Plaintiff v First Defendant

2 Rysze opposed Ms Liu's application. The first defendant ('Mr Guan') supported it.

3 For reasons I will now give, I will order that this proceeding be stayed until the resolution or determination of Rysze's claims against Mr Guan in the VCAT proceeding or until further order of this Court.

4 Ms Liu relied upon submissions filed 6 October 2021 and her affidavit affirmed 15 September 2021. Mr Guan relied upon submissions filed 7 October 2021. Rysze relied upon submissions filed 12 October 2021 and affidavits of Rita Zhang, sole director of Rysze, sworn 24 June 2021 and of Michael Kenny, of Rysze's solicitors, sworn 21 September 2021. Counsel for the parties made oral submissions at the hearing of the application.

5 By a written lease dated 19 February 2016, Ly & Lay Holdings Pty Ltd, as landlord, leased the land known as Lot T6, 1 Queens Road, Melbourne ('Melbourne premises') to Empire on Queens Pty Ltd ('the Lease').[1] Clause 7.2 of the Lease provided:[2]

Termination by the landlord ends this lease, but the landlord retains the right to sue the tenant for unpaid money or for damages (including damages for the loss of the benefits that the landlord would have received if the lease had continued for the full term) for breaches of its obligations under this lease.

6 The permitted use of the Melbourne premises under the Lease was a café and restaurant.[3]

7 On 16 August 2016, Rysze became the sole registered proprietor of the Melbourne premises.[4] As a result, Rysze became entitled to every covenant or provision of the Lease in favour of the landlord.[5]

8 On 6 July 2017, Mr Guan and Ms Liu, who are husband and wife, became the registered proprietors of land known as 5 Annadale Street, Kew ('the Kew land').[6]

9 On 30 July 2018, Empire on Queens Pty Ltd transferred its interest as tenant in the Lease to Empire Queen Road Pty Ltd ('Empire') pursuant to a transfer and variation of lease made between, among others, Rysze, Empire on Queens Pty Ltd, Empire and Mr Guan ('the Transfer of Lease').[7] Mr Guan is the sole director and secretary of Empire.[8] Pursuant to the Transfer of Lease, Mr Guan guaranteed Empire's obligations under the Lease ('the Lease Guarantee').[9] Mr Guan and Ms Liu intended to continue to operate the business at the premises named 'Empire Café'.[10]

(a) Mr Guan provided to Rysze's agents a statement of assets and liabilities that included the Kew land valued at $3,370,000 and as unencumbered;[11] and

(b) Empire provided a bank guarantee to Rysze in the sum of $42,138.76 to secure the obligations of Empire under the Lease and Transfer of Lease ('Bank Guarantee').[12]

11 On 21 December 2018, Mr Guan sent a letter to Rysze's agents in which he stated the café at the Melbourne premises will close that day and that, among other things: 'Therefore, we intend to close the business at the end of this year.'[13]

12 On or about 21 December 2018, and in breach of the Lease, Empire abandoned the Melbourne premises without Rysze's consent.[14]

13 In breach of the Lease, Empire did not pay rent and outgoings due on 15 December 2018 and 15 January 2019.[15] Rysze called on the Bank Guarantee to cover the payment of this rent and outgoings.[16]

14 Empire has not paid any money to Rysze in respect of rent and outgoings under the Lease since 15 November 2018.[17]

15 On 3 May 2021, Rysze's solicitors sent letters of demand to Empire and to Mr Guan for arrears of rent and outgoings and interest.[18]

16 On 14 May 2021, J. Lei & Co sent a letter to Rysze's solicitors in which they stated that they acted for Empire and Mr Guan and were in the course of obtaining instructions.[19]

17 On 14 May 2021, Mr Guan transferred his interest in the Kew land to Ms Liu.[20]

18 On 21 May 2021, a Mr Qichang Quan ('Mr Guan's father') lodged a caveat on the Kew land in relation to a freehold estate concerning an agreement with Mr Guan and Ms Liu dated 28 June 2017.[21]

19 On 25 June 2021, Rysze commenced the proceeding in this Court by writ and statement of claim. In brief, Rysze makes the following allegations:

(a) Rysze is and has been at all material times since 16 August 2016 registered as the proprietor of the Melbourne premises;[22]

(b) it pleads the existence of the Transfer of Lease and the Lease Guarantee;[23]

(c) Mr Guan and Ms Liu were at all material times up until 14 May 2021 jointly registered as the proprietors of the Kew land;[24]

