Supreme Court New South Wales Medium Neutral Citation: Chi Man Li v Hanson Property Developments Pty Ltd [2017] NSWSC 500 Hearing dates: 27 April 2017 Date of orders: 27 April 2017 Decision date: 02 May 2017 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Make orders in accordance with the Short Minutes of Order dated 27 April 2017. 2. Defendants pay the plaintiffs' costs of the proceedings on the ordinary basis. Catchwords: PRACTICE AND PROCEDURE – application to set aside orders pursuant to UCPR rr 36.15 and 36.16 – where defendants had orders against them vacated despite having been found to have been in contempt of interlocutory regime – where orders had been vacated on basis that defendants' contempt of court was purged by the granting of a charge over certain land – where contracts had already been exchanged in respect of the property over which the charge was granted and the property was in fact sold by the time the earlier orders were vacated – application successful. Legislation Cited: Corporations Act 2001 (Cth), ss 232, 233, 234 Uniform Civil Procedure Rules 2005 (NSW), rr 36.16, 36.15 Cases Cited: Chamberlain Group v Kids for Life [2015] NSWCA 241 Li v Hanson Property Development Pty Ltd [2016] NSWSC 1870 Xenos v National Australia Bank Ltd [2007] NSWSC 973 Category: Principal judgment Parties: Chi Man Li (First Plaintiff) BMO Brindabella Developments Pty Ltd (ACN 126 747 564) (Second Plaintiff) Hanson Property Developments Pty Limited (ACN 124 538 110) (First Defendant) Shuk Han Lau (Second Defendant) Henry Han Ho Lau (Third Defendant) Hanson Australasia Pty Ltd (ACN 124 538 110) (Fourth Defendant) Representation: Counsel: B F Katekar (Plaintiff) D F Elliott (Solicitor) (Defendant) Solicitors: Kamy Saeedi Law (Plaintiffs) David Legal (Defendants) File Number(s): 2014/00189714 Publication restriction: Nil EX TEMPORE Judgment 1. HER HONOUR: This is an application by amended notice of motion filed in court today, by my leave, for various orders in relation to proceedings commenced by the first plaintiff, Chi Man Li, and the second plaintiff, BMO Brindabella Developments Pty Ltd, against Hanson Property Developments Pty Ltd, Mr Shuk Han Lau and two other defendants. 2. The defendants were not represented on the hearing of this application and there was no attendance by them. At the commencement of the hearing of the amended notice of motion, on the application of the solicitor on the record for the defendants, Mr Fred David, I gave leave for him to withdraw as the legal representative for the defendants. The circumstances in which I did so were as follows. 3. The matter had come before me on 13 April 2017 in the duty list on which occasion I ordered the solicitor for the defendants, amongst other things, to file and serve an affidavit explaining the circumstances in which he sought leave to withdraw as solicitor on the record. He has done so by affidavit affirmed 18 April 2017. In that affidavit Mr David is circumscribed in what he can say since he has no instructions from the defendants to waive any client legal privilege that they have, or may have, over any documents or communications. Mr David deposes to the fact that he became aware of a matter on 4 April 2017, the nature of which is not disclosed in his affidavit, which caused him to notify counsel briefed in the matter on behalf of the defendants and, relevantly for present purposes, to seek advice from the Ethics Department of the Law Society of New South Wales. Mr David was advised that he could no longer continue to act on behalf of the defendants due to the professional/ethical duties he owed to the court as an officer of this court. I would infer that it was for similar reasons that counsel instructed in the matter for the defendants returned his brief on the basis of the information drawn to his attention by Mr David. (As will become apparent in due course, the timing of Mr David seeking ethical advice followed shortly after an issue had been raised with him by the plaintiffs' legal representatives as to non-compliance by the defendants with an undertaking given by them to charge certain property in the first plaintiff's favour.) 4. It was in those circumstances that I gave leave for Mr David to withdraw as solicitor on the record for the defendants. 5. On 13 April 2017, I had also directed Mr David to notify the defendants of the orders that had been made on that day in relation to the first plaintiff's notice of motion and to advise the defendants that this Court would be hearing that notice of motion today at 10.00am, whether or not they were represented at that stage. There has been no appearance for the defendants today. The matter has twice been called outside court. I am satisfied that all reasonable steps have been taken to notify the defendants of the listing of the hearing of the first plaintiff's application today. (In Mr David's earlier correspondence to his client he strongly urged Mr Lau to obtain legal advice.) 