Wang v Cai

[2020] NSWSC 1414

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Wang v Cai [2020] NSWSC 1414

Hearing dates:

9 October 2020

Date of orders:

9 October 2020

Decision date:

09 October 2020

Jurisdiction:

Equity - Applications List

Before:

Parker J

Decision:

See [84]-[86]

Catchwords:

OCCUPATIONS – legal practitioners – solicitors – conflict of interest – litigation about property joint venture – solicitor acting for trustee of unit trust owning half of property – solicitor also acting for unit-holder making resulting trust and misleading & deceptive conduct claims – conflict of interest

CIVIL PROCEDURE – representation of parties – solicitor acting for parties not in the same interest – leave of court – Uniform Civil Procedure Rules 2005 (NSW) r 7.25

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), Part 54, rr 6.22, 7.25

Cases Cited:

Calverley v Green (1984) 155 CLR 242

Kallinicos v Hunt (2005) 64 NSWLR 561

TécnicasReunidas SA v Andrew [2018] NSWCA 192

Category:

Procedural and other rulings

Parties:

Motion filed 18 August 2020 (Restraint Motion)
Applicants
Wan Hao Cai (First Applicant/First Defendant)
Solid Asset Manage Pty Ltd (Second Applicant/Third Defendant)
Xiang Zhou (Third Applicant/Fifth Defendant)
Yi Guang Zhang (Fourth Applicant/Eighth Defendant)

Respondents
Gang Sun (First Respondent)
Sunfield Chambers Solicitors & Associates Pty Ltd (Second Respondent)
Xiaobo Wang (Third Respondent/First Plaintiff)
Haixin Australia Pty Ltd (Fourth Respondent/Second Plaintiff)
Adventure Continent Group Pty Ltd (Fifth Respondent/Third Plaintiff)

Motion filed 2 October 2020 (Amendment Motion)
Applicants
Xiaobo Wang (First Applicant/First Plaintiff)
Haixin Australia Pty Ltd (Second Applicant/Second Plaintiff)
Adventure Continent Group Pty Ltd (Third Applicant/Third Plaintiff)

Respondents
Wan Hao Cai (First Respondent/First Defendant)
Yun Xia Fang (Second Respondent/Second Defendant)
Solid Asset Manage Pty Ltd (Third Respondent/Third Defendant)
Ozjian Trading Pty Ltd (Fourth Respondent/Fourth Defendant)
Xiang Zhou (Fifth Respondent/Fifth Defendant)
High 618 Pty Ltd (Sixth Respondent/Sixth Defendant)
Urban Apartments Pty Ltd (Seventh Respondent/Seventh Defendant)
Yi Guang Zhang (Eighth Respondent/Eighth Defendant)

Representation:

Motion filed 18 August 2020 (Restraint Motion)
Counsel:
R Yezerski (Applicants)
R Newlinds SC/R Tregenza (First and Second Respondents)
LT Livingston/H Cooper (Third, Fourth, Fifth Respondents)

Solicitors:
Corrs Chambers Westgarth (Applicants)
Sunfield Chambers Solicitors & Associates (Respondents)

Motion filed 2 October 2020 (Amendment Motion)
Counsel:
LT Livingston/H Cooper (Applicants)
R Yezerski (First, Third, Fifth, Eighth Respondents)
J Mee (Second and Fourth Respondents)

Solicitor-Advocate:
P Hudson (Sixth and Seventh Respondents)

Solicitors:
Sunfield Chambers Solicitors & Associates (Applicants)
Corrs Chambers Westgarth (First, Third, Fifth, Eighth Respondents)
JurisBridge Legal (Second and Fourth Respondents)
Hudson Law Pty Limited (Sixth and Seventh Respondents)

File Number(s):

2020/143926

Publication restriction:

Nil

Judgment – EX TEMPORE

Revised from transcript; issued 19 October 2020

1. Before the Court are two applications by way of notice of motion. The first application is to restrain the third plaintiff's solicitor from acting for it. The applicants are four of the defendants. The application is based on the nature of the claims made in the plaintiffs’ existing statement of claim. It has prompted a counter-application by the plaintiffs to amend.

2. The proceedings are complex. The following description of the parties and the factual background is taken from the pleadings. It does not relevantly appear to be in dispute.

