspring Develop Group Unit Trust was established pursuant to a Trust Deed dated 28 September 2015 between Giant, as trustee, and each of VIP Sale, Hai Tao Pty Ltd (Hai Tao) and Diamond Bay, as the initial unitholders. The Trust Deed appears to have been prepared based on the same precedent as the Burwood 168 Unit Trust Deed (a form of trust deed apparently acquired by VIP Sale’s accountant, Ms Xueling (Sally) Huang of HL Tax Services from a law firm, Battalion Legal Pty Ltd – seemingly akin to the purchase of an “off the shelf company”).

18. I interpose here to note that the plaintiffs dispute the accuracy of dates appearing on a number of executed documents, including this Trust Deed, (and, at least in relation to one document – the so-called “30 September minute” – the plaintiffs dispute the veracity of the document itself). The plaintiffs have expressed their concern to establish the precise chronology of events (this being a reason put forward by them for seeking production of documents and disclosure of information at this stage of the proceeding) in order to enable the foreshadowed amended pleading to be comprehensive (and to avoid the need for later further amendment to the pleadings), as to which I say more in due course. Suffice it at this stage to say that, although complaint is made by various of the defendants as to the timing of the present application, the plaintiffs maintain that it is consistent with the overriding statutory mandate for the just, quick and cheap resolution of the real issues in dispute (see s 56 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) for the plaintiffs now to be provided with the documents and information they seek in order to be able efficiently to plead their claim (and they resist the contention by the defendants that, in effect, they are here impermissibly fishing around to find additional claims).

17. The shareholding of Giant is held by the same entities that are unitholders in the Everspring Develop Group Unit Trust and in the same proportions as they hold units in that trust.

18. Initially, the units in the Everspring Develop Group Unit Trust were held: as to 40%, by VIP Sale (in its capacity as the trustee of the Burwood 168 Unit Trust); as to 33%, by Diamond Bay (as noted above, a company associated with Mr Elias); and, as to 27%, by Hai Tao, a company associated with a Chinese investor, Mr Shunxiang Rong.

19. Presently, the units in the Everspring Develop Group Unit Trust are held: as to 40%, by VIP Sale (in its capacity as the trustee of the Burwood 168 Unit Trust); as to 33%, by Diamond Bay; as to 18%, by PJE918; and, as to 9%, by an entity not (yet) joined as party to the proceeding, Clarence Property Group Pty Ltd (Clarence Property Group), which is a company associated with Mr Zhang and Ms Cai.

20. The circumstances in which this change in the unitholdings occurred are the subject of some dispute in the substantive proceeding, as I explain below. As I understand it, the change came about because, in late 2018, Hai Tao wished to withdraw from the Burwood Development, which resulted in the divestment of its units in the Everspring Develop Group Unit Trust. Two-thirds of Hai Tao’s units were acquired by PJE918 and the remaining third by Clarence Property Group. Following Hai Tao’s withdrawal from the project, the unitholdings in the Everspring Develop Group Unit Trust were therefore as set out in [22] above.

21. Complaint is made by the plaintiffs that the acquisition of the Hai Tao units (by interests associated with Mr Elias, Mr Zhang and Ms Cai) occurred without notice to the plaintiffs (and without giving them an opportunity to participate), despite the existence of pre-emption clauses in the respective Trust Deeds. (The Zhang defendants, however, assert that Ms Wang was informed – through Ms Fang – of Hai Tao’s inability to continue in the project and the proposal for the acquisition of Hai Tao’s units and entry into costs sharing arrangements; which simply highlights the difficulty of embarking on any consideration of the factual issues in dispute at this stage.)

22. At or around the same time as Hai Tao’s units were acquired by PJE918 and Clarence Property Group, a Unitholders Deed of Agreement dated 7 September 2018 was entered into by the unitholders in the Everspring Develop Group Unit Trust (i.e., VIP Sale, Diamond Bay, PJE918 and Clarence Property Group) (the 2018 Unitholders Deed). The 2018 Unitholders Deed provided that unitholders would be responsible for certain additional expenses and holding costs of the project in the proportions of 35% (as to Diamond Bay and PJE918) and 65% (as to VIP Sale and Clarence Property Group); and that, upon completion, the proceeds of the development would be divided in the proportions of 50% (as to Diamond Bay and PJE918) and 50% (as to VIP Sale and Clarence Property Group). As already noted, PJE918 is an entity associated with Mr Elias. Clarence Property Group is an entity associated with Mr Zhang and Ms Cai.

23. The plaintiffs make various complaints as to the circumstances in which Hai Tao’s units in the Everspring Develop Group Unit Trust were acquired by PJE918 and Clarence Property Group, including as to the validity of the 2018 Unitholders Deed. Relevantly, the plaintiffs say that the 2018 Unitholders Deed substantially altered, to the detriment of VIP Sale, the provisions of a Management Agreement that had earlier been entered into in relation to the project (see below at [41]). The plaintiffs say that, although the unitholders in VIP Sale (of which Haixin was one) were named as parties to this Deed, it was not presented to or executed by the plaintiffs (and, in the plaintiffs’ case, it is said to be of no effect because necessary parties have never executed it and because informed consent thereto was not obtained).

24. The plaintiffs also raise issues concerning matters referred to in the 2018 Unitholders Deed (such as the reference in cl 2.3 to an obligation of VIP Sale to fund “Payout Loans from the 9th Avenue Partnership”, as to which the plaintiffs say that no explanation has been provided). It is not necessary here to delve into the queries raised by the plaintiffs as to this, other than to note that the plaintiffs point to the reference in the unsigned 2018 balance sheet of the Everspring Develop Group Unit Trust to a secured loan of $7,571,354.99 from Ninth Avenue Partnership Pty Ltd (Ninth Avenue) as at 2018; the plaintiffs noting that the directors of that company are Mr Elias and Mr Zhang.

25. Complaint is made by the plaintiffs that, instead of contributing through the unitholder entities (as the plaintiffs say was agreed) and otherwise raising bank finance, it appears that entities associated with the then directors of Giant (Mr Zhang and Mr Elias), and with the director and acting director of VIP Sale (Mr Zhang and Ms Cai, respectively), lent moneys to Giant on the security of the trust property, without disclosure to the plaintiffs. In their submissions on the present application, the plaintiffs point to connections between various of the present defendants and companies associated with Ninth Avenue.

26. I return in due course to the significance of the 2018 Unitholders Deed, which the plaintiffs complain was entered into in breach of fiduciary duties owed by various of the defendants.

Burwood 168 Unit Trust

29. The Burwood 168 Unit Trust was established by Trust Deed dated 25 September 2015 (between VIP Sale, as trustee, and Haixin, Mayland, Ozjian and Aqua Blu, as the unitholders). Again, the plaintiffs dispute the date of this document (which Ms Wang says does not bear her signature, was written without her authority, and was not provided to her until 2020).

30. The unitholders in the Burwood 168 Unit Trust are: Haixin, as to 37.5% (3,750 units), Mayland as to 18.75% (1,875 units), Ozjian as to 18.75% (1,875 units) and Aqua Blu as to 25% (2,500 units); and each holds shares in VIP Sale in the same proportions.

31. By reason of the units held by VIP Sale in the Everspring Develop Group Unit Trust, the plaintiffs say (and this does not appear to be disputed) that the relevant stake effectively held by the respective entities in the overall Burwood Development is: for Haixin, 15% (i.e., it holds 37.5% of the entity that holds 40% of the units in the Everspring Develop Group Unit Trust); for Mayland (Ms Cai’s company), 7.5%; for Ozjian (Ms Fang’s company), 7.5%; and for Aqua Blu (Mr Zhang’s company), 10%. However, the plaintiffs further note that both Ms Cai and Mr Zhang have an interest in Clarence Property Group.

The Burwood development

32. I have referred above to the two properties the subject of the Burwood Development.

33. On 29 September 2015, Giant entered into a contract to purchase the Burwood Road Site for the sum of $16.8 million plus GST. The contract provided for a deposit of 10%, payable in two tranches – half on exchange and the balance on 17 December 2015. The terms of the contract granted to Giant an election to extend the completion date to 24 March 2016 upon payment of the second half of the deposit (and Giant in due course exercised that right to an extension). Completion of the purchase ultimately occurred on or before 7 April 2016, when the Transfer was registered. (Complaint is made by the plaintiffs on the present application as to non-disclosure of how and by whom the deposit was paid on behalf of Giant; and as to the incomplete statement of Giant’s receipts and payments.)

34. On 16 March 2016, Giant entered into a contract to purchase the Burleigh Street Site for $7.2 million plus GST, with a 10% deposit payable in two equal instalments on exchange or on the earlier of either the defined completion date (being 18 months after the contract date) or actual completion. On 4 October 2017, a Transfer of the Burleigh Street Site to Giant was registered.

35. On 21 December 2017, Giant entered into a building contract with Urban Apartments Pty Ltd (Urban Apartments), a company associated with Mr Elias for the construction of the Burwood Development. As I understand it, there is no dispute as to the entry by Giant into the construction contract with Urban Apartments per se (it apparently having been understood by Ms Wang that Mr Elias’ company would carry out the building work) but the plaintiffs have expressed concern that (without obtaining the “agreed” contributions from investors or obtaining construction finance) Giant entered into a building contract providing for 18% p.a. interest to accrue on overdue payments.