6. The amended notice of motion, which was filed in Court this morning, was served at the email address for Mr David, who was then still on the record as solicitor for the defendants, and at the email address for Mr Lau which had been provided to the first plaintiff. 7. In those circumstances I am satisfied that it is appropriate to deal with the additional matters raised in the amended notice of notion raised today, notwithstanding that there is no appearance for any of the defendants. (I interpose to note that in these proceedings, there has been a history of non-attendance by the defendants on other occasions.) 8. The amendment made to the notice of motion is to seek to set aside some further orders that were made by Stevenson J in February 2017 in addition to O 1 of those orders. I will go through the detail of those orders in due course. Background 1. The background to the matter is that the plaintiffs brought proceedings by summons filed on 26 June 2014. The dispute relates to a joint venture agreement entered into by the first plaintiff with Mr Lau and a Mr Zhang. 2. In the proceedings, the first plaintiff sought a range of relief, including orders for the first defendant to be wound up pursuant to ss 232-234 of the Corporations Act 2001 (Cth), on the basis that the affairs of the company had been conducted in a manner oppressive to, unfairly prejudicial to and unfairly discriminatory against the first plaintiff as the member of the company. 3. In substance, Mr Chi claims that he is entitled to a one-third share of the profits of the joint venture. That is disputed by the defendants. But even on the defendants' case, insofar as that was articulated to Stevenson J last year, it is accepted by the defendants that a sum of $300,000 was owing to Mr Chi. 4. The nature of the joint development agreement is described in a judgment delivered in these proceedings by Lindsay J on 8 August 2016. 5. Lindsay J described the object of the joint venture agreement as being the re-development of land located in Queanbeyan, New South Wales, so as to construct multi-storey building housing in multi-residential lots and a small number of commercial lots for sale (at [3]). His Honour recorded, amongst other things, that there was a falling out between the joint venturers, such that the second and third defendants had sought to exclude the first plaintiff from participation in the joint venture and any profits attending it (at [9]). 6. The defendants did not appear before Lindsay J when the matter came before him in August 2016. His Honour described the circumstances in which he found that the defendants had taken what appeared to be a deliberate decision to withdraw from participation in the proceedings. 7. His Honour was satisfied, on the evidence, that the first defendant owed to the first plaintiff the sums for reimbursement for expenses and for a project management fee as claimed by the first plaintiff and was also satisfied that the affairs of the defendant had been deducted in a manner oppressive of the first plaintiff within the scope of s 232 of the Corporations Act. 8. His Honour proceeded (at [33]) to make certain declarations and orders, including a declaration as to the indebtedness of the first defendant to the first plaintiff in particular amounts and an order that the first defendant be wound up and that Mr Ezio Marco Senatore be appointed as liquidator of the first defendant. However, his Honour contemplated that there might be an application for those orders to be discharged or varied and granted liberty to any party, or to the liquidator, to apply for an order that those orders be discharged or varied by way of notice of motion returnable before his Honour on 11 August 2016 at 10.00am. 9. The defendants exercised that liberty by way of a motion seeking to vacate the orders made in their absence by his Honour and his Honour then stayed the orders that he had made, pending the hearing of that application. 10. The hearing of the notice of motion to vacate the orders entered by Lindsay J on 8 August 2016 was listed before Stevenson J. Mr Lau filed an affidavit affirmed by him on 10 August 2016, in support of the application for vacation of the orders. In advance of the hearing of that variation motion, submissions were filed in accordance with directions that had been made by the court. 11. The defendants' written submissions on the variation motion, which were dated 3 November 2016, included a submission that Mr Chi had not put on any evidence as to any remedial prejudice he would suffer if the orders were vacated. 