Cong v Shen

Some Cong Family History

1. The deceased was born in 1959 and was 56 at the date of his death in July 2016. He and Ms Joyce separated. Their time of separation is contested. Ms Joyce says they remained a couple but living apart between 2006 and 2013. But Ms Shen says that she and the deceased were together as a couple from 2009. Ms Joyce and the deceased divorced in 2014.
2. At the time of his death, the deceased operated a business exporting animal hides from Australia through Jolly Trading Propriety Limited ("Jolly Trading"), a company which he was the sole shareholder and director. He had previously used other companies for this trade. The value of the deceased's shares in Jolly Trading at the time of his death is uncertain but it then conducted an active business.
3. The deceased had an apparently successful business and investment history. He was able to accumulate seven properties in the Sydney suburbs of Campsie and Burwood, mainly in his final years. The exact location of these properties is not of significance for the present application. It is sufficient for present purposes to have an understanding of the general profile of the deceased's assets at the time of his death.
4. Ms Shen migrated to Australia from the People's Republic of China. After her arrival in Australia and her marriage to the deceased, she and the deceased assisted her mother, Ms Wu, to also migrate to Australia. Another asset in the deceased's estate is a debt owing to it from Ms Wu for a bond of $10,000 that the deceased paid to the Department of Immigration and Ethnic Affairs to support her application for residency in this country.
5. Although the deceased's English was limited, he and Ms Joyce had a strong belief in good education. They sent their children to private schools and encouraged them to go to university. After completing secondary school, they all went on to attain tertiary level degrees. But in the meantime, they acquired debts to the Higher Education Contribution Scheme (HECS). None of the deceased's and Ms Joyce's surviving children have yet managed to acquire many assets in their own names.
6. The plaintiffs' pleadings also challenge Ms Shen's sale, or transfer, of various properties out of the deceased's estate, one of them to Ms Wu. A strategic consideration in the plaintiffs' pleaded case is to reclaim these propertiess for the benefit of the estate, or at least to seek an account from Ms Shen as to her dealings with them. Some analysis of that pleading is necessary, when the Court is considering the plaintiffs' amendment application.
7. The surviving children, Edmund and Teresa, both managed to maintain a fairly good relationship with their father; although, the evidence suggests that the relationship between the deceased and Ms Joyce was often tense, and at times abusive on his part. Life was difficult because the deceased was often overseas, which itself led to family tension. But the deceased's physical violence towards Ms Joyce ultimately forced their separation, not long after Ms Joyce took out an Apprehended Violence Order against the deceased. It was whilst the deceased was separated from Ms Joyce that he met Ms Shen, when she was in her mid-20s. Within a few years they had had their first child. Two other children followed in quick succession.
8. Evidence will be adduced from Teresa at trial that when her father first became sick he invited her to work in the Earlwood office of Jolly Trading one day a week. From that direct acquaintance with the business she says that the deceased's business operated with a substantial cash component to its transactions.
9. Teresa's affidavit evidence, if accepted, would support the conclusion that at her father's direction she couriered amounts of cash between $20,000 and $60,000 between Sydney and Melbourne, that she saw shipping invoices altered to disclose significantly lower amounts than the actual value of goods being shipped out of Australia. The inference is that as a result he was able to lead a more luxurious lifestyle and had more funds available for investment than the declared income and value of Jolly Trading would justify.
10. Her evidence, if accepted, is a basis to infer that cash taken from the Jolly Trading business was used to finance the acquisition of the several properties in Campsie and Burwood, with the assistance of loans from banks.
11. But it is clear already that Teresa's evidence about the cash component of the business and about the deceased's apparent evasion of his taxation obligations are matters that will be strongly contested by Ms Shen at a final hearing of the proceedings. But Teresa's evidence, if accepted, also would be a basis to infer that, by about 2015, Ms Shen was also involved in transferring cash in and out of Australia at the deceased's request.
12. Teresa's evidence, if accepted, would also allow the Court to infer that during much of 2015 and 2016, as the deceased's health began to decline, she drove him to many of his hospital, chemotherapy and radiotherapy appointments. She recalls conversations in which the deceased was exploring how he was planning to leave his estate after his death to provide for Ms Shen and all his children. He is said to have explained to Teresa that Ms Shen was happy with the arrangements that he was making.
13. Ms Joyce confirms much of Teresa's account. She explained the deceased and his family had been persecuted during the Cultural Revolution and came to Australia and that she and he had built up a multimillion dollar business from nothing and with no financial support. She describes an enduring relationship with the deceased but one bedevilled at times by violence, ultimately leading to a divorce and binding financial settlement under the Family Law Act 1975, executed in May 2006. But she says she and the deceased presented as a couple for a long time after that and indeed until 2013.
14. Ms Shen contradicts much of Ms Joyce's account about the period their respective relationships with the deceased overlapped. But much of what Ms Joyce says about the deceased's business will be important evidence in play at a final hearing. The capacity of Ms Shen to contradict it up to about 2010-2012 may be quite limited. Equally Ms Joyce may have difficulty in contradicting Ms Shen's account of the operations of the business after 2010-2012.
15. Ms Joyce says that much of the conflict between her and the deceased over their business affairs related to his insistence on, and her resistance to, the construction of company documentation for the trading companies that preceded Jolly Trading that would allow the deceased to understate the income of these companies, including by recording it as a repayment of overseas loans. Ms Joyce explains that the business engaged in double invoicing, creation of false backing lists, the use of fraudulent Australian quarantine stamps, with the deceased secretly bringing profits back into Australia in money bags strapped to his waist. In substance the business operated, according to Ms Joyce, with two sets of accounts and with much of the financial differences between those accounts being accounted for by dealings in cash. But Ms Shen tells a different story of the later conduct of the deceased's business when she was on the scene.
16. The evidence filed already contains detailed material concerning the acquisition of the seven properties. The full detail of their acquisition need not be recorded for present purposes. But they were acquired between February 2012 and April 2016, either in the name of Ms Shen or the deceased and Ms Shen. The deceased's will and the deed appear to assume that Ms Shen would deal with properties held in her name in ways that he would direct.
17. The total purchase price of the seven properties was some $14.6 million. A number of them have been sold. But at least two remain: one in Amy Street, Campsie which was transferred to Ms Wu in February 2017; and another in Woodside Avenue, Burwood, which was acquired by Ms Shen in April 2016, shortly before the deceased's death and in which she and her three children live. Various other properties have been sold and the proceeds of sale used to pay down mortgages over them. Some proceeds of sale are available.
18. Ms Shen contests the plaintiffs' case that the Campsie and Burwood properties were funded from cash derived from the business but not declared as income. She claims that at least some of the money was sent to her mother in China. She otherwise says that the properties given to her by her husband were gifts.
19. A clear picture of the acquisition of the seven Campsie and Burwood properties does not emerge from the evidence. It can be anticipated that there will be a lengthy contest at trial about the funding of the acquisition of these properties.
20. According to Teresa, the deceased advanced a number of different schemes for leaving his estate to his family after his death. But they essentially involved dividing his real estate investments between his two families. According to her, which properties he would leave to which family changed from time to time in Teresa and the deceased's discussions.
21. Shortly before his death, Teresa says the deceased discussed with her a will that he had made in May 2016 and a deed he had executed in June 2016. The deceased explained to her that the scheme essentially involved each of the three children of his first marriage receiving an annuity of $10,000 per annum for ten years, whilst the value of his Campsie properties increased, as rezoning opportunities expanded, and whilst his children matured. The structure of the two documents is essentially this, as will be seen below.

