The parties entered a number of agreements about a proposed 40/60 joint venture property development in Yarraville in Victoria, including a March 2016 agreement which Mr Jiang claims was breached because the defendant has not made the final outstanding payment it provided for, to acquire his shares in the joint venture vehicle. The development was not pursued after Mr Jiang's involvement in the venture came to an end and the property was eventually sold.
In these proceedings Mr Jiang pursues orders for damages of over $5 million, which he claims ought to have been paid to him as the final amount due under the 2016 agreement, consequential losses resulting from that non-payment, as well as interest.
Mr Jiang's claim is defended, the defence case being that the payments which were made to Mr Jiang were loans which he had failed to repay and that he is not owed anything. A cross-claim is also pursued, which relies on representations it is claimed Mr Jiang made before the property was acquired and agreements were entered.
In September 2021 Johnson J made ex parte freezing orders against Mr Han, who was then residing in the Republic of China, albeit seemingly being a permanent resident of Australia, as well as orders permitting service of a subpoena for production of documents on a firm of solicitors: Jiang v Han and Fortune New City (Yarraville) Development Ltd (unreported 24 September 2021).
In December 2021 the cross-claim was brought. It alleged that it was as the result of Mr Jiang's misleading and deceptive representations that the parties had entered the 2016 agreement under which loans of over $13 million had been made to Mr Jiang. Their repayment together with interest at 25% per annum was pursued.
In October 2022 Harrison AsJ made orders requiring $215,305 security to be provided: Jiang v Han [2022] NSWSC 1398. At that time there was no issue that Mr Han was a resident of China and had no current visa permitting his entry into Australia: at [29]. Her Honour's orders were not complied with, which resulted in the cross-claim being stayed. But after Mr Jiang filed a motion in December 2023 seeking orders that the cross-claim be dismissed, some $5,658,252 was paid into court. That is now, by agreement, held in an account which continues to attract interest.
In August 2024 the cross-claim was amended to also claim that Mr Jiang's representations had led to Mr Han's entry into an earlier 2015 agreement, under which the parties had agreed that they would contribute equity to the project in 40/60 shares. Those representations may not be entirely the same as those relied on in respect of the 2016 agreement.
It is also claimed that:
1. Mr Jiang was also responsible for an increase in the purchase price for the property and a broker's fee, which had caused the defendants other considerable damage;
2. It was as the result of Mr Jiang's inability to contribute his share of the purchase price which had led to the March 2016 agreement and the loans which he had failed to repay in accordance with its terms;
3. It was a part of the sale price of the property which was later frozen as the result of the orders Johnson J made; and
4. Mr Jiang is liable to repay the claimed $13 million loan and interest, as well as other claimed losses which brings the defendants' total damages to over $23 million.
Mr Jiang defends all these claims. Amongst what is in issue between the parties is not only the disputed representations and the proper construction of the challenged agreements, but also the operation of pleaded statutory schemes, the Competition and Consumer Act 2010 (Cth) and the Limitation Act 1969 (NSW); who was responsible for the increased price paid for the Yarraville property, Mr Jiang claiming that all parties needed an extension of time to pay; who the negotiations were conducted by; and how the assessment of any damages would have to be approached, given all the competing claims.
The matter is listed for a 10 day hearing in June 2025. While the defendants have provided particulars of their cross-claim, whether they are adequate is disputed and they still have not complied with the Court's further orders for service of their evidence on the cross-claim, having not complied with earlier orders.
This is relevant because the cross-claim alleges not only written representations, but oral representations, representations from silence, as well as representations from a failure to contradict when Mr Han said something.
[2]
The motions
This judgment deals with two motions.
The defence motion seeks orders setting aside a notice to produce documents served on them, as well as a subpoena to produce documents served on the purchaser of the property, Yarraville Development JV Pty Ltd. They require production of documents such as the sale contract, PEXA Settlement Completion record, cheque directions, statement of adjustments and payment directions. The defence motion is supported by affidavits sworn by their solicitors, Mr Wu and Ms Thai.
The defence case is that the disputed documents are irrelevant to what lies in issue between the parties and that the notice and subpoena have no proper forensic purpose. It is also claimed that a confidentiality provision in the sale contract would be breached, if that contract is produced, as it would disclose sensitive commercial information to third parties. What the confidentiality term provides has not been established, the contract not having been produced.