12. Mr Chi's written submissions on the application, dated 15 November 2016, raised as an issue whether his Honour ought entertain the vacation motion in circumstances where it was asserted that Mr Lau and the other defendants were in contempt of orders that had been made on an interlocutory basis by Bergin CJ in Eq on 2 July 2014. 13. Those orders relevantly were: 2. By consent, until further order of the court, one third of the net proceeds payable to [Hanson Property] from the sale of any of the units at [the Queanbeyan property] (net proceeds being the gross proceeds of the sale, less any amounts payable by [Hanson Property] to [Hanson Property's] secured creditor(s), and costs associated with the sale including agent's fees, advertising and legal fees) up to a sum of $300,000 be deposited into an interest bearing account in the joint names of the solicitors for [Mr Chi] and the defendant [sic] with no withdrawal to be made from that account without an order from the court or by agreement of the parties. 3. On or before 21 July 2014 the Defendants' solicitors are to notify [Mr Chi's] solicitors of all units of the property (as defined in prayer 1 of the Amended Summons) which have been sold by exchange of contracts and the sale price of each of those units. 4. The Defendant's solicitors are to notify [Mr Chi's] solicitors when each of the sales of the units have been completed within seven days of that completion. 1. On 17 November 2016 at 8.16pm, on the eve of the hearing listed for the variation motion, the defendants filed a motion seeking to vary the 2 July 2014 orders, including a variation under which a property (lot 33) was to be charged in favour of Mr Chi in the sum of $300.000. 2. The defendants also served an affidavit of Mr Lau, sworn 17 November 2016 (a copy of which is Exhibit D on the present application and is read not as to the truth of the contents, but as to what was deposed by Mr Lau on that occasion) in support of that variation motion in which Mr Lau deposed that Hanson Property Developments was the registered proprietor of the unsold remaining units in the Queanbeyan property and those units were not able to be subject of a charge (by reference to the mortgages registered on the titles of those units). However, Mr Lau also deposed that Hanson Australasia Pty Ltd (the then proposed fourth defendant in the proceedings) was the registered proprietor of adjoining properties (lots 33 and 35) and lot 33 was able to be charged immediately in favour of the first plaintiff. 3. Mr Lau referred to an exchange of contracts in respect of lot 35 for the sum of $500,000, the sale being scheduled to settle on 24 November, 2016, and deposed that this would discharge most of the amount owing to National Australia Bank Ltd in respect of lots 33 and 35. 4. Mr Lau also deposed that the estimated valuation of lot 33, which had been listed for sale, was above $480,000. 5. The defendants' submissions filed in support of the variation motion included the statement (at [4]) that any charge over lot 33 would more than secure the amount of $300,000. 6. The matter came before Stevenson J on 18 November, 2016. On that occasion the defendants' legal representatives submitted to his Honour that the position of the defendants was that a charge over the property (lot 33), owned by Hanson Australasia, was adequate security for the first defendant. 7. The matter was part heard on 18 November 2016 and came back before his Honour on 12 December 2016. His Honour reserved judgment on that occasion, publishing reasons on 20 December, 2016 (Li v Hanson Property Development Pty Ltd [2016] NSWSC 1870). On that occasion his Honour made certain findings in respect of the allegation that the defendants were in breach of the 2 July 2014 orders made by Bergin CJ in Eq. His Honour noted that there was a debate as to whether there had been compliance with O 2 but that there was no dispute that the defendants did comply with O 3 and did not comply with O 4 (see [19] and [14]). His Honour concluded (at [61]-[62]), that there was a breach of the 2 July 2014 orders by reference to payments that had been made to Mr Zhang and to Hanson Australasia out of the proceeds of sale of units 8, 23, 29 and 40 of the Queanbeyan development. His Honour also concluded that, in any event, by reason of Hanson Property's failure to comply with O 4 of the 2 July 2014, it was in breach of the 2 July 2014 orders and was, thus, in contempt. 