The 2 May 2016 Will and the 3 June 2016 Deed

1. The deceased and Ms Shen entered a deed between them on 3 June 2016. The legal effect of aspects of the deed is controversial. Parts of it are reproduced here.
2. The deed is declared to have been made between the deceased and Ms Shen. It recites the registered ownership of seven properties in Campsie and Burwood. It also recites the various members of the deceased's two families.
3. The deed recitals isolate the Campsie properties and declare that it is "Cong and Shen's intention to retain ownership of the Campsie properties until rezoning or until such time that the local authority determines the zoning of these properties". The deed said that at that stage the local authority was contemplating a rezoning "for high density living and as a consequence [the Campsie properties] will increase in value".
4. The deed attached the 2 May 2016 will and then recited that the "the purpose of this deed is to make provision for Teresa, Laurence and Edmund upon the death of Cong". The deceased is referred to as "Cong" in the deed.
5. The operative provisions are relatively short and are set out as follows: "Cong and Shen agree between each other and other and with Teresa, Laurence and Edmund as follows: (a) In the event of Cong's death Shen will retain ownership of the Campsie properties for no longer than ten (10) years for the purposes of the rezoning of the these properties; and (b) Upon rezoning of the Campsie properties or sale of any or all of the Campsie properties Shen agrees to pay to Teresa, Laurence and Edmund no sooner than 10 years after my death an amount in her absolute discretion to be divided equally between them an amount of no less than $6 million and not more than $9 million such amount to be determined by her as to the then market value of the Campsie properties; (c) In the event the Campsie properties are not rezoned for high density living within 10 years of the death of Cong, Shen agrees to pay $3 million to Teresa, Laurence and Edmund to be divided equally between them. (d) In the event of the sale of the said property at Amy Street, Campsie before my death I direct and agree that upon rezoning of the remaining Campsie property to pay Teresa, Laurence and Edmund an amount between $5 million and $8 Million such amount to be determined by Shen in her absolute discretion. (e) In the event of my death before the refund of the Bond that amount is to be paid to Shen".
6. The deed has various clauses covering confidentiality, an entire agreement clause and a dispute resolution clause. The entire agreement clause was as follows: "This deed is the entire agreement and understanding between the parties on everything connected with the subject matter of this deed, and supersedes any prior understanding, arrangement, representation or agreements between the parties as to the subject matter contained in the deed"
7. Clause 13 of the deed provided for counterparts as follows: "This deed may be executed in any number of counterparts each of which will be an original but such counterparts together will constitute one and the same instrument and the date of the deed will be the date on which it is executed by the last party."
8. Finally, the deed was signed, sealed and delivered by each of the deceased and Ms Shen as a deed. Although the operative part of the deed referred to agreement with Laurence, Teresa and Edmund. They did not execute the deed. Whether they could take the benefit of it is one of the issues for the final hearing of the proceedings.
9. The deceased's will dated 2 May 2016 appoints Ms Shen and Edmund as his executors and trustees. The general scheme of the will is declared in clause 7 as follows: "My will has been drafted to enable my family to benefit from the structure of my financial affairs. All long term holdings are held by Jolly Trading Pty Ltd with a view to providing a continuing income stream for the beneficiaries. The assets held by Jolly Trading Pty Ltd have been identified as the ones best sold for the purpose of discharge of all debts although these debts are readily serviced by income. I therefore encourage my executors and beneficiaries to take the appropriate legal financial and taxation advice relating to the administration of my estate-"
10. The operative provisions of the will are not lengthy and are set out in clause 9: "My executors and trustees hold my estate; (a) To sell, call in or convert into money any part of my estate and pay all or any debts, legacies, funeral and testamentary expenses and any death, estate or succession duties associated with my death or the administration of my estate; (b) I give all my right title and interest in the shares and business conducted by Jolly Trading Pty Ltd to my said wife Yanjiao Shen. (cx) I GIVE to Teresa Mae Yin Cong and Laurence Xavier Xiao Ming Cong and Edmund Bede Hao San Cong an annuity each, payable by equal monthly instalments from my death for a period of 10 years, which bears the same relation to $10,000.00 as the Consumer Price index All Groups, Weighted Average of Eight Capital Cities or the index which is substituted for it current at the date of my death bears to that index at the date of this Will, and my Trustees must vary the annuity on each anniversary of my death so that the annuity amounts to a sum which bears the same relation to $10.000.00 as the index current at the date of each anniversary bears to the index at the date of this Wiil. (c) I direct my trustee to retain the ownership of the properties at [address not published, Campsie NSW 2194] and [address not published, Campsie NSW 2194] for a period of no more than ten (19) years after the date of my death so as to maximise its value as a result of any rezoning of those properties and at the expiration of this period, (d) I acknowledge that my spouse will pay to Teresa Mae Yin Cong and Laurence Xavier Xiao Ming Cong and Edmund Bede Hao San Cong the agreed amount as contained in the Deed dated 2 May 2016 which is attached to this my Will. (e) The residuary beneficiaries of this my will are: (i) My said spouse Yanjiao Shen; and (ii) In the event that my said spouse does not survive me equally between those of my children namely Bruce Cong, David Cong and Leon Cong who survive me and attain the age twenty one (21) years provided always that should any of my children not survive me to take under this my will leaving children who survive me and attain twenty one (21) years then such children shall take by substitution and if more than one equally the share in my estate which their parent would otherwise have taken."
11. This structure of the will and the deed and the lack of assets of the surviving children, Edmund and Teresa, are the basis for their pleaded claims under Succession Act 2006, Chapter 3 for further provision out of the deceased's estate.
12. Not surprisingly the various conflicts recorded in these reasons have led to competing claims for administration of the deceased's estate. In the existing Statement of Claim, Edmund seeks administration of the estate. In the Cross-Claim, Ms Shen also seeks a grant of administration. These contests are maintained in the proposed Amended Statement of Claim. But in the meantime, on 24 August 2017, Hallen J made orders under UCPR, r 7.10(2)(b) that Ms Shen be appointed to represent the deceased's estate and notional estate for the purposes of the proceedings.

