Min Sheng Investment Pty Ltd v Skyland Australia Developments Pty Ltd

Catchwords: CIVIL PROCEDURE — Parties — Joinder — Proceedings for possession of property by a beneficiary against a trustee — Where trustee has capitulated — Where joinder would require the hearing listed for next week be vacated — Where applicant seeking joinder is also a unit holder in the trust — Where applicant seeks to run the trustee's defence and cross-claim as a derivative action

Cases Cited: Gillespie v Gillespies Cranes Nominees Pty Ltd [2022] NSWSC 1184

Category: Procedural rulings

Parties: Min Sheng Investment Pty Ltd trading as Min Sheng Investment Pty Ltd as trustee for Min Sheng Investment Trust (Plaintiff)
Skyland Australia Developments Pty Ltd trading as Skyland Australia Developments Pty Ltd in its own capacity and as trustee for SAD Unit Trust (Defendant)
Bai Family Management Pty Ltd (in its own capacity and ATF the Bai Family Trust) (Interested Party)
Cross Claim:
Skyland Australia Developments Pty Ltd trading as Skyland Australia Developments Pty Ltd in its own capacity and as trustee for SAD Unit Trust (Plaintiff)
Min Sheng Investment Pty Ltd trading as Min Sheng Investment Pty Ltd as trustee for Min Sheng Investment Trust (First Defendant)
Australian Ao Bo Assets Management Pty Ltd as trustee for the Ao Bo Family Trust (Second Defendant)
Australian Ao Bo Assets Management Pty Ltd as trustee for the Bo Lian Family Trust (Third Defendant)
PPD Investment Group Pty Ltd (Fourth Defendant)

Representation: Counsel:
G McDonald (Plaintiff)
No Appearance (Defendant)
C Bova (Interested Party)
S Murray (Interested Party)
Solicitors:
Tahota Law Firm (Plaintiff)
Du and Associates (Interested Party)
Cross Claim
Plaintiff (No Appearance)
Tahota Law Firm (First, Second, Third & Fourth Defendants)

File Number(s): 2022/366623

Publication restriction: No

JUDGMENT

1. These reasons concern a notice of motion filed on 1 August 2025. An amended notice of motion was filed in court today which adds a further order to those already sought. The respondent also indicated that it wished to pursue a motion of its own, but this would only occur if the applicant’s motion failed.

2. There are two proceedings at the core of the motion. I will refer to them as the 2022 proceedings and the 2025 proceedings. The applicant is not a party to the 2022 proceedings but wishes to be joined to those proceedings. As a general statement, the balance of the parties in the two proceedings are common. There is one small difference, but I do not think it relevant for the present decision.

3. The 2022 proceedings concern the enforcement of two agreements, a facility agreement, and a mortgage. The plaintiff is a company and unitholder. The defendant is the trustee of SAD Unit Trust.

4. The 2025 proceedings include allegations by the applicant of a breach of a unitholder’s agreement on the part of the defendant, the trustee in the 2022 proceedings.

5. The 2022 proceedings are set down for a hearing, with an estimate of 10 days, to commence next Monday (18 August). If the orders sought by the applicant are granted this will necessarily require the vacation of the hearing date and a possible future delay, perhaps in excess of 12 months.

6. The setting down of a matter for 10 days, to start very shortly, is a significant reason for refusing the motion. The allocation of court time is precious, and vacation involves the possible deprivation of other litigators who might have benefited from their cases being heard.

7. The applicant made six primary points in favour of its position:

8. the 2022 proceedings involve the enforcement of the facility agreement and the mortgage by the plaintiff against the trustee;

9. by its defence in the 2022 proceedings, the trustee has sought to set aside the above agreements based on allegations of unconscionable conduct. This is the basis of the defence and what may be termed a defensive cross-claim;

10. the trustee has now abandoned both the defence and the cross-claim. The respondent has been on notice of this attitude for some weeks. The trustee has not filed any evidence, nor obeyed Court directions, and is in breach of a guillotine order made by Chen J on 28 March 2025. In contrast, the applicant only became aware of the trustee’s capitulation last week;

11. the applicant is a current unit holder in the relevant trust and has loaned more than $5 million to the trust;

12. the abandonment of its case by the trustee has denied the applicant of the benefits that would have ensued had the trustee been successful in its defence of the 2022 proceedings. Accordingly, the applicant wishes to effectively run the trustee’s defence, namely the unconscionability allegations, against the respondent and the defendant to the cross-claim. This is a form of derivative action on behalf of the trustee. It is of the type described by Parker J in Gillespie v Gillespie**s Cranes Nominees Pty Ltd [2022] NSWSC 1184, from [41], but particularly at [43]:

“The High Court in Alexander (at [55]) expressed the doctrine in the form of ‘the proposition that, where relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his own name, joining as defendants the trustee and any other beneficiaries, but only where there are “special circumstances”.’ This proposition operates as an exception to the general rule which the Court quoted from Scott on Trusts:

The interests of the beneficiaries of a trust are protected against a third person acting adversely to the trustee through proceedings brought against him by the trustee and not by the beneficiaries. As long as the trustee is ready and willing to take the proper proceedings against the third person, the beneficiaries cannot maintain a suit against him.”; and

6. the 2025 proceedings involve the same parties seeking relief against the trustee, the plaintiff, and the cross-defendants in the 2022 proceedings. Consequently, there is a great deal of overlap between the two proceedings.