3. The first plaintiff is Xiaobo (also known as Bonny) Wang. Ms Wang is a Chinese property investor. The second plaintiff, Haixin Australia Pty Limited (“Haixin”), is a company which she uses for Australian property investments. I will refer to Ms Wang and Haixin together as "the Wang interests".

4. The fifth defendant, Xiang Zhou, and the first defendant, Wan Hao Cai, are a married couple. Both of them are licensed real estate agents. They appear to be active in facilitating Chinese investment in Australian property.

5. The eighth defendant, Yi Guang Zhang, is Ms Cai's brother-in-law. He has a swimwear business. Between them, Mr Zhou and Mr Zhang each own 50 per cent of the third defendant, Solid Asset Manage Pty Limited (“Solid Asset”). This is an Australian company which was incorporated in November 2014, apparently in connection with the venture which is the subject of these proceedings.

6. Mr Zhou, Ms Cai, Mr Zhang and Solid Asset are commonly represented. I will refer to them as "the Zhou interests".

7. The proceedings arise out of a property development venture. The property is question is located at High Street, Penrith.

8. The story begins in November 2014. It seems that at the time Mr Zhou and Ms Cai were trying to promote the purchase of the property from its existing owners for redevelopment purposes. They approached Ms Wang to become involved as an investor.

9. It was also contemplated that companies associated with a Mr George Elias (also known as Farah Elias) would be involved in the development. Mr Elias is a property developer who is said to have been experienced in the type of development under consideration. Two companies associated with him are parties to these proceedings.

10. The sixth defendant is a company called High 618 Pty Limited (“High 618”). It was incorporated in November 2014, apparently for the purposes of the venture. Mr Elias and Mr Zhang each owned 50 per cent of the shares in the company and are its directors.

11. The seventh defendant is a company called Urban Apartments Pty Limited (“Urban Apartments”). Mr Elias is the sole director, and the shares in the company are indirectly owned by him and his wife. It carries on a property development business specialising, in particular, in the sale of "off the plan" residential development apartments.

12. Before the approach was made to Ms Wang, Mr Zhou (perhaps with the involvement of Ms Cai) had arranged for the establishment of an investment vehicle to hold 50% interest in the proposed development, alongside that to be held by Mr Elias or his companies. For this purpose a company called Adventure Continent Group (“ACG”), was incorporated and constituted as trustee of a unit trust known as the Brighten Future Property Trust (“the Brighten Trust”). Mr Zhou was the sole recorded director of the company.

13. It was contemplated that another investor would have a minority interest in the Brighten Trust. This was the fourth defendant, Ozjian Trading Pty Limited (“Ozjian”). That company is controlled by Ms Yun Xia Fang, the second defendant. Ms Fang is also a licensed real estate agent and operates as a real estate investor on her own account. I will refer to Ms Fang and Ozjian collectively as the “Fang interests”.

14. The initial approach to Ms Wang came through Ms Cai and was oral. It was followed by the preparation of a document, which has been referred to in the evidence as the “Chinese language agreement”. An English language translation of the document is in evidence. It is headed "Introduction to the 616 High Street Penrith Project and the Plan to Raise Capital By Floating Shares".

15. The document proposed a redevelopment of the site into approximately 175 apartments with a sales value of up to $80 million. It stated:

The price for the purchase of the land of this project together with design and approval fees (about $ 500,000), stamp duty $ 500,000, a total fund of $9,500,000 is needed. The investor (Adventure Continental [sic] Pty Ltd ATF Brighten Future Properties Trustee) will provide funds of $5,700,000.

For 50% of the equity of the project, initially, the shares are to be:

Company	Amount	Shares	Equity/Total project
Hai Xin Australia Pty Ltd	$4,900,000	85.9%	42.95%
Ozjian Trading Pty Ltd	$500,000	8.772%	4.386%
Solid Asset Manage Trust Fund	$300,000	5.263%	2.631%

16. Consistently with the contributions recorded in the agreement, units in the Brighten Future Property Trust were issued to Haixin, Ozjian and Solid Asset in the ratio 49:5:3. Although this gave the Wang interests approximately 86 per cent of the economic interest in the trust, Mr Zhou remained the sole director. The Chinese language agreement was formally signed by the parties on or shortly after 30 December.

