Jin Niu Investments Pty Ltd v Wang

R 89; [2007] HCA 22 Fast Financial Solutions Pty Ltd v Crawford and Battye [2012] NSWSC 40 Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21 George v Webb [2011] NSWSC 1608 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Hoh v Ying Mui Pty Ltd [2019] VSCA 203 Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 John Alexander's Club Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19 Peter Cox Investments Pty Ltd (in liq) v International Air Transport Association [1999] FCA 27 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31 Potter v Potter [2003] 3 NZLR 145 Rambaldi v Commissioner of Taxation (2017) 107 ATR 1; [2017] FCAFC 217 Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 Re Associated Securities Ltd and the Companies Act [1981] 1 NSWLR 742 Re Australia Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 Twinsectra Ltd v Yardley [2002] 2 AC 164 United Dominions Corporation Ltd v Brian Pty Limited (1985) 157 CLR 1; [1985] HCA 49 Warman International Limited v Dwyer (1995) 182 CLR 544; [1995] HCA 15 Weige v Cupton Pty Ltd [2012] NSWCA 414 Ying v Song [2010] NSWSC 1500 Texts Cited: JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) Young, Croft and Smith, On Equity (2009, LawBook Co) Robert Austin and Ian Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) WA Lee & HAJ Ford, Principles of the Law of Trusts (March 2018, Thomson Reuters, looseleaf) Category: Principal judgment Parties: Jin Niu Investments Pty Ltd (First Plaintiff) Henan Jin Niu Industrial (Group) Co Ltd (Second Plaintiff) Jianqiang Wang (Third Plaintiff) Yuehui (Christine) Wang (First Defendant) Ping Li (Second Defendant) Jin Niu Property Development Pty Ltd (Third Defendant) Jin Niu Agribusiness Pty Ltd (Fourth Defendant) Australian Securities and Investments Commission (as recipient of the property of NSW Land Pty Ltd) (Fifth Defendant) Representation: Counsel: Dr K Stern SC with Mr G Ng (Plaintiffs)

Solicitors: Ashurst Australia (Plaintiffs) No appearances for the Defendants File Number(s): 2018/00196981 Publication restriction: Nil

JUDGMENT

1. These proceedings arise out of an alleged joint venture between the third plaintiff, Mr Jiangiang Wang, and the first and second defendants, Ms Yuehui (Christine) Wang and Ms Ping Li.
2. The terms of the alleged joint venture provided for a company to be formed to invest in Australian assets. Mr Wang was to arrange funding for the company and hold 90% of the shares. Ms Wang and Ms Li were to manage the company and each hold 5% of the shares. No one was to be paid fees or salary and profits were to be divided between them.
3. On 26 February 2013, Jin Niu Investments Pty Ltd (JN Investments) was incorporated as the joint venture vehicle and Mr Wang, Ms Wang and Ms Li were each appointed as directors.
4. Subsequently, and over an 18 month period, Mr Wang and Henan Jin Niu Industrial (Group) Co Limited (Henan), a Chinese corporation of which Mr Wang was the president and majority shareholder, provide funding to JN Investments of around $11 million. Between October 2013 and December 2017, those funds were used to pay for three investments in Australia, which are referred to in these reasons as the Hyde Apartment, the Blueberry Farm and the Lane Cove Property. They were also used by Ms Wang and Ms Li to pay themselves over $4.5 million by way of consulting fees, reimbursed expenses, loans or salary.
5. On 26 June 2018, Mr Wang was granted leave, pursuant to s 237 of the Corporations Act 2001 (Cth), to bring these proceedings on behalf of JN Investments so as to facilitate the prosecution of various claims against Ms Wang and Ms Li. On that occasion, the Court also made freezing orders over Ms Wang and Ms Li's Australian assets and orders for substituted service.
6. In addition to claims made in the name of JN Investments as the first plaintiff, Henan (the second plaintiff) and Mr Wang (the third plaintiff) also advance a range of claims against Ms Wang and Ms Li on their own account.
7. In essence, the plaintiffs' claims are that Ms Wang and Ms Li misappropriated and used funds held by JN Investments and created and issued interests in three corporate and trust entities, namely Jin Nui Agribusiness Pty Ltd (JN Agribusiness), Jin Nui Property Development Pty Ltd (JN Property), and the Jin Nui Property Development Unit Trust (JN Property Trust), in breach of their director and fiduciary duties owed to JN Investments, in breach of the joint venture agreement, in breach of fiduciary duties owed to Mr Wang as joint venturers, and in breach of trusts that arose in favour of Henan and JN Investments. The plaintiffs also claim that Ms Wang and Ms Li knowingly assisted each other's breaches of fiduciary duties and are liable to account as constructive trustees and that the proceeds from the sale of the Hyde Apartment and the interest in the Lane Cove Property are held on trust.

The hearing

1. The proceedings were originally listed for a 10 day final hearing to commence on 18 November 2019.
2. On 15 November 2019, Ms Wang was declared bankrupt. Prior to then, she had taken steps to defend the proceedings.
3. The hearing was adjourned to enable the plaintiffs to obtain leave from the Federal Court, pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth), to continue the proceedings. They did so on 18 November 2019. On 25 November 2019, I granted an order pursuant to s 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) for the proceedings to be determined by this Court: Jin Niu Investments Pty Ltd v Wang [2019] NSWSC 1697.
4. On 25 and 26 November 2019, the hearing proceeded before me on an uncontested basis.
5. Ms Wang's trustee in bankruptcy was on notice of the hearing but did not appear and was not joined as a party. The hearing proceeded in his absence as correspondence before the Court indicated that he accepted that he did not need to be joined as any findings of trust against Ms Wang's property would take that property out of the bankruptcy and any findings for an account or quantum of debt would be provable under s 82 of Bankruptcy Act.
6. As for Ms Li, she had taken no steps in the proceedings. An affidavit of Wen-Ts'ai Lim sworn 3 July 2018 established that Ms Li had been served in accordance with the substituted service order made on 26 June 2018. There was also evidence that Ms Li had been informed of the hearing date and served with other material filed by the plaintiffs.
7. The third and fourth defendants are JN Property and JN Agribusiness. They were not represented.
8. The fifth defendant is the Australian Securities and Investments Commission (ASIC), as recipient of the property of NSW Land Pty Ltd (NSW Land). NSW Land was incorporated by Ms Li, holds shares in JN Property and is now deregistered. There was no appearance by ASIC.
9. At the hearing, the plaintiffs relied on a substantial amount of lay, documentary and expert evidence in support of their claims. The Court book comprised eleven volumes. During the course of the hearing, the plaintiffs provided three additional volumes, as well as detailed schedules referring to and summarising some of the documentary evidence relied on.
10. I have been assisted by the summary schedules prepared by the plaintiffs as well as by the written and oral submissions from their senior and junior counsel.

Facts

1. Before dealing with the claims, I set out some further details about the parties and the factual matters that give rise to the claims made. The details are drawn from the unchallenged evidence before the Court.

