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[2025] NSWSC 1142
Supreme Court of NSW
2025-09-25
Kunc J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Option Funds Management Ltd v Tung Chit Real Estate Investment Australia Ltd [2025] NSWSC 1142
Hearing dates: 23 – 24 September 2025
Date of orders: 25 September 2025
Decision date: 25 September 2025
Jurisdiction: Equity
Before: Kunc J
Decision: Proceedings dismissed
Catchwords: PARTNERSHIPS AND JOINT VENTURES — Joint venture agreements — Rights and duties between joint venturers — Whether partnership — Whether receiver validly appointed
Legislation Cited: Income Tax Assessment Act 1997 (Cth)
Partnership Act 1892 (NSW)
Cases Cited: United Builders Pty Ltd v Mutual Acceptance Ltd (1980)144 CLR 673
Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd (2010) 242 CLR 508
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
Texts Cited: W D Duncan, Joint Ventures Law in Australia (3rd ed, 2012, The Federation Press)
Category: Principal judgment
Parties: Option Funds Management (Plaintiff)
Tung Chit Real Estate Investment Australia Ltd (First Defendant)
Zhao’s Brothers Investments Pty Ltd (Second Defendant)
Jason Tung & Ozem Kasem in their capacity as Receivers and Managers of Option Funds Management Ltd as Trustees for Options SIV Real Estate (Third Defendant)
Representation: Counsel: G Sirtes SC/A Hourigan (Plaintiff)
D L Cook SC (First Defendant)
Ms L O’Keeffe, Solicitor (Second Defendant)
R Glasson (Third Defendant)
Solicitors: Chancery Legal (Plaintiff)
Auyeung Hencent & Day (First Defendant)
Amberlake Lawyers (Second Defendant)
Hilton Bradley (Third Defendant)
File Number(s): 2025/149215
Publication restriction: Nil
These proceedings are a dispute between the participants in a venture to develop four parcels of land at Magenta on the NSW Central Coast.
The plaintiff is Option Funds Management Ltd (Receivers and Managers Appointed) (OFM). The third defendants are the receivers of OFM. They were appointed by the first defendant, Tung Chit Real Estate Investment Pty Ltd. The second defendant is Zhao’s Brothers Investment Pty Ltd (Receiver and Manager Appointed). In what follows, unless the context otherwise requires, the abbreviations which I have given to the parties refer to them as they were before the appointment of receivers. Although irrelevant to these reasons, I also note for completeness that OFM and Zhao’s Brothers were acting as trustees.
The original parties to the venture were OFM, Tung Chit and Zhao’s Brothers in accordance with the terms of a joint venture agreement (JV Agreement). Those terms included that the parties’ respective “Percentage Interests” in the “Joint Venture” (whatever it was as a matter of law) were held as tenants in common (OFM 39%; Tung Chit 51%; Zhao’s Brothers 10%), which reflected how they held as tenants in common the four parcels of land that were the subject of the venture.
As part of their arrangements, the parties also incorporated Magenta Shores Development Pty Ltd (Development Manager) as the vehicle to undertake the venture. The shareholdings in the Development Manager were OFM 39 shares; Tung Chit 56 shares; and Zhao’s Brothers 5 shares. Nothing turns on the reason why the shareholdings of Tung Chit and Zhao’s Brothers in the Development Manager are not in accord with their interests in the venture.
OFM was unable to make the financial contributions required of it to the venture. Tung Chit lent OFM the funds OFM needed to make those contributions and, in return, OFM granted Tung Chit security over OFM’s assets and undertaking, including its interest in the venture. There was no dispute that OFM has defaulted in its obligations to Tung Chit, which has purported to appoint the receivers.
The receivers have since exchanged a contract to sell to Golden Stone Fund Pty Ltd OFM’s interest in the land which is the subject of the venture. While Golden Stone was not a party to these proceedings, it would have to be given an opportunity to be heard before the Court granted the relief sought by OFM because that relief may be adverse to Golden Stone’s rights under its contract with the receivers. That relief included a declaration that the appointment of the receivers was “invalid on the specific ground that receivers cannot be appointed by one partner over another partner in a partnership, or over partnership property”.
The proceedings were efficiently conducted over two days almost exclusively by reference to the various agreements between the parties. There was no material dispute about the facts.
For all the complexity of the agreements, there were only two questions which the Court had to determine. These arose because OFM contended that the venture was a partnership, so that the appointment of the receivers was invalid because a creditor partner could not take a security (and hence enforce by appointing a receiver) over a debtor partner’s interest in the assets of the partnership. OFM submitted that the correct course was for the partnership to be wound up by the appointment of a receiver who would then sell all of the land comprising the venture rather than just OFM’s interest in it.
Tung Chit, supported by the other defendants, contended that it was irrelevant whether or not the venture was a partnership, because the right being exercised by the receivers and over which Tung Chit had security was a personal right of OFM’s under the JV Agreement to withdraw from the venture. Assuming the venture was a partnership, that right could not be partnership property and its exercise by the receivers could not fall within the principles relied upon by OFM.
The two questions, and their resolution for the reasons set out below, were:
Were the receivers appointed over and exercising a right that, assuming the venture was a partnership, was a partnership asset? The Court answers this first question “no”.
In any event, was the venture a partnership? The Court answers this second question “no”.
Mr G Sirtes of Senior Counsel appeared with Mr A Hourigan of Counsel for OFM. Mr D L Cook of Senior Counsel appeared for Tung Chit. Ms L O’Keeffe, Solicitor, appeared for Zhao’s Brothers. Mr R Glasson of Counsel appeared for the receivers. Zhao’s Brothers and the receivers adopted the submissions put by Mr Cook SC on behalf of Tung Chit.
