Fan v Tang & Ors

EX TEMPORE Judgment 1These proceedings have returned before me because of difficulties in implementing the orders made by the Court on 17 February 2010. I gave my principal judgment in these proceedings on 28 January 2010: Fan v Tang & Ors [2010] NSWSC 11. The Court anticipated in paragraph [87] of the first judgment that such difficulties might arise. 2To understand the issue that has now arisen in execution of the orders, it is necessary briefly to re-state the issues and conclusions in the proceedings. 3The plaintiff, Mr Fan, brought these proceedings against the first defendant, Mr James Tang, the second defendant, J V Capital Pty Ltd, and the third defendant, Ms Vicky Yang. Mr Fan alleged that Mr Tang had misused his position as a signatory on several of Mr Fan's bank accounts and that Mr Tang who together with Ms Yang controlled J V Capital, had misapplied funds from those accounts. The application of those funds had resulted in the acquisition of a part interest in a property known for the purpose of these proceedings as "the Box Hill property". Contrary to Mr Fan's instructions the Box Hill property was acquired in the names of J V Capital and Ms Yang, not his name. Together J V Capital and Ms Yang acquired a forty percent interest in the Box Hill property with Mr Fan's funds. The Court had declared that J V Capital Pty and Ms Yang held their interests in the Box Hill property on trust for Mr Fan. 4The implementation issue that arises from the making of the Court's orders relates to the proposed dealing with that forty percent interest in the Box Hill property. The other sixty percent of the Box Hill property is held by members of the Cappello family, William, John and Emanuel Cappello. 5Mr Fan sought other relief in the proceedings related to Ms Yang's mortgaging of her own and J V Capital's legal interest in the Box Hill property to St George Bank Ltd by Ms Yang and Mr Tang to secure advances to them. Other findings related to the transfer of funds by Mr Tang out of Mr Fan's bank accounts. 6Mr Fan made out his case in relation to the mortgage for the unauthorised mortgage of Ms Yang and J V Capital's interest in the Box Hill property to St George Bank. Mr Fan also succeeded in establishing his allegations about the misapplication of funds by Mr Tang. 7The result of my first judgment was that, leaving aside the mortgage findings and the findings of misapplication of funds by Mr Tang, the Court declared that J V Capital holds its 32/100 share in the Box Hill property on trust for Mr Fan. An order was also made that J V Capital transfer that share in the Box Hill property to Mr Fan. A declaration was made that Ms Yang holds an 8/100 share in the Box Hill property on trust for Mr Fan. A further order was made for Ms Yang to transfer that 8/100 share to Mr Fan. Other orders were made for equitable compensation in relation to the unauthorised mortgage and the unauthorised transfer of the funds by Mr Tang out of Mr Fan's account. 8The Court anticipated difficulties arising in unwinding the interests of Mr Fan and the Cappellos' in the Box Hill property. The Court granted liberty to apply to Mr Fan in the event such complications arose. A complication has arisen from Mr Fan's attempts to realise his beneficial interest in the Box Hill property. He has negotiated with the Capellos' and proposes to sell his forty percent interest of the property to them. But there is no-one available to execute the transfers on behalf of Ms Yang and J V Capital. Normally this would not present a problem. The Court would simply make orders to enable the Registrar in Equity to execute transfers to give effect to the Court's orders, in the event that Ms Yang and J V Capital did not do so. 9In respect of Ms Yang that normal situation applies. The situation is more complicated in respect of J V Capital, to which I will come in a minute. First Mr Fan asks the Court to make orders that the Registrar in Equity execute the transfers of Ms Yang's interests to Mr Fan or his nominee. I would be prepared to make those orders against her without any further orders for further service. My first judgment sets out all the evidence that indicated that adequate notice had been given to the defendants: Fan v Tang & Ors [2010] NSWSC 11 at [16] to [28]. 10Those paragraphs show that after Mr Fan commenced proceedings and amended his pleadings a number of times that versions of the pleadings were served on multiple occasions upon Mr Tang and Ms Yang, who are married to each other and who between them control J V Capital. 11There is evidence from the Australian Customs Service that Mr Tang left Australia on 28 November 2008 and has not returned. It is believed that Ms Yang also left Australia about that time. I was satisfied at the time of the hearing on 2 September 2009 that Mr Fan had been given adequate notice not only of the proceedings but of the hearing date of the present application and of the likelihood that orders of the kind that were made would be made. The present application is merely an implementation of the relief already sought. I am prepared to make the orders sought against Ms Yang without ordering any further substituted service upon her and without evidence of the making of further attempts to find her. Quite adequate notice has been given to her of the relief being sought in these proceedings. 12The position with respect to J V Capital is more complicated. I considered the position of service on J V Capital in paragraphs [27] and [28] of my previous judgment as follows:- [27] It is also necessary for Mr Fan to establish that JV Capital has been given adequate notice of these proceedings including notice of the hearing on 2 September 2009. JV Capital is a "company" as defined in s 9 of the Corporations Act 2001 (Cth). Service of a document on JV Capital may be effected by leaving a copy of it at or posting it to JV Capital's registered office: s 109X Corporations Act . The company's registered office is at the Castle Cove address at which the Court's substituted service orders already required documents to be served on the other defendants. [28] In accordance with s 109X Corporations Act Mr Fan caused to be served at the registered office of JV Capital, the second further amended statement of claim, the affidavit material read on behalf the plaintiff, the Court's order of 15 July 2009 to the effect that if there was no appearance by the defendants at the directions hearing on 12 August 2009 the matter would be set down for hearing, a letter notifying JV Capital of the hearing date and a copy of Mr Fan's submissions and chronology. Mr Fan has given adequate notice to JV Capital of these proceedings including notice that the hearing would take place on 2 September 2009. 