The parties

1. Mr Wang is a Chinese businessman. He does not speak or read English. During 2013 and 2017, Mr Wang spent most of his time in China, where he was a resident and national.
2. Ms Wang was born in China and is an Australian resident. According to her tax return for the 2011 financial year, during 2010 and 2011, Ms Wang worked for the Department of Trade and Investment. She has been a director of four companies in Australia, a company secretary of two companies and has held shares in seven.
3. Ms Li was born in China and trained as a lawyer. She has been a director of two companies in Australia and has held shares in one company.
4. Ms Wang and Ms Li both speak and read English and Chinese.
5. Mr Wang first met Ms Wang in March 2009 at an Australian investment promotion conference in Beijing, China. Ms Wang's business card identified her as a director of PRIMEX, NSW Department of Primary Industries.
6. After meeting, Mr Wang had a number of telephone conversations with Ms Wang. During one of those calls, Ms Wang told Mr Wang that she could assist him if he was interested in investing in Australia.
7. In March 2012, Mr Wang met with Ms Wang in Beijing and told her that his company, Henan, remained interested in investing in Australia and asked for her advice. Ms Wang said she would be willing to provide investment assistance and legal advice and that she had many contacts in government. At that time, she also recommended Ms Li as a lawyer who could assist him.
8. In May 2012, Mr Wang met Ms Li in Zhengzhou. Ms Li's business card indicated that she was a partner in Tongshang, a Chinese law firm. Ms Li told Mr Wang that she had been a lawyer in Australia, that she was "well versed in the laws of Australia and China" and that she could assist him to maximise returns on investments if he decided to do business in Australia.
9. In August 2012, Mr Wang, Ms Wang and Ms Li discussed going into business together. At the time, Mr Wang understood that Ms Wang was employed by an Indonesian company.
10. In early February 2013, Ms Wang invited Mr Wang to come to Sydney to discuss working together and investing in Australia. He met with Ms Wang and Ms Li at "The Canopy" café in Liverpool Street, Sydney on 25 February 2013. During the meeting, Ms Wang and Ms Li presented to Mr Wang on how he could conduct business with them in Australia. The presentation lasted for approximately one hour.

The establishment of JN Investments

1. On 26 February 2013, Mr Wang, Ms Wang and Ms Li attended ASIC's registry and lodged the forms to incorporate JN Investments (then known as Zheng Zhoug Jin Niu Industrial (Group) Australia Pty Ltd). Mr Wang, Ms Wang and Ms Li were recorded as directors and Ms Wang as company secretary. JN Investments' share capital was recorded as AUD$6 million, with Mr Wang holding 5,400,000 ordinary shares and Ms Wang and Ms Li each holding 300,000.
2. Sometime between 26 February and 17 June 2013, Mr Wang had a conversation with Ms Li and Ms Wang during which they told him that $6 million share capital was not necessary and that $600,000 was sufficient. During that period, they also discussed fund raising progress in China, the foreign exchange permit application to the Chinese government and a plan to research a blueberry farm project in Australia.
3. On 17 June 2013, Mr Wang arranged the transfer of $449,999 to bank accounts nominated by Ms Wang and Ms Li to provide equity capital for JN Investments. The amount transferred was by way of eight deposits of $50,000 and one deposit of $49,999. At around this time, Ms Li and Ms Wang told Mr Wang not to transfer any more money, that Ms Li would contribute the remaining $150,000 and that she would get that amount back from JN Investments.
4. In mid to late June 2013, an account in the name of JN Investments was established with the China Construction Bank Corporation Limited (CCB) in Sydney (account initially ending in 3297 and then ending in 0050) (CCB Account). Between 18 June and 26 June 2013, $600,000 was deposited into the CCB Account made up of two deposits of $150,000 from Ms Li, one deposit of $150,036 from Ms Wang, and three deposit amounts of $49,988 from others.
5. On 24 June 2013, JN Investments' share capital and allocations were corrected at ASIC to provide for share capital of $600,000 and 600,000 ordinary shares on issue of $1 each, with 540,000 held by Mr Wang and 30,000 each held by Ms Wang and Ms Li.

Retainer of Winner Partnership and preparation of financial statements

1. In around September 2013, Ms Wang retained Winner Partnership to provide accounting, tax and financial advice to JN Investments. That retainer was later expanded to include JN Property, the JN Property Trust and JN Agribusiness.
2. During the course of Winner Partnership's retainer, Ms Wahhab prepared financial statements and tax returns for JN Investments, JN Property, the JN Property Trust and JN Agribusiness in relation to the 2013 to 2016 financial years based on instructions from Ms Wang and Ms Li.
3. Relevantly, those instructions included that regular cash payments that Ms Wang and Ms Li received, usually on a monthly basis, should be recorded in the financial statements as loans they owed to JN Investments and that certain initial $20,000 payments to each of them should be recorded as consulting fees. Ms Wahhab's evidence is that Ms Wang and Ms Li also instructed her that they were going to bring in their own money to invest in JN Investments.
4. During the course of her retainer, Ms Wahhab also recorded cash payments made from JN Investments and JN Agribusiness to Ms Wang and Ms Li as expense reimbursements. She did so based on information contained in "reimbursement" spreadsheets she received from Ms Wang each fortnight or month. The spreadsheets itemised amounts which Ms Wang and Ms Li claimed as business expenses. Copies of the reimbursement spreadsheets are in evidence, as are some of the underlying receipts.
5. On 17 December 2013, Mr Wang's 540,000 shares in JN Investments were transferred to Henan. That change was made by Winner Partnership on instructions from Ms Wang without Mr Wang's knowledge or consent. It is not clear on the evidence why that change was made.
6. On 18 December 2013, an amount of $120,000 was recorded as a "share allocation" against each of Ms Wang and Ms Li's loan accounts with JN Investments. The effect of these share allocations was to record a reduction in the amount of the loans owing by Ms Wang and Ms Li to JN Investments by $120,000. The allocations were made by Ms Wahhab based on instructions from Ms Wang that she and Ms Li had each initially transferred $150,000 to JN investments by way of share capital.

Funding to JN Investments

1. Between 8 October 2013 and 27 January 2015, Mr Wang arranged for Henan to advance funds by way of loans to JN Investments totalling $10,785,766.83, as follows: 8 October 2013 $3,467,634 23 June 2014 $1,054,753 25 August 2014 $1,001,934.25 29 October 2014 $606,617.65 27 January 2015 $4,654,827.93
2. The funds advanced by Henan were deposited into JN Investments' CCB Account and recorded in JN Investments' financial ledger as a credit to Henan's loan account. There are no written loan agreements in respect of the amounts advanced.
3. Mr Wang's evidence is that the funds were "to be used to make investments for JN Investments" and that he did not consent to them being used for any other purpose. The circumstances surrounding the transfer of those amounts to JN Investments and the use to which they were put are described in more detail below.

Acquisition of the Hyde Apartment

1. In around July 2013, Ms Wang contacted Mr Wang and suggested they invest in a property in Sydney for $3 million which could be used as a residential apartment and office. Ms Wang advised Mr Wang that, as the property was residential and second-hand and Mr Wang was a foreigner, it could not be bought in his name or that of JN Investments but she and Ms Li could buy it and it would "belong to the company". Mr Wang agreed.
2. On 8 October 2013, Mr Wang caused Henan to deposit the amount of $3,467,634 into the CCB Account to cover the purchase of the property by Ms Wang and Ms Li.
3. On the same day, two amounts totalling $3,010,000 were transferred from the CCB Account; $1,585,000 to an account in the name of Ms Li and $1,425,000 to an account in the name of Ms Wang.
4. On 10 October 2013, an apartment in "The Hyde", 2801/157 Liverpool Street, Sydney, being Lot 114 in Strata Plan 83861 (Hyde Apartment) was purchased by Ms Wang and Ms Li as tenants in common in equal shares for $3 million.
5. On 13 December 2013, JN Investments' registered office was changed to the address of the Hyde Apartment.
6. Mr Wang agreed to pay the costs of the Hyde Apartment. On 17 April 2014, he opened an account at the Bank of China, Haymarket branch. Although Mr Wang made two deposits into that account, according to the financial statements in evidence, some of the Hyde Apartment costs were funded by JN Investments.