The proceedings turn on the effect and operation of these agreements:
JV Agreement entered into in October 2015 between Zhao’s Brothers, OFM and Tung Chit;
Development Management Agreement entered into in October 2015 simultaneously with the JV Agreement between Zhao’s Brothers, OFM, Tung Chit and Magenta Shores Development Pty Ltd (Development Manager);
Secured Loan Facility Agreement entered into on 6 December 2019 between, relevantly, OFM as borrower and Tung Chit as financier;
General Security Agreement – All Property (GSA) entered into on 6 December 2019 between OFM as grantor and Tung Chit as grantee;
Deed of Appointment of Receivers & Managers made on 27 August 2024 between Tung Chit as the secured party and the receivers; and
An Umbrella Deed made on 18 July 2025 between OFM as seller, the receivers, Golden Stone as buyer, Tung Chit, Zhao’s Brothers and the receiver of Zhao’s Brothers.
Having identified the various agreements, it is convenient to make five preliminary observations.
First, the dispute between the parties was very narrow. For example, there was no dispute that:
Tung Chit had advanced funds to OFM;
OFM was in default under the Facility Agreement and GSA for non-payment of the moneys secured by the GSA;
Tung Chit was entitled, as a general proposition and subject to the position advanced by OFM, to appoint the receivers;
There was no complaint about the adequacy of the market testing process undertaken by the receivers to ascertain the sale price for OFM’s interest in the venture under the Umbrella Deed; and
If the venture was not a partnership, OFM was not entitled to the relief it sought in these proceedings.
Second, to keep quotations from the various agreements within reasonable bounds, where I have extracted sections from the agreements, I have not extracted the definitions for defined terms used in those sections unless necessary to understand the extract or to resolve some dispute.
Third, the Court does not accept Mr Sirtes SC’s submission that in considering the JV Agreement and the Management Agreement, primacy should be given to the JV Agreement. This is because it is clear from their terms and their simultaneous execution that the documents comprise the entire framework of the contractual relationship between the parties to those agreements and that they must be read together.
The relevant parts of the JV Agreement which support that conclusion are:
“Recitals:
…
D. The Parties wish to enter into this agreement for the purpose of conducting the Project in accordance with the terms and conditions contained in this agreement.
…
Definitions:
1.1 Definitions
For the purposes of this Agreement unless there is something in the subject or context inconsistent therewith the following expressions shall have the meanings assigned to them below:
1.1.11 "Manager'' means the manager appointed pursuant to clause 6;
…
- Manager
6.1 Appointment of Manager
The parties have appointed Magenta Shores Development Pty Ltd (ACN 607 133 577) as Manager of the Joint Venture under a Development Management Agreement dated on or about the date of this Agreement (Development Management Agreement).
6.2 Management Agreement
The parties must not amend, assign or terminate or give any notice or consent under the Development Management Agreement without the prior approval of all parties.”
“Recitals:
A. As at the date of this Agreement, The Joint Venturers have entered into the Joint Venture Agreement to develop and undertake the Magenta Project.
B. The Development Manager has been incorporated to undertake the Works on the Land and act as the development management company for the Magenta Project.
C. The Development Manager must carry out or procure that the Works are carried out in accordance with this Agreement.
D. The Joint Venturers and Development Manager have agreed to enter into this Agreement to record the Parties' rights, obligations and entitlements in respect of the Magenta Project.
1. Definitions and Interpretations
1.1 Definitions
For the purposes of this Agreement unless there is something in the subject or context inconsistent therewith the following expressions shall have the meanings assigned to them below:
….
(h) "Magenta Project" has the same meaning as Project in the Joint Venture Agreement.
…
(k) "Transaction Documents" means this Agreement, the Joint Venture Agreement, the Building Contract, securities for the Development Finance, Contracts for Sale and all other agreement and documents entered into or created for the purposes of the Magenta Project.
…
1.2 Incorporation of definitions
For the purpose of this Agreement, the definitions in the Joint Venture Agreement are incorporated and form part of this Agreement.
…
8.3 Development Manager's Undertakings
The Development Manager must not at any time:
(a) terminate, rescind, discharge (otherwise than by performance) or agree to vary a Transaction Document; or
(b) grant any material waiver, time or indulgence in respect of an obligation under a Transaction Document;
(c) enter into any agreement that may have the effect of derogating from the obligations of a person under a Transaction Document;
(d) do or omit to do anything with a result that another party to a Transaction Document may rescind or terminate the Transaction Document, or
without the consent of the Joint Venturers.”
Fourth, while the JV Agreement and the Management Agreement each define “Party” and “Parties”, the agreements have been inconsistently drafted with those terms capitalised and not capitalised for no apparent reason. Therefore, nothing can be drawn from whether capital or lower case forms of those words are used.
Fifth, in part the argument proceeded on the basis that the Court should start with the JV Agreement and Management Agreement and, if of the view there was not a partnership, look at the subsequent conduct to see if something had changed so that the parties had come to behave as in a partnership. I do not accept this approach, in particular where there is no pleading of variation, abandonment or any similar legally cognisable departure from those original contractual arrangements. Subsequent conduct would undoubtedly be relevant to establish an estoppel, but OFM did not pursue that aspect of its claim.
The Court accepts Mr Cook SC’s submission that even if the venture is a partnership, the receivers have relevantly not been appointed over, and are not exercising, a right that is a partnership asset. The submission proceeds in the following steps, which the Court finds to be correct.