(1) Should an Amendment to the Statement of Claim be Allowed?

1. The plaintiffs seek leave in their motion filed on 18 April 2019 to file an Amended Statement of Claim. The new pleading, the Amended Statement of Claim, which the Court will mark as Exhibit "C", contains a much expanded range of relief against Ms Shen and Ms Wu. It is not necessary to set out here the full pleaded relief other than in the most general terms. The defendants took issue with certain parts of the amendments. It is only necessary in these reasons to deal with the parts of the amendments that were in issue.
2. The proposed Amended Statement of Claim may be briefly summarised. It pleads that the June 2016 deed contains implied terms that Ms Shen would hold the proceeds of sale of the Campsie properties on trust to make the payments due under the deed and that she accepted the terms of the deed in the will, which incorporated the will by reference. The Amended Statement of Claim pleads that Jolly Trading adopted irregular business and taxation practices and that its financial statements did not disclose its true financial position. It pleads that on the true construction of the will and the deed Ms Shen was obliged to retain ownership of the Campsie properties for no longer than 10 years but by accepting the properties she elected to deal with them only in conformity with the terms of the deed. Instead it pleads she breached the implied terms by selling a number of the properties and not retaining the proceeds of sale on trust for the plaintiffs. A risk of further disposals of this kind is pleaded.
3. The plaintiffs' claim standing to sue on the deed on the basis that it operates as a deed poll that is binding on Ms Shen for the plaintiffs' benefit. The plaintiffs allege they are therefore entitled to enforce the deed directly. A restitutionary claim is also made on the basis that the will and the deed were executed concurrently and that Ms Shen accepted that they would operate in combination to benefit not only Ms Shen but the plaintiffs, and that Ms Shen would now be unjustly enriched were she to deny the plaintiffs the benefits intended by the deed.
4. Ms Shen's sale of the Amy Street property is also claimed to amount to a breach of trust on which it was said to be held for the plaintiffs. The same facts are said to found relief, on the basis that Ms Shen undertook to the deceased that she would act as trustee of a half secret trust; the terms and objects of which were not disclosed in the will but were disclosed in the deed.
5. Substantially the same facts are said to found relief restraining Ms Shen from engaging in conduct that would be a fraud upon the power conferred on her to deal with the properties for limited purposes. The plaintiffs' claim to be creditors of the deceased's estate. The plaintiffs allege that Ms Shen's conduct was also in fraud of creditors within Conveyancing Act 1919, s 37A.
6. The Amended Statement of Claim pleads that the deceased provided part of the purchase price of the properties, such that Ms Shen now holds her interest in them on resulting trust for his estate in a proportion that represents the deceased's contribution to the costs of their acquisition.
7. The Amended Statement of Claim also alleges diversion of assets from Jolly Trading to two other companies Ms Shen has set up: Cong Australia Pty Ltd and Ugg Australia Pty Limited. Some of the property transfers pleaded took place after the death of the deceased and are said to have been made without proper authorisation from the estate. Ancillary claims are made for Ms Shen to account to the estate for her alleged intermeddling in the estate.
8. Finally, Edmund and Teresa seek relief under Succession Act, Chapter 3 for further provision out of the estate and the notional estate of the deceased. The pleading claims that the notional estate of the deceased includes many of the properties in question, monies received by Ms Shen from the deceased's life insurance policy in the amount of $1.2 million and assets transferred out of Jolly Trading in the alleged sum of not less than $689,000.
9. These reasons now turn to consider the objections to the pleadings.