7. The respondent replied with four main points:

8. the applicant does not have the necessary standing to be joined to the proceedings, effectively to act in the derivative action it has outlined;

9. the applicant should have acted earlier to seek the joinder;

10. there will be a significant delay before the ‘new’ proceedings are heard, carrying a good deal of prejudice as a result; and.

11. there is not as much overlap between the two proceedings as claimed.

12. In relation to standing the respondent relied upon a transfer dated 6 August 2019. The difficulty with reliance upon this document is that the agreement for sale of unit trust units maybe unsigned and is inconsistent with a letter from the defendant’s solicitor on 24 July 2024, stating:

“Bai Family Management Pty Ltd remains on the unitholder register ...”

10. The respondent submitted that if I allowed the joinder I would effectively be ruling on the ‘standing’ question. I disagree. I would be neither making a finding of standing, or against standing. That question would be left to the final hearing.

11. In relation to the allegation that the applicant should have acted much sooner, the affidavit of Mr Tianguang Bai dated 31 July 2025, sets out, from para 12, the applicant’s dealings with the trustee, and its solicitors in an endeavour to obtain information about the proceedings. Inquiries were persistently met with assertions about a Harman undertaking, which ultimately had no substance, in particular concerning pleadings.

12. The respondent submitted that in not taking action, the applicant was effectively trusting the trustee that it considered untrustworthy. This untrustworthiness is demonstrated by the 2025 proceedings, as well as the basis for the joinder to the 2022 proceedings. There is some merit in the submission, but it does not overcome the fact that the applicant was denied access over a long period to the details of the 2022 proceedings and therefore could not move to be joined to those proceedings.

13. In relation to prejudice, the respondent envisaged a continuing loss which could exceed $2 million, and there was no obligation on the applicant, such as might arise from an undertaking or a guarantee, to protect against the loss. The respondent accepted that the residential units involved in the dispute might increase in value over the period of delay, but this was not certain and might not exceed the loss otherwise incurred.

14. I agree that the possibility of prejudice does exist. However, if the documents relied upon by the respondent are ultimately found to be based on its unconscionable conduct, then the prejudice will flow in the other direction if I allow the matter to proceed, noting that judgment for the respondent will inevitably follow.

15. The respondent provided me with a chart showing that there were large areas where the two proceedings did not overlap. The chart, which I will mark as MFI 1, is useful but it also shows where there is an overlap, and ultimately the case will turn on the validity of the original facilities agreement and mortgage.

16. Returning to the six points made by the applicant, I think the one with the most strength is the fifth point, concerning the derivative action. The applicant said that if the matter proceeded next week there would inevitably be a judgment in favour of the respondent, the case being undefended, which would give rise to an estoppel preventing contrary orders being made in the 2025 proceedings.

17. In my view, but perhaps only just, the orders sought by the applicant in the amended motion should be made. I appreciate that a long hearing is being vacated close to its commencement. At the same time, I think it obvious that with the capitulation of the defendant, the hearing would probably have lasted no more than a day.

18. As far as costs are concerned, the respondent said the applicant should pay the costs thrown away by the vacation of the hearing date. The applicant said that because the hearing would have been so short the amount of costs would be minimal. I do not entirely agree with the applicant because no doubt there has been preparation for the case and times set aside. In the applicant’s favour, on the other hand, I note that on 11 July 2025 the trustee’s solicitor sent an email to the respondent stating that:

“Given my client’s poor financial position and its inability to further defend the claim or prosecute its crossclaim for several months ...”

19. I think the answer on costs is that the granting of the indulgence to the applicant, and the apparent innocence of the respondent in respect of the application, that the respondent should have some of its costs paid. I will make an order that the costs of the notice of motion be costs in the cause, and also that the applicant should pay one day of the respondent’s costs of the hearing.

20. I make the following orders:

21. Supreme Court proceedings 2022/366623 and Supreme Court proceedings 2025/278371 are to be heard together with evidence in one to be evidence in the other.

22. The hearing for proceedings 2022/366623, due to commence on 18 August 2025, is vacated.

23. Bai Family Management Pty Ltd (in its own capacity and acting as trustee for the Bai Family Trust) is joined as a party to proceedings 2022/366623.

24. The matter is listed before the Registrar on 25 August 2025 to dictate directions as to the management of the two matters and the allocation of a future hearing date.

25. Each party is to pay its own costs of the notice of motion filed on 1 August 2025.

26. The applicant on the notice of motion is to pay one full day of hearing costs thrown away by the vacation of the hearing.

27. The costs order made in the previous paragraph is not to take effect until the completion of the joint proceedings.

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