Clause 8 of the JV Agreement gives each party a right of withdrawal (withdrawal right):
“8. Withdrawal
8.1 Withdrawal
The parties in this Joint Venture may withdraw from the Joint Venture only with the consent of all parties in this Joint Venture and in which case the withdrawing party must first offer to the remaining parties in this Joint Venture the first opportunity to purchase the withdrawing parties' share in the Joint Venture by giving not less than three calendar months' written notice of its terms and conditions which must be reasonable to reflect market conditions to the remaining parties in this agreement.
The offers to the remaining parties must be in proportion to their ownership of the total Percentage Interests of the remaining party. If one remaining party does not accept the offer the other remaining party may accept the offer for all of the Percentage Interest being offered by the withdrawing party.
8.2 Sale to third party
In the event that the remaining parties to this Joint Venture do not wish to purchase the withdrawing parties' share of the Joint Venture as per clause 8.1 then:
(a) if the withdrawing party is Tung or Zhao, the withdrawing party may then offer the sale to a third party on terms no more favourable to the third party than offered to the remaining parties in which the third party must be approved by the remaining parties in the Joint Venture and such approval must not be unreasonably withheld; and
(b) the withdrawing party must use its best endeavours to procure that the third party offers to purchase the remaining parties' share of the Joint Venture on the same terms as the purchase from the withdrawing party (adjusted to reflect the different Percentage Interests held by each party).
8.3 Consequences of Withdrawal
Upon withdrawal of a party pursuant to clauses 8.1 or 8.2 that party's Percentage Interest shall be transferred to the remaining parties or to the third party, and the withdrawing party shall forthwith (and as a condition of its release from its obligations under this Agreement) execute such transfers and do all matters and things necessary to transfer the whole of its Percentage Interest for consideration and free from all encumbrances to the remaining party or to the third party.”
It is clear beyond argument that the right conferred by cl 8 is a right personal to each party and could not be partnership property even if there were a partnership.
Under the GSA, OFM granted Tung Chit this security:
“2.1 Security
The Grantor grants to the Grantee as security for the due and punctual payment of the Secured Moneys:
(a) a PPSA Security Interest (by way of charge) in the Personal Property; and
(b) a charge over all its interest in the Other Property.”
“Other Property” means all of the present and after-acquired (and other future) undertaking, assets, rights and interests of the Grantor including:
(a) all real and personal property, things in action, goodwill, uncalled and called but unpaid capital wherever located other than Personal Property;
(b) all the Trust Property of the Trust which is not Personal Property; and
(c) to the extent PPSA does not apply to it, the Trustee's Indemnity and the Trustee's Lien.
…
“Personal Property” means:
(a) all of the present and after-acquired (and other future) personal property of the Grantor (but excluding interests in personal property to which PPSA does not apply);
(b) all Trust Property which is personal property (but excluding interests in personal property to which PPSA does not apply); and
(c) to the extent PPSA applies to it, the Trustee’s Indemnity and the Trustee’s Lien.”
The combined effect of those definitions is to cast the definition of “property” as widely as possible. To be specific in this case, the withdrawal right is “Other Property” as a “right” of OFM as Grantor.
By the Appointment, the receivers were appointed receivers and managers of the secured property, being defined in Schedule 1 to the Appointment in identical terms to that set out in [25] above.
The receivers have therefore been appointed as receivers and managers of the chose in action which is the withdrawal right.
In addition to their powers conferred by the general law, under cl 9.3(r) of the GSA, the receivers have this specific power (exercise power):
“(r) perform or enforce documents: to observe, perform, enforce, exercise or refrain from exercising any right, power, authority, discretion or remedy of the Grantor under, or otherwise obtain the benefit of:
(i) any document, agreement or right which attaches to or forms part of the Secured Property; and
(ii) any document or agreement entered into in exercise of any Power by the Receiver;”
“Recitals
A. Option Funds Management Ltd is the trustee for Option SIV Trust.
B. Zhao's Brothers Investment Pty Ltd is the trustee for Zhao Family Trust.
C. The Seller, Tung Chit and Zhao's Brothers are the parties to the Joint Venture, as described below.
D. On or about 26 August 2015, the Joint Venture Parties entered into the Joint Venture Agreement in relation to the development project known as "Magenta Stage 4A Joint Venture" to develop the Joint Venture Lands.
E. The Joint Venture Parties' respective interests in the Joint Venture are as follows:
(i) Tung Chit – 51%;
(ii) The Seller – 39%; and
(iii) Zhao's Brothers – 10%.
F. Tung Chit has advanced loan funds to the Seller, including pursuant to documents described as the Loan Documents, the General Security Agreement and the Deed of Variation.
G. The Seller has defaulted under the Loan Documents and the Deed of Variation.
H. On 27 August 2024, Tung Chit appointed the Seller Receivers as receivers and managers over the assets of Option SIV Trust, which include the Seller's interests in the Joint Venture.
I. On 27 August 2024, Tung Chit also appointed Zhao's Receiver as receiver and manager over the assets of Zhao's Brothers and the Zhao Family Trust, which include Zhao's Brothers' interest in the Joint Venture.
J. The Seller Receivers wish to exercise the Seller's rights under clause 8.1 of the Joint Venture Agreement to withdraw from the Joint Venture and, as a result, to realise the assets of the Seller and repay the Debts to Tung Chit.
K. The Seller Receivers have been given notice by Tung Chit that the Joint Venture Agreement has not been terminated and remained valid, and that the Joint Venture Parties are expected to comply strictly with the terms of the Joint Venture Agreement.