13I concluded upon those facts that J V Capital had been given adequate notice of the proceedings including notice that the hearing would take place on 2 September 2009. 14However, it now emerges from the process of attempting to have J V Capital execute a transfer of its interest in the Box Hill property that an error was made in the presentation of evidence to the Court on 2 September 2009. The Court was told that J V Capital was then a registered company with its registered office at Castle Cove. The Australian Securities and Investment Commission ("ASIC") searches now before the Court show that J V Capital had in fact been deregistered on 19 July 2009, that is before the hearing took place on 2 September 2009, and before the time I made orders in February 2010 against it. This was unknown to the Court at the time and appears to have arisen as a result of inadvertence in the gathering and presentation of evidence on Mr Fan's behalf. Now the position is clear, steps have been taken to demonstrate what the current legal position is and what would have happened if the true position had been known at the time of the hearing in September 2009. 15The true position is that by reason of the operation of the Corporations Act 2001 (Cth), s 601 AD(1A) J V Capital's 32/100 interest in the Box Hill property vested in the Commonwealth of Australia on 12 July 2009 when the company was deregistered. Although the Court had not declared that Mr Fan's interest was held on trust by J V Capital at the time of deregistration, that was indeed the case at that time. The Commonwealth now holds that 32/100 interest in the Box Hill property on trust for Mr Fan. 16By force of Australian Securities and Investment Commission Act 2001 (Cth) s 8(6), ASIC may on behalf of the Commonwealth perform all duties and exercise all powers of the Commonwealth as trustee in relation to any real or personal property held on trust for the Commonwealth. The 32/100 interest in the Box Hill property now held by the Commonwealth on trust for Mr Fan is administered by ASIC. That is why the correspondence has been between Mr Fan's attorneys ASIC. ASIC concedes in correspondence that the Commonwealth became the trustee of a 32/100 interest in the Box Hill property on behalf of Mr Fan. 17This matter was referred back to the Court in December of last year. The Court informed the parties it was not prepared to make orders in chambers until the position of ASIC and the Commonwealth were made clear. After those communications were sent in early February, the matter was listed before me today for hearing. 18In preparation for the hearing today the solicitors for Mr Fan notified ASIC. The Commonwealth sought to appear today in the proceedings. I have allowed it to appear by the filing of an appearance of its solicitor, Kim Turner, on behalf of ASIC. It also seeks to be substituted for J V Capital as second defendant. I have foreshadowed I will make that order. 19The Commonwealth indicates that it has no objection to the company's 32/100 interest in the property being transferred to Mr Fan or his nominee. ASIC pointed out in a letter dated 17 February 2011 that the hearing on 2 September 2009 would probably have proceeded very little differently if notice of that hearing had been served on ASIC prior to that hearing. 20ASIC says that had it been served with notice of the hearing on 2 September 2009 instead of notice being given to J V Capital, that ASIC would have forwarded a copy of the process to J V Capital's former directors and shareholders, Mr Tang and Ms Yang at their last known address in ASIC's records, in Willowy Road, Castle Cove. That is the same address as given for the registered office of the company. ASIC says it would then have given Mr Tang and Ms Yang an opportunity to reinstate the company in order for them to defend the proceedings. Apart from doing this, ASIC says that it would have merely informed the Court by letter that it is not possible to make orders against a deregistered company by virtue of Corporations Act s 601 AD and ASIC would not itself have sought to appear at the hearing. 21ASIC suggested two ways ahead for Mr Fan. The first was for him to seek an order in these proceedings pursuant to the Corporations Act s 601 AH(2) to reinstate the company and then to proceed against the company in its own name for the orders. Had this course been pursued, the Registrar could still have been asked to make orders on behalf of J V Capital to execute the transfer. But Mr Fan chose to pursue the other course suggested by ASIC. 22The other course ASIC suggested was to take advantage of the Court's finding that the property was already held on trust for Mr Fan and as a result it was vested in the Commonwealth. Had the Court been aware of the deregistration of J V Capital and that it had not been reinstated, either ASIC or the Commonwealth would have had to be substituted as a defendant for the purposes of the hearing and the making of subsequent orders. On behalf of the Commonwealth, ASIC indicated a willingness to the Court and Mr Fan that the Commonwealth be substituted as a defendant and then it would consent to orders to execute the necessary transfer of the company's interests. The transfer would then be able to be executed by ASIC on behalf of the Commonwealth using the authority conferred on ASIC by the ASIC Act , s 8(6). 23Mr Fan elected to pursue that course and to have the Commonwealth be substituted as a defendant and for it to execute the transfers, a course to which, as I have said the Commonwealth consents. I am prepared to order that the Commonwealth be made a defendant and its appearance has been filed and is noted. 24That leaves the making of the further orders. The Court is now satisfied that all necessary steps have been taken to present a party to the Court who can carry out the Court's order in conformity with the judgment given last year. I will give Mr Fan's counsel, Mr Mitchell, an opportunity to prepare some short minutes of order to give effect to these reasons and mention the matter later.