The Criticisms of the Pleading

1. The defendants took issue with the timing of the amendments now being sought. A party seeking to amend pleadings may be required to give an explanation for any delay associated with the application to amend: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; [2009] HCA 27. But the need for such an explanation will vary with the circumstances. This matter has not yet been set down for hearing. A hearing date may be some time off, as the case looks likely to take far more than a week. Ms Marion Thorburn, the solicitor for the plaintiffs, has adequately explained that the amendments have been occasioned by a change of counsel in August 2018 and the engagement of senior counsel in October 2018, followed by the drafting of new pleadings. This was in turn followed by requests for consent to their filing, which were declined. Then the present motion was filed, in April 2019. In my view, this does not constitute any disqualifying delay against the plaintiffs. Moreover, the expansion of the pleadings adds clarity to the case and would appear to only add marginally to the evidence already filed.
2. The defendants take issue with a number of specific allegations in the proposed Amended Statement of Claim, contending that they cannot succeed and that an amendment should not be allowed. Mr Smallbone deployed careful argument in response to the amendments showing what he says were their potential weaknesses. But in my view, whatever their weaknesses might be, they are not such that the Court should decline to allow them even to be argued and all the amendments will be allowed. The issues are the following.
3. Embarrassing Pleading. Mr Smallbone argues that much of the proposed Amended Statement of Claim is embarrassing, as not providing sufficient particulars and general clarity that pleads clear causes of action and claims for relief.
4. This argument is not persuasive. The Amended Statement of Claim is a well organised document of some 30 pages on which each species of equitable relief is clearly and separately pleaded to raise issues that the defendants can either admit or contest. It is not a document that leaves the defendants in the dark about the case being made against them. There is no ground, in my view, for further particulars to be ordered at this time in respect of any matter, particularly as extensive affidavit evidence has already been served by the plaintiffs of matters within their knowledge. Moreover, as these reasons show below more material within the defendants' knowledge is yet to be revealed. Analysis of that material and its service in evidence on the defendant should avoid the need for any further particulars.
5. Relief Claimed on Behalf of the Estate. Mr Smallbone next contends that the parts of the pleading that seek to bring action on behalf of the deceased's estate have to pass a more onerous test than merely showing that they are arguable, and that they fail at more onerous test. Mr Smallbone argues that the test for allowing the amendment here is more demanding than being able to resist a motion for summary judgment on the new causes of action, being more or less the test propounded in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1965] ALR 636; [1964] HCA 69. Mr Smallbone argues that the test here is one in which the plaintiffs must also establish that it is in the best interests of the estate to bring the action on its behalf.
6. The plaintiffs' claim that the various properties are held on resulting trust for the estate and the plaintiffs' claim for specific performance of the deed are both claims made on behalf of the estate. Mr Smallbone says that the plaintiffs have not demonstrated that either of these claims is in the best interest of the estate and that as a result the amendments should not be allowed.
7. If it is necessary to establish that the bringing of these claims are in the best interests of the estate, and the Court does not have to decide that legal question, the bringing of these claims is in the best interests of the estate. The available evidence suggests the estate may well be insolvent and bringing claims on behalf of the estate to recover property claimed as a resulting trust for the estate or by way of damages for breach of the deed is in the interest of maintaining the solvency of the estate. This argument is not persuasive.
8. Third-Party Action on the Deed. Mr Smallbone argues that the deed cannot be a deed poll which can be accepted and relied upon by the plaintiffs. He submits it does not qualify as a deed poll and the plaintiffs cannot sue upon it. In the alternative, he argues that the principles that might allow third parties to take advantage of promises in contracts to which they are not a party, such as Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; (1988) 80 ALR 574; [1988] HCA 44, are not applicable here.
9. This is a matter for trial. Whether or not the deed qualifies as a deed poll and whether or not the plaintiffs are entitled to sue on it cannot be determined as a pleading issue. It is not a basis for refusing leave to amend the Statement of Claim.
10. Implied Trust from the Terms of the Deed. Mr Smallbone next submits that the plea that the deed is the foundation of an implied trust, as pleaded, is not available. Mr Smallbone does not take issue that a Mackay v Dick (1881) 6 App Cas 251 ("Mackay v Dick") implied term may arguably arise from the terms of the deed but that there is no basis for suggesting that an implied trust arises out of clause 5 of the deed as is pleaded, as that would be contrary to the entire agreement clause of the deed.
11. This argument too is also a matter for trial. It is quite inapt to be determined on an application to amend pleadings.
12. No Breach of a Mackay v Dick Term. Mr Smallbone's next argument is that even if one accepts that a Mackay v Dick term is to be implied into this agreement, that such a term only has generalised content and that it is not possible to say that a sale of some of the deceased's properties would automatically be a breach of such an implied term. He submits that for breach to be established one would need to go further and allege that the sale was an improper sale, designed to defeat the terms of the scheme of the deed and that such impropriety in the sale is not pleaded.
13. Like the earlier arguments, this is not appropriate to be determined on an application to amend pleadings. The arguments in relation to the issue can be developed at trial.
14. Weakness in the Resulting Trust Case. Mr Smallbone next argues that the resulting trust case cannot succeed and will have always be defeated by the presumption of advancement. Mr Smallbone says that all the properties other than two were acquired after the deceased's marriage to Ms Shen so the presumption of advancement applies. He says that the proposed Amended Statement of Claim merely pleads that the deceased contributed to the purchase money. But he complains that there are no facts pleaded to rebut the presumption of advancement and therefore there is no arguable case.
15. The short answer to this argument is that facts pleaded to rebut the presumption of advancement need only be pleaded in a reply to a defence, not in an Amended Statement of Claim. The fact that they are not in the Statement of Claim does not indicate there is no arguable case.
16. A further criticism of the resulting trust case is that the pleading alleges that the properties are all held in proportion to the extent that the deceased made contributions to them but the pleader does not indicate what those proportions are alleged to be.
17. It can be expected that once the defendants supply more financial material to the plaintiffs that this criticism will dissolve.
18. All of the defendants' other criticisms of the pleading fall into much the same categories as these ones and are no basis to refuse leave for it to be filed.

(2) Should a Representative be Appointed for Laurence Cong's Estate?