L. Further, the Seller Receivers have been given notice by Tung Chit that Tung Chit does not consent under clause 12.1 of the Joint Venture Agreement to the Seller Receivers disposing of the Joint Venture Interests, including the Joint Venture Lands.
M. Further, the Seller Receivers have been given notice by Tung Chit that Tung Chit will seek to restrain any attempt by the Seller of the Seller Receivers to realise the Joint Venture Interests other than with Tung Chit's consent, conditional or otherwise, including Tung Chit obtaining an injunction to restrain any attempt to sell the Lands Assets.
N. On behalf of the Seller, the Seller has sought consent under clause 8.1 of the Joint Venture Agreement from Tung Chit and the Zhao's Brothers to withdraw from the Joint Venture.
O. Zhao's Brothers is considering seeking the same consent as referred to in Recital N.
P. The Seller Receivers on behalf of the Seller have given notice of the amount of the offer to sell the Joint Venture Interests and the terms and conditions of that offer, which the Seller Receivers say are reasonable to reflect market conditions and would be required under clause 8.1 of the Joint Venture Agreement, if the consent requested in Recital N. was granted.
Q. Tung Chit has given conditional consent to the Seller withdrawing from the Joint Venture, on the terms of this Deed.
R. On behalf of Zhao's Brothers, the Zhao's Receiver has given conditional consent to the Seller withdrawing from the Joint Venture, on the terms of this Deed.
S. In the Accounts as of the Accounts Date, there are the following current assets of the Joint Venture, which the Seller Receivers, based on current information available to them, consider may not be recoverable:
(i) Trade debtors, net of allowance for expected loss - $613,619;
(ii) Legal fee retainer - $124,099; and
(iii) Other receivables - legal dispute funds - $205,500.
T. Without prejudice to their rights and further to the terms of the Joint Venture Agreement, Tung Chit and Zhao's Brothers have agreed, by this Deed, for Seller Receivers on behalf of the Seller to invite offers for the purchase of the Joint Venture Interests, but without any obligation to accept any offer.
U. This Deed records the agreement of the parties for the Seller to withdraw from the Joint Venture and to realise the Joint Venture Interests.”
Mr Sirtes SC made two answers to the reasoning set out in the preceding paragraphs.
His first answer was that cl 8 of the JV Agreement conferred a “right to seek consent to withdraw” which would not fall within the definition of secured property under the GSA. The Court rejects this for two reasons.
First, it does not reflect the language of cl 8, which does not even include an express reference to seeking consent, as opposed to proceeding with the consent of the other parties. Obviously enough, the obligation (a more apt description than “right”) to seek consent is implicit in the requirement to proceed with the other parties’ consent.
Second, even if it were a “right to seek consent to withdraw” so as to begin the process of withdrawal, that right would itself be “Other Property” under the control of the receivers. In other words, the same reasoning as is set out in [24] to [29] above would apply to reach the same result.
The second answer, as I understood it, was that if the result was as contended for by the defendants, the appointment of the receivers over the withdrawal right was void as a matter of law. This was because it was said to be an illegitimate circumvention of the general law that a receiver could not be appointed by one partner to enforce a debt owing from another partner over the latter’s interest in the partnership assets. The proper course was for a receiver to be appointed to wind up the entire partnership with the debtor partner’s surplus (if any) on winding up being payable to the creditor partner. It was said that the vice of what was being done was that there would not be a potential surplus on dissolution to which Tung Chit’s security interest could attach.
Even if the venture were a partnership, this submission is rejected. That is because partners are entitled to regulate by agreement their “interests …in the partnership property and their rights and duties in relation to the partnership” (see s 24 of the Partnership Act 1892 (NSW)). The withdrawal right is part of such an agreement. Whatever the common law position, the fact that in this case the exercise of the right by the receivers will result in another partner having a debt owed to it satisfied does not derogate from the receivers’ right on behalf of OFM to exercise OFM’s withdrawal right under the JV Agreement. That there will be no dissolution is also not to the point. The parties’ arrangements insofar as withdrawal was concerned mean that no dissolution would be required (and in fact was actively opposed by the other parties/hypothetical partners).
There was no dispute about the applicable principles.
As to partnerships, the statutory starting point is ss 1 and 2 of the Act. Section 1 provides that “Partnership is the relation which exists between persons carrying on a business in common with a view of profit”. Section 2 sets out the rules for determining the existence of a partnership, including in s 2(1)(3) that “receipt by a person of a share of the profits of a business is prima facie evidence that a person is a partner in the business”.
The essential propositions relied upon by OFM appear in the judgment of Mason J (as his Honour then was and with whom Barwick CJ, Gibbs and Wilson JJ agreed) in United Builders Pty Ltd v Mutual Acceptance Limited (1980)144 CLR 673 at 687-688:
“The vital question is: What rights passed to Mutual by virtue of the charge over United's right, title and interest in the partnership? The answer to this question is that, according to long established principle, a mortgage or charge over a partner's share or interest in the partnership does not vest any interest in the assets of the partnership against the other partners. What the mortgage or charge does is to confer an entitlement on the holder on dissolution of the partnership in relation to the partner's share of the partnership assets. Section 34 of The Partnership Act specifically provides that a mortgagee is on dissolution entitled to receive the mortgagor's share of the assets and that, for the purpose of ascertaining that share, he is entitled to an account from the other partners as from the date of dissolution.