17. On 1 December 2014, Mr Zhou caused ACG to enter into a joint venture agreement with High 618 and Urban Apartments for the development of the site. A few days later, on 5 December, ACG and High 618 exchanged contracts with the then owners.

18. The contract provided for a purchase price of $6.5 million. Half was to be paid at or before completion, with the remaining half to be the subject of a vendor finance arrangement under which it was to be paid in July the following year.

19. Three days later, on 8 December, the Wang interests paid a sum of approximately $3.1 million to ACG to contribute to the purchase of the property. The amount contributed represented, apparently, both the 49/57 contribution for Haixin and the 5/57 contribution for Ozjian.

20. On 19 December the purchase was completed. The property was registered in the names of ACG and High 618 as tenants in common in equal shares. A mortgage was granted by ACG and High 618 in favour of the vendors for the remaining half of the purchase price. In July 2015, the remaining moneys under the vendor finance arrangement were paid and the mortgage in favour of the vendors was discharged.

21. ACG's entry into these transactions was effected by Mr Zhou. Ms Wang was not involved.

22. Approximately a further $2.4 million was provided by the Wang interests to ACG to discharge the vendor finance in July 2015. This brought the total amount paid by the Wang interests to $5.4 million, representing Haixin's 49/57 and Ozjian's 5/57 shares of the investment.

23. The development has not been completed. In November 2019, Ms Wang procured her own appointment as a director of ACG and Mr Zhou resigned. Since that point, Ms Wang has controlled ACG.

24. The present proceedings were begun in May 2020. The three named plaintiffs are Ms Wang and Haixin as the first and second plaintiffs (as I have already mentioned), and ACG as the third plaintiff. In the proceedings the plaintiffs are represented by a solicitor corporation called Sunfield Chambers Solicitors & Associates Pty Ltd (“Sunfield”). The solicitor-principal of that company is Mr Gang Sun.    

25. Ms Wang's essential complaint is that she became involved in the project on the basis of representations that the cost of the land would be $8.5 million or so when in fact it was $6.5 million. The result is that her interests have borne a much higher proportion of the acquisition cost in comparison to those of Mr Elias than she had contemplated.

26. The plaintiffs’ existing statement of claim is lengthy. In summary, it pleads four main claims.

27. First, the statement of claim alleges on behalf of Ms Wang and Haixin a claim by way of resulting trust over the Penrith property. The statement of claim alleges that they contributed 83.07 per cent of the purchase price and should be entitled to an equivalent ownership in the property.

28. The second claim is against the Fang interests. The statement of claim alleges (consistently with the figures which I have quoted above) that their share of the investment was financed by the Wang interests. The statement of claim pleads a claim in debt but also alleges an entitlement to Ozjian's proprietary interest in the venture.

29. The third claim is one for misleading and deceptive conduct. Again, this is pleaded on behalf of Ms Wang and Haixin. The claim is made against all of the eight defendants. The statement of claim seeks damages but also (under the Australian Consumer Law, s ***) orders restructuring the ownership interests in the venture.

30. The fourth claim is pleaded as a claim by ACG against Mr Zhou and Ms Cai for breach of duty as directors. Ms Cai is sued on the basis that she was a de facto director of the company. The allegation is that Mr Zhou and Ms Cai should have secured for ACG an interest in the venture which was more commensurate with the contribution actually made by ACG to the purchase price.

31. It is notable that there is no claim by the Wang interests against ACG for misleading and deceptive conduct. Counsel for the plaintiffs acknowledged that such a claim could readily have been made, on the basis that the representations which were made to Ms Wang, including those in the Chinese language agreement, were made on behalf of ACG. That would have enabled the Wang interests to seek rescission of their investment in the venture, or damages.

32. It is also notable that the resulting trust claim on behalf of the Wang interests is being pursued despite the fact that on their own case the moneys were paid to ACG and it was ACG which contributed the moneys to the purchase. The interest claimed is also based on the ultimate contributions to ACG, even though in a resulting trust the beneficiary's entitlement is fixed at the date of purchase and contributions towards the subsequent discharge of a mortgage entered into to finance the purchase do not count (see Calverley v Green (1984) 155 CLR 242 at 252).

