LCC Property Development Pty Ltd (Receiver and Manager Appointed) v Winau Aust Pty Ltd

LCC alleges all these payments were made at its expense. Of the Trust’s total financial liabilities of $9,004,929 in FY20, the sum of $4,101,254 represented LCC’s Unit Holder’s loan to 183E. No more than $5,319,675 (being $9,420,929 minus $4,101,254) was owed by 183E to creditors other than LCC. But 183E paid out $6,974,695.66 under the authority of Ms Chen, Ms Yuan and Mr Liang. The difference of approximately $1,655,020 appears to have been paid out to non-creditors. Had the $6,974,695.66 been distributed rateably among 183E’s creditors, as might ordinarily be expected if 183E were to treat its creditors equally, then LCC should have received about 43.5% of the $6,974,695.66 being $3,033,690.

Instead, LCC received nothing. Moreover, several parties associated with the respondents to the motion benefited from 183E’s payments. Ms Yuan was at all material times a director and 40% shareholder of Winau Aust Pty Ltd (“Winau”), the first defendant, and a director and shareholder of Tourmaline Australia Pty Ltd (“Tourmaline”), which 183E paid respectively $2,700,544.85 and $1,372,870.93 from the funds paid out of Court at this time. Ms Chen was also a director and the sole shareholder of Shunjiyan Investments Pty Ltd (“Shunjiyan”) which was also paid $1,014,908.32.

LCC's case is supported by material evidence that these various payments were made and authorised by the directors of 183E without them giving any prior notice to LCC that the payments would be made. The making of the payments by 183E to the various defendant entities does not seem to be actively disputed on the motion. Nor is the lack of advance notice to LCC that payment was going to be made to these other defendants apparently disputed. Ms Yuan, Ms Chen, and Mr Liang owe LCC an explanation for these apparently self-dealing preferential payments in their own interests in the exercise of their director’s duties. The material before the Court does not provide an obvious explanation of the payments. These facts found a range of claims for equitable compensation and damages against Ms Chen and Ms Yuan on behalf of LCC, including for breach of fiduciary duty, breach of directors’ duties, breaches of their Corporations Act 2001 (Cth) statutory duties as directors, and a Barnes v Addy second limb claim: Barnes v Addy (1874) LR 9 Ch App 244.

LCC’s case against these defendants, Ms Chen and Ms Yuan, goes further. They continued as directors of 183E through FY21. In the financial statements for the Trust for FY21 the Unit Holder Loan of $4,101,254 owing by 183E to LCC and recorded in its balance sheets in FY17, FY18, FY19, FY20, was reduced to nil. But LCC’s loan had not been repaid. It had not been consulted about the cancellation of its acknowledged liability recorded over many years in 183E’s financial statements. LCC says that the writing down of 183E’s obligations to LCC to nil is consistent with an intent to conceal the effect of the improper distributions.

Other parts of 183E’s financial statements are anomalous given these undisputed payments. The FY21 financial statements continued to record Winau as a creditor of 183E in the sum of $910,175 as at balance date FY20 but as a creditor of 183E in the sum of $198,091 at balance date FY21. It is a fact in need of explanation that although 183E had paid Winau $2,700,544.85 in FY21, 183E’s indebtedness to Winau apparently decreased by only $712,084 that financial year. Another fact in need of explanation is that although Tourmaline was paid $1,372,870.93 in FY21 it does not appear anywhere in 183E’s FY21 balance sheet either as a creditor or a debtor.