This principle does not in my opinion deny the existence of a partner's beneficial interest in each of the partnership assets, but this interest is of a special and non-specific kind (Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd. (1974), 131 CLR 321, at pp. 327-328; Commissioner of Taxation v. Everett (1980), 54 ALJR 196, at pp. 197-198). In Helmore v. Smith (1) (1887), 35 Ch. D 436, it was recognized that a sheriff under a writ of fi. fa. could sell a partner's chattel interest in the partnership. But, as Lindley L.J. pointed out, the purchaser “has to find out what he has really had assigned to him, and that he can only do by a partnership account” (pp. 447-448). This in itself will virtually ensure a dissolution of the partnership. It is significant that the Partnership Act now provides that a writ of execution shall not issue against any partnership property except on a judgment against the firm (s 26(1)) and that the court may by order charge a partner's interest and his share of profits with payment of a judgment debt and by subsequent order appoint a receiver of that partner's share of profits and of any other money which may be coming to him from the partnership (s 26(2)). What is more, a partnership may at the option of the other partners be dissolved if any partner suffers his share of the partnership property to be charged under the Act for his separate debt (s 36(2)).
The vital consideration is that the partner's interest is in truth a chose in action, which, as Everett acknowledged, “consists of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership” (supra, p.197). A mortgage or charge is considered to vest rights over that chose in action but it is not considered to carry any title to the specific assets until dissolution.”
It is important to note that Mr Cook SC expressly agreed with the propositions in the passage just reproduced. His point was that, even accepting that the secured property included whatever interest OFM had in the partnership assets (assuming a partnership), the receivers were not exercising a right in relation to that interest.
Reliance was also placed on these observations of the High Court in Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd (2010) 242 CLR 508 at [22] to [24]:
“22. The significance of the interplay between the law of contract and the doctrines and remedies of equity was further explained by Lord Millett in Hurst v Bryk (12). His Lordship observed that disputes between partners and the dissolution and winding up of partnerships have always fallen within the jurisdiction of the Court of Chancery, and continued (22):
“This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract (to use the expression of Dixon J in McDonald v Dennys Lascelles Ltd (14); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved (15). Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract.”
23 This foundation for the engagement of equitable doctrines and concomitant remedies has given rise to judicial consideration of the nature of the interest conferred by equity upon each partner with respect to partnership assets as they exist from time to time and in advance of a “general” dissolution under the control of a court of equity. Neuberger LJ (16) recently described as “conceptually somewhat opaque” the concept of a partner's share in the partnership assets as understood in the earlier English authorities. However, the matter has received attention in a series of decisions in this Court.
24 Any such interest with respect to partnership assets was described by Dixon CJ as (26) “a right in respect of assets but … a right, or a congeries of rights, growing out of the partnership articles.” As Windeyer J indicated in Bolton v Federal Commissioner of Taxation (27), the right is generally regarded as equitable and is “a fractional interest in a surplus of assets over liabilities on a winding up and in the future profits of the partnership business”. In Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (28), McTiernan, Menzies and Mason JJ said that the interest of the partner is sui generis.”
“The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots' law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a “joint venture” and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a “joint venture” than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one: but cf. per Cardozo C.J., Meinhard v. Salmon (1928) 164 NE 545 at 546. The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship: see generally, Birtchnell v. Equity Trustees, Executors and Agency Co. Ltd (1929) 42 CLR 384 at 407-409.”
Pausing here, and with the greatest respect, in my opinion commercial legal practice has moved on since 1984 such that some qualification of the proposition in the first sentence of the passage just quoted is required. In my respectful opinion, where (as here) sophisticated commercial parties with the assistance of lawyers enter into something called a joint venture agreement and not a partnership agreement, that is an indication (I do not say it is more) that their relationship is not intended to be a partnership. The experience of a modern Australian commercial court today is that joint venture agreements (so called) are generally entered into precisely when partnerships are not intended. In making these observations, I am not to be taken as suggesting anything more than a rule of thumb that must yield to the facts and circumstances of any particular case. Nevertheless, I consider it applies and has not been displaced in this case.
Finally, I would add the helpful list of features of joint ventures which appears in W D Duncan, Joint Ventures Law in Australia (3rd ed, 2012, The Federation Press) I return to this in [62] below.
The Court answers this question “no” generally for the reasons advanced by the defendants and which are incorporated in what follows. I will then explain why OFM’s contentions are rejected.
There are a number of reasons why the Court does not accept the venture is a partnership.
First, where many of the features of the parties’ arrangements point in both the direction of a partnership or joint venture (as the parties accepted was this case), I accept Mr Cook SC’s submission that a critical distinguishing feature of a partnership – mutual agency – was completely missing in this case. There is no contractual provision between the parties permitting this and no evidence that any one of them ever attempted to do so. In reaching this conclusion I express my respectful agreement with this analysis in Duncan (at pp 26-27):
“In the early 19th century two opposing conceptions of a partnership contended for supremacy in the law. One conception treated partnership as a commercial association which generated joint profit, giving rise to liabilities to third parties, whilst the other treated partnership being a type of mutual agency.
In Cox v Hickman the latter conception of partnership as a form of mutual agency prevailed in the House of Lords, but ultimately both conceptions came to contribute to the development of the concept that was to be enshrined in the Partnership Act of 1890.
…
The issue in Cox v Hickman was whether the defendants by executing a deed as creditors of a firm rendered themselves liable to the creditors of the trustees. As persons having a stake in the profits of the trading activity of the trustees it was claimed that they were partners.
The House of Lords held that they were not; the real basis of liability in partnership was ‘in truth the liability of a principal for the acts of his agent’ and ‘the real ground of the liability is, that the trade has been carried on by persons acting on his behalf’.