36. Various development approvals were issued in relation to the Burwood Development during the course of 2017 through to 2021. Complaint was apparently made by Ms Wang as to the delay in completion (her evidence is that it was represented to her that the development would be completed in about four years). This seems to have led to some of the requests (or demands) for information made by or on behalf of Ms Wang (and the request, to which the Zhang defendants acceded, for Ms Wang to be appointed to the Board of VIP Sale). The plaintiffs complain about the adequacy of the response to these demands for information and, in particular, as to the information supplied in respect of a number of transactions listed in a document provided to them by letter dated 20 April 2021 (including as to the reference to transfers of moneys in “error” between accounts). Suffice it to note (as adverted to above) that the Burwood Development is not yet completed and, as I understand it, there is little likelihood that the plaintiffs will recoup their investment in the project (let alone make any profit from it).

The principal instruments

37. The plaintiffs say that they entered into the project on the faith of representations that, in respect of the Burwood Road Site, the first to sixth defendants were making agreed contributions to a required sum of $9.36 million for a combined 40% equity share in the project (of which the plaintiffs’ share was 37.5%, or 15% of the total project), against a required contribution of $3.51 million from Haixin.

38. The principal instruments that the plaintiffs have identified as establishing the venture (apart from the Trust Deeds in respect of the two trusts) are as follows.

39. First, an undated three-page document written mostly in the Chinese language (referred to in submissions as the Chinese language agreement) between Haixin and the fourth to sixth defendants (which the plaintiffs believe is likely to have been signed on or shortly before 8 October 2015). The plaintiffs say that, pursuant to the Chinese language agreement, the fourth to sixth defendants (i.e., the corporate defendants), under the control of the first to third defendants (i.e., the individuals who controlled those corporate defendants), contracted with Haixin to contribute specific sums (agreed to be proportions of respectively 18.75%, 18.75% and 25%) by 24 March 2016; these amounts (in addition to Haixin’s 37.5% share) to comprise the $9.36 total million for the 40% stake. The plaintiffs’ complaint is that the first to sixth defendants did not honour this bargain and that the corporate (fourth to sixth) defendants thus leveraged their participation in the venture off the plaintiffs’ contribution. (The plaintiffs say that the Burleigh Street Site was acquired and its financing proceeded on much the same basis, save that the agreement to contribute was not in writing.)

40. Second, a Deed dated 28 September 2015 entitled “Unitholders & Management Agreement ‘Everspring Develop Group Unit Trust’” (the Management Agreement) to which Giant is a party as “the Trustee Company” and to which VIP Sale is also a party, together with Hai Tao and Diamond Bay (which the plaintiffs say was probably prepared and signed on or shortly before 16 October 2015).

41. Another document to which I was taken by the plaintiffs in the course submissions is a second Chinese language document (this one undated) between Giant, “VIP Pty Ltd”, Hai Tao and Diamond Bay (referred to in submissions as the Hai Tao agreement).

42. As adverted to above, complaint is made by the plaintiffs as to uncertainty about the precise order of entry into various of the documents relating to the Burwood Development (a number of which the plaintiffs say have been backdated or, in the case of a so-called 30 September minute, fictitious). The plaintiffs say that the precise order of entry into the documents is potentially capable of affecting either the rights of the parties or the probabilities as to material facts concerning the administration of the two trusts (a matter relied upon in support of the present application for disclosure).

43. By way of example, the plaintiffs say that, if the 30 September meeting the subject of the 30 September minute was a real historical event (and the plaintiffs contend that it was not), then this should have been disclosed to them prior to entry into the Chinese language agreement (and hence there would be a claim that it was misrepresented to them how much they were required to contribute by 24 March 2016, even if the first to sixth defendants intended to contribute $7.941 million); but that, if the 30 September minute was produced later, then a different case is available. Similarly, the plaintiffs attach significance to when precisely the Hai Tao agreement was entered into, since that informs the allegations of non-disclosure as to the intentions of the defendants in respect of the National Australia Bank (NAB) borrowing and how contributions to the project were to be made (see below).

44. It is submitted that it is intolerable for a beneficiary to be put in a position where there is uncertainty as to the chronology of events in relation to entry into these documents; and that the plaintiffs are entitled to have a disclosure of documents and information that renders this chronology into a certain state.

45. The plaintiffs have addressed at some length in their submissions inconsistencies with various of the documents, giving rise to their surmise as to when various documents were actually entered into (and it is suggested that the chronology of events pleaded in the respective defendants’ defences does not make sense and is internally inconsistent as between various of the groups of defendants). I do not propose here to go into the detail of those submissions. As I understand it, reliance is placed both on the perceived inconsistencies in the documents, and the uncertainty as to the precise order of events to support the submission for the plaintiffs that there is cause for concern as to what has occurred in relation to the respective trusts (and, hence, the plaintiffs say the orders sought for production of documents and disclosure of information should be made).

46. In particular, as I understand it, the somewhat lengthy excursus in submissions into the factual background to the dispute (apart from educating me as to the background or context of the dispute) was largely to establish the basis for, or likelihood of, a general administration order being made in relation to the trust or trusts (in lieu of which discovery orders as here sought may be made), having regard to the observations of Young J, as his Honour then was, in McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623; (1985) 9 ACLR 926 (McLean v Burns Philp). I address that authority in due course. I also note that there is a separate action on foot for the making of a general administration order in relation to the respective trusts, which has been listed for hearing in September this year.

47. However, the very exercise of going in detail through the history of the dealings between the parties in relation to the Burwood Development and their investments therein causes me no little concern, because it seems to me to come perilously close to inviting a determination as to contested factual issues in advance of a final hearing (and, pertinently, in advance of any evidence having been filed other than that relied upon for the present interlocutory application). It does not appear to me to be appropriate to embark upon such an exercise in the course of an interlocutory application such as the present; in advance of the application for general administration orders itself.

Zhang defendants’ pleaded account of plaintiffs’ participation in project

48. It is convenient at this stage (since it highlights some of the factual issues in dispute) to point to the allegations made in the defence of the Zhang defendants as to the circumstances in which the plaintiffs came to invest in the Burwood Development project (see at [12B]-[12R]).

49. Relevantly, it is there pleaded that: (a) Ms Cai was first introduced to Ms Wang in about 2012 by Ms Fang and has since then provided various real estate services to Ms Wang in relation to properties owned by Ms Wang; (b) in about January 2014, Ms Cai asked Ms Fang whether Ms Fang would be interested in investing in a property development at Wolli Creek (a development being undertaken by Mr Elias’ group); and that Ms Fang indicated that she was interested in participating in the project and that Ms Wang was also interested in participating; (c) by September 2015, both Ms Fang and Ms Wang through their respective corporate entities had jointly invested with Ms Cai and Mr Zhang in a number of property development projects, including developments at Wolli Creek and Penrith (both of which are developments undertaken by Mr Elias’ group) and at Petersham; (d) in all of these projects, Ms Cai and Mr Zhang had very little direct communication with Ms Wang and any information provided to, or received from, Ms Wang was through Ms Fang; (d) in about mid-September 2015, Ms Cai and Mr Zhang, Mr Rong and Mr Elias decided that they would they would invest in a property development project of the Burwood Road Site, and possibly adjoining land, to be developed by Mr Elias’ group; (e) Ms Cai mentioned the Burwood project to Ms Fang but did not invite Ms Fang to participate as an investor; a short time later, Ms Fang advised Ms Cai that both she and Ms Wang wished to participate as investors in the project and asked whether that would be possible; and (f) Ms Wang and Ms Fang were both permitted to join, and did join, as investors in the Burwood Development.

Procedural history

50. That brings me to the history of the matter leading up to the present application.

51. The plaintiffs commenced the proceeding by statement of claim on 11 August 2020. The various active defendants filed their defences by 22 October 2020.

52. On 1 February 2021, the plaintiffs indicated an intention to amend their statement of claim and an order was made by consent that the plaintiffs serve a proposed amended statement of claim by 12 February 2021. The plaintiffs apparently did not do so.

53. On 22 February 2021, when the matter was back before the Court the plaintiffs informed the Court that they had commenced preparing a proposed amended statement of claim and sought an extension to 10 March 2021 to serve the proposed amended pleading. That extension was granted and an order was made that the plaintiffs serve their proposed amended statement of claim by 10 March 2021 and their evidence in chief by 29 March 2021. Again, it appears that the plaintiffs did not do so. Instead, on 13 April 2021, the plaintiffs filed the notice of motion now before me for determination, seeking extensive disclosure from the first to eighth defendants and what, in effect, are interrogatories.