1. Laurence's mother, Anastasia Joyce, presently has a grant of administration of his estate. She has been representing the estate up until now. She had apparently been doing so under the impression that her liability to costs in this representative capacity in these proceedings may be limited. But she now believes she may have some personal costs liability arising out of the Court's broad costs jurisdiction in proceedings such as these. She has now decided to revoke the letters of administration granted to her and no longer to seek to represent Laurence's estate in these proceedings.
2. The other plaintiffs, Edmund and Teresa, have given notice that they intend to apply for a grant of letters of administration of Laurence's estate. Once they obtain letters of administration they will seek to represent Laurence's estate in the proceedings. In the meantime, they seek appointment under Uniform Civil Procedure Rules 2005, r 7.10(2)(b) ("UCPR") to represent Laurence's estate for the purposes of the proceedings. Alternatively, they seek orders for the proceedings to continue in the absence of a representative of Laurence's estate.
3. The defendants oppose this course. They deployed several contentions to support the conclusion that Ms Joyce cannot now be released from acting on behalf of Laurence's estate in the proceedings and that she should continue to represent Laurence's estate and that Edmund and Teresa should not be appointed in her place. The position taken by the defendants seems to be driven in part by their perception that Edmund and Teresa, who are relatively young and do not have many assets, whereas Anastasia may have more assets at risk as to costs if she is unsuccessful in the proceedings.
4. The defendants' arguments are not persuasive. First, there are no impediments to making such an order. Laurence's estate stands in exactly the same interest in the proceedings as do the other two plaintiffs, Edmund and Teresa. Everything that could be said on behalf of Laurence's estate can be said by the other plaintiffs, who have a strong incentive to advocate it in their own interests as well. There is no conflict of interest in the conduct of these proceedings between Laurence's estate and the other plaintiffs. They all stand to gain by maximising recovery from the defendants.
5. Second, the defendants contend that Edmund and Teresa have insufficient interest in Laurence's estate to warrant them being appointed to represent it. Laurence died intestate and his mother is the person entitled to the whole of his estate, before his siblings. For that reason, the defendants argue she rather than Edmund or Teresa has the financial interest in representing the estate to its best advantage in the proceedings.
6. But the plaintiffs have countered this contention by Ms Joyce assigning the benefit of this litigation to Edmund and Teresa. But quite apart from that assignment, Edmund and Teresa already have a strong incentive to press for the success of an interest in the proceedings which is identical to theirs.
7. A possible alternative approach to these orders was dealt with in submissions. UCPR, r 7.10 (2)(a) allows the Court to order that the proceedings continue in the absence of a representative of the deceased person's estate. Orders to that effect have been made in other cases, especially where another party to the proceedings has the same interests as the estate: see for example Vukic v Grbin [2006] NSWSC 41.
8. But disadvantages exist in making a r 7.10 (2)(a) order to proceed in the absence of a representative of Laurence's estate. Where it is likely at the end of the proceedings that some judgment or order will be made for or against the estate, before the final orders are made or the judgment entered, a named person will still have to be identified in a representative capacity to be the subject of the in personam order or judgment: Ivanovski v Perdacher [2009] NSWSC 913 (at [49]).
9. This alternative course offers little utility in this case. At the end of these proceedings, Laurence's estate will either gain an order in its favour, or will suffer a costs order against it. If a representative of the estate is not appointed now, an appointment may well need to be made later. Unlike most cases in which a r 7.10 (2)(a) order is made, no one is volunteering to represent the interests of the otherwise unrepresented estate.
10. A representative order in respect of Laurence's estate in these proceedings will be made in favour of Edmund and Teresa. Any orders that presently govern his estate may have to be consequentially varied. The parties should look at this.

(3) Should a Representative be Appointed for the Deceased's Estate?