33. Finally, I note that there is no pleaded claim that High 618 or Urban Development, which appear to have been the major beneficiaries of the overpayment by Ms Wang, should return those moneys to Ms Wang or ACG or otherwise bring them to account for the purposes of the development. While the Chinese language agreement on its face is one involving the Zhou interests, the Fang interests and the Wang interests only, it obviously reflects some sort of prior joint venture arrangement with the Elias interests.

34. Overall, it is striking that the one thing that Ms Wang appears not to wish to do is to get out of the project. On the evidence before me, she has a strong case of misrepresentation which, as I have said, would apparently allow her either to rescind or to claim damages. But what she really wants is to go on with the project but to do so on the basis of a much higher level of ownership of the property than was offered to her in the Chinese language agreement.

Restraint application

35. I turn now to the application to restrain the solicitor from acting. The application is brought by the Zhou interests. They seek an order in the following terms:

The first and second respondents, Gang Sun and Sunfield Chambers Solicitors & Associates Pty Ltd, be restrained from acting for the third plaintiff in the proceeding, Adventure Continent Group Pty Ltd, whilst also acting for the first and/or second plaintiffs in the proceeding.

36. The respondents to the application are named as the three plaintiffs, Sunfield and Mr Sun personally. Sunfield and Mr Sun were separately represented for the purpose of the application.

37. The application is put on two bases. First, the applicants rely on Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), r 7.25. That provides:

Adverse parties

If a solicitor or a partner of the solicitor is a party to any proceedings, or acts as solicitor for a party to any proceedings, that solicitor may not act for any other party in the proceedings, not in the same interest, except by leave of the court.

38. The second basis for the application is the court's inherent power to control who represents the parties to litigation before it.

39. Counsel for the Zhou interests contended that there was a conflict between the interests of Ms Wang and Haixin on the one hand and those of ACG on the other. Counsel sought to illustrate the conflict by reference to two specific prayers for relief in the statement of claim.

40. The first is prayer 1, which arises out of the resulting trust claim by the Wang interests. That prayer claims:

A declaration that [ACG] and [High 618], in their capacities as registered proprietors, as tenants in common in equal shares, of the fee simple estate in the [High Street land], hold their respective interests therein on resulting trust for the benefit of [Ms Wang] and/or [Haixin], in the proportion of their contributions to the purchase price of the said land, namely 83.07% (calculated as the first and/or second plaintiff’s contributions totalling $5,400,000 expressed as a percentage of the purchase price of $6,500,000), or in such other proportion as the Court considers appropriate.

41. The second relevant prayer for relief is prayer 7(c) which arises from the misrepresentation claim by Ms Wang and Haixin. The prayer seeks an order:

Varying Part V of the Brighten Future Property Trust Unit Trust Deed dated 24 November 2014 between [ACG], as trustee, and [Haixin] and [Ozjian] and [Solid Asset], as unitholders, so as to require that [Ozjian] and [Solid Asset] pay, or cause the payment, to [Ms Wang] and/or [Haixin] of 83.07% of the net profit of the said unit trust, or such other proportion thereof as the Court considers appropriate.

42. As I have mentioned, the application was met by a counter-application from the plaintiffs to amend the statement of claim. Among the amendments were amendments made to prayer 1. In its revised form that provides:

A declaration that [High 618], in its capacity as registered proprietor of the fee simple estate in the [High Street land], holds its interests therein on resulting trust for the benefit of [Ms Wang] and/or [Haixin], in the proportion of their contributions to the purchase price of the said land, namely 35.71% (calculated as the first and/or second plaintiff’s contributions totalling $5,400,000 expressed as a percentage of the purchase price of $6,500,000), or in such other proportion as the Court considers appropriate.

43. The proposed amendments also add a resulting trust claim by ACG based on its contribution to the purchase of the High Street land. This is reflected in the new prayer 1A:

Alternatively, a declaration that [High 618] in its capacity as a registered proprietor of the fee simple estate in the land described in prayer 1 above, holds its interest therein on resulting trust for the benefit of [ACG], in the proportion of [ACG’s] contribution to the purchase price of the said land, namely 87.69% (calculated as the third plaintiff’s contributions totalling $5,700,000 expressed as a percentage of the purchase price of $6,500,000) or in such other proportion as the Court considers appropriate.