54. Both the Zhang and Fang defendants point to the plaintiffs’ stated intention to amend the statement of claim. They argue that the purpose of the present application is not to advance the resolution of the issues in dispute in the proceeding; rather, that it is to facilitate the plaintiffs’ proposed amendment to their statement of claim so as to make new unspecified allegations (in circumstances where the plaintiffs have already been capable of pleading the existing claims). As adverted to above, the plaintiffs characterise the information sought as being necessary to enable them properly to amend their pleading (the initial pleading apparently having been prepared before a change in legal representation) rather than to enable them to trawl for additional claims to make. In any event, complaint is made by both the Zhang and Fang defendants that the present application is premature, as it is brought prior to the service of any evidence in the proceeding. Senior Counsel for the Zhang defendants was at pains to point out that in due course the plaintiffs should be able to obtain documents (at least insofar as they are relevant to the issues in the proceeding) through the usual disclosure process.

Compulsory sale of VIP Sale’s units in the Everspring Develop Group Unit Trust

55. After the plaintiffs filed their statement of claim in this proceeding (in which an order was sought that VIP Sale be wound up – see prayer 10 of the statement of claim), Giant exercised (or purported to exercise), the compulsory sale procedure under cl 8 of the 2018 Unitholders Deed in respect of VIP Sale’s units in the Everspring Develop Group Unit Trust (in reliance on cl 8.2.3 of the 2018 Unitholders Deed). (It is thus perhaps ironic to note that, if the 2018 Unitholders Deed is valid, then the complaint by the plaintiffs that there has been an attempt to eject them from the project altogether stems from events triggered by their own conduct – i.e., their claim for a winding up order as a remedy for alleged oppressive conduct. The plaintiffs, however, submit that reliance on the compulsory sale process under the 2018 Unitholders Deed constitutes an impermissible attempt to oust the jurisdiction of the Court.)

56. In any event, the plaintiffs have asserted that Giant had no entitlement to invoke the compulsory sale procedure under cl 8 (on grounds which include that the 2018 Unitholders Deed is liable to be set aside) and have made clear their intention to challenge in this proceeding the validity and effectiveness of the unit sale that in due course followed Giant’s invocation of the compulsory sale procedure (although the Zhang defendants point out that the plaintiffs have refrained from seeking interlocutory injunctive relief to restrain the sale process).

57. I was taken in the course of the present application to the correspondence in which Giant invoked the compulsory sale process; from which it is apparent that Haixin was notified that Giant was invoking that process (see letter dated 30 November 2020 from Giant to each of VIP Sale, Clarence Property Group, PJE918 and Diamond Bay), a copy of which letter was sent to Haixin as a shareholder of VIP Sale. It would seem that Haixin chose not to avail itself of, or to seek, an opportunity to acquire a proportionate share of VIP Sale’s units in the course of that process. I was also taken to correspondence in which the solicitors for the Fang defendants took objection to the compulsory sale process (which highlights that the position of the Zhang and Fang defendants is not necessarily aligned on all issues in the proceeding).

58. On 21 July 2021, VIP Sale entered into a sale agreement to sell VIP Sale’s units in the Everspring Develop Group Unit Trust to PJE918. The Zhang defendants say that this occurred in circumstances where Giant, Diamond Bay and PJE918 insisted that VIP Sale was obliged to complete the sale process and reserved their rights in the event that VIP Sale failed to do so.

59. It is said by the Zhang defendants that, to preserve the status quo against the possibility that the plaintiffs are successful in their contentions (those being that the 2018 Unitholders Deed is liable to be set aside or was entered into in breach of fiduciary duty, or that the compulsory sale process is otherwise invalid, unlawful or in breach of any duty), VIP Sale, Giant and PJE918 have entered into a further deed which obliges the parties to reverse the sale of VIP Sale’s units to PJE918 if any such contention is made good. The Zhang defendants say that, by entering into these arrangements, VIP Sale has protected itself (and its unitholders) against an exposure to damages by Giant and PJE918 in failing to comply with the compulsory sale process but, at the same time, preserved VIP Sale’s interest in the Everspring Develop Group Unit Trust in the event that the plaintiffs are successful in the relief they seek.

Issues in dispute in the substantive proceeding

60. Before turning to the precise relief sought on the present application and the parties’ submissions in relation thereto, it is convenient at this point to note the claims raised on the pleadings as they presently stand (though, as I have already adverted to, the plaintiffs have made no secret of their intention to amend their pleadings to include other claims; and they have intimated that this may include the joinder of other parties).

61. Broadly speaking, the claims made in the statement of claim as it presently stands are for misleading or deceptive conduct and for breach of fiduciary duties or oppressive conduct.

62. As to the misleading or deceptive conduct claims, they relate in the main to alleged oral representations (albeit with some representations allegedly arising out of the documents) and alleged non-disclosures.

63. The pleaded claims of misleading or deceptive conduct may be summarised as follows. First, the making of alleged oral representations by Ms Cai on or about 2 October 2015 about the purchase price of the land for the Burwood Road Site, the timeframe for completion of the project (four years) and the estimated return on investment (see statement of claim at [47]). Second, alleged written representations by all the defendants made in about October 2015 in the terms of the Chinese language agreement, representations which were allegedly repeated by Ms Fang on 14 March 2016 (statement of claim at [13], [48], [50]). Third, alleged oral representations by Ms Cai in or about October 2015 about how the project would be financed and operated (statement of claim at [49]). Fourth, alleged oral representations by Ms Cai in or about late March 2016 about the purchase of the Burleigh Street Site (statement of claim at [51]). Finally, alleged non-disclosures by all defendants of matters which it is alleged were required to be disclosed to the plaintiffs, including that: the land was acquired by Giant in part using the proceeds of an $8.4 million loan from the NAB secured by a mortgage over the land; the Unit Trust Deed for the Burwood 168 Unit Trust was backdated to 25 September 2015; and that the investment required by VIP Sale for the Burwood Road Site was $7,941,150, not $9,360,000 (statement of claim at [52], [56]).

64. It is alleged that each of the pleaded representations was a representation with respect to a future matter (the plaintiffs here invoking the deeming effect of s 4 of the Australian Consumer Law) (statement of claim at [54]-[55]). However, the plaintiffs also make positive allegations as to a series of matters which allegedly rendered the defendants’ conduct misleading or deceptive, including that: the contribution that VIP Sale was liable to make for the Burwood Road Site and associated costs was not $9,360,000 but, instead, $7,941,150; the Burwood Road Site was encumbered by a mortgage; Mr Zhang was the sole director of VIP Sale; and Ms Cai, Ms Fang and Mr Zhang used bank financing to fund their contribution to the investment (statement of claim at [56], [59]-[60]).

65. Thus the misleading or deceptive conduct claims broadly relate to the investment by the plaintiffs into the project.

66. As to the claims of breach of fiduciary duties, these relate to the entry by VIP Sale into the 2018 Unitholders Deed in September 2018. The plaintiffs allege that: (a) VIP Sale breached the fiduciary duties it owed to unitholders in the Burwood 168 Unit Trust by entering into the Deed in circumstances of an alleged actual or potential conflict between the interests of unitholders in the Burwood 168 Unit Trust and third parties (namely, Giant, Mr Elias and companies associated with Mr Elias) (statement of claim at [64]); and (b) Mr Zhang (in his capacity as sole director of VIP Sale at the time) and Giant knowingly induced or procured the alleged breaches by VIP Sale of its fiduciary duties (statement of claim at [65], [66]).

67. It is further alleged that Mr Zhang, by causing VIP Sale to enter into the 2018 Unitholders Deed, has conducted the affairs of VIP Sale in a manner that is oppressive to the plaintiffs within the meaning of s 232 of the Corporations Act (statement of claim at [68]).

68. The relief claimed in the proceeding includes damages for loss suffered by the defendants’ alleged misleading or deceptive conduct in the amount of $5,738,905 (that being the total amount invested by the plaintiffs in the project). In the alternative, the plaintiffs seek a range of remedies in relation to the 2018 Unitholders Deed, including that: VIP Sale, Mr Zhang and Giant account to the plaintiffs for any benefit obtained by the Everspring Develop Group Unit Trust from entry into the Trust Deed; orders pursuant to the statutory oppression remedy in s 233 of the Corporations Act (including a compulsory buy-out order requiring the other investors in VIP Sale to acquire the plaintiffs’ shareholding in VIP Sale at fair value, a compensation order, an order that VIP Sale be wound up and an order varying the 2018 Unitholders Deed); and an order appointing a receiver and manager to the assets of the Burwood 168 Unit Trust.

69. Pausing here, this indicates the difficulty of proceeding at this stage on at least one of the bases (i.e., the oppression remedy) on which the orders are sought on the present application. The Zhang defendants say (and I agree) that there should not be a determination on an interlocutory basis that the affairs of VIP Sale have been conducted in an oppressive manner within the meaning of s 232 of the Corporations Act, or that individuals were acting as de facto and/or acting directors of various companies. (At most, it would be open to determine whether there was a serious question to be tried as to those matters, or a reasonable basis for concern as to the alleged conduct, were that to be relevant for the purposes of a particular application in the proceeding.) For the same reason, it is said that the factual disputes raised on the pleadings as to conversations in which the Zhang defendants claim to have disclosed to Ms Wang many of the matters about which she now complains cannot properly be determined at this stage.