1. An Independent Representative. The plaintiffs sought interlocutory relief that an independent solicitor with no connection to the parties in these proceedings, Ms Tamara Goodwin, be appointed to represent the interests of the deceased's estate in the litigation. The purpose of her appointment is said to be to maintain the interests of the estate in recovering the deceased's real estate and other property that the plaintiffs allege is in the hands of Ms Shen and Ms Wu. They argued that one of the presently named executors, Ms Shen, is in a position of conflict of interest and duty in relation to such an action.
2. Ms Shen was appointed in August 2017 to represent the estate. But as the issues have unfolded since then she is now obviously in a position of conflict of interest and duty on the question of whether or not the deceased's estate should bring recovery action against her and her mother.
3. Ms Goodwin has consented to her possible appointment, should the Court be minded to make it. But Mr Smallbone argued on behalf of the defendants that Ms Goodwin should not be appointed to represent the estate in this litigation.
4. Edmund and Ms Shen are the named executors in the May 2016 will. Neither of them has as yet taken out probate the entitlement to which, will be in contest at the hearing of the proceedings. The plaintiffs seek by way of final relief that Edmund have a grant of administration of the deceased's estate, passing over Ms Shen as an executor of the estate, on account of her misconduct, as alleged in the Amended Statement of Claim. The present application may be perceived by Ms Shen as being an early grant of that final relief. But the prayer for relief on the motion only seeks the appointment of Ms Goodwin, (not Edmund) as administrator of the deceased's estate, on an interim basis until the conclusion of the proceedings and for the purpose of these proceedings. The order for her appointment will reflect that limitation.
5. Mr Condon SC's submissions were ultimately the more persuasive on this issue. First, this is just the kind of situation in which the beneficiary of an estate or trust is permitted to bring proceedings in the name of the estate or trust, or joining the estate or trust as a defendant. Beneficiaries, or indeed one of several beneficiaries, may institute proceedings to compel the performance of the trustee's duty to protect their beneficial interest in the trust property: Elliot v Secretary, Department of Education, Employment and Workplace Relations (2008) 103 ALD 318; (2008) 249 ALR 182; [2008] FCA 1293 (at [39]). Short of a beneficiary seeking to remove the trustee for failure to take steps to recover trust property, a beneficiary may institute proceedings against the third-party either in the beneficiary's own name or in the name of the trustee. Where relief is sought in the equitable jurisdiction of the Court against a third party a beneficiary may sue in his own name, joining as defendants the trustee and any other beneficiaries but only where there are "special circumstances": Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109; (2004) 204 ALR 417; [2004] HCA 7 ("Alexander") (at [55]).
6. The requirement for "special circumstances" to be established is not limited to situations of active collusion between the trustee and a third party, or of the insolvency of the trustee: Ramage v Waclaw (1998)12 NSWLR 84, at 91 - 93 ("Ramage"). Although such situations will readily qualify as "special circumstances".
7. A broader reason exists for the special circumstances requirement. The restriction is in part to avoid the vexation of the third-party by multiple suits brought by the beneficiaries and the trustee: Sharpe v San Paulo Railway Company (1873) LR 8 Ch App 597, at 609-610. The primary way that the interests of beneficiaries are protected is by the trustee bringing action on their behalf against the third party, who may be diminishing trust property. Provided the trustee is "ready and willing to take the proper proceedings against the third person" the beneficiaries cannot do so: Alexander (at [55]) and Scott on Trusts (4th ed, 1989, Vol 4). Special circumstances will readily be established when the trustee refuses to bring proceedings against the third party.
8. Special circumstances exist here. Mr Smallbone's submissions do not at any point contend that Ms Shen is willing to commence proceedings against her mother, or against herself, to recover the property they hold and that is said to belong to the estate. Ms Shen has in substance, by her conduct, declined to bring such proceedings and so special circumstances are established. Even if she were prepared to do so, it would be inappropriate for her to appear as a party on both sides of the record in this fully contested case. The position of conflict between her interest and her duty are sufficient to establish special circumstances here, permitting the Court to appoint Ms Goodwin to represent the deceased's estate.
9. For these reasons, the Court will appoint Ms Goodwin to represent the estate of the deceased under UCPR, r 7.10, because no other person presently represents the estate in the proceedings and the estate has an interest in the proceedings. Before the end of the proceedings it is not clear that there will be any other significant estate administration unrelated to the proceedings to take place. But if there is Ms Goodwin, Ms Shen or Edmund can approach the Court for appropriate relief to supplement her functions. Any ambiguity in Ms Goodwin's functions that cannot be resolved by agreement can perhaps be the subject of an application for judicial advice under Trustee Act, s 63.
10. An Indemnity? Mr Smallbone further argued that if Ms Goodwin were to be so appointed, as the Court has found she should be, that as a condition of her appointment, the plaintiffs must undertake to indemnify her, for acting to represent the deceased's estate, against any costs liabilities that the estate may incur in the litigation, including any costs orders that might be made against the estate. Using the analogy of the grant of leave to persons to bring derivative actions on behalf of corporations against third parties under Corporations Act (Cth) 2001, Mr Smallbone argued that such leave is normally only granted upon the prospective plaintiff agreeing to indemnify the company in respect of the costs of the litigation and in respect of any liabilities arising out of the litigation, including, for example, adverse costs orders that might be made against the company.
11. Mr Condon argued that an undertaking to indemnify an estate, or trust, was not a precondition for a beneficiary to be able to bring proceedings in the name of the trustee against a third party.
12. Authority does not compel the conclusion that persons in the position of the plaintiffs, requesting the appointment of a neutral representative of the estate, must always undertake to indemnify the estate as a condition of bringing an action in the estate's name, although that is not an uncommon outcome. Cases such as Ramage, that describe the special circumstances in which a beneficiary may join a trustee as a defendant and proceed on behalf of the trust against a third party, do not state that the beneficiary must always indemnify the trustee against the costs of the litigation. Nor is it expressed as a requirement in the principal academic texts: see in J.D. Heydon and M.J. Leeming, Jacobs' Law of Trusts in Australia (8th Ed, 2016, LexisNexis Butterworths Australia), at [23-03].
13. Moreover, the structure of such proceedings and the rights of trustees means that an upfront offer of an indemnity to the trust or estate may not always be necessary. But because of the circumstances of this case in my view the first and second plaintiffs should give an indemnity, although as will be seen Ms Goodwin's involvement in the litigation and her consequent risk as to costs may be quite minimal. The estates risk of a costs liability may be able to be closely contained.
14. Ms Goodwin has a right of indemnity at general law out of estate assets: Trustee Act, s 51(4). But the deceased's estate may be insolvent. Its financial position is at best uncertain. Moreover, a trustee has a right of personal indemnity against a beneficiary who is sui juris and absolutely entitled: Hardoon v Belilios [1901] AC 118; (1900) 70 LJPC 9. A right of indemnity exists against multiple beneficiaries: Balkin v Peck (1998) 43 NSWLR 706; (1998) 98 ATC 4842. But where some of the beneficiaries are not sui juris (as is the case here because of the young age of Ms Shen's children) and have not requested Ms Goodwin's appointment (as is also the case here) the position is more complicated. Non-sui juris beneficiaries who do not request Ms Goodwin's appointment may not be liable to indemnify her: Balkin v Peck (1998) 43 NSWLR 706; (1998) 98 ATC 4842.
15. It would be a sound exercise of discretion in this case to appoint Ms Goodwin on terms which avoid future near-term disputation about meeting any liabilities she may incur. The Court is not inclined to appoint Ms Goodwin without her receiving some clear assurance of an indemnity from the first and second plaintiffs in respect of her acting in the interests of the estate. If at the conclusion of these proceedings, for example, there are insufficient funds in the estate to pay Ms Goodwin's fees as a result of a Court appointment, she should not be left with any financial risk.
16. But this appointment will be, as these reasons now express, without prejudice to the first and second plaintiffs' rights in the later administration of the deceased's estate, to seek recoupment from other beneficiaries of the estate. As a condition of appointing Ms Goodwin, the first and second plaintiffs will be required to give an undertaking to indemnify her.
17. But all this being said, it is difficult to see what separate costs the estate will actually incur in this litigation. After all, the estate can be expected to take a passive role in the proceedings. It is only to be joined as a defendant, so it will be bound by the result of the litigation, and so the existing defendants will not be vexed by action twice. Ms Goodwin should have very little to do. Indeed after her appointment she might well conclude that the best course for her to take, in the interests of the estate, is to file a submitting appearance. This will avoid the estate incurring any liabilities in the litigation and will minimise the cost to the estate from her involvement.
18. Finally, the Amended Statement of Claim, as presently drafted, does not join Ms Goodwin as a representative of the deceased's estate. That will need to be attended to in light of these reasons. The liberty to amend the plaintiffs' pleadings in the form of the Amended Statement of Claim will be framed so that the liberty granted will be to file a document "substantially" in accordance with Exhibit "C", in order to accommodate minor variations to the final form of filed document, such as is maintained here.