By his motion Mr Jiang seeks further orders for security under r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), as well as a permanent stay if that security is not provided. This motion is supported by affidavits sworn by the solicitor Mr Zhang who explained the additional costs likely to flow from the amended cross-claim, which was disputed by affidavits sworn by Mr Wu.
Mr Wu considers that the amendments to the cross-claim will result in minimal additional costs, given what they raise. He also disagrees with much of Mr Zhang's assessment of costs, given the hours and work involved and the obligations imposed by the Civil Procedure Act 2005 (NSW).
At the hearing of the motion, in open Court, the defence proposed that if further security was ordered, which was opposed, it should be in an amount of $185,000 on the basis of a proffered undertaking to the Court.
That was not all accepted. Mr Jiang did accept further security in an amount of $185,000 but resisted the proposed undertaking.
[3]
Issues
There is no issue that the Court has power to make the orders sought and:
1. That the property was acquired by Fortune New City (Yarraville) Development, in which Mr Jiang and Mr Han respectively had a 40% and 60% interest, after it was incorporated;
2. That the settlement was deferred and the sale price increased, when the parties were not ready to settle on the due date;
3. That Mr Jiang did not provide funds contemplated, with the result that the 2016 agreement was entered, under which the disputed payments were made to him;
4. The development did not proceed, and the property was sold to Yarraville Development JV Pty Ltd; and
5. The freezing orders were successfully pursued after the contract for the sale of the land was entered.
In issue is whether any further security should be ordered and whether the notice to produce or subpoena should be set aside.
[4]
Should further orders for security be made?
A security for costs order is not intended to provide a complete and certain indemnity for costs: Mr D v Ms P [2020] NSWCA 174 at [57]; Brundza v Robbie & Co (No 2) (1952) 88 CLR 171; [1952] HCA 49 at 175. But there is no issue that when security is ordered and there is a material change in circumstances, the Court has power to increase the order. I am satisfied that there has been such a change.
Given what Harrison AsJ had to consider and all that is now pursued by the amended cross-claim, I am satisfied that further security should be ordered given, first, the matters which arise to be considered under r 42.21(1). They were originally dealt with by Harrison AsJ and it was not suggested that they have relevantly changed.
They include Mr Han's residence outside Australia; Fortune New City being a corporation without the mandatory resident director, having sold the development site; and it operating in blatant violation of the requirement for a resident director contained in section 201A of the Corporations Act 2001 (Cth): Jiang v Han [2022] NSWSC 1398 at [29].
Secondly, the defendants now pursue claims which have changed significantly, with the result that the currently ordered security is inadequate. Thirdly, it is also relevant that the defendants amended cross-claim does not appear to comply with the requirements of the Rules and that they have not complied with the Court's orders.
It is true, as the defendants contended, that significant funds have been paid into court which do not belong to Mr Jiang and are now held on a basis which results in them accruing substantial interest, sufficient to meet the further security proposed. But it must be accepted that these funds will not also cover any order for damages made in Mr Jiang's favour, especially given that the parties are also unable to agree about the way in which interest would be calculated under their agreement.
Further, the defendants now advance not only a claim for considerable economic loss consequential on claimed misleading and deceptive conduct, as a result of which both the 2015 and 2016 agreements were entered, but that it was also Mr Jiang who was responsible for the increased cost of acquisition of the joint venture property, which further damaged them, all of which is disputed.
The amendments to the cross-claim will thus inevitably result in work which would not have had to be undertaken, if the cross-claim was not amended as it was. The result is that a 10 day hearing has now been fixed, which is a considerably longer hearing than that contemplated before Harrison AsJ, reflective of all the issues which the claims now pursued give rise to.
Also relevant is that even now the defendants are in breach of the Court's orders as to their service of the evidence they rely on to advance their cross-claim. This has to be considered in light of the amended cross-claim not providing particulars of pleaded material facts, including documents and spoken words relied on, as rr 14.7 and 14.8 of the UCPR require. It is also disputed that the particulars the defendants finally provided as the result of the Court's orders were adequate.
Such facts ought, necessarily, to be disclosed by the evidence by which the defendants intend to prove their cross-claim. This is because the Rules and the Court's orders are intended to ensure that litigation is not conducted by ambush or surprise. But still, the defendants have not served that evidence.
Even the Court's orders as to the defendant's service of their evidence and submissions on the motions were not complied with. Ordinarily such repeated breaches of the Court's orders would involve a contempt. There was no explanation for them and it would appear that the cross-claimants now require the Court's leave to serve their evidence.