These are substantial unexplained payments, and all made to the disadvantage of LCC. A curious feature of this case is that despite the explanations Ms Chen and Ms Yuan gave about the particular recent transactions that appear to have triggered the motion, very little has been said about how these two defendants propose to defend the claims against them in the principal proceedings. Those claims for Barnes v Addy second limb relief feature allegations that the defendants participated in a dishonest scheme to defraud the plaintiff. Ms Chen and Ms Yuan have fielded some defences to these claims so far. These defences are discussed below in the Court’s analysis. But these are technical defences which appear to have answers (as the analysis below shows) and do not seek to meet or explain the substance of the allegedly dishonest preferential payment scheme superintended by the directors of 183E in June-July 2021. These defendants may at trial give substance to their denials of the misconduct alleged by the plaintiff, by making out a substantive defence to the plaintiff’s principal claim at trial. But the Court has not yet seen the profile of that substantive defence. In contrast, there is certainly prima facie evidence of the plaintiff’s case that the defendants participated in a dishonest scheme to defraud LCC.

These facts found other causes of action in LCC’s pleading. The deed constituting the Trust and the Unit Holder Agreement among the investors in the Trust create a range of contractual and equitable duties among those investors to act fairly, reasonably inter se and in the interests of Trust. LCC alleges that these terms of the Trust Deed and the Unit Holders Agreement were breached by Ms Yuan and Ms Chen by the same conduct in excluding LCC from 183E’s June-July 2021 creditor payments. LCC’s case that these payments constituted breaches of the Trust Deed and the Unit Holders Agreement is arguable on the facts available to the Court.

LCC’s contention that 183E’s June-July 2021 creditor payments purposely excluded LCC is compounded by 183E’s failure to inform LCC (a Unit Holder to which 183E owed obligations of good faith) of the payments. This supports a contention that Ms Chen and Ms Yuan are the kind of people who would be prepared to engage in transactions to the financial disadvantage of LCC, whilst choosing to keep LCC in the dark.

On 15 August 2025 Mr Danielle O’Brien, the liquidator of 183E, notified creditors that he had accepted an offer from Dragon Property Development and Investment Propriety Limited (“Dragon”) to assign his rights under Corporations Act 2001 (Cth) s 588FE to pursue various entities (including LCC and many of the defendants to these proceedings) to set aside voidable transactions and to any person who acted as a director of 183E for breach of fiduciary duty.

But LCC relies upon two more recent other transactions to support its case on the motion. One transaction involves Ms Chen and the other involves Ms Yuan.

On the Chen motion, LCC seeks relief against both Ms Chen and her brother, Mr Chen, who is a respondent to the motion although not a defendant in the proceedings. The basis of this claim is that Ms Chen is alleged to have transferred certain real property to Mr Chen for an undervalue shortly after becoming aware of these proceedings. The real property in question was referred to in the proceedings as “the Gearin Property”, a property in Gearin Alley, in the Sydney suburb of Mascot.

The Court is satisfied that on or about 15 August 2025 Ms Chen obtained information from the liquidator of 183E that LCC was about to take steps to prosecute on behalf of 183E various assigned potential claims against Ms Chen and Ms Yuan and the entities they controlled, claims arising out of the June-July 2021 transactions. LCC says that the transactions which followed were triggered by this knowledge.

On 1 September 2025 Ms Chen, who had acquired the Gearin Property from her father for $950,000 in March 2020, obtained a valuation of the property for stamp duty purposes. Ms Chen’s father had previously acquired the property in 2017 from a developer for $1,286,000. These various intra-family transactions are not obviously arms-length transactions and represent consideration considerably below prior arm’s length market value transactions.

On 25 September 2025, Ms Chen entered into an agency agreement to sell her only other real property in Australia, a property in Forster Street, Mascot (“the Forster Street property”). Then on 18 November 2025 Ms Chen contracted to sell the Gearin Property to her brother, Mr Chen for $950,000, the same price at which she had acquired it from her father five years earlier. That price was well below the price at which he had acquired it from a developer. This sale settled only three days later, on 21 November 2025. Such a shortened settlement period is commercially unusual but may be more explicable within a non-arm’s length sale between family members. But the combination of a shortened settlement period, no increase in the consideration for the property in five years, a sale between family members, and a reduction in the value of property since 2017 are nevertheless indicative of a non-arm’s length transaction. Ms Chen says there are reasons why the consideration for the property was the same in 2020 and 2025.