(4) What Orders for the Production of and Access to Requested Documents should be Made in Respect of Both Parties?

1. The parties are also at issue about whether various subpoenas and notices to produce should be set aside, and whether access should be granted to documents that have been brought into Court on subpoena.
2. The plaintiffs issued three broad groups of subpoenas, production upon which is now in contest. 1. The first group of subpoenas was issued on 1 June 2018 to a number of banks. This group of subpoenas sought bank statements and other documents relating to financial transactions involving Ms Shen, Ms Wu and Jolly Trading; 2. The second group of subpoenas was issued on 5 June 2018 also to a number of banks. This group of subpoenas sought bank statements and other documents relating to Ugg Australia International Pty Ltd; and 3. The third subpoena group was a single subpoena issued on 3 December 2018 to Freight Solutions (Vic) Pty Ltd. This subpoena sought bills of lading, invoices and quarantine documents relating to Jolly Trading, Cong Australia and Ugg Australia International Pty Ltd.
3. The defendants submit that these subpoenas are being used as a substitute for discovery, as they are being directed at records of either Ms Shen, or the deceased, whose estate is already represented in the proceedings by Ms Shen. The defendants also submit the subpoenas also are a plain fishing expedition.
4. Subject to some formal changes being made to them, the first group of subpoenas should not be set aside. The plaintiffs contend persuasively that this first group of subpoenas are relevant to a number of issues for trial.
5. The Court accepts that the documents sought in this first group may show the source of the funds used to purchase the Campsie and Burwood properties in the name of Ms Shen. In my view, the documents are potentially relevant to the plaintiffs' claim that those properties are held on a resulting trust for the benefit of the deceased's estate. The material subpoenaed may also potentially establish that some of those properties are part of the deceased's notional estate in relation to the plaintiffs' Succession Act 2006, Chapter 3 claim.
6. The documents under subpoena are also relevant, in my view, to challenging Ms Shen's defence that she used her own funds to purchase these properties. The bank statements for Jolly Trading are a likely resource for showing that Jolly Trading is the source of funds used to purchase these properties. This is the plaintiffs' case, and the documents under subpoena may be apt to advance that case. The subpoenas may also, in my view, provide material that might help prove that funds were supplied for the purchases through Jolly Trading, and are not likely therefore to attract the presumption of advancement as is pleaded in Ms Shen's defence.
7. The bank statements of Jolly Trading may also be useful to test Ms Shen's case that Jolly Trading had negative net value and was de-registered as a result. This contrasts with the plaintiffs' case that it had substantial value that was being depleted by Ms Shen.
8. In my view, the time over which this first group of financial documents are being sought, from 2009, is reasonable. That was when the de facto relationship between the deceased and Ms Shen allegedly commenced, according to her own case.
9. The plaintiffs have acknowledged that the subpoenas, as drafted, are too broad in part. They accept the subpoenas should be read down to include only the documents referred to in category (a) of each of the subpoenas, bank statements, as well as any statements of assets and liabilities, which are referred to in category (b). The newly proposed amended subpoenas can be issued and served by agreement after the parties have prepared short minutes of order authorising such changes.
10. The second group of subpoenas, in my view, can also be enforced and should be complied with. There is a legitimate forensic purpose for this group of subpoenas. This group of subpoenas seeks a range of documents designed to show that Ms Shen caused the assets of Jolly Trading to be transferred to Ugg Australia, a company she controlled, that was registered on 10 August 2016.
11. Documents produced under this group of subpoenas may advance the plaintiffs' claim that the assets of Jolly Trading were depleted by Ms Shen's conduct.
12. These subpoenas should be limited in time to dates after August 2016. And this group of subpoenas should also be read down in the same manner as the first group.
13. The third subpoena group is a single subpoena addressed to Freight Solutions (Vic) Pty Ltd. In my view, this subpoena has a legitimate forensic purpose. It seeks documents to advance a case that Ms Shen caused the assets of Jolly Trading to be transferred to Ugg Australia and Cong Australia. The bills of lading, packing lists and invoices sought under this subpoena are designed to establish that Ugg Australia and Cong Australia are now dealing with Jolly Trading's former clients. And it is noted that the plaintiffs do not press the subpoena in so far as it seeks documents in relation to Eastern Australian Sheep Products Pty Ltd.
14. The defendants further submit that even if the subpoenas are not set aside, inspection should not be permitted. They submit that there is a substantial risk of the plaintiffs tailoring their evidence, in circumstances where by their July 2018 affidavits they seek to implicate themselves in serious dishonesty, and where indications exist that those affidavits were tailored to meet the defendants' evidence.
15. The type of orders the defendants seek are well within the Court's power to make in appropriate cases. Documents produced under subpoena are in the control of the Court and that the Court may defer inspection by one party: National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372, at 383B. And procedural directions may be adopted in the interests of justice to deprive one side of material until trial, where there is a risk that evidence may be tailored: Halpin v. Lumley General Insurance Ltd [2009] NSWCA 372; (2009) 78 NSWLR 265; (2009) 261 ALR 741; [2009] NSWCA 372.
16. But these arguments are not persuasive. The plaintiffs have already committed themselves to a very detailed account of events, so far as it is within their knowledge. Most of what they are missing now is information they can only get from the defendants. That is what their subpoenas are seeking now to do. The opportunity for the plaintiffs to tailor their case is extremely limited from this point on. Moreover, the Court does not accept the contention that the plaintiffs have been tailoring their case based upon evidence and other material from the defendants. The high degree of detail which is volunteered in the plaintiffs' case is not consistent with this contention. This is not a case where deferring inspection of documents by the plaintiffs is warranted and the Court will not make such an order.
17. The plaintiffs have also issued a notice to produce, which seek various documents of Ms Shen and Ms Wu. This notice supersedes an earlier notice to produce of the plaintiffs issued on 3 November 2017.
18. In my view, the documents sought under this notice to produce are generally relevant to the plaintiffs' resulting trust claim and other claims pleaded in the proposed Amended Statement of Claim. Some of the documents sought would, for example, enable Ms Shen's overall financial position to be assessed. Her financial position at the time of acquisition of these properties is relevant to determining where the funds may have come from for their purchase. Negativing that Ms Shen was the source of funds used to purchase properties in her name is one way for the plaintiffs to advance their resulting trust case.
19. The defendants contend that the plaintiffs' notice to produce is really a list of discovery categories. In short, the defendants submit: the plaintiffs want discovery before completion of evidence contrary to Practice Note SC Eq 11; discovery is too early, as it is occurring before the plaintiffs comply with the defendants' request for particulars; discovery requested is to support a charge of tax evasion implicating Ms Shen; the discovery sought trawls through every possible bank statement or other financial record of Ms Shen, the deceased, or of Jolly Trading to see if "something will turn up" to help the plaintiffs; and it ignores the limitations of UCPR, Pt. 21 discovery which is confined to documents that are material to a fact in issue.
20. The time has now come in this case for discovery by the defendants. It is not too early for that to happen. To the extent that the notice to produce may represent categories of documents for discovery, it can be treated as an order for discovery which the Court will make. Because the plaintiffs have filed substantial quantities of evidence within their knowledge, this is one of those circumstances in which orders will be made for discovery, notwithstanding Practice Notice, SC Eq 11.
21. Moreover, the detail of the pleaded case now advanced by the plaintiffs in their Amended Statement of Claim strongly neutralises the suggestion that the notice to produce is just an exercise in "trawling" for a possible case to see if something will turn up. A circumstantial case has already been made on the available evidence that Ms Shen probably did not have the financial resources herself to purchase these properties. The discovery in large degree is to further that inference. The discovery sought is not primarily to support a charge of tax evasion but to advance a theory about a mechanism by which the estate's cash was used to acquire the properties, a theory which is already partly supported by the plaintiffs' existing oral evidence.