These are all relevant matters, the Civil Procedure Act 2005 (NSW) not only requiring the Court to give effect to the overriding purpose specified in s 56, the just, quick and cheap resolution of the real issues in the proceedings, to which the Court must have regard when managing the proceedings, but also the objects specified in s 57(1).
When deciding what orders to make the Court must also act in accordance with what the dictates of justice require, having regard to the relevant matters specified in s 58(2). They include not only the degree of expedition with which the parties have approached the proceedings, but the timeliness of their interlocutory activities, their compliance with the requirements imposed upon them by s 56(3), and the use they have made of opportunities available to them under the Rules and the court's procedural directions.
In the current circumstances it thus ought not to be assumed that the amended cross-claim will be heard. Still, I am satisfied that given what is now advanced by the cross-claim that Mr Jiang defends, that further security should be ordered, even though I am not persuaded that the cross-claim should be dismissed if the security is not provided without the parties being heard further.
What must be accepted is that the costs for which the earlier security was ordered will be significantly exceeded if the amended cross-claim does go to hearing. The cross-claimant having increased the claimed damages pursued from some $13 million to over $23 million, what is pursued and how it is defended, resulting in further complex issues will have to be heard and determined.
This is what establishes the relevant material change in the circumstances which Harrison AsJ had to consider.
While it was agreed that if further security was ordered it should be in the sum of $185,000, there was no agreement about the proffered undertaking "that the first $185,000 of interest that has accrued on the frozen assets shall stand as security for the further security sought on the present motion" (T12.32).
I am satisfied that the undertaking is not sufficient. I have arrived at that conclusion in the face of the defendants' ongoing failures to comply with the Court's orders, which only increase the parties' costs; Johnson J's satisfaction about the risk of the dissipation of assets in this jurisdiction; what Harrison AsJ had to consider when she concluded that there was a need for security; and the changed circumstances, which I have explained.
If the undertaking were to be accepted that would undoubtedly risk the assets available to satisfy an order for damages made in Mr Jiang's favour being significantly depleted. It is also relevant that there was no suggestion that if it were not accepted and an order for further security was made, these proceedings would be stultified.
In all of these circumstances I have concluded that justice requires that a further order for security be made.
[5]
Should the notice to produce or subpoena be set aside?
I am also satisfied that neither the disputed notice nor the subpoena should be set aside, given all that is in issue on the amended cross-claim.
In Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 it was held that:
1. It was not necessary, in order to demonstrate a legitimate forensic purpose, that the documents sought by way of a subpoena would materially assist the case of the party that issued the subpoena;
2. The subpoena will be presumed to have been issued for a legitimate forensic purpose if the documents sought are "apparently relevant" to the issues in the proceedings, or if it can be seen that the documents sought to be produced by way of subpoena will (or there is a reasonable basis beyond speculation that they will) materially assist on an identified issue;
3. Documents will add "in some way" to the relevant evidence and be sought for a legitimate forensic purpose if they are capable of providing a legitimate basis for cross-examination or go to credit, notwithstanding that they are inadmissible according to the rules of evidence; and
4. The absence of any apparent relevance of the subpoenaed documents sought, to the issues in the case, may warrant a conclusion of a lack of legitimate forensic purpose and be a sufficient ground to set aside the subpoena.
The defendants contend that the documents in issue lack any legitimate forensic purpose, despite the additional claims and damages pursued by their amended cross-claim and how they are defended. What is in issue includes matters such as:
1. Whether, properly construed, the defendants are liable to pay anything under the 2016 agreement;
2. Before this agreement was entered Mr Jiang made misleading and deceptive representations in trade or commerce in contravention of s 18 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law orally and in writing, including about the profit which the proposed development would generate, as well as it being inferred from his silence or failure to contradict undisclosed propositions Mr Han made;
3. Those representations were relied on by the defendants when entering into the 2015 and 2016 agreements, with resulting damages;
4. How, why and by whom an additional $9.9 million purchase price and a $500,000 service fee were negotiated and whether this resulted in economic loss for which Mr Jiang was also liable; and
5. How any damages might be calculated.
The subpoenaed documents relate to the sale of the land at Yarraville, after Mr Jiang's shares in the joint venture was acquired. The subpoenaed documents establish what the cross-claimants did with the land, the terms on which it was sold, including the sale price and any other forms of consideration and how the proceeds were dealt with.