Acquisition of the Blueberry Farm

1. In December 2013, at a meeting in Sydney, Ms Wang showed Mr Wang a business report about a blueberry farm and suggested it as a good investment. Shortly afterwards, Mr Wang visited the farm, which was located in Fairy Hill, NSW.
2. Due to a delay in raising funds in China, Ms Wang proposed to Mr Wang that the purchase of the Blueberry Farm be funded by way of a loan to Ms Wang and Ms Li for $1 million to be secured by a mortgage over the Hyde Apartment. Mr Wang agreed to the purchase of the farm being funded by a loan but told Ms Wang that the loan had to be paid in full immediately after he transferred sufficient funds to JN Investments.
3. On 8 April 2014, Ms Wang transferred $1,099,865.50 into JN Investment's CCB Account, which were from funds that Ms Wang and Ms Li had borrowed from Westpac. Their loan from Westpac was secured by a mortgage which was registered on the title to the Hyde Apartment (Westpac mortgage). JN Investments' financial ledger records that an amount of $549,932.75 was credited to each of Ms Wang and Ms Li's loan accounts on 8 April 2014.
4. On 21 May 2014, JN Investments became the registered proprietor of the land on which the Blueberry Farm is situated (being Lot 5 in Deposited Plan 817939) (Blueberry Farm) for $750,000.
5. On 23 June 2014, Mr Wang arranged for Henan to transfer the amount of $1,054,753 to JN Investments to enable Ms Wang and Ms Li to discharge the Westpac mortgage, in accordance with the discussions referred to in [56].
6. On 26 June 2014, $1 million was transferred from JN Investments' CCB account to a Westpac account jointly held by Ms Wang and Ms Li with account number ending 9528 (Joint Account). Ms Wang and Ms Li did not use the $1 million to immediately discharge the Westpac mortgage. Rather, the evidence demonstrates that they instructed Ms Wahhab to record that JN Investments had made "investment" loans of $500,000 to each of them. They then appeared to have used the $1 million for other purposes, including to make loan payments in reduction of their loans from JN Investments and JN Agribusiness.
7. In particular, the evidence discloses that: 1. following the transfer on 26 June 2014 of the $1 million, Ms Wang and Ms Li's Joint Account had a balance of $1,040,538.70; 2. on 1 September 2014, the balance of the Joint Account, being a sum of $1,032,825.65, was withdrawn, and deposited: 1. as to $549,552.22 into a Westpac loan account jointly held by Ms Wang and Ms Li with account number ending 4026 (the 4026 Account), which had previously been overdrawn in the amount of $549,522.22; and 2. as to $483,273.43 into a Westpac loan account jointly held by Ms Wang and Ms Li with account number ending 5627 (the 5627 Account), which had previously been overdrawn in the amount of $549,552.34; 1. on 14 October 2014, the sum of $600,000 was withdrawn from the 4026 Account and on 15 October 2014, the same amount was deposited into JN Investments' CCB Account. This is recorded in JN Investments' financial ledger as loan payments made by Ms Wang and Ms Li to JN Investments; 2. on 13 February 2015, an amount of $100,000 was withdrawn from the 5627 Account and applied towards an unknown purpose; 3. on 16 February 2015, a further $100,000 was withdrawn from the 5627 Account and deposited into an account held by JN Agribusiness at ANZ. This amount is recorded as loan payments made by Ms Wang and Ms Li to JN Agribusiness in JN Agribusiness' financial ledgers; 4. on 26 October 2015, $220,386.33 was withdrawn from JN Investments' CCB Account and deposited into the 5627 Account. This is recorded in JN Investments' financial ledger as loans of $110,193.17 made to Ms Wang and Ms Li by JN Investments; 5. on 11 December 2015, $300,000 was withdrawn from JN Investments' CCB Account and deposited into the 4026 Account. This is recorded in JN Investments' financial ledger as loans of $150,000 made to Ms Wang and Ms Li by JN Investments; 6. on 15 February 2016, $250,000 was withdrawn from the 5627 Account and, on 16 February 2016, the same amount deposited into JN Investments' CCB Account. This appears in the financial ledger as loan payments made by Ms Wang and Ms Li to JN Investments; and 7. on 21 June 2016, $150,000 was withdrawn from the 4026 Account, and deposited in JN Agribusiness' ANZ account. This is recorded as another loan payment made by Ms Wang and Ms Li to JN Agribusiness in the financial ledger.

Transfer of further funds by Henan

1. On 25 August 2014, Mr Wang caused Henan to transfer the amount of $1,001,934.25 into JN Investments' CCB Account. The evidence does not identify why Mr Wang arranged to transfer that amount to JN Investments on that day.

Establishment of JN Agribusiness, JN Property and the JN Property Trust

1. On 23 September 2014, Ms Wang and Ms Li caused NSW Land and NSW Asset Holdings Pty Ltd (NSW Asset Holdings) to be incorporated. Ms Li was registered as the sole director and shareholder of NSW Land. Ms Wang was registered as the sole director and shareholder of NSW Asset Holdings.
2. On the same day, Ms Wang and Ms Li caused JN Property to be incorporated and the JN Property Trust to be settled, with JN Property appointed as the corporate trustee.
3. JN Property was registered as having 100 dividend shares and 100 ordinary shares on issue at $1 each. 60% of the shares were recorded as being held by Mr Wang and 20% by each of NSW Land and NSW Asset Holdings. Mr Wang, Ms Wang and Ms Li were registered as the directors.
4. On 23 September 2014, Ms Wang and Ms Li executed an Application for Units in the JN Property Trust and the JN Property Trust Deed. The documents provided for 60 units in the JN Property Trust to be issued to Mr Wang, 20 units to NSW Land as trustee for the NSW Land Trust, and 20 units to NSW Asset Holdings as trustee for the NSW Asset Holdings Trust.
5. Mr Wang did not execute any instrument or participate in any resolution to give effect to the incorporation of JN Property, the establishment of the JN Property Trust or the allocation of shares and units in those entities.
6. On 29 September 2014, Ms Wang and Ms Li caused JN Agribusiness to be incorporated as the management company for the Blueberry Farm business. Mr Wang, Ms Wang and Ms Li were registered as directors. JN Agribusiness was registered as having 100 dividend and 100 ordinary shares on issue at $1 each, with Mr Wang holding 40% of the shares and Ms Wang and Ms Li each holding 30%.
7. There is evidence that Mr Wang signed a page from a Share Application Journal recording an application by him for shares in JN Agribusiness and a document recording his consent to act as a director, both of which are dated 29 September 2014.
8. Mr Wang's evidence is that he did, on occasion, sign documents in English which he did not ask to be translated by Ms Wang, including at a meeting on 30 September 2014 at the offices of Baron & Associates (the then solicitors for JN Investments), and that he was not aware of JN Agribusiness until late in 2017. Based on his evidence, I consider it open to find that, when Mr Wang signed the documents referred to in [69], he did so not knowing that he was consenting to be a director of JN Agribusiness or applying for shares which provided him with 40% of the equity.