70. So, for example, the Zhang defendants point to the factual dispute as to Ms Wang’s knowledge (or otherwise) of the existence of the NAB loan, which the Zhang defendants have pleaded was disclosed to Ms Wang (alleging that Ms Wang was offered the opportunity to take the benefit of the loan to fund in part her contributions, which she declined). Similarly, it is said that there is a factual dispute as to whether, in August 2018, Ms Cai and Mr Zhang informed Ms Fang (and consequently asked her to inform Ms Wang) of Hai Tao’s inability to continue in the project, the proposal for Clarence Property Group and PJE918 to acquire Hai Tao’s units in the Everspring Develop Group Unit Trust and the proposed amendment to the cost sharing arrangements which were ultimately reflected in the 2018 Unitholders Deed.

71. Complaint is made by the Zhang defendants that on the present application the plaintiffs are seeking to invoke, on an interlocutory basis, the discretionary jurisdiction to intervene in the administration of trusts by recourse to facts which can only be established on a final hearing. Further, the Zhang defendants complain that the plaintiffs here invoke that jurisdiction by pointing to what they contend are questions arising from facts in issue which call for answers, in circumstances where the defendants have not yet served (or been required to serve) any evidence in the proceeding.

72. The plaintiffs, conversely, maintain that there is a circularity of argument to suggest that an administration suit must first be determined before determining an application for discovery of the kind here made and that the appropriate test is as to whether there is a cause for concern demonstrated as to misconduct in the administration of the trust(s) in order to enliven the jurisdiction here invoked.

73. That brings me to the relief sought on the present application.

The present application

74. The notice of motion dated 13 April 2021 contains 18 prayers for relief. The Zhang defendants have categorised those broadly into the following eight categories and it is convenient to deal with them as such.

75. First, prayers 1-3 seeking orders requiring the provision of the following to the plaintiffs’ solicitor or to the Court: by Giant (the trustee of the Everspring Develop Group Unit Trust) all books and records of the Everspring Develop Group Unit Trust; by VIP Sale (the trustee of the Burwood 168 Unit Trust) all books and records of the Burwood 168 Unit Trust; and by Mr Zhang (a director of VIP Sale and a former director of Giant) all books and records of both the Everspring Develop Group Unit Trust and Burwood 168 Unit Trust in his possession. I refer to these as the Trust Books and Records Orders.

76. Second, the order sought in prayer 4 requiring Mr Zhang and VIP Sale, pursuant to ss 247A or 233 of the Corporations Act, to provide all books and records of VIP Sale to the plaintiffs’ solicitor or the Court. I refer to this as the Corporations Act Order.

77. Third, prayers 5 and 6 seeking orders requiring Ms Cai and Ms Fang, respectively, to provide to the plaintiffs’ solicitor or the Court all books and records of Giant and VIP Sale (whether or not held by those entities as trustees of the Everspring Develop Group Unit Trust and Burwood 168 Unit Trust, respectively) in their possession. I refer to these as the Directors/Officers Orders.

78. Fourth, prayers 9 and 10 seeking orders requiring VIP Sale, pursuant to r 46.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or the Court’s inherent power, to file and serve upon the plaintiffs a detailed list of the assets and liabilities of the Burwood 168 Unit Trust and a detailed list of the transactions of the Burwood 168 Unit Trust specifying all money received and disbursed, such lists to be verified by Mr Zhang and with each of Ms Cai, Ms Fang and Mr Zhang required to disclose to VIP Sale all documents and information in their possession to enable it to comply with the order.

79. Fifth, prayers 11 and 12, seeking equivalent orders to orders 9 and 10 but obliging Giant to file and serve upon the plaintiffs a detailed list of the assets and liabilities of the Everspring Develop Group Unit Trust and a detailed list of the transactions of the Everspring Develop Group Unit Trust, specifying all money received and disbursed, with each of Ms Cai, Ms Fang and Mr Zhang required to disclose to Giant all documents and information in their possession to enable it to comply with the order.

80. I refer to the above two categories of orders as the Transaction List Orders.

81. Sixth, prayer 13, seeking an order requiring the defendants to give discovery, or preliminary discovery under Pt 5 of the UCPR, of the 41 categories of document set out in the Schedule to the letter dated 7 April 2021 from the plaintiffs’ solicitors to the Zhang defendants’ solicitors. I refer to this as the Discovery Orders.

82. Seventh, prayer 14, seeking an order requiring Ms Cai and Mr Zhang, and their companies Mayland and Aqua Blu, to provide a written response to the 28 interrogatories (which the Zhang defendants note in many cases contain up to 7 sub-questions) in the letter dated 7 April 2021 from the plaintiffs’ solicitors to the Zhang defendants’ solicitors, as well as to the four further questions set out in prayer 14.

83. Finally, prayer 15, seeking an order requiring Ms Fang and Ozjian to provide a written response to the 9 interrogatories in a separate 7 April 2021 letter from the plaintiffs’ solicitors to the Fang defendants’ solicitors.

84. I refer to the last two categories of orders as the Interrogatories Orders.

Plaintiffs’ submissions

Disclosure by Trustees and Directors/Officers

85. As to the production by Giant (as trustee) of all books and records of the Everspring Develop Group Unit Trust (of which Haixin is not a unitholder or creditor), and leaving aside for the moment that Giant does not here oppose (or consent to) such an order, the plaintiffs say that the right of Haixin to seek production of records from Giant (other than by way of discovery or preliminary discovery under the procedures provided in the UCPR) arises as follows.

86. First, it is said that Haixin, as a creditor and beneficiary of the Burwood 168 Unit Trust (the trustee of which, VIP Sale, is a creditor and/or beneficiary of Everspring Develop Group Unit Trust), has standing (at least given the failure of VIP Sale to do so) to seek: (a) administration relief in respect of the Everspring Develop Group Unit Trust and, as an incident thereof, to claim production from Giant to VIP Sale and to Haixin of trust documents and information in respect of the Everspring Develop Group Unit Trust; (b) corporate and trust records of Giant to which VIP Sale is entitled, pursuant to the terms of the Everspring Develop Group Unit Trust Deed and the Management Agreement (including accounts, pre-emption notices and the like) and that it is entitled to have or obtain (by virtue of its right under the Management Agreement) representation on the board of Giant, but extending in any event to all of the trust records of the Everspring Develop Group Unit Trust that Giant has under its control by its officers, servants or agents.

87. Second, that Haixin, as a creditor and beneficiary of the Burwood 168 Unit Trust, which is a member of Giant, has standing (at least given the failure of VIP Sale to do so) to seek the corporate records of Giant, to which VIP Sale is entitled pursuant to the ordinary rights of a shareholder, such as minutes of meetings and resolutions of the Company, notices, financial statements published to members in Giant and reports that the directors are obliged to make to the company, including in respect of any business put to the members for their decision, or arising because of conflicts of interest or duty, to the extent not already covered above.

88. Third, that Haixin is entitled to seek disclosure from Giant because Giant owes direct equitable obligations of confidence and, alternatively, ought to have made disclosure because it owes direct fiduciary obligation and had conflicts which required disclosure.

89. There is no dispute that, in the present case, the relevant Trust Deeds give to any beneficiary the right to access to all of the records of the trust. The plaintiffs point in this regard to the clauses in the Trust Deeds which oblige the trustee to keep proper accounts, financial statements and the like (see cll 64, 65, 67 and 68) and to the obligation under the Management Agreement (cl 13.1), as well as to the obligation under s 286 of the Corporations Act. Relevantly, the right of access and inspection of books and records under the respective Trust Deeds is dealt with by cl 69, which provides that:

69.    If any unit holder gives reasonable notice to the trustee, then that unit holder is entitled to inspect all of the books and accounts of the trust.

90. Clause 13.1 of the Management Agreement provides that:

13.1.   The Company shall keep proper and regular books of account of the Business which shall give a true and fair view of the cost and income of the Business and such books of account shall be kept properly posted by the Company and shall be available for inspection and audit at all reasonable times by any Shareholder hereto or by any duly authorised agent of a Shareholder.

91. The definition of “Shareholder” in the Management Agreement (see cl 29.1) includes VIP Sale. Therefore, it is said that VIP Sale would be entitled under the Management Agreement to call for inspection of the books of account of the “Business” of the Everspring Develop Group Unit Trust (these being records that the trustee, Giant, is obliged to keep).

92. The plaintiffs say that compliance with the record keeping obligations imposed by s 286 of the Corporations Act, under cll 68 of each Trust Deed and under cl 13.1 of the Management Agreement, is necessary in order for the access and audit rights of unitholders under each of cll 67 and 69 of each Trust Deed and cl 13.1 of the Management Agreement to be effectively exercised.

93. The plaintiffs also point also to what is said (at [17-13]-[17-15]) in Jacobs’ Law of Trusts, eighth edition, LexisNexis Butterworths, 2016 as to the obligations of trustees both to keep and to render (and to be ready to render) proper accounts, and to report to beneficiaries or to the Court concerning the administration of the trust; that trustees should gain no advantage by a failure to keep and produce proper records; that the Court will resolve doubts against trustees guilty of this failure; and that adverse inferences may be drawn against trustees who destroy records or who fail to create appropriate vouchers. It is noted that trustees must pay the costs of proceedings instituted to obtain accounts that they fail to render. The plaintiffs note that the authors there observe that, in addition to keeping and rendering accounts, trustees must, when asked, give full information to the beneficiaries as to the amount of the trust property and as to its investments.