44. Counsel for the plaintiffs, supported by counsel for the solicitor, presented three arguments in opposition to the application. Counsel's first argument was that the resulting trust claim by Ms Wang does not involve any real or sensible risk of conflict. Counsel submitted that the claim concerns only the beneficial interests in the property.

45. Counsel characterised the issues to which the resulting trust claim gives rise as merely issues between the unitholders of the Brighten Trust as to the size of their respective interests. Counsel observed that all the unitholders are represented in the proceedings and submitted that in such a case it would in any event be the obligation of ACG as trustee to adopt a position of neutrality and allow the issues to be fought out between the unitholders.

46. I do not accept these submissions. Even if the claims by Ms Wang did not involve the legal title to the land, the fact remains that they involve an inconsistency between Ms Wang's own interests and those of the Trust. This is not a dispute between one unitholder and another about entitlements to the trust property inter se. It is a dispute involving a claim of an inconsistent trust which, if it were established, would reduce the beneficial interest of the unit trust, taken as a whole, in the property.

47. In any event I think that Ms Wang's claim does necessarily involve a potential alteration to the legal title held by ACG. Prayer 3 in the statement of claim is as follows:

An order that that [High 618], at its own expense, take all such steps as are necessary including, without limitation, execution of transfers in registrable form, to transfer to the plaintiff the proportion of its legal interest in the said land as are necessary to ensure that [Ms Wang] and/or [Haixin] is recorded as the registered proprietor, as tenant in common, of 83.07% of the land or of such other proportion as the Court considers appropriate.

48. The consequence of a finding of resulting trust is that the legal owner of the property holds the property on bare trust for those who have contributed the money in shares reflecting the quantum of their respective contributions. Prayer 3 is therefore a typical and appropriate consequential order which would follow if Ms Wang's claim were sustained. This clearly shows that the end point of her claim would be a transfer of legal title.

49. It is true that in the current formulation prayer 3 purports to limit itself to requiring High 618 to make good Ms Wang's alleged entitlement out of its share. That is the case under the existing statement of claim and would remain the case under the proposed amendments, but I do not think that is a tenable position.

50. ACG and High 618 were co-acquirers and are now co-owners of the property. I find it difficult to see how a finding of resulting trust could be made against one but not the other. In any event, the interest Ms Wang claims exceeds the value of the whole of High 618's interest in the property. It would not be possible to satisfy the equity which Ms Wang claims without reducing the legal title of ACG.

51. Counsel for Ms Wang submitted, as I understood them, that prayer 7(c) was a merely mechanical change affecting the interests of the unitholders which only affected the interest of the unitholders inter se. Again I cannot agree. The unitholders' beneficial interest in the property is one which is mediated through the terms of the trust deed. There is a real difference between an economic interest held as a unitholder and one which is held directly as a beneficiary under resulting trust. Again, in my opinion, prayer 7(c) shows Ms Wang's claim involves a contest between the beneficial interest of the unitholders, taken as a whole, and her private interests.    

52. Counsel's second argument was that any conflict had been resolved because fully informed consent had been obtained. Counsel relied on a memorandum of consent executed by Ms Wang, apparently on behalf of herself and Haixin and ACG. There was also affidavit evidence from Ms Wang and Mr Sun.

53. I will not go into this evidence in detail. In my view, it is sufficient to say that it falls far short of demonstrating fully informed consent. Neither the memorandum of consent nor the affidavit evidence even acknowledges that a conflict exists. Rather it asserts that in the view of Ms Wang and Mr Sun there is no conflict.

54. It is elementary that no question of fully informed consent can arise unless the conflict is first identified and its implications explained (or the existence of the conflict and its implications are obvious). Neither of those conditions is satisfied in the present case.

55. Counsel’s third argument was based on the well-known and often cited statement of principle by Brereton J, as his Honour then was, in Kallinicos v Hunt (2005) 64 NSWLR 561 at [76]. His Honour summarised the authorities on the Court’s inherent power over representation in proceedings before it in the following dot points (citations omitted):

●   During the subsistence of a retainer, where the court’s intervention to restrain a solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court’s jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests.