Management of Blueberry Farm by JN Agribusiness

1. On 8 October 2014, Mr Wolton met with Ms Wang and Ms Li and signed an employment contract with JN Agribusiness as the farm manager of the Blueberry Farm. He worked as the Blueberry Farm manager from that day.
2. On around 10 October 2014, an account at the ANZ bank (ending in 7768) was established in the name of JN Agribusiness (ANZ Account).
3. On 21 October 2014, an initial deposit of $200,000 was made into JN Agribusiness' ANZ Account and a corresponding withdrawal made from JN Investments' CCB Account.
4. According to the Exner Report, the operational costs and trading losses of the Blueberry Farm were funded by JN Investments. JN Agribusiness' financial statements record that, as at 30 June 2017: 1. JN Agribusiness' total trading losses amounted to $1,025,438; 2. the balance of the loans owed by JN Agribusiness to JN Investments was $1,856,767; and 3. JN Agribusiness held assets valued at $724,896.15.
5. The Exner Report also identifies that JN Investments did not charge JN Agribusiness any rent for the occupation of the Blueberry Farm. This is consistent with a letter dated 25 January 2017 from the Australian Taxation Office to JN Investments which states that "there was an agreement between JNA (JN Agribusiness) and you (JN Investments) whereby the former would be running the farming operations and that no rent was currently being paid. You (Ms Wang) explained there was a belief that rent would be paid in the future based on the expected profits of the farming of the blueberries".

Interest in the Lane Cove Property

1. In September 2014, Mr Wang became aware of an opportunity to invest with two other parties in a venture to purchase and develop property located over three titles situated at 25-29 Longueville Road, Lane Cove, Sydney, being Lot 78 in Deposited Plan 1055896 and Lots 12 and 13 in Deposited Plan 808119 (Lane Cove Property).
2. In about October 2014, Mr Wang, Ms Wang and Ms Li met with representatives of one of the parties and agreed to contribute funds in return for a 33% interest in the Lane Cove Property project. That interest was subsequently increased to 35%, based on a contribution of $3,255,000. Mr Wang told Ms Wang and Ms Li that once the Lane Cove Property project "was complete", the funds would go back to JN Investments and the net profit would be split between them.
3. As events transpired, the funding arrangements for the Lane Cove Property project were structured such that JN Investments' funds were used to pay $3,255,000 for an interest in the Lane Cove Property and to lend additional amounts to one of the parties, BMV Developments Pty Ltd, which were later repaid and on which JN Investments was paid interest, as follows: Date Withdrawal ($) Deposit ($) Payments from JN Investments 24/10/2014 558,600.00 18/12/2014 402,990.50 6/02/2015 2,358,379.85 6/02/2015 1,438,375.79 6/02/2015 703,244.36 Repayments to JN Investments 27/03/2015 1,500,000.00 22/07/2015 706,590.50 Total 5,461,590.50 2,206,590.50 Net (35%) 3,255,000.00 Interest on additional amounts lent 22,683.77

1. As noted earlier, Henan transferred to JN Investments the amount of $606,617.65 on 29 October 2014 and the amount of $4,654,827.93 on 27 January 2015. Based on the timing of those payments, I accept they were made to cover the costs relating to the investment in the Lane Cove Property project.
2. Between 13 and 16 February 2015, JN Property was registered as having acquired title to a 35/100 share in the Lane Cove Property as a tenant in common with BMV Developments Pty Ltd (holding an 35/100 interest) and Claireleigh Lane Cove Pty Ltd (holding an 30/100 interest).
3. At that time, Mr Wang was not aware that JN Property, as trustee for the JN Property Trust, acquired the 35/100 interest in the Lane Cove Property.

Change to JN Property Trust unit holdings

1. In August 2015, Ms Wang and Ms Li instructed Baron & Associates to prepare documents to equalise the number of shares and units that the parties held in JN Property and the JN Property Trust. On 4 August 2015, Baron & Associates sent Ms Wang and Ms Li draft documents to effect those instructions, including minutes of a meeting of the directors of JN Property dated 24 September 2014 which recorded resolutions in relation to the transfer and issue of shares and units. The documents were not provided to Mr Wang.
2. The 2015 financial statements for JN Property Trust record that, with effect from 24 September 2014, the unit holdings in the JN Property Trust were equalised, with each of Mr Wang, NSW Land and NSW Asset Holdings holding (and continuing to hold) 34 units. The change to the unit holdings was effected by the transfer from Mr Wang of 13 units to each of NSW Land and NSW Asset Holdings and the issue of 1 unit to each of NSW Land and NSW Asset Holdings.
3. Mr Wang did not execute any instrument or participate in any resolution giving effect to the transfer or issue of the units in the JN Property Trust.

Sale of Hyde Apartment

1. In around September 2016, Mr Wang, Ms Wang and Ms Li agreed to sell the Hyde Apartment. During discussions about a possible sale of JN Investments' assets, Mr Wang told Ms Wang that, once tax and other expenses had been deducted, the sale proceeds had to be transferred to JN Investments, after which the net profits could be distributed equally amongst them and Ms Li.
2. On 10 December 2016, the Hyde Apartment was sold by Ms Li and Ms Wang for $3.85 million and the Westpac mortgage in the amount of $1.1 million was discharged.
3. The Hyde Apartment sale proceeds totalling $2,664,199.52 were paid into a joint account in the names of Ms Wang and Ms Li. As at the date of the hearing, those sale proceeds had been distributed by Ms Wang and Ms Li as follows: 1. $300,000 was paid into JN Agribusiness' ANZ Account on 15 December 2016; 2. $150,000 was paid into JN Investments' CCB Account on 15 December 2016; 3. $1.1 million was paid to Ms Li; and 4. $1.1 million was paid to Ms Wang.
4. After the sale of the Hyde Apartment, Mr Wang telephoned Ms Wang multiple times about the sale proceeds. On at least one occasion, Mr Wang asked Ms Wang to confirm that the sale proceeds had been transferred to JN Investments' bank account. Ms Wang informed him that they had.

2017: Retainer of E-AccounTax and change in approach to accounting

1. In late January 2017, Ms Wang telephoned Ms Wahhab and advised her that she wanted to borrow money to buy another property in the Sydney CBD and needed payslips going back to July 2016 to show that she had a gross income of about $180,000. She instructed Ms Wahhab to work out the tax, super and other requirements if she was to be paid a gross income of $180,000, made up of $30,000 in wages from JN Investments and $150,000 in wages from JN Agribusiness. According to those instructions, in March 2017, Ms Wahhab arranged for payslips from JN Agribusiness and JN Investments to be prepared and sent to Ms Wang.
2. In about May 2017, Ms Wang terminated Ms Wahhab's retainer and engaged Ms Xie of E-AccounTax as the accountant for JN Investments, JN Agribusiness, JN Property and the JN Property Trust.
3. Ms Xie subsequently prepared revised financial statements for JN Investments and JN Agribusiness for the 2013-2016 financial years.
4. According to the Exner Report, approximately $1.35 million in payments made by JN Investments to Ms Wang and Ms Li, which, in the Winner Partnership financial statements, had been accounted for as loans owing by them to JN Investments, were reclassified in Ms Xie's revised financial statements as payments for wages of the company. This had the effect of treating the amount of $1.35 million paid to Ms Wang and Ms Li as no longer owing by them to JN Investments. The revised financial statements recorded $1.44 million as the wage expense of JN Investments and also recorded a reduction in the consulting fees expense (of $97,000) and a reduction in travel related expenses (of $101,398).
5. In the case of JN Agribusiness, Ms Xie's revised financial statements for the 2016 financial year recorded an increase in the amount of the loans owed by each of Ms Wang and Ms Li to the company by around $95,000.