(d) on or about 3 May 2021, Rysze made demands on Empire and on Mr Guan, in his capacity as guarantor, for the sum of $286,117.59, being unpaid rent and outgoings;[25]

(e) on or about 14 May 2021, Mr Guan transferred all of his interest as joint proprietor in the Kew land to Ms Liu for a non-monetary consideration and, as and from 14 May 2021, Ms Liu became registered as the sole proprietor of the Kew land;[26]

(f) on 21 May 2021, Mr Guan's father lodged a caveat on the title to the Kew land with the grounds of claim relied upon being pursuant to an alleged agreement made on 28 June 2016;[27]

(g) the transfer was an alienation of property made with intent to defraud creditors of Mr Guan, alternatively with intent to defraud Rysze as a creditor of Mr Guan;[28]

(h) the intention is to be inferred from, among other things, the making of the demands on Empire and on Mr Guan and the fact that at all relevant times Mr Guan was personally liable to Rysze under the Lease Guarantee;[29]

(i) Rysze is a person prejudiced by the transfer as the transfer deprives Mr Guan of his interest in the Kew land and therefore deprives Rysze of the ability to enforce any judgment it obtains against Mr Guan by recovery out of Mr Guan's interest in the Kew land;[30]

(j) the transfer is voidable under s 172 of the Property Law Act 1958 (Vic) ('Property Law Act');[31] and

(k) unless restrained, Ms Liu will deal with or otherwise dispose of the Kew land with the intent of defeating any claim that Rysze otherwise had or might have had against Mr Guan's interest in the Kew land.[32]

20 Rysze claims relief, inter alia, as follows:[33]

(a) pending the hearing and determination of this proceeding, an interlocutory injunction restraining Ms Liu from in any way dealing with or disposing of the Kew land;

(b) an order that Ms Liu execute all documents and do all things necessary to remove the caveat;

(c) a declaration that the transfer is void under s 172 of the Property Law Act; and

(d) an order that the transfer be set aside and the register rectified accordingly.

21 On 29 June 2021, the Court granted Rysze ex parte injunctive relief until 4:00pm on 2 July 2021, restraining Ms Liu from in any way dealing with, encumbering or disposing of the Kew land.[34] The Court extended the ex parte injunction on a number of occasions to enable Mr Guan and Ms Liu to be served.[35]

22 On 28 July 2021, the Court made orders by consent that, until the determination of the proceeding or further order, Ms Liu is restrained from in any way dealing with, encumbering or disposing of the Kew land.[36] Ms Liu gave evidence that the property is the family home and that she intends to continue residing at the Kew land with her husband and young children.[37]

23 Mr Guan filed a defence on 27 August 2021. He filed an amended defence on 29 September 2021. In brief, Mr Guan:

(a) admits the Lease Guarantee save that he relies on the full terms of the Transfer of Lease for their full force and effect;[38]

(b) says that the purchase of the Kew land by him and Ms Liu was financed in full by a loan in the sum of $3,560,000 from Mr Guan's father through a loan agreement and says that he and Ms Liu agreed to charge in favour of Mr Guan's father all of their interest in the Kew land as security for the payment of all monies owed to him under the loan agreement and consented to his lodging a caveat to be registered on the title to the Kew land;[39]

(c) admits that he and Ms Liu became joint registered proprietors of the Kew land on or about 6 July 2017;[40]

(d) alleges that the loan agreement with Mr Guan's father was entered into pursuant to an earlier oral agreement between himself, Ms Liu and Mr Guan's father made on or about 1 May 2017, whereby Mr Guan's father agreed to lend them all funds necessary for them to purchase the Kew land and pay all associated costs;[41]

(e) admits that Rysze made demands on 3 May 2021 but otherwise denies Rysze's allegations about those demands, including that the sum of $286,117.59 was 'inclusive of unpaid rent and outgoings due and owing by Empire';[42]

(f) admits that on or about 14 May 2021, he transferred all of his interest as joint proprietor in the Kew land to Ms Liu but says further that in consideration for the transfer, Ms Liu agreed to assume Mr Guan's obligations under the loan agreement and that on or about 14 May 2021, Mr Guan, Ms Liu and Mr Guan's father signed a deed in relation to the sum of $3,560,000 lent to Mr Guan and Ms Liu under the loan agreement.[43] Mr Guan says that pursuant to cl 1 of the deed, Ms Liu acknowledged that she owed the sum of $3,560,000 to Mr Guan's father;[44]