…
If the view of the fundamental nature of partnership expressed in Cox v Hickman remains the law even after the enactment of the Partnership Act 1890 (UK) (and it seems never to have been questioned) then there is a strong logical basis for claiming that a joint operating agreement which delegates or contracts control of the operations of the joint venture lacks the essential elements of partnership.”
“5. Magenta Project
5.1 General object of Magenta Project
The parties agree that the object of the Magenta Project is to:
(a) construct the Building on the Land;
(b) to sell the Lots; and
(c) to complete the Works.
5.2 Commitment to Proceed with the Magenta Project
The Development Manager agrees to proceed with and carry out the Magenta Project in a timely and cost effective manger in regard to market forces, weather and town planning conditions, in accordance with the directions of the Joint Venturers and its obligations under this Agreement.
5.3 Planning and Environment Court
If the Development Manager wishes to pursue the use of an Approval including if necessary seeking an appeal to the Land and Environment Court of any other appropriate forum, the Development Manager must seek the consent of the Joint Venturers. The Joint Venturers must take all such necessary steps to assist the Development Manager in obtaining any Approval or seeking an appeal to the Land and Environment Court or any other appropriate forum, where they have consented to such action.
5.4 Execution of the Works
(a) The Joint Venturers must procure that the:
(i) Land is available for demolition, site and building works, reconfiguration, titling as required for the execution of the Magenta Project; and
(ii) Development Manager pay all costs incurred in carrying out the works (such costs are Project Costs) on behalf of the Joint Venturers.
(b) The Development Manager must cause the Works to be carried out in accordance with the Project DA, all Approvals, all statutory or governmental requirements, the law (including any occupational health and safety laws) and good building practices, at all times subject to budgets approved by the Joint Venturers and otherwise in accordance with this Agreement.
(c) The Development Manager acknowledges and agrees that for the purpose of complying with all occupational health and safety laws in the carrying out of the Works, the Development Manager will be the principal contractor.
5.5 Joint Venturer’s Obligations
Without limitation to the Joint Venturers' obligations elsewhere in this agreement, the Joint Venturers must:
(a) sign any necessary consent to the Development Manager's applications for any Approvals;
(b) permit the erection on the Land of any notice or sign required in connection with the application(s) for the Approvals; and
(c) permit the Development Manager and its consultants, agents and contractors to enter the Land for the purpose of carrying out the Magenta Project
5.6 Development Manager's Obligations
Without limitation to the Development Manager's obligations elsewhere in this agreement, the Development Manager must:
(a) enter into a Building Contract with the Builder in accordance to develop the Land;
(b) set up and manage a Magenta Project bank account in the name of the Development Manager and on behalf of the Joint Venturers for the purpose of paying any Project Costs and receiving funds from the settlement proceeds from the sale of the Lots;
(c) ensure that the Project Costs are in accordance with the Schedule of Project Costs (as amended from time to time) and current budgets;
(d) submit the Contract for Sale to the Joint Venturers for consent and approval;
(e) carry out any services and activities required to be undertaken in order to deliver the Magenta Project in accordance with this Agreement and the Joint Venture Agreement;
(f) provide the Joint Venturers a Project Costs Statement;
(g) receive and disburse the proceeds of sales;
(h) lodge and progress, any strata plans or community plans and associated documentation with the NSW Land Titles Office, as required to procure the subdivision of the Land as envisaged by the Magenta Project;
(i) prepare and lodge tax returns, BAS statements and other tax applications in relation to the Magenta Project; and
(j) at all times act in accordance with the instructions of the Joint Venturers.
5.7 Distribution of profits
The Development Manager must distribute the profits of the Magenta Project to the Joint Venturers from time to time in accordance with the following agreed profit distributions:
(a) Tung - 56%;
(b) Option - 39%;
(c) Zhao - 5%
or such other distribution as agreed between the Joint Venturers.
- Signing and Power of Attorney
6.1 Power of Attorney
(a) If requested by the Development Manager, the Joint Venturers must appoint the Development Manager as their joint/several power of attorney. The appointment will include authority to sign on behalf of the Joint Venturers any documents that are reasonable required to carry out the Magenta Projects.
(b) The Power of Attorney commences on the date of the Power of Attorney and is irrevocable until:
(i) the Magenta Project is complete;
(ii) the Magenta Project is terminated; or
(iii) this Agreement is lawfully determined or terminated.”
“1.1.13 “Percentage interest” means the respective interest of a party in this Agreement, being an interest in all of the Properties and all of the assets owned by the Joint Venture from time to time as agreed between the parties from time to time;
…
1.1.15 “Properties” means those properties beneficially owned by Zhao, Option and Tung as tenants in common and identified as follows:
…
5. Establishment of Joint Venture
5.1 Establishment of Joint Venture
The Parties hereby form and agree to engage in an unincorporated Joint Venture, the name of which shall be the "Magenta Stage 4A Joint Venture", for the purpose of developing the Properties.
5.2 Asset Contribution
The parties shall input into the Joint Venture the Properties to form the assets of the joint venture. The joint venture will then proceed to develop and construct buildings on the Properties.
5.3 Investment
During the course of the Joint Venture:
(a) The parties must continue to contribute to any mortgage repayments and expenses over the Properties in their respective Percentage Interest;
(b) The parties must not mortgage or grant any person or company an unsecured loan or second mortgage over the Properties without the 100% approval of the parties;
(c) The parties shall secure any finance required to develop and construct the buildings on the said Properties as and when required on terms agreed by the parties.