Ms Chen did not receive any cash from Mr Chen by way of a deposit or on account of the balance of the purchase price, another marker of a non-arm’s length transaction. The net result of the transaction was to diminish Ms Chen’s assets not long after she acquired knowledge that LCC’s current action was imminent. Between mid-October and mid-November 2025 Ms Chen also transferred cash out of bank accounts in her name into bank accounts in her mother’s name.

Ms Chen and Mr Chen say that there are offsetting transactions in relation to these transfers. But even if those offsetting transactions help to neutralise the argument that these late 2025 transactions involved a diminishment of Ms Chen’s assets, the respondent’s evidence does not neutralise the inferences that these transactions:

were timed to occur shortly after Ms Chen gained notice of LCC’s proposed action in these proceedings, and

involve Ms Chen removing from her possession tangible assets such as real estate and cash in alleged satisfaction of claimed intangible obligations such as debts owed to family members, so the net effect of the transactions was to deplete Ms Chen’s readily realisable assets.

LCC advances similar contentions against Ms Yuan, concerning her transactions involving certain real estate referred to in the proceedings as “the Atchinson Property”, a property in Atchinson Street, in the Sydney suburb of St Leonards. Like Ms Chen, in about August 2021 Ms Yuan probably gained information about Dragon purchasing 183E’s claims under Corporations Act, s 588FE and that as a result LCC and Dragon may be enlivening 183E’s potential claims against Ms Yuan and Ms Chen.

Ms Yuan had purchased the Atchinson Property in August 2016 for $1.49 million. A little over 12 months earlier, in May 2024 Ms Yuan had entered into an Agency Agreement to sell the Atchinson Property for between $1.4 and $1.54 million. On 29 September 2025, and LCC says with knowledge of the imminence of the claims in these proceedings, Ms Yuan instructed the agent to take the Atchinson Property off the market. On 18 November 2025 Ms Yuan exchanged contracts with Mr Liu for an off-market sale of the Atchinson Property for $1.15 million. Mr Liu paid Ms Yuan the $1.15 million consideration on settlement on 12 December 2025. Three days later she withdrew $1.48 million from her bank account and deposited it with Ms Yang, her mother. Ms Yuan says that this withdrawal and deposit was in satisfaction of a debt owed by her to Ms Yang.

But as with Ms Chen, even if paying over the $1.48 million to Ms Yang in 2025 was to satisfy an offsetting debt obligation, the evidence does not neutralise the inferences that these transactions:

occur shortly after Ms Yuan gained notice of LCC’s proposed action in these proceedings, and

involve Ms Yuan removing from her possession tangible assets such as real estate (at an undervalue) and cash, in satisfaction of intangible and disputable obligations owed to family members, so the net effect of the transactions was to deplete Ms Yuan’s readily realisable assets.

In addition to these transactions, on 8 October 2025 Ms Yuan applied to de-register Tourmaline. The timing of this conduct is consistent with Ms Yuan seeking to frustrate 183E’s attempts to recover funds paid to Tourmaline. Ms Yuan applied the same day, 8 October 2025, to de-register Winau, another defendant to LCC’s action in the present proceedings for the benefit of 183E.

Ms Yuan and Ms Chen and the other respondents put several contentions against LCC’s case that there is a serious question to be tried. None of these contentions are ultimately persuasive. These contentions (a) attack the basis of LCC’s case and (b) attempt to show that the evidence about the more recent transactions in which the respondents to the two motions have been involved is not sufficient to ground a freezing order against those respondents.

A serious question to be tried – basis of LCC’s case. First, the respondents contend that the injunction should be discharged for material non-disclosure. The respondents say that LCC failed to disclose on the original ex parte applications in December 2025 that the defendants would claim in their defence that 183E’s payments were in payment of bona fide debts. In fact, this was disclosed. But specific disclosure may not have been necessary because the possibility that Ms Chen and Ms Yuan and the other defendants would raise such a defence is obvious from the nature of LCC’s claim.

