BEIJING URBAN & RURAL CONSTRUCTION GROUP v GOLDENFIELD INTERNATIONAL IMPORT & EXPORT PTY LTD & ORS [2000] NSWSC 578

New South Wales Supreme Court

CITATION : BEIJING URBAN & RURAL CONSTRUCTION GROUP v GOLDENFIELD INTERNATIONAL IMPORT & EXPORT PTY LTD & ORS [2000] NSWSC 578 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2179/00 HEARING DATE(S) : 20 June 2000 JUDGMENT DATE : 20 June 2000

PARTIES : BEIJING URBAN & RURAL CONSTRUCTION GROUP LTD v GOLDENFIELD INTERNATIONAL IMPORT & EXPORT PTY LTD & 3 ORS JUDGMENT OF : Mason P at 1

COUNSEL : Plaintiff: A S Martin SC 1st,3rd,4th Defendants: E A Cohen SOLICITORS : Plaintiff: Clayton Utz 1st,3rd,4th Defendants:Neil J O'Connor & Associates DECISION : Mareva Orders as per Short Minutes

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION 2179/00

MASON P

Tuesday 20 June 2000

BEIJING URBAN & RURAL CONSTRUCTION GROUP LTD v GOLDENFIELD INTERNATIONAL IMPORT & EXPORT PTY LTD & 3 ORS JUDGMENT 1 HIS HONOUR: The second plaintiff was the vehicle through which the first plaintiff invested funds in Australia. The first plaintiff is owned by the Beijing Municipal Government. The second defendant, Fah Hok Li, was deputy general manager of the first plaintiff between 1994 and early 2000. 2 In 1995 the plaintiffs entered into a joint venture with a company called Australia United International Investment Group Proprietary Limited (Australia United). It was to be the vehicle whereby the plaintiffs invested in Australian real estate. The second, third and fourth defendants were directors of that company, the second and third defendants being brothers. The first plaintiff held 3000 of the 8000 issued shares, the third defendant 3500. The second defendant, the fourth defendant and one Li Sheng Wang held 500 shares each. In 1996/97 the second plaintiff transferred approximately 2.7 million dollars to the first defendant in Sydney. 3 The first defendant is a company in which the third defendant holds two shares and the fourth defendant one share. The reasons why the first defendant was the chosen vehicle to receive the plaintiff's moneys as distinct from Australia United are not presently material. They can be explored at the final hearing if they are relevant. It would appear that none of the parties dispute, at this stage, the propriety of the money being channelled through the first defendant rather than Australia United. It is common ground that the first defendant received the money for the purpose of the joint venture that had been originally planned to involve Australia United. 4 In November 1996 the first defendant used the transferred funds to purchase a property at 29 John Street, Rydalmere, for $138,000 and a development site at 2a Charlotte Place, Illawong, for $930,000. 5 The latter site was developed into twelve townhouses which were completed in late 1999. The personal defendants were closely involved in this work and from time to time representatives of the plaintiffs came to Australia to supervise and check out developments. The second, third and fourth defendants also invested borrowed moneys through the first defendant in the Illawong project. It may very well be that the personal defendants incurred expenses for which they may be entitled to some credit in a proper accounting. At this stage I am not in a position to do any more than note that as a likely outcome. 6 On about 1 September 1999 the second defendant executed a termination agreement with the first defendant, purportedly on behalf of the plaintiffs. The plaintiffs say that they had no knowledge in advance of his intention to do so. The matter is complicated by the fact that there appear to be two versions of a document, apparently signed about the same time, broadly having common provisions but with discrepancies, some of them apparently material. Both versions of the agreement acknowledged the termination of the joint ventures. The twelve Illawong townhouses were, by these agreements, to be divided between the two groups with the first plaintiff being allocated six of them including unit 12. 7 Various matters have happened since then which the plaintiffs rely upon as the bases for the substantive claims they make in these proceedings. To date, no pleadings have been filed and it seems to me that this is a case that cries out for the plaintiffs' claims to be embodied in proper pleadings. The plaintiffs submit that the dealings in late 1999 and early 2000 are incompatible with the defendants' duties as parties or directors of parties to the joint venture, and also incompatible with a proper or sufficient winding up of the affairs of the joint venture. The plaintiffs contend that these dealings give cause for real concern as to the capacity of the plaintiffs to recover the money owing to it through the taking of accounts in what is now, on any version, a terminated joint venture as between the plaintiffs and the first defendant. 8 The matters relied upon by the plaintiffs as the bases for the final and the interim relief which they seek in the proceedings include the following: (a) On 3 September 1999 the first defendant transferred to the third defendant the Rydalmere property for a purported consideration of $140,000 but a real consideration of $1. The property has been used since that date as the matrimonial home of the third and fourth defendants. A recently filed affidavit of the third defendant sets out various bases upon which offsets are claimed which are said to give rise to an entitlement to the transfer of this property without payment of full consideration, or indeed entitlement to transfer of the property at all. It seems to me that these are matters of which the plaintiffs were unaware, at least until very recently, and which have not been the subject of any informed consent on the plaintiffs' behalf. At least that appears to be the strongly arguable case on the present state of the evidence. No mention was made of this particular transaction in a memorandum which purports to have been sent by the third defendant to the first plaintiff in December 1999 although it should be noted that the authenticity of this memorandum is itself a matter of dispute.