(g) denies that the transfer was an alienation of property made with intent to defraud his creditors, or that he had intent to defraud Rysze as a creditor;[45] and

(h) denies that Rysze is a person prejudiced by the transfer. He also says that at all material times, all of his interest in the Kew land was subject to a charge in favour of Mr Guan's father as security for the repayment of monies owed under the loan agreement.[46]

24 Ms Liu filed a defence on 26 August 2021. In brief, she denies that the transfer of the land was an alienation of property made with intent to defraud creditors of Mr Guan, alternatively with intent to defraud Rysze as a creditor of Mr Guan.[47] She says that at the time of the transfer, the Kew land was the subject of a charge which secured the sum of $3,560,000 owed by herself and Mr Guan to Mr Guan's father, which was approximately equal to or exceeded the value of the land.[48]

25 On 7 October 2021, Rysze filed an amended reply to Mr Guan's amended defence in which Rysze, among other things:

(a) alleges that Empire abandoned the Melbourne premises on or about 21 December 2018 in breach of the Lease and admits that it re-entered the Melbourne premises in about January or February 2019 pursuant to cl 7.1.2 of the Lease; and

(b) denies various allegations made by Mr Guan concerning the alleged transaction involving Mr Guan's father.

26 On 2 August 2021, Rysze commenced the VCAT proceeding.[49] I do not intend to set out all of the claims made in that proceeding. However, it is important to note in brief that Rysze (as the applicant):

(a) alleges that Empire (as the first respondent) has failed to pay any rent or outgoings under the Lease since 15 November 2018;[50]

(b) alleges that the outstanding rent and interest is in the sum of $277,597.02;[51]

(c) alleges that Empire failed to make good the Melbourne premises when it abandoned the Melbourne premises on 21 December 2020;[52]

(d) alleges its loss and damage in relation to its claim to make good the Melbourne premises is the sum of $63,500.00;[53]

(e) seeks legal costs in relation to the ending of the Lease in the sum of $4,097.70;[54] and

(f) makes claims against the second respondent (Mr Guan) pursuant to the Lease Guarantee and against the third and fourth respondents, who were parties to the Lease, on the basis that they also gave guarantees and indemnities.[55]

27 Rysze seeks relief against the respondents as follows:[56]

(a) $277,597.02 for outgoings and arrears of rent and interest;

(b) $63,500.00, being damages for the make good claim;

(c) $4,097.70 for legal costs;

(d) a declaration that Empire and Mr Guan are liable to pay Rysze the outstanding amount of $265,590.86; and

(e) a declaration that the third and fourth respondents are liable to pay Rysze the sum of $265,590.86 pursuant to the Lease.

28 Empire and Mr Guan filed points of defence dated 8 September 2021. I do not intend to set out all of the matters raised in the points of defence. Relevantly, Empire and Mr Guan:

(a) admit that Empire has not paid any money to Rysze in respect of rent or outgoings under the Lease since 15 November 2018;[57]

(b) deny that Empire was required to pay rent or outgoings under the Lease at any time after Rysze terminated the Lease on or about January 2019 or alternatively February 2019;[58]

(c) say further that to the extent that Rysze retained the right, pursuant to cl 7.2 of the Lease, to sue for damages following the termination of the Lease, Rysze was required to take reasonable steps to mitigate its loss, which it failed to do;[59] and

(d) deny Rysze's claims in relation to the make good claim and say that Empire abandoned the Melbourne premises on or about 21 December 2018, rather than 21 December 2020 as alleged.[60] They also say, among other things, that prior to abandoning the Melbourne premises, Empire gave notice to Rysze's agent and, at the time Empire vacated the Melbourne premises, it left the Melbourne premises in a clean and undamaged condition.[61]

29 Pursuant to paragraph 3 of the orders made by Senior Member Forde on 12 August 2021 in the VCAT proceeding,[62] the third and fourth respondents filed an application on 17 August 2021 to join their former solicitors, Lai & Hamilton (a firm).[63] As at 21 September 2021, the joinder application had not yet been determined upon by VCAT.[64]

30 On 12 August 2021, Rysze made an application in the VCAT proceeding for an interlocutory injunction to restrain the third respondent from dealing with the proceeds of sale of a property located at 2/47 Drummond Street, Chadstone, which was refused.[65] Rysze has appealed to this Court[66] and that appeal is set down for hearing on 23 November 2021.