Moreover, whether the payments made by 183E were lawfully made to bona fide creditors is a matter for trial, as is the question of whether making preferential payments is a breach of the Unit Holders Agreement. But there is certainly a serious question to be tried on the quantum of the payments made to creditors associated with the defendants, even if they were bona fide creditors. And there is a serious question to be tried as to whether Tourmaline was ever a bona fide creditor of 183E.

Ms Chen and Ms Yuan also contend that they have a complete defence to LCC’s Barnes v Addy claim on behalf of 183E, because 183E’s liquidator has determined not to pursue preference claims against them. This is not persuasive. LCC’s pleaded claim does not depend on establishing a voidable transaction, or a preference, or any other claim under Corporations Act 2001 but is a Barnes v Addy second limb claim in equity for equitable compensation and a claim for breach of contract under the Unit Holders Agreement.

The respondents also contend that the fact that LCC has been funded partly by Winau should have been disclosed but was not disclosed at the time that ex parte relief was obtained. The respondents say that therefore the injunction that was granted should be discharged for non-disclosure. This contention is not persuasive - the Winau funding was disclosed.

The respondents next argue that the funds received by 183E from the payment out of Court were not assets of the Trust. This puzzling argument does not acknowledge the fundamental assumption behind the payment out of Court to 183E. If the funds were not Trust funds it is difficult to understand why they were ever paid to 183E by Court order with the apparent consent of Ms Chen and Ms Yuan, the directors of 183E. It is not clear in what other character 183E would ever have been entitled to receive them. None is suggested. Prima facie they were the proceeds of the primary undertaking of the Trust, which was to acquire and develop identified parcels of land in Eastwood, proceeds which had previously been paid into Court.

Next, the respondents contend they have a complete answer to LCC’s claim because LCC holds its property on Trust for others, including some of the defendants. This argument is unpersuasive. The funds that LCC advanced to 183E were either held on trust by LCC or borrowed by LCC from a range of persons including some of the defendants . But because LCC advanced the funds, it is prima facie entitled at law to sue in debt for their return. Whether it holds the cause of action for recovery of the funds so advanced on trust for others, or as funds to be repaid later to others is irrelevant. 183E has no standing at law to contest LCC’s rights to recover the primary debt owed to it. But in any event, this is a matter for trial and does not undermine LCC’s present case that it has raised a serious question to be tried.

Finally, the respondents raise the issue of LCC’s alleged laches. It would be a rare case indeed that a defence of laches in respect of the main claim would be an answer to a claim for interlocutory injunction. There was no alleged laches in bringing the present claim. LCC’s evidence indicates that without any positive assistance from 183E, it acted reasonably promptly in investigating the circumstances after it discovered that 183E had excluded it from the June – July 2021 payments to other creditors. LCC first came to know that the Trustee had disbursed cash from its bank accounts was in early April 2023 when LCC's solicitors read Meagher JA’s judgement in 183 Eastwood Pty Ltd v Dragon Properly Development & Investment Pty Ltd [2022] NSWCA 195 at [12] the Trustee's remaining cash at bank was a little more than $500. LCC then pursued 183E for financial documents which were not supplied. Simpson AJA's judgment in 183 Eastwood v Dragon Property Development & Investment Pty Ltd [2023] NSWCA 146 on 23 June 2023 then revealed that the funds paid out of Court to the trustee were used inter alia to repay unitholder loans. 183E was wound up in insolvency on application by Dragon on 6 November 2023. Thereafter LCC was negotiating the assignment of the claims from the liquidator, which was successful in August 2025, and these proceedings were commenced in October.

A serious question to be tried – the recent transactions*.* Mr Chen and Mr Liu contend that there is insufficient evidence for the Court to extend the existing freezing orders against them.

As to Mr Chen, the evidence supports the inference that he acquired the Gearin property at an undervalue in a non-arm’s length transaction, which should have been self-evident to him.