●   Once the retainer is at an end, however, the court’s jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure).

●   After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court’s intervention, such duty having come to an end with the retainer.

●   However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice.

●   The test to be applied in this inherent jurisdiction is whether a fairminded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.

●   The jurisdiction is to be regarded as exceptional and is to be exercised with caution.

●   Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.

●   The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief.

56. Counsel for both the plaintiffs and for Sunfield emphasised the last three dot points in particular. Counsel submitted that for the Court to intervene at this stage would be likely to result in delay and inconvenience. Counsel also laid heavy stress on what his Honour said about the jurisdiction being exceptional, and about due weight being given to the public interest in a litigant not being deprived of the law of his or her choice.

57. With due modesty, counsel for Sunfield submitted that this was of special significance in the present case. Counsel pointed out that Ms Wang has confidence in her existing solicitor and does not want to change. Counsel also observed that she holds a dominant economic interest in the trust.

58. As I have already noted, Kallinicos was a case of the exercise of the Court's inherent power. It arose in a case where a solicitor had previously acted for a client, and then wished to act for another client in litigation against the former client.

59. As Brereton J explained, while a solicitor is retained, he or she owes contractual and fiduciary obligations to the client. But those obligations cease when the retainer ends. Putting aside any ongoing obligations with respect to confidential information which the client may have provided to the solicitor in the course of the retainer, the solicitor owes no obligation, legal or equitable, not to act. That is why the Court's inherent power comes in, based on general principles concerning the administration of justice. Hence a test which looks to the perception of fair minded and reasonably informed members of the public concerning what the proper administration of justice requires.

60. The operation of r 7.25 is quite different. The rule is a command addressed to the solicitor acting for more than one party. The rule operates of its own force, and does not require the invocation of any power of the Court for it to be binding on the solicitor.

61. The rule is triggered when a solicitor acts for two parties who are not in the same interest. Once that condition is satisfied, the rule has the effect that the solicitor cannot act. The only question for the Court is whether to grant leave to the solicitor to do so, in effect dispensing with the rule.

62. That question is informed by relevant legal considerations. As will be seen below, they may include the proper practice and procedure of case management and the administration of trusts. The weighing of these factors is a matter for the Court. No question of public perception arises.

63. The difference between the exercise of the Court's inherent power and the application of the rule is pointed up in the current case by procedural differences. The Court’s inherent power arises from control of the solicitor personally, based on the solicitor's status as an officer of the Court. This cannot apply to a solicitor corporation which does not, in any corporate sense, sign the roll of solicitors or become admitted as a solicitor of the Court: Técnicas Reunidas SA v Andrew [2018] NSWCA 192 at [79].

64. On the other hand, r 7.25 applies to the solicitor on the record in the proceedings. In the present case, that would be Sunfield. The rule would not apply to Mr Sun personally.

65. The difference is also reflected in the form of the order which would be made by the Court. If a solicitor is acting in violation of r 7.25, the proper order would appear to be one which requires the solicitor to cease to act, by removing himself or herself from the record. Even if an order in the form of a restraint (as sought by the applicants here) is appropriate, it does not reflect the exercise by the Court of some sort of inherent power over the solicitor. It would only be an expedient method of compelling obedience to the command in the rule itself.

66. I was not referred to any authority on the meaning of the phrase “not in the same interest” as it appears in the rule. The argument before me proceeded on the basis that it was to be equated with the existence of a conflict. Certainly, the phrase would include a conflict as traditionally understood. But the language itself is not so limited. All it requires is that the two parties’ interests should not be the same.

67. On the face of it, something less than a direct conflict between the parties’ interests may be sufficient. But on the view I take, it is not necessary for me to attempt to define the limits of the phrase.

68. In my view, the terms of the rule are clearly satisfied. The fact is that Ms Wang is propounding a claim to the Penrith property, which is in competition with that which now is being propounded (through prayer for relief 1A) by ACG. In my view, that is enough to trigger the operation of the rule.

69. In any event, for reasons I have given, I consider that the plaintiffs' claims in prayers 1 and 7(c), despite the proposed amendments, are in substance claims against ACG.

70. The question is whether I should grant leave. As I have already noted, counsel both for the plaintiffs and for the solicitor argued that the efficient course was to do so.