Events leading to these proceedings

1. By the second half of 2017, Mr Wang began to have concerns about the lack of information provided to him about JN Investments. Despite repeated requests to do so, Ms Wang and Ms Li had failed to provide Mr Wang with copies of any of the books, records and bank statements relating to JN Investments. Nor had they provided him with contact details for the accountants they had retained to act on behalf of JN Investments or updated him on progress made in trading in respect of the Blueberry Farm or on the Lane Cove Property development.
2. In late November 2017, on a trip to Sydney, Mr Wang attended a CCB branch with Ms Wang and Ms Li. Mr Wang observed that the balance of the funds held in JN Investments' accounts was in the "thousands". Having regard to the amount of the funds advanced by Henan and the sale proceeds from the Hyde Apartment, Mr Wang expected to see a balance of several million dollars. He was later provided with bank statements for the CCB Account and another account.
3. Mr Wang asked Ms Wang what had happened to the funds and was told that "it should be in one of the bank accounts". After attending a nearby ANZ branch and identifying that the "missing money" was not in any ANZ account, Mr Wang arranged for the balance of the ANZ accounts to be transferred to JN Investments' CCB Account and instructed CCB to freeze all funds pending further instructions.
4. In early December 2017, Mr Wang received from the Winner Partnership copies of the financial records relating to JN Investments, JN Agribusiness and the JN Property Trust. On a review of those records, Mr Wang became aware of the existence of JN Agribusiness, JN Property, the JN Property Trust and his respective holdings in those entities. He also became aware that Ms Wang and Ms Li had received various payments from JN Investments and JN Agribusiness which were recorded in the financial statements as consulting fees, reimbursement for business expenses and loans or salary.
5. On 14 December 2017, Mr Wang and Ms Wang met in Sydney and discussed the transfer of funds from JN Investments to Ms Wang and Ms Li. Ms Wang asserted that some of the money was "salary". Mr Wang disputed their entitlement to salary noting that they had agreed only to share net profits. Following that meeting, Mr Wang instructed lawyers and an accountant to assist him to understand what had happened to the funds and transactions.

The claims and issues for determination

1. The Further Amended Commercial List Statement (FACLS), filed on 25 October 2019, advances a range of claims against Ms Wang and Ms Li. The Third Amended Summons, filed on 29 November 2019, sets out the final relief sought. The nature of some of the trust claims and pecuniary relief was also the subject of supplementary materials received on 26 and 29 November 2019.
2. As finally put, the plaintiffs' claims and relief sought against Ms Wang and Ms Li can be summarised as follows.
3. First, they claim that Ms Wang and Ms Li have retained the net sale proceeds of the Hyde Apartment in breach of trust in favour of JN Investments and that they did so in furtherance of a dishonest and fraudulent design or having knowingly procured the other to act in breach of trust. They claim that Ms Wang and Ms Li are liable to account and that JN Investments is entitled to declaratory relief and equitable compensation in respect of the net sale proceeds: FACLS at [31D], [31DE], [31E], [37], [37A]; Third Amended Summons at [11], [12], [13] and [24].
4. Second, they claim that the 35/100 interest in the Lane Cove Property was held by JN Property on resulting or constructive trust in favour of JN Investments, or alternatively, in favour of Henan following breach by JN Investments of a Quistclose trust over the funds advanced to it by Henan. They claim that the proceeds from the sale of the interest in the Lane Cove Property are also held by JN Property on trust and that JN Investments, or alternatively, Henan, is entitled to declaratory relief to that effect: FACLS at [31F], [31G], [33(e)], [38]; Third Amended Summons at [24A].
5. Third, they claim that Ms Wang and/or Ms Li caused cash payments to be made to themselves from JN Investments' funds in breach of their statutory duties and fiduciary obligations as directors of JN Investments and in breach of the JV Agreement. They also claim that, in making the cash payments to Ms Wang and Ms Li, JN Investments acted in breach of a Quistclose trust over the funds it held in favour of Henan: FACLS [30(c)], [31], [32] and [33].
6. The plaintiffs allege that Ms Wang and Ms Li knowingly assisted or induced each other in their breaches of fiduciary obligations to JN investments in furtherance of a dishonest and fraudulent design to appropriate funds from JN Investments for their own benefit. They also allege that Ms Wang and Ms Li knowingly assisted JN Investments in furtherance of a dishonest and fraudulent design to appropriate funds towards purposes other than the joint venture: FACLS [34] and [34A]. They claim that Ms Wang and/or Ms Li are liable to account as constructive trustees and to compensate JN Investments and Henan, or alternatively Mr Wang, for the unauthorised payments and seek declaratory relief and equitable compensation: FACLS [36]; Third Amended Summons [7], [10], [12], [13] and [24].

Was there a binding joint venture agreement and did it give rise to fiduciary obligations?

1. The plaintiffs claim that, on 25 February 2013, Mr Wang, Ms Wang and Ms Li entered into a joint venture (referred to as the JV Agreement or Joint Venture), the terms of which were that: 1. they would incorporate a joint venture company to invest in Australian assets; 2. Mr Wang or his nominee would be issued 90% of the equity of the corporate entity through which the Joint Venture might invest in Australian assets; 3. Ms Wang and Ms Li or their respective nominees would each be issued 5% of the equity in the joint venture company; 4. Mr Wang or his nominee would advance funds to the joint venture company to provide working capital for the Joint Venture; 5. Ms Wang and Ms Li would manage the affairs of the Joint Venture but did not have to provide any funding; 6. each of Mr Wang, Ms Wang and Ms Li would be directors of the joint venture company; 7. none of Mr Wang, Ms Wang and Ms Li would receive any remuneration from the joint venture company; and 8. each of Mr Wang, Mr Wang and Ms Li would receive one third of any profits earned by conducting the business of the Joint Venture.
2. The agreement is alleged to have been made orally and in Mandarin.
3. The plaintiffs also allege that, by reason of the terms of the JV Agreement that provided for Mr Wang to advance funds and for Ms Wang and Ms Li to manage the affairs of the Joint Venture and not provide funding, Ms Wang and Ms Li assumed responsibility to act in Mr Wang's best interests, and thereby owed him fiduciary obligations in relation to the affairs of the Joint Venture.
4. I am satisfied that Mr Wang, Ms Wang and Ms Li entered into a binding agreement on 25 February 2013 on the terms alleged by the plaintiffs. The terms alleged reflect the terms of the joint venture proposal proffered by Ms Wang and Ms Li. That proposal was accepted by Mr Wang on that day.
5. While not in writing, the terms of the joint venture proposal which were proposed by Ms Wang and Ms Li and accepted by Mr Wang were sufficiently certain for a binding agreement of the nature asserted by the plaintiffs. Although somewhat high level and informal, they provided for the key rights and obligations of the parties in respect of the business arrangement that they had agreed to pursue. Those rights and obligations continued to govern the business arrangement after the agreement was entered into on 25 February 2013.

Were the funds advanced by Henan subject to a Quistclose trust?

1. The plaintiffs' claim that the funds advanced by Henan to JN Investments were held on trust in favour of Henan.
2. While the alleged trust is pleaded to be an express, or in the alternative, a resulting trust (FACLS 30), at the hearing, Senior Counsel contended that the funds were held on an express trust, in the nature of a Quistclose trust, in favour of Henan: T108:2-19.
3. The plaintiffs contend that a Quistclose trust arose as the funds were advanced to JN Investments for the purpose of the joint venture and were to be used in a manner consistent with the agreement entered into by the parties on 25 February 2013, which included that Mr Wang would hold 90% of the equity in the corporate entity through which investments would be made in Australian assets, and Ms Wang and Ms Li would each hold 5%. Thus, they allege that JN Investments held the advanced funds on trust, subject to a power or mandate to deploy them for the purposes of the joint venture, being a joint venture in which Mr Wang held 90% of the equity.
4. In support of that contention, the plaintiffs' written submissions rely, in particular, on the statement by Lord Millett in Twinsectra Ltd v Yardley [2002] 2 AC 164 at [100]: "The lender pays the money to the borrower by way of loan, but he does not part with the entire beneficial interest in the money, and in so far as he does not it is held on a resulting trust for the lender from the outset.… when the purpose fails, the money is returnable to the lender, not under some new trust in his favour which only comes into being on the failure of the purpose, but because the resulting trust in his favour is no longer subject to any power on the part of the borrower to make use of the money. Whether the borrower is obliged to apply the money for the stated purpose or merely at liberty to do so, and whether the lender can countermand the borrower's mandate while it is still capable of being carried out, must depend on the circumstances of the particular case."
5. During oral submissions, reference was also made to George v Webb [2011] NSWSC 1608 and Rambaldi v Commissioner of Taxation (2017) 107 ATR 1; [2017] FCAFC 217 to demonstrate that the principles in respect of Quistclose trusts are well established and have been applied by Australian courts.