5.4 Building Completion
(a) The parties agree that prior to completion of the building construction on each site, the buildings shall be offered for sale by the Manager who is entitled to develop, market and promote the building for sales on behalf of the parties in this joint venture as well as collecting sales proceeds on behalf of the parties.
(b) In the event that the properties are not sold within three months of completion the parties agree that the Properties shall be offered for rent while still marketing the properties for sale.
5.5 Profit Sharing
During the term of this Agreement it is the intention of the Parties that any profits made after all property acquisition costs, development and construction costs, sales and marketing fees, transactional costs have been paid shall be distributed between the parties as per their Percentage Interest, with any distributions to Tung having priority in timing of payment over distributions to Zhao and Option (whose distributions will rank equally in terms of timing behind distributions to Tung).
5.6 Commencement and Term
The Joint Venture shall commence on the Commencement Date and continue:
5.6.1 until terminated by written agreement of the parties; or
5.6.2 until if due to permitted withdrawals, assignments or otherwise, there is only one party;
whichever is the sooner.”
“10. Relationship of Parties
10.1 Several and not joint liability
The rights, duties, obligations and liabilities of the parties are several and not joint.
10.2 Tenants in Common
The ownership of the respective Percentage Interests in the Joint Venture ls as tenants in common and not joint tenants.”
- Authority and Status of Parties
2.1 Authority
Each Party promises that it has full corporate or other right, power and authority to enter into this Agreement and to carry out the Magenta Project.
2.2 Term
The Magenta Project continues until determined by:
(a) The sale of all the Lots (unless otherwise agreed by the Joint Venturers) and distribution of the Proceeds of Sale in accordance with this Agreement; or
(b) Five (5) years from the date of this Agreement (unless extended by agreement between the Parties),
or is otherwise determined or terminated in accordance with this Agreement.
2.3. Ownership of Land
The rights, powers and privileges granted in accordance with this Agreement do not create in favour of the Development Manager an estate or interest including, without limitation, an equitable interest in the Land or any improvements at any time constructed on the Land. The legal ownership in the Land will remain always with the Landowners subject to the Mortgage and any securities granted in relation to the Development Finance.
2.4 No Partnership
(a) Nothing stated or implied in this Agreement makes a Party the partner or legal representative of the other Party for any purpose or creates any partnership or trust. Unless otherwise specifically stated in this Agreement, a Party has no authority to bind the other Party or to act for, or to incur any obligation or assume any responsibility on behalf of, the other Party.
(b) The rights of the Parties are several, not joint and collective. Each Party is only responsible for their obligations. No Party will represent to anyone else that it has the authority to act as agent of, or in any way bind or commit the other Party to any obligation to anyone else, other than pursuant to the terms of this Agreement.
2.5 Name
The project is to be known as the Magenta Project.
2.6 Fidelity and Good Faith
The Development Manager:
(a) undertakes to be just and faithful in all its activities and dealing with the Joint Venturers;
(b) must act in good faith and assist the Joint Venturers in the performance of its obligations; and
(c) recognise that this Agreement creates a fiduciary relationship by the Development Manager in favour of the Joint Venturers which can be enforced by equitable remedies.”
Three things need to be said about these clauses.
First, cl 10 of the JV Agreement negatives a partnership. In United Builders there was no doubt that the parties were in a partnership (there was a deed of partnership), and it was accepted as fundamental that each partner had a beneficial interest in each of the partnership assets. That is not the case here. The parties are insistent at every turn in the JV Agreement and Management Agreement that their interest is as tenants in common in fixed shares, reflecting their status as such in relation to the properties which they have put into the venture (see cl. 5.2 of the JV Agreement set out in [49] above).
Second, turning to cl 2 of the Management Agreement, reflection discloses a clear logic between the clauses in the two agreements. As between themselves, the parties to the JV Agreement make it clear that their interests are not joint (joint ownership being an indicium of partnership) but several as tenants in common in specific shares. It is only in the agreement with the Development Manager, which otherwise has no interest in the land or any other part of the venture, that it is necessary to specify that the Development Manager obtains no estate or interest, that there is no partnership and that, other than as agreed, no party has authority to bind the other, and that their rights are several and not joint.
I should not pass from considering cl 2 without adverting to an argument between the parties at the bar table that, noting the definition that ““Party” means a party in this agreement”, the parties to the Management Agreement should be understood as OFM, Zhao’s Brothers and Tung Chit of the one part and the Development Manager of the other part. Ultimately, whether it is one or the other does not change my view of the effect of the two clauses across the agreements when read together. Although the contention is certainly arguable, I do not accept it.
There are two reasons why the parties referred to as such in cl 2 are each of the four companies.
First, the Management Agreement might be referred to as the actual operations agreement under which the venture was to be effected. It makes more sense in that agreement that the prohibition against representing oneself as another party’s agent should be a prohibition that fixes on each of the companies individually. None can represent itself as agent of any of the others unless they have agreed otherwise.
Second, I accept Mr Cook SC’s submission that something as simple as the notice provision in cl 13 of the Management Agreement specifying a separate address for each of the four companies is a confirmatory indicator that each of the four companies is a “party” or “Party” under that agreement.
The third point to make about the two clauses is that when they are understood in the way I have set out in [53] to [58] above, taken together they are inconsistent with a partnership between OFM, Zhao’s Brothers and Tung Chit, especially because cl 2 of the Management Agreement expressly excludes that relationship between any of the parties to that agreement.
The fifth reason for the Court’s conclusion is one of fortification and is another manifestation of the absence of mutual agency. Significant documents were always signed by representatives of each of the three joint venturers. There is no attempt for one to sign on behalf of the others.