91. Pausing here, the consequences of a failure (if the trustees were here to be guilty of such a failure) to comply with the obligation to keep proper books and records, and the ability to draw adverse inferences from such a failure, are not in my opinion necessarily to the point where what is sought are the books and records (however incomplete or inadequate they might be). I am not in a position to determine whether there has been such a failure and I should not proceed on the assumption that there has been. Rather, the point seems to me that it might reasonably be expected that the trustee (here, relevantly, Giant) would have been careful to comply with its record keeping obligations both at statute and as a matter of general law having regard to its obligations as trustee, which a beneficiary (here, VIP Sale) may be entitled to inspect.

92. That said, insofar as such documents have already been produced (see below), then there would be no utility in making an order for their production again (and, to the extent that what is sought goes beyond the trust documents themselves – such as the metadata showing the creation or amendment of particular documents), it is difficult to see how there would be an entitlement thereto based on the beneficiary’s right to inspect books and records of the trust.

93. The plaintiffs emphasise that the right to access to documents and information is an incident of the Court’s supervision of the administration of trusts and estates, which in turn is an incident of the trustee’s obligation to adhere to the terms of the trust. It is said that even a potential object of discretion has a right to have the trust administered transparently and with accountability (citing Wright v Stevens [2018] NSWSC 548 (Wright v Stevens) at [252]-[289], [297]-[298], [335]; Jordan v Goldspring [2021] NSWSC 7; and the article by The Hon JC Campbell (then a Judge of Appeal), writing extra-judicially in Access by Trust Beneficiaries to Trustees’ Documents Information and Reasons, (2009) 3 Journal of Equity 97) (the Campbell Article); and that the right is incidental so that the beneficiary can see what has been done and to decide what, if any, administration relief to seek.

94. Indeed, the plaintiffs say that Haixin’s position is stronger than that of a discretionary object; in that Haixin is an actual beneficiary with express rights of access to all the records of the Burwood 168 Unit Trust (which in turn is an actual beneficiary with express rights of access to all the records of the Everspring Develop Group Unit Trust).

95. The plaintiffs note that this relief can be sought without a decree of general administration, by virtue of r 54.3 of the UCPR or the Court’s inherent supervisory power (citing Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808, at [50]-[52]; Rattigan v Hanly [2020] NSWSC 1722 at [45]-[55]; Wright v Stevens at [319]-[332]).

96. Reference is made to Hancock v Rinehart (Trust documents) [2018] NSWSC 1684, (the Rinehart Trust Documents decision) as to the range of what may be classified as trust records (there, the expression used was “documents of the trust”) (see at [107]ff]), his Honour there including within the scope of that category: all electronically-held accounting records of the trust where they existed; access to any electronic database or other electronic information retention system maintained by or for the trust; all documents to which the trustee gave consideration or “used” in performance of her duty as trustee of the trust including advice obtained in connection with the defence of proceedings; any documents to which a trustee gave consideration in performing the trustee’s duty trustee to investigate and take steps to ensure that a company, which was an asset of the trust, paid appropriate dividends to the trust; vouchers concerning expenses relating to a particular property for repairs and improvements made at the expense of the trust; vouchers containing expenses disbursed for the trustee’s benefit; documents relating to the sale of a property belonging to the trust; any document relating to a loan with respect to that property; any communication or advice sought with respect to that property; records of “reversal” transactions (which the plaintiffs say is a category germane to the present case given the recording of payments made in “error”); all primary accounting records relating to any expense in respect of which the trust was charged; all retainers in respect of any legal advisor and charged to the trust account; all records concerning the process by which the accounting for the trust was performed; all files maintained by the trustee in respect of each of the beneficiaries of the trust; all documents relating to any advance of moneys made by the trustee to the trust; minutes of meetings of a corporate asset of the trust; costs of legal and accounting advice; and trust documents in the custody of third parties. (It is also noted that an affidavit verifying compliance was required and vouching for each transaction in the account ordered.) I return in due course to consider the implications of this decision on the application here made.

97. As to the production of documents and information from Giant, the plaintiffs say that here (unlike the situation in Re Butt (deceased); Butt v Kelson [1952] 1 All ER 197 (Butt v Kelson), to which the Zhang defendants have referred – see below), Giant is itself a trustee and has promoted and operated an investment venture in which the plaintiffs are not volunteers but have invested millions of dollars.

98. The plaintiffs say that, where there is a proper case for consideration of administration relief (referring to McLean v Burns Philp at 635A-B), supervisory control would be exercised to compel the trustee to exercise its powers to produce disclosure from the ultimate investment vehicle company. The plaintiffs assert that, in the present case, there are multiple instances of self-interested dealing by those in control of the venture, serious irregularities in the accounts, and many proper questions about “strange dealings” with large sums of money, which appear not to have been properly administered. (Pausing here, whether those allegations are made good will only be able to be determined on a final hearing – for present purposes, what is relevant is that these are allegations based on a necessarily incomplete view of the evidence.)

99. The plaintiffs note that in McLean v Burns Philp (at 627C-E, 636F-638A), his Honour held that a unitholder in a trust that was in turn a creditor or a beneficiary of a head trust had standing to seek administration relief in respect of the head trust, and that his Honour further noted (at 635E, 643D) that this carried the right to seek access to trust documents and information. The plaintiffs say that to seek this remedy it is not necessary first to obtain a general administration order because a general administration order will not be made except to the extent necessary (i.e., unless there is no more specific order that will meet the case). (Pausing here, there does, however, seem to me to be a distinction between the making of an order for discovery in lieu of a general administration order after the hearing of a contested application, interlocutory or otherwise, for a general administration order and the present case, where the application for a general administration order has not yet been heard and where the evidence as to the question of irregularities or misconduct has not yet been tested even at an interlocutory level.)

100. The plaintiffs nevertheless submit that the right of a beneficiary or creditor to seek general administration of a trust confers standing to seek remedies which could be obtained in such a suit, including remedies that could be enforced on behalf of the administered trusts against another trust of which it is a creditor or beneficiary.

101. An alternative approach to standing that is here relied upon by the plaintiffs is that stated in Ramage v Waclaw (1988) 12 NSWLR 84 (Ramage v Waclaw), namely that a beneficiary may, in special circumstances, sue in its own name for purely equitable relief joining the trustee and other beneficiaries as defendants (at 91E).

102. The plaintiffs point out that in Ramage v Waclaw (at 91F), Powell J noted that circumstances that may be regarded as special include collusion between trustee and debtor; and insolvency of the trustee, but extend also (see at 91G) to other cases, including improvident breach of duty; and (at 92A-B) to “all cases where the relation between the executors and the surviving partners is such as to present a substantial impediment to the prosecution by the executors of the rights of the parties interested in the estate against the surviving partners” (this last example being one that the plaintiffs submit is apt to meet the present case).

103. The plaintiffs submit that (if left to Mr Zhang) VIP Sale will never compel the production of records and information to which it is entitled from Giant, given that: VIP Sale has, through its solicitors, been requested to sign short minutes consenting to the relief sought against it in the notice of motion (comprising the provision of accounts, the giving of access to trust records, production of corporate records and discovery) and has refused that consent; over a long period VIP Sale has not supplied the material requested and requests for information have produced only selective responses (complaint is made that the list of transactions supplied on 22 April 2021 is incomplete and does not explain the purpose of the transactions); many self-interested dealings by Mr Zhang and others with Giant or with VIP Sale have gone undisclosed to the plaintiffs over a period of years; and that neither VIP Sale nor Mr Zhang has filed any affidavit deposing to what records VIP Sale has or what is held by Mr Zhang for VIP Sale. It is submitted that there can be no confidence that Mr Zhang will voluntarily make available records and information that he obtained while holding office or acting as director or agent of Giant. Further, it is said that Mr Zhang is personally interested, including through Clarence Property Group and Ninth Avenue, and not likely to welcome scrutiny of his actions; and that Mr Zhang has resisted disclosure in the past.

104. It is thus said that Haixin has standing to seek the relief (by way of document production and information from Giant) that VIP Sale itself is entitled to seek (and that Haixin is entitled, by virtue of its direct interest in and the terms of the Burwood 168 Unit Trust, to have that information passed on to it). The Zhang defendants cavil with that proposition – and say that even if VIP Sale obtained the documents and information, this would not make that material accessible by Haixin, as it would not be books and records of the trust of which VIP Sale is trustee.

105. The plaintiffs further say that the activities of directors of a trust company must be viewed in light of the way that this shapes their duties to the company (citing Australian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 218 ALR 302; [2015] VSCA 9 at [228]-[229]); and that, because of the impact of the company’s trusteeship on the directors’ roles and obligations, their correspondence and activities are to be viewed in a corresponding light, potentially affecting the range of information and records that they are obliged to disclose to the company or keep as its trust records.