31 Mr Kenny gave evidence that it is unlikely that the VCAT proceeding will receive a hearing date for a compulsory conference until mid-2022 and if unsuccessful, a hearing date towards the end of 2022 or early 2023.[67]

32 Section 30 of the Supreme Court Act 1986 (Vic) ('Supreme Court Act') provides:

Nothing in this Act affects the power of the Court to stay a proceeding in the Court, either of its own motion or on the application of any person, whether or not a party.

33 In exercising its discretion, the Court must seek to give effect to the overarching purpose of the Civil Procedure Act 2010 (Vic) ('Civil Procedure Act') and the Rules to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute (ss 7 and 8) and, in making any order, the Court shall further the overarching purpose by having regard to the objects in s 9(1) of the Civil Procedure Act. In Tucker v State of Victoria,[68] the Court of Appeal recently set out the principles regarding the grant of a temporary stay:

121 This Court has power to stay a proceeding.[69] In Sterling Pharmaceuticals Pty Ltd v The Boots Co (Australia) Pty Ltd,[70] Lockhart J summarised the considerations to be taken into account in deciding whether to grant a temporary stay of a proceeding pending the determination of a proceeding in another court in the following terms:

• Which proceeding was commenced first.

• Whether the termination of one proceeding is likely to have a material effect on the other.

• The public interest.

• The undesirability of two courts competing to see which of them determines common facts first.

• Consideration of circumstances relating to witnesses.

• Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

• The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

• How far advanced the proceedings are in each court.

• The law should strive against permitting multiplicity of proceedings in relation to similar issues.

• Generally balancing the advantages and disadvantages to each party.[71]

122 In Bella Products Pty Ltd v Creative Designs International Ltd, Finkelstein J stated that the following propositions may be drawn from the factors in Sterling Pharmaceuticals:

(a) it is undesirable that two courts should determine the same dispute; and

(b) practical considerations based on common sense and fairness should dictate which action should proceed first.[72]

34 It was submitted on behalf of Ms Liu, in substance, that an analysis of the law in respect of a temporary stay is set out in UDP Holdings Pty Ltd (rec and mgr apptd) v Ironshore Corporate Capital Ltd.[73] It was submitted that in considering the exercise of its discretion for a temporary stay, the Court will necessarily be concerned with the just, efficient, timely and cost-effective resolution of the real issues in dispute, as set out in ss 8 and 9 of the Civil Procedure Act.[74] The authorities point to a consideration of practical difficulties and case management rather than a strict meeting of any threshold test by an applicant for a stay.[75]

35 A temporary stay of the proceeding in this Court is appropriate pending resolution or the determination of the VCAT proceeding.[76]

36 Continuing with the proceeding in this Court creates a possible outcome whereby Rysze is successful in this Court but is unsuccessful in obtaining judgment against Mr Guan in the VCAT proceeding.[77] Mr Silver, counsel for Ms Liu, also submitted that Rysze may settle its claims in the VCAT proceeding against Mr Guan. It was submitted that in these circumstances, the proceeding in this Court could have been wholly avoided and will have been 'a waste of everyone's time and money'.[78] It was submitted that if Rysze and Mr Guan reach a resolution in the VCAT proceeding and a payment is made, there would be no need for the Court to determine this proceeding. Mr Silver submitted that:[79]

until there's determination or resolution [of the VCAT proceeding], it would be premature to run this case. That is my primary submission.

37 There is no material prejudice to Rysze in the Court granting a temporary stay because the Kew land is subject to a 'freezing order'.[80] Mr Silver submitted that Rysze's claim against Mr Guan is at most as an unsecured creditor and if Rysze's claim in the proceeding in this Court succeeds, it cannot exercise any enforcement against Mr Guan, or seek remedy against the Kew land, until after the determination of its claim at VCAT. Mr Silver submitted that Rysze retains liberty to bring the proceeding in this Court back on. Mr Silver also submitted that any prejudice caused by delay that may be suffered by Rysze is outweighed by the prejudice that would be suffered by Mr Guan and Ms Liu if a stay is not granted.