The sixth reason is also one of fortification along similar lines. It is this affidavit evidence of the financial controller of the venture, an employee since 2017 of the Development Manager, which was neither objected to nor challenged by cross-examination:
“Use of the word “partnership” when dealing with third parties
- The Amended Statement of Claim filed in these proceedings have referred to multiple instances where the Joint Venture parties have made reference to calling the venture a "partnership".
- As stated above, the concept of a legal partnership where the 'partners' have joint liability has not to my knowledge, ever been embraced between the Joint Venture parties. In all instances where contracts are signed with third parties such as builders, consultants, retail property buyers and other key stakeholders, the Joint Venture parties were all named individually in the contracts as opposed to having one or two parties representing the group. Set out at the following pages in Exhibit YS1 are some examples, including:
a. Page 711, copy of front page of building contract; and
b. Page 712, copy of front page of property presale contract.
- The only occasion where I recall the concept of a "partnership" being mentioned in relation to the Joint Venture was when I heard accountants calling the venture some form of a "tax partnership" for tax purposes.”
(1) The undertaking is usually for a single business project of limited duration rather than a relationship among the participants to conduct an indefinite series of projects of such description. Although it has gone on for some time, the venture is a single business project to develop a specific parcel of land, not an arrangement to develop property generally.
(2) The joint venture is not usually the principal commercial activity of any of the participants but rather a particular, collaborative extension of each of their commercial dealings in which the resources, identity or skills of each complement the others rather being fused or submerged in the collective whole. The evidence does not permit a conclusion on this.
(3) The relations of the participants are generally regulated by a written charter called the Joint Venture Agreement. That is this case, which for the reasons I have given must be read with the Management Agreement; its terms usually include:
a. A provision that the co-venturers are not agents for each other (with the possible exception of any participant who is appointed the manager or operator). Clause 2.4 of the Management Agreement ([57] above);
b. A provision that all obligations and rights of the participants are expressed to be several rather than joint See cl 10*.2* *of the JV Agreement ([*50] above) and the definition of “Properties” ([49] above) and, in particular, the operator is separately appointed by each participant Clause 6.1 of the JV Agreement *([*17] above) refers to the parties having appointed the Development Manager but the Court was not taken to any separate instrument of appointment;
c. Provisions that ensure that the undertaking is conducted in such a way as to give the participants a right to share in the product of the undertaking rather than a monetary profit from its sale. The parties receive a proportionate share of the profit: see cl 5.7 of the Management Agreement ([48] above);
d. Provisions that ensure that the day-to-day operations of the joint venture are conducted by a manager or operator which may be one of the participants, a jointly controlled company or third person who is an independently contracted manager. The venture is to be undertaken by the Development Manager in accordance with the Management Agreement;
e. A provision that the relationship among the participants is not that of partners but of joint venturers. *Cl 2.4 of the Management Agreement ([*51] above) excludes partnership and the parties are consistently referred to in the JV Agreement as the joint venturers;
f. A provision that the assets of the joint venture are held among the participants as tenants in common at law rather than beneficially in equity for the purposes of the venture. The definition of “Properties” in cl 1 of the JV Agreement ([**49] above);
g. Provisions regarding transfer of the participants’ interests subject only to pre-emptive rights to the other participants. This is the withdrawal right ([22] above). The principles of delectus personae is therefore much modified in the typical joint venture agreement;
h. Fiduciary obligations may arise by an express covenant of mutual good faith or may be expressly excluded Fiduciary obligations are expressly owed under cl 2.6 of the Management Agreement by the Development Manager to the joint venturers *([*51] above.
Turning to Mr Sirtes SC's arguments, insofar as he advanced the contention of partnership by reference to the specific clauses of the agreements to which I have referred above, I do not accept his submissions for the reasons I have already indicated.
Second, much of his argument was devoted to an examination of how the parties conducted themselves during the course of the venture. I have already set out (see [20] above) the difficulty I have with this approach. True it is that, between themselves, there are documents and communications referring to themselves as partners, and documents for third party consumption such as special purpose financial accounts and tax returns that also refer to partners or partnership. The parties conducted a bank account in the name of all three of them. The high point of the examples to which the Court was taken is litigation they conducted in this Court where they pleaded that they were partners.
At first blush, this evidence may seem to be powerful. However, it becomes a completely neutral factor when it is understood that, for tax and GST purposes, the venture had to be treated as a partnership. For tax purposes, the venture was a partnership (see definition of “partnership” in s 995.1 of the Income Tax Assessment Act 1997 (Cth)). For GST, they needed an ABN for a single entity, being the collocation of the three companies. That was also how they had to enter into the agreements that became the subject of litigation and gave rise to the pleading of their status as a partnership.
In my respectful opinion, just as calling your activity a joint venture does not of itself negative partnership, so does calling yourself a partner negative the conclusion that you are not a partnership. Whether or not persons are in partnership depends upon a proper assessment of all the facts and circumstances, most importantly being the contractual arrangements entered into between the parties, which I have considered in some detail in these reasons.
Finally, Mr Sirtes SC relied upon the fact that the parties were pledging their assets to each other for a common purpose as a strong indicator of partnership. That is certainly what they were doing. Again, the difficulty for OFM's case is that the JV Agreement and Management Agreement make it very clear that each of them was retaining their legal and beneficial interest as tenant in common, in particular in the land that each was putting into the venture. That is contrary to the existence of a partnership.
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Option Funds Management Ltd
Tung Chit Real Estate Investment Australia Ltd [2025] NSWSC 1142
(2010) 242 CLR 508
(1985) 157 CLR 1
(1929) 42 CLR 384