106. The plaintiffs say that VIP Sale, by reason of the terms of the Everspring Develop Group Unit Trust Deed and cl 13.1 of the Management Agreement, has the right of access to all the records of the Everspring Develop Group Unit Trust; and that Haixin, as unitholder in the Burwood 168 Unit Trust has the right to all the records of that Trust, which must include the records that it has and the records that it should obtain pursuant to its rights in the Everspring Develop Group Unit Trust.

107. It is submitted that it is a breach of trust for Giant or VIP Sale to use the advantage of control to deny to, or withhold from, Haixin information to which Haixin is entitled to access under the terms of the Burwood 168 Unit Trust Deed or under the general law of trusts; or to which VIP Sale is entitled under the Everspring Develop Group Unit Trust, Management Agreement or under the general law of trusts. (Again, it seems to me to be problematic to seek to rely here on breaches of trust that have not yet been determined at a final hearing.)

108. In respect of Giant, the plaintiffs say that this is true whether or not Giant owes any direct obligation of confidence or fiduciary obligation to Haixin; and that it would be a breach of trust for Giant to withhold from VIP Sale information with a view to keeping it from one or more of the Burwood 168 Unit Trust beneficiaries. However, the plaintiffs further submit that Giant does owe an obligation of confidence to Haixin as a beneficiary of Burwood 168 Unit Trust, and is in a direct relationship of fiduciary obligation to Haixin in that interest.

109. Reference is made in this regard to the discussion by Professor Finn (as his Honour then was) in Fiduciary Obligations (1977, Lawbook Co) (Fiduciary Obligations), (at [469]-[470]) as to relationships where fiduciary obligations are owed to parties in a chain and in particular to the hypothesis advanced by Professor Finn (there referring to Powell & Thomas v Evan Jones [1905] 1 KB 11 and Blair v Martin [1929] NZLR 225) that “if B is engaged by A to perform some service on his behalf, and then B passes that work on to C, C being given the substantial performance of B’s undertaking and knowing that what he is doing is for A’s benefit, then the A-C relationship will be a fiduciary one for the purposes of the services C in fact renders”.

110. Reference is also made to Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; [1995] FCA 1663 (ASC v AS Nominees), where Finn J (at [60]-[61]) found that a trustee company owed direct fiduciary obligations to its beneficiary company’s investor beneficiaries, in circumstances where the two companies had common boards and the ultimate beneficiaries were exclusively (through the first trustee) the investors in the ultimate trust.

111. The plaintiffs point in this regard to the following matters in the present case: that (a) Mr Zhang, as well as being the sole director of VIP Sale, was one of only two directors of Giant (until he resigned from Giant’s board in November 2020); (b) there was express agreement in the Management Agreement that Mr Zhang exercised representative functions for VIP Sale on the board of Giant; (c) in the Management Agreement, VIP Sale contracted expressly as trustee for the Burwood 168 Unit Trust; (d) the Management Agreement regulated the conduct of Giant both in the company and shareholders’ relationship as well as between it as trustee and the unitholders of the Everspring Develop Group Unit Trust (referring to Recital A and cl 2 by way of example), and Giant undertook these obligations knowing and expressly agreeing that it was contracting with a unitholder which was itself a trustee (knowing, through Mr Zhang, about the Burwood 168 Unit Trust, including the identities of its unitholders); (e) by cl 10 of the Management Agreement, Giant agreed that unanimous consent of Unitholders was required for a large number of matters (by which it is said that Giant’s conduct was closely controlled and confined to the Trust business and as to how it could be carried on; and there was thus very close regulation for the benefit and protection of VIP Sale’s unitholders, as well as the other unitholders in the Everspring Develop Group Unit Trust); (f) the original incorporation of Giant was made by the fourth, fifth and sixth defendants under the control of the first, second and third defendants (and the plaintiffs in this regard say that it was only at the point of introducing the plaintiffs into the venture, and as part of Giant’s fundraising activities, that the Burwood 168 Unit Trust was established as a sub-trust within the venture’s structure (it being said that Giant was in a real sense as much a promoter of the Burwood 168 Unit Trust as were the first to sixth defendants); (g) Giant was intended to, and did, obtain the benefit of the funds subscribed by the plaintiffs and was thereby enabled to complete the purchase of the Burwood Road Site and to obtain finance on a footing that it had substantial trust funds raised from its investors; and (h) at that time, Mr Elias was not a director of Giant and the only director was Mr Zhang, the sole director of VIP Sale.

112. The plaintiffs say that various terms of the Management Agreement (such as cll 1, 2.2, 3, 4 and 11.2) make plain that Mr Zhang’s directorship of Giant was in a representative capacity (noting that, under cl 11.3, VIP Sale has a right to replace Mr Zhang with another representative director on the Board of Giant if he resigns or is removed). Complaint is made that the resignation of Mr Zhang from the Board of Giant in 2020 (while remaining a director of VIP Sale) and his failure to exercise the rights contained in cl 11.3 of the Management Agreement to appoint a replacement representative director (while continuing to be involved in the project both through his company’s interest in VIP Sale, as well as through Clarence Property Group) has had the practical effect (which it is said must be calculated) of frustrating Haixin’s rights of access to information and records.

113. The plaintiffs say that, given the difficulty that has been experienced in obtaining the facts concerning when and in what order the various instruments and agreements were prepared and executed (requiring close study of and the drawing of inferences from the contents of the documents), it is important for them to see the originals (especially the electronic originals) and the electronic drafts and other records of the preparation and commissioning of the constitutive instruments, related agreements and other central records of and pertaining to the two trusts. In particular, it is said that retainer agreements and payment records of the professionals involved are likely to be informative; and that these are among the materials that the defendants are unwilling to produce.

114. It is noted that, in ASC v AS Nominees, Finn J considered the position of a trust manager in relation to trust investors and concluded (at [69]-[70]) that in the circumstances of that case, the manager owed direct fiduciary obligation to the beneficiaries and not only to the trustee (that conclusion being made by reference not only to the terms of the trust deeds to which the manager was party but also what the manager “in fact did for the trusts” (see at [71]). The plaintiffs say that Giant played a similar role in the present case, in that it secured the investment by paying for the sites and undertook obligations to the trustee to benefit the investor beneficiaries. The plaintiffs say that Giant must have appreciated that the plaintiffs were vulnerable (being, it is said, completely in Giant’s hands) and that its actions were required to be for their benefit, equally with all other investors. It is said that this appreciation is apparent in the subsequent conduct of Giant (and its unitholders and directors) in naming Haixin as a party to the 2018 Unitholders Deed of Agreement (although, as noted above, it is said that the Deed was never actually presented to or executed by Haixin).

115. In this regard, the plaintiffs note that a direct fiduciary obligation between a director and shareholder was recognised in Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWCA 199 in circumstances of relative advantage, information and control on the one hand, and vulnerable powerlessness on the other; and that in In the matter of Idyllic Solutions Pty Ltd; ASIC v Hobbs [2012] NSWSC 1276 (ASIC v Hobbs) (at [1497]-[1508], [2418]-[2431]) a direct fiduciary obligation was found between company officers (involved in the promotion and operation of managed funds) and the investors (reference there being made to Daly v The Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25); the schemes in ASIC v Hobbs being “such as to inform potential investors of the ability to give them access to investment schemes that would yield a high rate of return” ([1507]). (I interpose to note that the underlying factual dispute in ASIC v Hobbs was very different from that in the present case; and that the finding to which the plaintiffs here point was made after a contested hearing on the factual and legal issues there raised.)

Directors/Officers Orders

352. Prayers 5 and 6 seek orders requiring Ms Cai and Ms Fang, respectively, to provide to the plaintiffs’ solicitor or the Court all books and records of Giant and VIP Sale (whether or not held by those entities as trustees of the Everspring Develop Group Unit Trust and Burwood 168 Unit Trust, respectively) in their possession.

353. As outlined earlier, the plaintiffs seek these orders on the basis that they have standing to enforce disclosure of officers, agents and other persons who owe obligations of confidence to VIP Sale (as trustee of the Burwood 168 Unit Trust) or who have control of trust records or information. However, the orders sought seem to go beyond this (insofar as they seem to seek books and records of Giant or VIP Sale whether or not in their capacities as trustee). Moreover, there appears to be a dispute as to the role played at least by Ms Fang in the respective companies (if not also as to Ms Cai).

354. I do not consider these orders to be appropriate, particularly in the case of Ms Fang who disputes that she was involved in the management of the relevant companies. (Insofar as Ms Fang has emphasised that, if requested to assist by the relevant entities, she will do so and the relevant entities have either produced the books and records – in the case of VIP Sale; or will now be producing those records – in the case of Giant; unless there are books and records in her possession, which she denies, that will not already be produced, such an order would not seem to have any utility.)

355. I consider that allegations of breach of fiduciary duty, and attempts to enforce obligations of disclosure that the plaintiffs contend are imposed on one or more of the defendants, should await the final trial.