8. His Honour then referred to Mr Lau's evidence as to Mr Lau's stated misunderstanding of the effect of the 2 July 2014 orders and addressed the submission made on behalf of the first plaintiff that the defendants should not be heard on either their application to vary the 2 July 2014 order or to set aside the 8 August 2016 orders. His Honour referred to what was said in Chamberlain Group v Kids for Life [2015] NSWCA 241 at [17], and ultimately said the following (at [90] to [91]): In circumstances where an explanation (which I accept) has been offered for the breach, an apology offered to the Court and to Mr Chi, and a proposal made which, for all practical purposes will place Mr Chi in a position similar to that which he would have obtained had the 2 July 2014 orders been complied with, I am prepared to make orders to the effect of those sought in the defendant's notice of motion of 17 November 2016. That clears the way for me to hear the substance of the application before me, namely whether the orders made by Lindsay J on 8 August 2016 should be set aside. [my emphasis] 1. His Honour also accepted Mr Lau's explanation for not having attended the hearing on 8 August 2016, although expressing some reservations in that regard, and said that he proposed to make orders to the effect of those set out in [1], [2], [3], [5] and [7] of the defendants' notice of motion of 17 November 2016, and in accordance with [1] of the defendants' notice of motion of 10 August 2016. 2. The matter was then stood over to 2 February 2017 in order to give the parties an opportunity to confer and agree on the orders to be made to dispose of the motion before his Honour and to progress the matter to a final hearing. Orders were not made therefore until 2 February 2017. 1. Pursuant to UCPR r 36.16, the orders made by Lindsay J on 8 August 2016 be vacated. 2. Order 2 of the orders made by Bergin CJ in Eq on 2 July 2014 be varied so as to apply only to sales of units at 13-15 Morisset Street, Queanbeyan NSW completed after the date of this Order. 3. Hanson Australasia Pty Limited (ACN 124 538 110) be joined as a party to these proceedings as the fourth defendant. 4. Note the agreement between the parties that without admissions, until further order of the Court, or otherwise provided for in these orders, the property at 33 Eric De Salis Street, Macgregor ACT, being Section 122 Block 14 in DP10517, Volume 1862 Folio 75 (Lot 33), be charged in favour of the first plaintiff in the sum of $300,000, with a copy of these orders to be lodged on the folio of Lot 33 forthwith. 5. Upon the sale of Lot 33, the sum of $300,000 (or, if $300,000 is not available from the sale of Lot 33, the entirety of the proceeds from the sale of Lot 33 after discharge of the registered mortgagee, payment of sale and Conveyancing costs, and payment of any statutory or other charges associated with Lot 33) be paid into the joint account referred to in Order 2 of the Orders made on 2 July 2014. 6. Upon payment of the sum of $300,000 into the joint account referred to in Order 2 of the Orders made 2 July 2014, order 4 above be vacated and the proceedings be discontinued against Hanson Australasia Pty Ltd with no order as to costs. 1. Unbeknownst to his Honour, by the time the matter was heard on the resumption of the hearing of the vacation and variation of the motions (on 12 December 2016) and when the orders were made on 2 February 2017, the charge that had been proffered over lot 33 in effect to purge any contempt that was found to have occurred by reason of breach of the 2 July 2014 orders was not adequate or able to be provided as security. Lot 33 was the subject of a sale advice as early as 21 November 2016. I refer in that regard to the affidavit of Thomas Barrington-Smith affirmed 12 April 2017 at [7]. Mr Barrington-Smith, the solicitor with carriage of the matter for the first plaintiff, deposes to a conversation he had with a real estate agent on 11 April 2017, the real estate agent (Mr Farmer) informing him that the sale of lot 33 was first confirmed on 21 November 2016, when he prepared a sale advice and was asked to "put the deal together". Mr Farmer also confirmed to Mr Barrington-Smith that settlement of the sale occurred on 2 December 2016. 2. I have been taken to the relevant real property documents to establish that a transfer was registered on 3 February 2017 in relation to that property. 3. Therefore, at the time that the defendants were proffering a charge over lot 33 (that being taken by his Honour as a proposal which for all practical purposes would place Mr Chi in a position similar to that he would have been in had there been compliance with the 2 July 2014 orders and, amongst other things, which his Honour said cleared the way for him) and certainly by 2 February 2017, that was an offer incapable of fulfilment. There is also evidence from Mr Robens, at [8] of his affidavit, that no proceeds from the sale of lot 33 have been received or paid into the controlled moneys account as contemplated at the time the variation and vacation motions were heard and determined by Stevenson J. Submissions 1. It is on the basis of those matters that the first plaintiff now seeks various orders. Those orders fall into two categories. First, Mr Chi seeks to have O 1 made by Stevenson J on 2 February 2017 set aside. That was the order vacating the orders made by Lindsay J on 8 August 2016, pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). 