Hyde Apartment: trust claim by JN Investments over the sale proceeds

1. JN Investments' claim to recover the net sale proceeds is based on the Hyde Apartment having been held by Ms Wang and Ms Li on a resulting trust in favour of JN Investments.
2. A resulting trust may arise where a person provides the money to purchase property and legal title to that property is in another's name. In such a case, a resulting trust in favour of the person who provided the money is presumed to arise at the time of purchase of the property. That presumption may be rebutted by evidence establishing the contrary: Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 at 246-7, 252; see also JD Heydon and MJ Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) at [12-10].
3. The evidence establishes that JN Investments provided all the necessary funds for the purchase of the Hyde Apartment. On 8 October 2013, two amounts totalling $3,010,000 were transferred from JN Investments' CCB Account to Ms Wang and Ms Li to cover the purchase price of $3 million. Other costs associated with the purchase, such as stamp duty (in the amount of $150,510), legal and conveyancing fees (in the amounts of $1,450 and $825) were also funded by JN Investments.
4. Prior to its purchase, Ms Wang told Mr Wang that the Hyde Apartment was to "belong to the company" even though it was to be registered in her name and Ms Li's name. Mr Wang acceded to the proposal because he believed Ms Wang's advice that there were restrictions on the Hyde Apartment being purchased in JN Investments' name or in his name. Had Ms Wang not advised him of those matters, Mr Wang would have required the Hyde Apartment to be purchased in JN Investments' name.
5. The $3,010,000 funds were, therefore, advanced by JN Investments in the character of a purchaser of the Hyde Apartment, rather than as a lender of funds to enable Ms Wang and Ms Li to purchase it on their own behalf: Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 at 246.
6. The existence of a purchase money resulting trust in favour of JN Investments also accords with the admission made by Ms Wang that the amounts transferred to her and Ms Li to purchase the Hyde Apartment were for the benefit of JN Investments and that they received their respective portions of the proceeds of sale on trust for JN Investments: Further Amended Commercial List Response, filed 1 November 2018, at [37].

Lane Cove Property interest: trust claim over sale proceeds

1. At the hearing, the plaintiffs' claim that the proceeds from the sale of the 35/100 interest in the Lane Cove Property were held on trust by JN Property was put on three bases.
2. The first is that the interest in the Lane Cove Property, and thus the sale proceeds, was held on constructive trust in favour of Henan following breach by JN Investments of a Quistclose trust in respect of the funds used to acquire it. As the foundation for that claim is the existence of a Quistclose trust over the funds advanced by Henan to JN Investments, for the reasons outlined above, it does not succeed.
3. The second basis is that the 35/100 interest in the Lane Cove Property was held on trust by JN Property for JN Investments by way of a purchase money resulting trust.
4. I am satisfied that the plaintiffs have established that claim and that the sale proceeds are also held by JN Property on the terms of that resulting trust.
5. As set out in [78] and [79], all of the funds for the acquisition of JN Property's 35/100 interest in the Lane Cove Property were provided by JN Investments. There was, therefore, a presumption that the beneficial ownership of 35/100 interest in the Lane Cove Property was held by JN Investments with a resulting trust arising at the time of its acquisition by JN Property in February 2015.
6. Mr Wang's evidence also supports a finding that JN Investments' funds were used in the character of a purchaser of the interest in the Lane Cove Property and the existence of a resulting trust. Mr Wang agreed to JN Investments' funds being used to pay for the investment, intending for JN Investments to be the purchaser and "co-owner". He was not aware that JN Property or the JN Property Trust existed until late in 2017 and did not consent to JN Property acquiring the interest in the Lane Cove Property using the funds held by JN Investments.
7. The onus of rebutting the presumption of the resulting trust in favour of JN Investments lies on the party seeking to rely on the legal title, namely JN Property, or others with an interest in that legal title, being Ms Wang, Ms Li, NSW Land or NSW Asset Holdings: Weige v Cupton Pty Ltd [2012] NSWCA 414 at [46]. They have not done so.
8. JN Property was (and remains) the trustee of the JN Property Trust. As the interest in the Lane Cove Property was held on a resulting trust, the only property that could become the subject of the JN Property Trust was JN Property's bare legal title.

Cash payments to Ms Wang and Ms Li: misappropriation of JN Investments' funds

1. The plaintiffs claim that, during the course of the 2013 to 2017 financial years, Ms Wang and Ms Li caused a series of cash payments to be made to themselves from JN Investments' funds by way of "loans" (some of which were later reclassified as "wages") "consulting fees" and "expense reimbursements", which were not authorised by the board of JN Investments and made without Mr Wang's knowledge or consent, in breach of their statutory and fiduciary duties owed to JN Investments, in breach of the JV Agreement and in breach of the Quistclose trust in favour of Henan.

Evidence of payments and amounts misappropriated

1. The payments made to Ms Wang and Ms Li are detailed in the financial statements prepared by Winner Partnership, the bank records and other documents in evidence. They are also summarised in the Exner Report for the 2013 to 2016 financial years and in MF1-1 for the 2017 financial year.
2. The Exner Report and MFI-1 identify that, in total, $7,598,510 was paid to Ms Wang and Ms Li by JN Investments and JN Agribusiness during the course of the 2013 to 2017 financial years by way of loans (and/or salary), consulting fees, expense reimbursements and "other".
3. Ms Wang received payments totalling $3,948,996, made up of: 1. $2,290,468, by way of "loans" (and/or "salary") and "consulting fees" from JN Investments and JN Agribusiness in the 2013 to 2017 financial years; 2. $1,425,000, being the funds transferred to Ms Wang for the purchase of the Hyde Apartment on 8 October 2013; and 3. $233,528, for "expense reimbursements" from JN Investments in the 2013 to 2016 financial years.
4. Ms Li received payments totalling $3,649,514, made up of: 1. $2,035,433, by way of "loans" (and/or "salary") and "consulting fees" from JN Investments and JN Agribusiness in the 2013 to 2017 financial years; 2. $1,585,000, being the funds transferred to Ms Wang for the purchase of the Hyde Apartment on 8 October; and 3. $29,081, for "expense reimbursements" from JN Investments in the 2013 to 2016 financial years.
5. A number of observations may be made about these payments and the plaintiffs' claim about the misappropriation of funds by Ms Wang and Ms Li.
6. First, a significant proportion of the "loan" and "consulting fees" payments received by Ms Wang and Ms Li were in the form of regular monthly or fortnightly payments, of which $1.35 million were later reclassified by Ms Xie in the revised financial statements as part of the wages expense of JN Investments.
7. In relation to JN Investments, the regular payments commenced in June 2013 in an amount of $12,948, increased to $20,000 per month for the period from September 2013 to February 2014, and then to $30,000 per month for the period from March 2014 to April 2016 (with limited exceptions). These payments also included amounts of $20,000 which were recorded as "consulting fees" based on instructions Ms Wahhab received from Ms Wang and Ms Li in August 2015.