356. Therefore, I will not make the orders sought in prayers 5 and 6.

Transaction List Orders

357. Prayers 9 and 10, in relation to VIP Sale and each of Ms Cai, Ms Fang and Mr Zhang (and the equivalent prayers 11 and 12 in relation to Giant and the same individuals) seek orders pursuant to r 46.2 of the UCPR or the Court’s inherent jurisdiction, requiring the filing of detailed lists of the assets and liabilities of the respective trusts and of the transactions of those trusts (specifying all money received and disbursed); and requiring verification of those lists (with a requirement of disclosure by the respective individuals to VIP Sale or Giant, as the case may be, of all documents and information in their possession to enable the companies to comply with the order against them).

358. As to r 46.2, this applies in relation to the remedy of account, strictly so-called – a remedy which is discretionary (see Mulherin v Quinn Villages Pty Ltd[2007] QSC 231 at [22]), including as to the time and manner in which any such account should be ordered. The process of taking an account involves more than a mere direction to inquire and report but proceeds upon an assumption that the party calling for the account is entitled to the sum found due after the accounting is undertaken (see Hons v Hons (2010) 3 ASTLR 278; [2010] NSWSC 247 in which reference was made to Doss v Doss (1843) 3 Moo Ind App 175 at 196-197; (1843) 18 ER 464 at 472; Rapid Metal Developments (Aust) Pty Ltd v Rosato[1971] Qd R 82 per Wanstall J; and Sharpe v Goodhew (unreported, 11 December 1992, in proceedings FED Q16/1989 at [6], per Drummond J).

359. Rule 46.2 of the UCPR provides:

(1)     If a party claims an account or makes a claim which involves taking an account, the court may, on application by that party at any stage of the proceedings—

(a)     order that an account be taken, and

(b)     order that any amount certified on taking the account to be due to any party be paid to him or her.

(2)     The court may not make an order under subrule (1)(a)—

(a)     against a defendant who has not filed an appearance, unless he or she is in default of appearance, or

(b)     if it appears that there is some preliminary question to be determined.

360. In Hancock v Reinhart (2015) 13 ASTLR 1; [2015] NSWSC 646 (at [338]) Brereton J cited Juul v Northey[2010] NSWCA 211, saying that “[a] plaintiff who seeks the remedy of an account must prove that the defendant is an accounting party, and that the plaintiff is entitled to some (uncertain) sum from the defendant”; his Honour there noting that a trustee is obliged to allow the beneficiaries to inspect the trust accounts and documents (Re Simersall (1992) 35 FCR 584; (1992) 108 ALR 375; Spellson v George). Brereton J continued at [339]-[341]:

In the relation of trustee and beneficiary, the trustee is an accounting party. It is a fundamental obligation of a trustee to keep and render to the beneficiaries a full and candid record of their stewardship, including all appropriate financial accounts… Waterhouse v Waterhouse(1998) 46 NSWLR 449 at 494 per Windeyer J. That duty to account encompasses a duty to keep records, a duty to report to the beneficiaries and/or the court, and a duty to pay amounts the trustee is obliged to pay to the beneficiaries: Byrnes v Kendle (2011) 243 CLR 253…

Except where an account on the wilful default basis is sought — and it is not sought here — a beneficiary’s entitlement to an account does not depend on alleging or establishing any default or breach of trust. As Powell J (as he then was) put it in Spellson v George(1987) 11 NSWLR 300 at 315-16 (Spellson):

This being the essential nature of the position of a trustee, and the liability to account being an essential ingredient in it, it seems to me that it is inescapable that the cestuis que trust, or any one of the cestuis que trust, have, or has, a correlative right to approach the Court for its assistance in enforcing the personal obligation of the trustee, and, in particular, in enforcing the trustee’s obligation to account. Since that right is, as it seems to me, a fundamental right of the cestuis que trust, or of a cestui que trust, it seems to me that it is not correct to say that its enforcement by the court is dependent upon the cestuis que trust, or the cestui que trust in question, first raising an allegation, or establishing a prima facie case, of fraud or some other like breach of trust. On the contrary, so it seems to me, where the court’s assistance in enforcing the trustee’s obligation to account is invoked, the court should be concerned with only two questions, they being, first, whether the plaintiffs are, or the plaintiff is one of the, cestuis que trust, and, second, whether the defendant trustee has failed to observe his obligation to account.

The only defences to a claim for accounts in common form, where liability to account is established, are (1) release, (2) that the defendant has already rendered proper accounts and the amount due has been paid, or (3) settled accounts: Dawson v Dawson (1737) 1 Atk 1 ; 26 ER 1 ; Young, Croft and Smith, On Equity at [16.1340].

361. I am not persuaded that the jurisdiction to order an account, as such, is here warranted at this stage in the proceeding.

362. What the plaintiffs in effect appear to be seeking is not an account in the sense considered above, but orders requiring the trustee to account (in the sense of the obligation to account referred to in the Campbell Article to which I have referred above; i.e., orders that require an explanation of what occurred in relation to the financial transactions recorded in the accounting documents, which the plaintiffs have already been provided – akin perhaps to the making of an affidavit disclosing assets that is commonly made on a freezing order application; or an affidavit vouching for discovery of the kind that was ordered by Brereton J in the Rinehart Trust Documents decision).

363. I note that in the Rinehart Trust Documents decision, those documents held by agents of the outgoing trustee were considered necessarily within the outgoing trustee’s possession, custody or power (see at [103], [131]). However, that case, as adverted to above, concerned an outgoing trustee, in respect of whom serious concerns had been expressed by Brereton J himself in the course of the proceedings before him and in his various judgments. His Honour ultimately required the outgoing trustee to go on oath and provide such an affidavit verifying delivery to clarify the scope of the order, because the first defendant had “adopted a misconceived narrow view of what is a ‘document of the Trust’” (see [110]).

364. In circumstances where orders for the service of evidence in the present proceeding are yet to be made, I consider that it is premature to make such an order. This is not a case of a freezing order application where there is urgency in ascertaining the whereabouts of funds over which there is a claim. This is litigation that ought to proceed in the ordinary course and in accordance with ordinary case management principles informed, of course, by the statutory mandate for the just, quick and cheap resolution of the real issues in dispute.

365. Insofar as there is an obligation of the trustee (here, VIP Sale) to provide an account of transactions, the transaction listing has done so. The plaintiffs cavil with the accuracy and completeness of this account. However, in circumstances where any further such explanation will presumably be given in affidavit evidence on the issues in dispute in the substantive proceeding, I am not persuaded that those orders need to be made at this stage.

366. Accordingly, I do not make the orders sought by prayers 9, 10, 11 and 12 in the notice of motion.

Discovery Orders

367. Prayer 13 of the notice of motion seeks an order for discovery, or preliminary discovery, of the categories of document set out in the Schedule to the letter dated 7 April 2021 from the plaintiffs’ solicitors to the Zhang defendants’ solicitors.

368. I deal first with the position in relation to orders for discovery. The Practice Note, introduced in March 2012, provides that in proceedings in this Division, disclosure should not occur before evidence has been served; and that disclosure should only occur if it is necessary (in the sense of what is reasonably required for a fair trial – see In the matter of Gerard Cassegrain & Co Pty Ltd - Cassegrain v Gerard Cassegrain & Co Pty Ltd [2011] NSWSC 241 at [20] (Cassegrain) for the resolution of the real issues in dispute in the proceedings.

369. The Practice Note relevantly provides that:

4.   The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure.

5.   There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings.

6.   Any application for an order for disclosure, consensual or otherwise, must be supported by an affidavit setting out:

the reason why disclosure is necessary for the resolution of the real issues in dispute in the proceedings;

the classes of documents in respect of which disclosure is sought; and

the likely cost of such disclosure.

370. The purpose of the Practice Note is to ensure that disclosure is “confined to the real issues between the parties as defined by not only the pleadings, but also the evidence” (see Bergin CJ in Eq in Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd [2012] NSWSC 393 at [64]-[66]).

371. As noted, the plaintiffs have also referred to the Campbell Article by the Hon JC Campbell. In that article, the author said the following regarding the grant of disclosure orders (at 146/147):

In the context of disclosure of information concerning trusts, the exercise of any of these discretions must take into account the relevant principle, namely, that the task of the court is to require the particular trustee in question faithfully to perform the intention of the settlor and the office of trustee, and if the trustee has strayed from that course, to make whatever order is appropriate in the circumstances to enable that intention to be effected, and whatever is necessary to carry out that office to be done. Concerning very many situations where a beneficiary seeks access to information about a trust, the outcome will be every bit as predictable as the outcome of, say, a suit for specific performance — that is, there will be some clear cases, and some not so clear cases.

… The previous case law has recognised, even concerning cases where the beneficiary has a vested interest, that the beneficiary is usually entitled to information, but entitlement always depends on the circumstances of the individual case.

372. In the present case, I am not persuaded that exceptional circumstances for disclosure at this stage have been shown. Although I accept that disclosure at a later stage of the proceeding (after evidence has been served) may well be necessary for the resolution of the real issues in dispute in the proceeding (not least because complaint is made as to transactions in respect of which the documentary evidence is not in the plaintiffs’ hands), it seems to me that there is much force in the complaint that the present application subverts the process of disclosure in this Division of the Court.