71. Counsel for the solicitors in particular added that, if I did not allow continued representation of the three plaintiffs together, the third plaintiff would inevitably have to be made a defendant. The proceedings would have to be reconstituted. Counsel asked rhetorically what the point of this would be, and how a reasonable observer would see it.

72. For reasons I have given, I do not consider that the reasonable observer’s perception is relevant. But in any event, I cannot agree with counsel’s submission.

73. In my view, the current constitution of the proceedings is potentially embarrassing. They have been constituted so that, in effect, three plaintiffs who are commonly represented are making inconsistent claims, and one of the plaintiffs is in substance a defendant to claims made by the other two. Even without this application, the Court's power in cases of inconvenient joinder, pursuant to UCPR 6.22, would probably be engaged.

74. I also consider the current constitution of the proceedings is unsatisfactory from the point of view of the administration of the trust. The Court must uphold the interests of the unit holders, and the obligations of the trustee to act in the interests of those unit holders as a whole. In my view, at the least, that would require an independent consideration on behalf of ACG as trustee of what defences ACG should make to the claims made against it, and (possibly more importantly) what claims ACG should itself make against other parties.

75. Again, I think that the issue could have been raised otherwise than under r 7.25. It seems to me that the issue could have been raised as one going to the proper administration of the trust, and therefore requiring orders to be made under UCPR Part 54 directing ACG as trustee as to what it should do by way of administration of the trust.

76. I acknowledge that any delay in the progress of the proceedings is regrettable, but in my view, the proper identification of the parties by and against whom the claims are being made in the proceedings is fundamental. It is asking for trouble not to deal with such questions as quickly as possible.

77. For these reasons, I think that separate representation of Ms Wang and ACG is not only desirable, but essential. Hopefully, it will result in a reappraisal of the respective parties' claims. It may actually lead to the convoluted present structure of the statement of claim being simplified, and other more straightforward claims being pursued. Whether that will actually come to pass, I do not know. But in my view, it is very much in the interests of the efficient conduct of the proceedings that every opportunity should be given to the parties to allow it to happen.

78. For these reasons, I have concluded that leave should be refused. I therefore propose to grant relief under UCPR r 7.25. It is not necessary to consider the Court's inherent power.

79. Rule 7.25 does not mandate that the solicitor can only act for Ms Wang and Haixin rather than ACG. All it requires is that the solicitor should make a choice between acting for parties with different interests.

80. Of course, the fact that Sunfield up to this point has acted for all three plaintiffs may give rise to issues of confidentiality and conflict going forward, but that is not within the purview of r 7.25. I consider it is a matter for Sunfield to consider in consultation with its clients or former clients.

81. It will be necessary to consider the precise order to be made, and also to give the opportunity to choose which of the plaintiffs he wishes to continue to represent. It will also be necessary to make consequential orders for the reconstitution of the proceedings. I think that the suggestion from counsel for the solicitor, namely, that the third plaintiff should become a defendant, would probably be the best way forward. But it will be necessary to consider whether that would give rise to any problem or embarrassment in the pursuit of ACG's claims, and in particular, the question of limitation.

82. I will hear from the parties on this in due course.

Amendment Application

83. In view of the conclusions that I have reached, there is no point in granting leave to amend the statement of claim in the form the subject of the application. The pleadings can be amended as part of the process of reconstituting the proceedings.

Conclusions and Orders

84. For these reasons, I will make an order under r 7.25, preventing the representation of all three plaintiffs by Sunfield. The amendment application will be dismissed.

(Parties addressed on the form of orders and costs).

85. The orders of the Court on the motion filed 18 August 2020:

1. Refuse leave to Sunfield Chambers Solicitors & Associates Pty Limited, the second respondent, to act both for the first and second plaintiffs and the third plaintiff.

2. Direct that within 14 days the second respondent file a notice of ceasing to act either for the first and second plaintiffs or for the third plaintiff.

3. Reserve the costs of the motion.

   86. The orders of the Court on the motion filed 2 October 2020:

   1.   Dismiss the motion.

   2.   Reserve the costs of the motion.

**********

Amendments

26 October 2020 - Amend representation and party details

Decision last updated: 26 October 2020