2. The second set of orders that Mr Chi seeks to set aside are O 2 to 6 of the orders made by Stevenson J under which there was a variation of the interlocutory orders made earlier on 2 July 2014 by Bergin CJ in Eq. In effect, what the first plaintiff seeks is to reinstate the orders made by Lindsay J on the basis that the defendants' conduct means that their contempt has not been purged and they should not have the benefit of the orders obtained on the vacation motion that was heard by Stevenson J. 3. The jurisdictional basis on which that relief is sought is put first on the basis that the orders were made against good faith, invoking the jurisdiction under UCPR r 36.15; second, invoking the court's inherent jurisdiction to set aside the orders as they now tend to be a source of injustice and, third, on the basis that these are interlocutory orders and that there has been a material change in circumstances permitting the court to set them aside under r 36.16(3). 4. It is submitted that the defendants, by Stevenson J's judgment in December 2016, succeeded in having the orders made against them vacated, despite the fact that they had been found to have been in contempt of the interlocutory regime made on 2 July 2014, and that the basis on which Stevenson J permitted the defendants to proceed on that motion was that their contempt would be purged by a $300,000 charge over lot 33. 5. It is submitted that as at 18 December 2016, lot 33 was not only on the market, but also exchange of contracts had occurred on 2 December 2016 and that the defendants must have known of the imminence of the settlement of that sale. And, in any event, by the time the 2 February 2017 orders were made, lot 33 had already been sold. Therefore, it is said that the February 2017 orders imposed a meaningless charge over lot 33 and the defendants contempt has not been purged. It is submitted that had this had been disclosed to Stevenson J, the February 2017 orders would not have been made. Determination 1. I should note that it is not suggested that the legal representatives for the defendants were aware of the true facts at the time the matter came before Stevenson J or when the orders were made by Stevenson J in February, 2017. I would, however, accept the first plaintiff's submission that it can be inferred that the legal representatives unknowingly made false representations to the Court on 12 December 2016 and/or failed to make appropriate disclosure to the Court on 2 February 2017. 2. Having read his Honour's reasons, it is in my opinion impossible to conclude that the orders made on 2 February 2017, would have been made on those terms had his Honour been informed of the true position in relation to lot 33. 3. Reliance is placed by the first plaintiff on Xenos v National Australia Bank Ltd [2007] NSWSC 973, where Palmer J accepted that certain orders made in court had been procured against good faith within the meaning of UCPR r 36.15(1) and should be set aside. I am similarly persuaded that in the present case the orders that were made by Stevenson J on 2 February 2017, were procured against good faith and should be set aside. 4. I note that the proposed liquidator has signed a consent to act as liquidator of the first defendant. 5. I accept that there is no suggestion that this is a case of innocent inadvertence or mistake by the defendants. I also note that the defendants have had the opportunity to put the true position before this court on the present application and/or to have purged the contempt by making payment into the controlled moneys account of the sum of $300,000, and have not done so. 6. Accordingly, I make orders in accordance with the short minutes of order which I will initial and date. I note that O 3 (b) in the short minutes of order is not pressed. 7. The effect of vacating the orders of 9 February 2017 will be to vacate the hearing date for this matter, which was listed before me from 22 May to 26 May 2017. 8. I also note that the making of these orders is not intended to affect the interlocutory order made by me on 13 April 2017, on the usual understanding as to damages proffered by the first plaintiff through its counsel, that until further order of the court, the first defendant be restrained from any further sale of units in 13 to 15 Morrisett Street, Queanbeyan, New South Wales, without the written consent of the first plaintiff. So that there be no doubt about that matter, I here confirm that order. 9. I order that the defendants pay the plaintiff's costs of the proceedings on the ordinary basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 May 2017