373. As to the application for preliminary discovery, the purpose of such discovery is to obtain information for the purpose of enabling a decision to be made as to whether there is a cause of action (see Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 at [54]).

374. As I noted in Pharmacy Guild of Australia v Ramsay Health Care Ltd [2019] NSWSC 1045 (Pharmacy Guild) (see from [252]-[254], with reference to Murray v Wheeler[2013] NSWSC 137 per Bergin CJ in Eq; Contour Building and Construction Pty Ltd v Kerr[2008] NSWSC 883 per Barrett J, as his Honour then was), an order for preliminary discovery can only be made if it appears to the Court that the applicant has made reasonable enquiries and, notwithstanding the reasonable enquiries, the applicant has been unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant. The preliminary discovery jurisdiction is not appropriately invoked in order to “build up a case which an applicant has already decided, or could decide to bring” (see Ritchie’s Uniform Civil Procedure NSW, vol 1 at [5.3.15] and the cases there cited, including St George Bank Ltd v Rabo Australia Ltd(2004) 211 ALR 147; [2004] FCA 1360; cited with approval in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435; [2008] FCAFC 133 at [36]).

375. In the present case, there is no doubt that the plaintiffs have decided to commence the proceeding and (though they have been for some time in the throes of amending their pleadings) have already been able to plead and to some degree particularise their claim. I understand that the desire to seek all of the documentary evidence at this stage is put on the basis that it is consistent with the just, quick and cheap resolution of the real issues in dispute (and to obviate the need to seek leave further to amend the pleading at a later time).

376. However, the preliminary discovery jurisdiction is not appropriately invoked for the reasons set out above; and to make an order for disclosure now (other than if that be for the purposes of a general administration order or on another of the bases here sought) would in my opinion subvert the clear objectives of the disclosure rules applicable in this Division.

377. Accordingly, I do not grant the relief sought by the Discovery Orders (prayer 13) as such.

Interrogatories orders

378. Prayers 14 and 15 seek orders against the Zhang defendants and the Fang defendants, respectively, in effect requiring answers to interrogatories, the questions set out in the letters dated 7 April 2021 from the plaintiffs’ solicitors to the Zhang defendants’ solicitors and Fang defendants’ solicitors, respectively (as well as, in the Zhang defendants’ case, to the four further questions set out in prayer 14 of the notice of motion).

379. In Australian Competition and Consumer Commission (ACCC) v Cornerstone Investment Aust Pty Ltd (No 2) [2017] FCA 393, Gleeson J (sitting in the Federal Court of Australia as her Honour then was) considered (at [10]-[11]) the principles underlying the ordering of interrogatories. It was noted that an object of interrogatories is to obtain admissions as to facts which will support the case of the interrogating party (WA Pines Pty Ltd v Bannerman [1980] FCA 79); and that “an interrogatory may be objected to when it is too wide, fishing or immaterial, or if it is unfair or unreasonable in the sense that the burden of answering it far outweighs the likely benefit which may be adduced from the answer” (reference being made to Austal Ships Pty Ltd v Incat Australia Pty Ltd(No 3)[2010] FCA 795 (Austal Ships). 

380. Her Honour continued, citing Aspar Autobarn Co-Operative Society v Dovala Pty Ltd (1987) 16 FCR 284 (per Woodward J) at 285:

If the use of interrogatories is to be effective, the task must be approached responsibly on both sides. It should not be seen as a battle of wits, or indeed as any form of contest. It is an opportunity to assist the parties and the court to have the matter prepared for trial as quickly and as cheaply as possible. The chief obligations on the interrogator are to ask questions as clearly and concisely as possible, and to ask only those questions which really require an answer in the particular case — by way of providing information not already known or making a relevant and required admission — in order to advance the interrogator’s case or help to meet the opposition’s case.

381. Her Honour noted that (at [12]) that it was unlikely that interrogatories would be permitted as a substitute for discovery of documents (citing Austal Ships at [7]).

382. As to whether an order for interrogatories is “necessary”, a proposed interrogatory must have a relevant connection with a matter in issue in the proceedings (see Ritchie’s at [22.1.10] and the cases there cited, including Seidler v John Fairfax & Sons Ltd[1983] 2 NSWLR 390 at 393; Tiver v Tiver [1960] SASR 40 at 50; and Attorney-General v Gaskill (1882) 20 Ch D 519). A relevant connection includes matters that may be relevant to determination of facts in issue and directly probative of facts in issue (Potters Sulphide Ore Treatment Ltd v Sulphide Corp Ltd (1911) 13 CLR 101 at 110-111). In Chong v Nguyen[2005] NSWSC 588, Rothman J said (at [16]):

16.   The word “necessary” when used in relation to a requirement on the exercise of a power granted to a court should generally and does here mean “reasonably required or legally ancillary” to the achievement of the goal, in this case, of a fair trial. I refer to the joint judgment of Gaudron, Gummow and Callinan JJ in Pelechowski v Registrar, Court of Appeal (NSW)[1999] HCA 19 ; 198 CLR 435 which, while determining whether there was a valid basis for contempt proceedings, examined the power of the District Court to issue injunctive relief. They said:

The term “necessary” in such a setting as this is to be understood in the sense given it by Pollock CB in Attorney-General v Walker (1849) 3 Exch 242 ; 154 ER 833, namely as identifying a power to make orders which are reasonably required or legally ancillary to the accomplishment of the specific remedies for enforcement provided in Division 4 of Part 3 of the District Court Act. In this setting, the term “necessary” does not have the meaning of “essential”; rather it is to be “subjected to the touchstone of reasonableness” (State Drug Crime Commission (NSW) v Chapman (1987) 12 NSWLR 477 at 452).

383. Ritchie’s commentary at [22.1.17] includes the proposition that it is consistent with the mandatory provisions of ss 56-61 of the Civil Procedure Act for interrogatories directed to obtaining admissions, explaining the contents of documents “or that otherwise offer a realistic prospect of reducing the length and/or the cost of the proceedings” may be regarded as necessary (even where the interrogatories relate to matters that might otherwise be reasonably expected to be the subject of a witness’ evidence at a final hearing), referring to Cassegrain (at [20]-[36]).

383. In the present case, I consider that many of the interrogatories go well beyond the permissible scope for interrogatories or what is necessary at the present stage (particularly those relating to the motivation for structuring arrangements in a particular way, the parties’ motivations not having been demonstrated to be relevant to an issue in the proceeding). Many of the interrogatories are premised on propositions that are disputed by the defendants (so, for example, questions as to why a representation was made, or why promises were not complied with, are questions that assume that the making of such representations and promises will be established on the evidence). I do not consider that it is appropriate that interrogatories of this volume and kind be administered at this stage of the proceeding, nor would I make such an order as an incident of the provision of information in lieu of a general administration suit.

Conclusion

385. Other than the order sought by prayer 1 (not opposed by Giant) for the production by Giant of books and records of the trust (properly so confined – as set out above) and other than the liberty I propose to give for the plaintiffs to identify any particular corporate books and records of VIP Sale to which they seek access pursuant to s 247A of the Corporations Act (and of which they have not already been provided with copies), I will dismiss the notice of motion filed on 13 April 2021. While I understand that the plaintiffs are frustrated at the perceived inadequacy of answers to their requests for information to date, the notice of motion is extraordinarily broad in scope (particularly the interrogatories sought to be administered) and in my opinion the applications for discovery and the like are premature.

386. I accept that the plaintiffs have serious concerns as to the maladministration of the respective trusts and that in due course much of the information that has been sought may well have to be provided on discovery or, as a practical matter, in the form of affidavit evidence from the defendants responding to the plaintiffs’ claims. Therefore, I simply propose to reserve the question of costs to be dealt with at a later stage in the proceedings (whether at the time of determination of the application for a general administration order or at the final hearing, a matter on which I will seek the parties’ views).

Orders

387. For the above reasons, I make the following orders:

1. Order that within 21 days, the seventh defendant (Giant) provide to the plaintiffs access for inspection (and permit the plaintiffs at their expense to take a copy of) all books and records of the Everspring Develop Group Unit Trust in its possession (and of any such books and records in the possession of any agent of the seventh defendant of which the seventh defendant is entitled to call for production from that agent and which on request are produced to it); noting for the avoidance of doubt that the expression “books and records” of the trust bears the meaning explained in these reasons.

2. Liberty to the plaintiffs to identify within 14 days a specific list of company books and records of the eighth defendant (VIP Sale) (being documents with which the plaintiffs have not already been provided), access to which is sought pursuant to s 247A of the Corporations Act.

3. Direct the eighth defendant to notify the plaintiffs within 7 days of the provision of any such list pursuant to Order 2 above whether there is a dispute as to production of those documents.

4. If there remains a dispute as to production of the documents listed in accordance with Order 2 above, liberty to the plaintiffs to apply for the matter to be listed before me for determination of the dispute as to access at an appropriate time.

5. Otherwise dismiss the notice of motion filed 13 April 2021.

6. Reserve the question of costs.

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Decision last updated: 15 September 2021