It is not suggested that the production of the identified documents required is onerous. Nor was the need for a confidentiality regime established.
There is no evidence which establishes the terms of the contract for sale or the claimed commercial sensitivity of any information contained in the disputed documents. Nor is there any issue that they would be subject to the usual implied Harman v Secretary of State for the Home Department [1983] 1 AC 280 undertaking, if produced. If a confidentiality regime were also required, appropriate orders could be made, but none were pressed.
The case pressed for Mr Jiang include that the documents are relevant because they will establish the benefits received on the sale and the claimed economic loss and damage the defendants pursue, their claim being that they had to pay some $9.9 million extra as the result of the delay in settlement and the variation deeds. It was not only the profit they made, but the full causal sequence and all the benefits received on the sale which had to be taken into account in assessing the claimed damages.
The defence case was that the documents were not relevant to that assessment, their simple claim being that the only impact of the delay in the settlement was an increase in the purchase price they paid, thus reducing their profit on sale. Not that this had had any effect on the sale price, which was outside the purview of the pleadings.
That was disputed.
How loss and damage should be calculated is thus in issue. On Mr Jiang's approach, profit is relevant to its calculation. That depending on the counterfactual to which the Court would have to make reference in its assessment, the breach and no breach scenarios are to be compared. In the latter case, where Mr Jiang would still have been entitled to a 40% share in the joint venture. This would thus require consideration of the basis on which the property was sold.
While the defendants were entitled to contend that the property could have been sold for the same price, in any event, Mr Jiang claimed to be entitled to contend otherwise. Mr Jiang advances a basis of calculation to which the sale price and terms of sale is relevant. This was still resisted.
It is contended by Mr Jiang that this dispute established that there is also an issue about how damages would be calculated, if the cross-claim succeeds and whether any counterfactual might then have to be considered, given what is in issue about who was responsible for the increase in the purchase price and what all the consequences of this were. The defendants contending that it was Mr Jiang who shortly before settlement disclosed that he did not have the required funds, and Mr Jiang contending that neither side was then in a position to settle and required the extension which he did not negotiate and for which he was not responsible.
Still, on the defence case it was absurd to suggest that in such a contest, what the property was later sold for was relevant to the assessment of the claimed damages, such a process involving "absurd double counting".
I am not persuaded of this, given all that is in issue between these parties.
At this stage all that Mr Jiang has to establish is that the disputed documents are apparently relevant to an issue in the proceedings. There are issues about the claimed damages and how they must be calculated, if established in whole or part. Mr Jiang seeks to rely on the sale, the price and any other benefits agreed, to advance his approach to the calculation of damages in respect of the defendants' claimed economic loss, in the event that his claims and his defence of the cross-claim do not succeed. On his case that not only depending on the sale price, as the defendants contend.
Who is correct about this issue does not now arise to be determined. The documents' apparent relevance, if damages have to be calculated in the way for which Mr Jiang contends, is sufficient to require their production.
I am satisfied that it thus cannot be concluded that the notice and subpoena can justly be set aside.
[6]
Costs
Under the Uniform Civil Procedure Rules 2005 (NSW) the usual order is that costs follow the event. In this case that is an order that the defendants bear Mr Jiang's costs of the motions. The parties did not suggest any departure from the usual order.
Given the cases which the parties advanced and how they have been resolved, I am satisfied that the usual order, that the defendants bear the costs of the motions, should thus be made.
[7]
Orders
For these reasons I order that:
1. The cross-claimants' motion is dismissed.
2. Pursuant to r 42.21(1) of the Uniform Civil Procedure Rules 2005 (NSW), the cross-claimants are to provide further security for the cross-defendant's costs of the amended cross-claim in the sum of $185,000.00 within 14 days, such security to be provided by way of:
1. Payment into court;
2. An unconditional bank guarantee, in a form acceptable to the cross-defendant, from an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth); or
3. Such other method ordered by the Court.
1. In the event that the security ordered is not provided within the time specified, that the cross-claim be stayed until further order.
2. The cross-claimants are to pay the cross-defendant's costs of the motions, as agreed or assessed.
[8]
Amendments
24 February 2025 - Typographical error with references to Harrison Ass J corrected to read Harrison AsJ in paragraphs, 6A, 22, 35 and 37.
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Decision last updated: 24 February 2025