As to Mr Liu, Mr Zhang submitted on his behalf that the transaction in relation to the Atchinson Property is supported by contemporaneous valuations of similar properties that show that it was not purchased at an undervalue and that there had been decreases in value in the last decade in the unit block where it is located, due to building defects and due to the views of the property being built out. Mr Zhang also points to the lack of any competing valuation evidence coming from LCC, so that the assumption should be made to the Atchinson Property was sold for market value. Mr Zhang submitted, based on Mr Liu’s evidence that Mr Liu used his own funds to purchase the property from an amount of $2.6 million held in his bank account for some time. Mr Zhang also pointed out that the discussions between Ms Yuan and Mr Liu concerning the Atchinson Property had commenced in April 2024, long before the liquidator’s assignment of the current causes of action to Dragon.

But the relationship between the pair was more complex. Mr Liu had received $190,000 from Ms Yuan on 14 November 2025, shortly before the transaction took place. He says that was the repayment of a loan he had previously made to Ms Yuan. Mr Liu has sought in his evidence to make a case that he met Ms Yuan in around May 2022 at a gathering in Chatswood and thereafter they occasionally exchanged greetings on dates of cultural significance but he says “I did not have much interaction with Ms Yuan in my daily life and I would not describe Ms Yuan as my close friend”. But his affidavit of January this year explaining his involvement of the purchase of the property says nothing about having made a loan of $190,000 to explain the receipt of these monies from her. This together with the favourable price are sufficient to ground a potential claim against him under Conveyancing Act 1919, s 37A and warrant the current interim restraint by freezing order.

Balance of convenience. Finally, on the balance of convenience the respondents to both motions challenge the quality of LCC’s undertaking as to damages. A receiver or manager has been appointed to LCC so prima facie its undertaking as to damages would need to be externally supported. This has occurred. Aquamore Credit Equity Pty Ltd (“Aquamore”) is funding this litigation. It has offered to secure its undertaking as to damages by any means which are found acceptable to the Court.

LCC has requested that the respondents nominate in what quantum the respondents’ requests Aquamore to give such security. During submissions no clear figure was provided, as to what security was wanted. It is not disputed that Aquamore has assets available to be used as security. The practical onus is now on the respondents to indicate how much security should be reserved. That will involve the respondents formulating a theory of the potential loss they face should LCC be unsuccessful in the proceedings and should the injunctions granted here be dissolved.

The respondents have not yet identified quantum of the security which they seek, despite invitation from LCC. This issue does not weigh against the continuation of these injunctions.

Finally on the balance of convenience the third-party respondents to the motions did not indicate any immediate need to deal with the real estate that would be under restraint. The Court expressly enquired about this. If that changes then the orders made can be adjusted to accommodate any such future transactions.

One footnote should be mentioned. After the proceedings were concluded on 23 February Ms Chen communicated directly with the Court in the form of written submissions, which the Court then distributed to all the parties. Mr Lim had properly warned her that communicating directly with the Court after the argument had been reserved was not appropriate.

But one of the matters that she raised was the extent to which the freezing orders were overreaching their proper intent and were affecting her ordinary day-to-day bank accounts and interfering with her daily living expenses being paid. As the Court pointed out during the hearing it was not the intention of orders such as this to prevent ordinary daily living expenses being paid and it was not in the interests of the plaintiff (in terms of its liability on the undertaking as to damages) for the orders to operate this widely. Should Ms Chen’s day-to-day financial affairs be unnecessarily inconvenienced by the orders made below, then she should be able to apply to have them varied due to the evolving circumstances affecting her. This is something which the plaintiff itself should facilitate.

Ms Chen’s submission also pointed out that the Forster Street property was being impacted by the freezing order. The order should not interfere with the sale of that property and the discharge of any arm’s length first mortgage security over the property. What happens to the balance of the proceeds of sale is a different question. LCC’s concern is that funds received over and above the first mortgage may be dissipated. In the short term they should probably be frozen rather than applied to satisfy unsecured debts to family members. That is no reason why the sale transaction cannot proceed to the third party as it does not appear to be at an undervalue. Adjustments to the orders may be required to achieve this.