38 The determination of the VCAT proceeding will resolve any question of whether Rysze has 'standing' to bring the proceeding in this Court. However, Mr Silver accepted that Rysze has standing to conduct its case in the proceeding in this Court as a contingent creditor. [81]

39 It was submitted that a temporary stay would be the most just, efficient and cost-effective method of dealing with the real issue in dispute. It was submitted that the real issue is that Rysze wants the Kew land available to it in the event that it obtains judgment against, or settlement with, Mr Guan in the VCAT proceeding.[82]

40 Mr Silver submitted that Rysze elected to commence the VCAT proceeding and the proceeding in this Court. Mr Silver submitted: 'it is not in a position to say, "I've brought my case, my case came first, I'm the plaintiff, I want to dictate where my facts are determined and VCAT has been thrust upon me as I'm an unwilling participant there".'[83]

41 Mr Silver also submitted that 'the plaintiff [Rysze] has elected to make allegations of material fact in pleadings both in its statement of claim and in its reply [in the proceeding in this Court] which necessarily are the subject of the VCAT proceeding determination'.[84]

42 Mr Silver submitted that there is no evidence that anyone else is prejudiced by the transfer of Mr Guan's interest in the Kew land to Ms Liu.

43 Mr Silver submitted that it is not a relevant factor on an application for a temporary stay as to whether the proceedings have reasonable prospects of success.

44 Finally, it was submitted that while in some cases, relevant considerations include which of the two concurrent proceedings was commenced first or is more progressed, such matters are of no material relevance here. It was submitted that what is primarily relevant at present is that the determination or resolution of the VCAT proceeding would largely if not wholly resolve the issues in the proceeding before this Court.[85]

45 It was submitted that the Court has inherent power to stay its own proceedings in the interests of justice and that power is recognised in s 30 of the Supreme Court Act.[86] Mr Guan's submissions referred to the principles set out by Lockhart J in Sterling Pharmaceuticals Pty Ltd v The Boots Co (Australia) Pty Ltd[87] and Finkelstein J in Bella Products Pty Ltd v Creative Designs International Ltd.[88]

46 It is in the interests of justice for the proceeding in this Court to be stayed pending the determination of the VCAT proceeding.[89]

47 The outcome of the VCAT proceeding is likely to have a material effect on whether the proceeding in this Court is necessary at all.[90] It was submitted that it is 'possible' that following the determination of the VCAT proceeding, Rysze will have no judgment against Mr Guan to enforce and it will be immaterial whether Mr Guan has any interest in the Kew land.[91] It was submitted that if VCAT finds that the Lease of the Melbourne premises terminated in early 2019, as alleged by Empire and Mr Guan in the VCAT proceeding, then the amount of Empire's unpaid rent and outgoings will, in all likelihood, be less than the amount of the $42,138.76 Bank Guarantee given by Mr Guan which Rysze has already called upon.[92]

48 Mr Lum, counsel for Mr Guan, submitted that Rysze does not make any claim under cl 7.2 of the Lease in the VCAT proceeding. Mr Lum submitted that even if such a claim was made, Rysze would run into the difficulty that it failed to mitigate its loss. Mr Lum submitted that 'it is possible that there is an outcome at VCAT that would not result in Empire and therefore Mr Guan owing any money or being liable to pay any damages to the plaintiff'.[93]

49 It was submitted that the extent of Empire's liability, and therefore Mr Guan's liability, to Rysze for its damages claim to make good the Melbourne premises may be limited if VCAT finds that Empire did not breach its obligation to make good the Melbourne premises and/or that Rysze failed to take reasonable steps to mitigate its losses.[94]

50 It was also submitted that if the proceeding in this Court is not stayed, it will be necessary for Mr Guan and Ms Liu to incur significant legal costs in these proceedings.[95] Mr Lum submitted that those costs will include costs in establishing the matters raised in the defences concerning Mr Guan's father. Mr Lum submitted that 'it would be more efficient to allow VCAT to proceed to its conclusion before all the issues in this proceeding are ventilated further and the parties are put to the costs of doing that'.[96]

51 It was submitted that if the Court finds that the Kew land is encumbered by a charge in favour of Mr Guan's father, then Rysze may be unable to enforce any judgment against Mr Guan's interest in the Kew land as it is an unsecured creditor.[97]

the defendant's intentions will ultimately be a matter for evidence but to succeed at trial the plaintiff will have to establish not only that the defendant - the first defendant had the relevant intention, but also that the plaintiff was prejudiced by the transfer. And if it had no real prospect of enforcing any judgment against Mr Guan's interest in the property because of the existence of the secured loan in favour of Mr Guan's father, then it's possible the plaintiff won't establish that element of its case.

53 It was submitted that a temporary stay of the proceeding in this Court would do no material prejudice to Rysze as Ms Liu is already restrained from dealing with the Kew land.[99] Mr Lum submitted:[100]

Clearly I accept that if the stay is ordered then the plaintiff will have to await what happens at VCAT until it can proceed with this and to some extent that is a source of prejudice to the plaintiff. But what I would say is that that shouldn't be seen as determinative. It has to be weighed against the other factors which is the potential for wasted costs.