Were the cash payments made in breach of duties to JN Investments?

1. The plaintiffs' claim that, in causing JN Investments directly, and through JN Agribusiness, to make the cash payments to themselves, Ms Wang and Ms Li contravened ss 181 and 182 of the Corporations Act and breached their fiduciary duties owed to JN Investments.
2. As noted at [113] and [114], as directors, Ms Wang and Ms Li owed statutory duties under ss 181 and 182 of the Corporations Act and fiduciary obligations to JN Investments.
3. As directors, Ms Wang and Ms Li could not use company property for their personal benefit without the company's authority and could not take remuneration or other benefits from the company's resources unless authorised by law, authorised by the company's constitution or with the fully informed consent of the company in general meeting: Robert Austin and Ian Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) at [9.200].
4. Their fiduciary duty to not promote their personal interests by taking profits or advantage from a company's property or funds for themselves (or some other person) in conflict with the interests of the company, and their statutory duties to act in good faith and for a proper purpose and not to improperly use their position to gain an advantage for themselves or someone else cover the same ground. If a director has promoted their personal interest or improperly used their position to gain such an advantage, their statutory and fiduciary duties would be breached: ASIC v Adler (2002) 168 FLR 253; [2002] NSWSC 171 at [735] per Santow J.
5. I am satisfied that Ms Wang and Ms Li caused JN Investments and JN Agribusiness to make the impugned cash payments to themselves in circumstances where they were not entitled to those payments.
6. Mr Wang, as the majority shareholder and other director of JN Investments, did not reach any agreement with Ms Wang or Ms Li regarding the payment of any consultancy fees, loans or salary. To the contrary, the terms of the JV Agreement and Mr Wang's evidence make clear that none of them were to receive any remuneration from the "joint venture company" other than profits that were to be shared equally.
7. The regular monthly and fortnightly payments meant that Ms Wang and Ms Li each received an annual payment of roughly $240,000 for the 2014 financial year, increasing to roughly $480,000 in the 2016 financial year. Receiving regular payments in those amounts was in clear breach of what the parties had discussed and agreed on 25 February 2013. I also reject any suggestion that Ms Wang and Ms Li were authorised to pay themselves such significant sums in the context where the joint venture business was a non-income producing start-up venture in respect of which the parties had agreed that financial benefits were to be taken by way of profits.

Did Ms Wang and Ms Li knowingly assist each other's breach of fiduciary duty?

1. The plaintiffs also advance claims of knowing assistance, or alternatively knowing inducement, against both Ms Wang and Ms Li and seek to establish them as constructive trustees in respect of the impugned cash payments.
2. Each of Ms Wang and Ms Li will be liable as constructive trustees for their own and the other's share of the impugned cash payments if they assisted each other with knowledge of the dishonest and fraudulent breach of fiduciary duty on the part of the other: Barnes v Addy (1874) LR 9 Ch App. 244.
3. In my view, the evidence establishes that Ms Wang had actual knowledge of and actively participated in Ms Li's breaches of fiduciary duty such that can it can be said that she assisted or facilitated Ms Li's fraudulent and dishonest breaches of duty with actual knowledge that she was doing so: Farah Constructions at 162-164.
4. The facts giving rise to the fraudulent and dishonest breaches of fiduciary duty by Ms Li were well known to Ms Wang and the evidence indicates that she assisted in, or facilitated, those breaches. Ms Wang was deeply and directly involved in the relevant activities that led to the impugned cash payments being made to Ms Li. She engaged in dishonest breaches of fiduciary duty of the same type, was present at meetings with Ms Wahhab when the making of certain payments were discussed, and had knowledge of and facilitated the same type of payments being made to Ms Li.
5. The evidence establishes that Ms Wang: 1. recorded the making of the regular payments to herself and Ms Li in her diary notes during the period June 2013 to 23 June 2017 and had no basis for believing that JN Investments or Mr Wang had consented to those payments being made to Ms Li; 2. was responsible for instructing Ms Wahhab in relation to the preparation of the financial statements, which included that the regular payments should be recorded as "loans" to Ms Li; 3. sent the expense reimbursement schedules to Ms Wahhab on behalf of herself and Ms Li; and 4. was copied to correspondence from Ms Wahhab to Ms Li relating to the payment to Ms Li of "consulting fees and research expenses" in December 2013, which form part of Ms Li's cash payments amount.
6. Similarly, I am satisfied that the evidence establishes, on the balance of probabilities, that Ms Li assisted in and had knowledge of Ms Wang's activities in furtherance of a dishonest and fraudulent design to appropriate JN Investments' funds for Ms Wang's own use and benefit. Ms Li associated herself with Ms Wang's breaches with actual knowledge of dishonest wrongdoing.

Other claims

1. Based on my findings at [234] to [246], I am also satisfied that the receipt of the impugned cash payments and failure to remit them to JN Investments was in breach of the JV Agreement. For the reasons previously outlined, Henan has not established a claim against JN Investments based on a breach of a Quistclose trust.

Relief

1. The plaintiffs seek declaratory relief, an order for account and an order that Ms Wang and Ms Li, jointly and severally, pay to JN Investments the value of the impugned cash payments by way of equitable compensation.
2. While I am satisfied that declaratory relief of the type sought in paragraph 10 of the Third Amended Summons is appropriate in this case, it will be limited to the impugned cash payments identified at [229]. I am not persuaded that the declaration should refer to the payments identified in the Exner Report at [3.10] and [3.19] as they include the 8 October 2013 payments relating to the purchase of the Hyde Apartment, which were authorised by Mr Wang, and expense reimbursement payments which are not challenged by the plaintiffs. The amounts referred to in the Exner Report also do not account for payments made by Ms Wang and Ms Li to JN Investments and JN Agribusiness that reduce the overall quantum of the funds which Ms Wang and Ms Li have misappropriated.
3. As for equitable compensation, the impugned cash payments are recoverable by JN Investments as the loss suffered consequent upon the breaches by Ms Wang and Ms Li of their fiduciary duties as directors of JN Investments and the knowing assistance of each in the breaches of the other. But for their breaches of duty, the impugned cash payments would have remained part of JN Investments' funds, whether held in its or JN Agribusiness' bank accounts. To the extent they were made from JN Agribusiness, they are losses recoverable by JN Investments as they represent funds that were sourced from, and would have been held by, JN Investments but for Ms Wang and Ms Li's sustained breaches of fiduciary duty.
4. Finally, I note that the pecuniary relief sought by the plaintiffs does not include a quantified claim for damages for breach of the JV Agreement.