Conclusion and Orders

1. The plaintiffs will have to pay the costs thrown away by their amendment of the Statement of Claim but they have acknowledged this. They have otherwise been substantially, but not entirely, successful on these motions. The defendants have had some success as well. The parties should attempt to agree upon an appropriate costs outcome in light of the Court's reasons. If the parties cannot agree, the Court will direct that they lodge submissions of no more than two pages with the Court. The Court will then determine the matter in chambers.
2. From several motions the parties have isolated for decision the issues that have been determined by these reasons. These motions are the defendants' motion filed on 19 June 2018, the plaintiffs' motion filed on 26 July 2018, the defendants' motion filed on 14 December 2018 and the plaintiffs' motion filed on 18 April 2019. A number of consequential orders will need to be made to dispose of these motions in light of these reasons. The parties should be in a position by co-operation and agreement to draft those orders and submit them to the Court in the form of short minutes of order that can be made in chambers. Directions to that effect are made below.
3. For these reasons the Court makes the following orders and directions: 1. Grant leave to the plaintiffs to file in Court by 4.00pm on 4 December 2019 an Amended Statement of Claim, which is substantially in the form of Exhibit C on this application. 2. Order the plaintiffs pay the defendants' costs thrown away by the filing of the Amended Statement of Claim. 3. Rescind Order 1 of the orders made on 24 August 2017. 4. Order pursuant to Uniform Civil Procedure Rules 2005 ("UCPR"), r 7.10 that until the conclusion of these proceedings and only for the purposes of these proceedings, Tamara Goodwin be appointed to represent the estate of the late Zi Li Cong, who died on 28 July 2016, but such appointment will only take effect seven days after the plaintiffs undertake to the Court to indemnify Ms Goodman in respect of her liabilities for acting in that capacity, noting that such undertaking will be without prejudice to their rights to seek contribution from other beneficiaries of the estate. 5. Order pursuant to UCPR, r 7.10 that the first and second plaintiffs be appointed, for the purposes of these proceedings, as representatives of the estate of the third plaintiff, the late Laurence Cong, who died on 15 July 2018. 6. The Court notes that as a result of Order (1) of its orders made on 27 September 2019 in this matter that the existing freezing orders will continuing for 5 business days from today and will unless extended further expire on Friday, 6 December 2019. 7. The parties are directed by 4 December 2019 to bring in short minutes of order disposing of their various motions in accordance with these reasons, including and providing any necessary detail in relation to the subpoenas and notice to produce in issue. 8. If the parties cannot agree on costs orders in relation to the several motions before the Court, by Friday 6 December, then they should provide to my Associate by 4 PM on Tuesday 10 December their submissions on costs of no more than two pages and the Court will determine the issue of costs in chambers and will inform the parties.

Amendments 11 May 2020 - [68] first line, "of the defendants other" to "of the defendants' other" [81] first line, "Court is" to "Court be" [91] third line, in my view the should" to "in my view the first and second plaintiffs should" [92] first line, "a general" to "at general" [94] third line, "deceased's estate to" to "deceased's estate, to" [95] fourth line, "result of the litigation" to "result of the litigation," third last line, "of the estate" to "of the estate," 18 May 2020 - [22] second last line, "difficult" to "difficulty" [73] fourth line, "not before his siblings" to "before his siblings" [75] second last line, "have the same interests" to "has the same interests" [82] fourth line, "deceased estate" to "deceased's estate" 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: 18 May 2020