Funds to discharge the Westpac mortgage: trust claim

1. At the hearing, Senior Counsel clarified that the trust claim in respect of the $1 million, which was transferred from JN Investments' CCB Account into Ms Wang and Ms Li's joint accounts on 26 June 2014, was a claim based on a resulting trust in the nature of a Quistclose trust: T99:50-100:1.
2. The Quistclose trust is asserted to arise as the sum of $1 million was taken by Ms Wang and Ms Li from funds held by JN Investments that were made available by Mr Wang for the specific purpose of discharging the Westpac mortgage. The plaintiffs also claim that Ms Wang and Ms Li used those funds in breach of that trust, relying on the matters referred to at [60] and [61], which evidence that Ms Wang and Ms Li used the funds for a range of purposes and did not discharge the Westpac mortgage until the time the Hyde Apartment was sold.
3. While there is force to the plaintiffs' claim that Ms Wang and Ms Li used the $1 million funds for purposes which were not authorised and which may have been in breach of trust, no specific relief is sought in respect of this claim.
4. It is also a claim which seems to me to overlap with the other claims made in relation to the Hyde Apartment and the impugned cash payments. I have already concluded that Ms Wang and Ms Li are liable to account for the net sale proceeds of the Hyde Apartment and to pay equitable compensation for that amount to JN Investments (at [194]-[197]). I have also found that JN Investments is entitled to recover equitable compensation from Ms Wang and Ms Li for the impugned cash payments (at [260]). The quantum of that equitable compensation takes into account the $1 million transferred to Ms Wang and Ms Li, the payments they subsequently made and the discharge of the Westpac mortgage.
5. In those circumstances, I consider it unnecessary to decide whether the $1 million advanced were subject to a Quistclose trust in favour of JN Investments or whether Ms Wang and Ms Li breached that trust by using the funds in the way they did.

Unauthorised creation of business entities: claims by Mr Wang

1. Mr Wang makes two claims against Ms Wang and Ms Li in relation to the creation of JN Agribusiness, JN Property, and the JN Property Trust and the issuing of shares and allocation of units in respect of those entities; a trust claim and a claim in contract.
2. The trust claim is that Ms Wang and Ms Li created those entities and allocated shares and units to themselves and their companies (NSW Land and NSW Asset Holdings) in breach of the fiduciary duties they owed to Mr Wang, as they did so acting in their personal interests at Mr Wang's expense. Mr Wang claims that the breaches of fiduciary duty were in furtherance of a dishonest and fraudulent design, namely, the diversion of the business of the joint venture to vehicles in which Mr Wang did not hold 90% of the equity without Mr Wang's knowledge or consent, and that NSW Land and NSW Asset Holdings knowingly assisted in those breaches of duty. Thus, he claims that NSW Land and NSW Asset Holdings hold their interests in JN Agribusiness, JN Property and the JN Property Trust, to the extent they are more than 5% of the shares and units in those entities, on constructive trust in his favour.
3. The contract claim is based on Ms Wang and Ms Li having breached the JV Agreement by creating those entities without Mr Wang's authority or consent and allocating interests to him which departed from the term of the JV Agreement that provided for a 90/5/5 division to apply to the equity in the joint venture between them.
4. Mr Wang had no knowledge of the existence of JN Agribusiness, JN Property or the JN Property Trust, or that he held less than 90% of the equity and units in them, until late 2017, well after the entities were created and the capital structures and unit holdings were first put in place. Nor was Mr Wang aware of the reallocation of units in the JN Property Trust which resulted in him holding only 34 units.
5. The fiduciary obligations that I have found were owed to Mr Wang required Ms Wang and Ms Li not to pursue their own personal interests in circumstances where there was a conflict between their interests and those of Mr Wang's: at [145]. In other words, they were bound by their fiduciary duty not to make or pursue a gain in respect of the joint venture business at Mr Wang's expense.
6. The entities created by Ms Wang and Ms Li were involved in the operations of, and held property acquired as part of, the joint venture business. JN Agribusiness operated the Blueberry Farm and JN Property acquired the interest in the Lane Cove Property as trustee for the JN Property Trust.

Other uses of JN Investments' funds: claims by Mr Wang, JN Investments and Henan

1. The plaintiffs' final claims relate to the purchase by JN Property of the interest in the Lane Cove Property and the rent-free occupation of the Blueberry Farm by JN Agribusiness. There is a deal of overlap in the way these and some of the other claims have been put. Based on my previous findings, the final claims are, in effect, alternative claims and can, in my view, be dealt with in a more summary way.
2. The first claim is based on Ms Wang and Ms Li having caused JN Investments to spend $3.255 million to purchase the 35/100 interest in the Lane Cove Property in the name of JN Property and accounted for as an asset of the JN Property Trust. The plaintiffs allege that this was done by Ms Wang and Ms Li in furtherance of a dishonest and fraudulent design to appropriate funds for their own benefit, namely acquiring property through vehicles in which they held more than 5% of the equity and units, in breach of Ms Wang and Ms Li's fiduciary and statutory duties owed to JN Investments. They also claim the conduct was in breach of the JV Agreement and in breach of the Quistclose trust in favour of Henan.
3. For reasons similar to those at [268] to [282], I am satisfied that Ms Wang and Ms Li's conduct in causing JN Property to purchase the interest in the Lane Cove Property using JN Investments' funds was in breach of their fiduciary duties they owed to JN Investments and to Mr Wang and, in doing so, they knowingly assisted each other in those dishonest breaches of duty. It was a transaction under which Ms Wang and Ms Li stood to make personal gains through their shareholdings in NSW Asset and NSW Land Holdings, was undertaken without the consent or authority of Mr Wang or the Board of JN Investments, and was contrary to and in conflict with the interests of Mr Wang in his capacity as the other director of JN Investments and a joint venturer. They assisted each other with the transaction and had actual knowledge of the dishonest nature of the breaches of duty.
4. That said, I have already found that NSW Asset Holdings and ASIC are liable as constructive trustees to account for and transfer their interests in JN Property and the JN Property Trust to Mr Wang. I have also found that JN Property holds the sale proceeds of the 35/100 interest in the Lane Cove Property on trust for, and is liable to account for them to, JN Investments. In that context, there does not seem to me to be a basis for further relief in respect of this additional claim of breach of fiduciary duty by Ms Wang and Ms Li.

Relief, costs and orders

1. I have already made findings in relation to some of the relief to be granted to the plaintiffs. I make the following further observations about the relief sought in the Third Amended Summons.
2. At paragraph 14 of the Third Amended Summons, the plaintiffs seek an order that Ms Wang and Ms Li render accounts in respect of themselves, JN Investments, JN Property and JN Agribusiness. That order is sought in aid of further proceedings for the taking of accounts and the hearing of any claim by the plaintiffs for either a proprietary interest in, or an equitable charge over, any property of Ms Wang and Ms Li.
3. An order that Ms Wang and Ms Li render accounts in common form is available to JN Investments as of right as funds are held by them as constructive trustees: Chong v Channell [2009] NSWSC 765 at [7]. That said, at this stage, I have only made an order that Ms Wang is to render accounts in respect of herself. I have deferred making an order in relation to Ms Li, JN Investments, JN Property and JN Agribusiness in order to enable the plaintiffs to consider these reasons and make further submissions as to whether they wish to pursue an order in respect of Ms Li and the other entities and, if so, on what basis.
4. Paragraph 24 of the Third Amended Summons seeks an order for Ms Wang and Ms Li to pay to JN Investments equitable compensation in the amount of $5,318,019.74, less the amount of stamp duty, conveyancing fees and adjustments on closing paid or payable on the sale of the Hyde Apartment and subject to any amounts recovered pursuant to any further proceedings after the taking of accounts. The amount of $5,318,019.74 reflects the total of the cash payments (at [229]) and the Hyde Apartment net sale proceeds (at [197]), in respect of which I have found Ms Wang and Ms Li to be jointly and severally liable to pay to JN Investments. It is appropriate to make that order, subject to any recovery in the event of proceedings for the taking of accounts.
5. Paragraph 25 of the Third Amended Summons seeks an order for interest. I have deferred making any specific order in respect of interest to allow the plaintiffs to make submissions as to nature of the interest order they seek and the quantum of any interest that should be subject to the order.
6. As for costs, I see no reason why the usual rule should not apply and will order the first and second defendants to pay the plaintiffs costs of the proceedings.

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