And in terms of the delay at VCAT, part of that delay, in my submission falls at the feet of the plaintiff in that they were on notice from December 2018 that Empire had vacated the premises and we took possession. All of that will be dealt with at VCAT. But then it was over two years before the VCAT proceedings were commenced. So, yes, the VCAT proceeding may take a while to run to its conclusion but if it had been started earlier it might well be finished by now.

55 Finally, it was submitted, in the present circumstances, that little turns on which proceeding was commenced first or how far each proceeding has advanced.[102]

56 Rysze referred to the Court's power to order a stay in s 30 of the Supreme Court Act and also to the legal principles in Sterling and Bella, and submitted that the application for a temporary stay should be refused.[103]

57 It submitted that the issues to be determined in the VCAT proceeding are different to the issues to be determined in the proceeding in this Court.[104]

58 First, it submitted that VCAT will be required to determine who is liable to Rysze and for how much. Contrary to the submission made on behalf of Mr Guan, it was submitted that Mr Guan has no defence to the guarantee claim made against him at VCAT.[105] Mr Herskope, counsel for Rysze, submitted that Mr Guan's case at VCAT has no reasonable prospect of success.[106] Rysze submitted that '[i]t is not in doubt that the first respondent in the VCAT proceeding abandoned the premises in or about December 2018, and that the first defendant's liability will be for the unpaid rent that has accumulated since that date.'[107] Mr Herskope submitted that:

And so immediately Your Honour should be hesitant or reluctant to accept the submission that any liability on the part of Mr Guan is or could be limited to two months rent and outgoing, in circumstances where my client at VCAT sues or brings its claim, on the basis that the breach permits and the parties have agreed as part of the bargain, for my client to be entitled to sue for what is provided for in clause 7.2 ... [108]

59 Mr Herskope further submitted that Rysze makes a claim that 'arises out of clause 7.2' which is set out in paragraph 28 of Rysze's points of claim at VCAT.[109] Mr Herskope submitted that termination of the Lease does not preclude the claim being made for unpaid rent.[110] In conclusion, Mr Herskope submitted:[111]

what Your Honour can, with respect I submit, take away from this whole discussion is that clause 7.2 does not bring the lease to an end in terms of the landlords rights to seek unpaid rent for the balance of the term and damages, and that's what indeed has been sought by Rysze down at VCAT.

60 Rysze submitted that the proceeding in this Court requires the Court to determine whether the impugned transfer is voidable under s 172 of the Property Law Act. It submitted that the authorities make it clear that Rysze has standing to bring the proceeding in this Court as a contingent creditor and thus as a person affected by the transfer. The factual case to be determined by the Court is confined to whether or not the impugned transfer is voidable under that section. It does not require the Court to make any determination as to the liability of Mr Guan under the Lease of the Melbourne premises.[112]

61 Mr Herskope submitted that the matters pleaded in Mr Guan's amended defence and Rysze's amended reply[113] in the proceeding in this Court concerning the Lease and the Transfer of Lease are 'strictly not relevant'[114] and '[i]n one sense those matters go nowhere ... '.[115] Mr Herskope also submitted that Rysze relies upon the Lease Guarantee and the making of the demands upon Empire and Mr Guan, and not upon a claim that any sums were then due and owing to Rysze.[116]

62 As a result, there is no risk that the determination of the proceeding in this Court will have a material impact on the VCAT proceeding, nor is there any risk of inconsistent findings.[117] There is no overlap in the factual determinations to be made in each proceeding.[118]

63 Mr Herskope also submitted that there are other substantive issues to be determined in the proceeding in this Court which 'need to be determined anyway, and which in no way are the subject of any issue at the VCAT', being the matters involving Mr Guan's father and that this is a factor against the grant of a temporary stay.[119] Mr Herskope submitted that the proceeding in this Court will include evidence concerning the asset and liability statement provided on behalf of Mr Guan prior to the Transfer of Lease that did not record the $3.5 million liability, and which only emerged in Mr Guan's defence.

64 Mr Herskope submitted that 'there are many issues that go beyond the strict rent liability issue that need to be the subject of explanation, evidence and findings ... ' in the proceeding in this Court.[120]

65 Mr Herskope submitted that the VCAT proceeding and the proceeding in this Court are not so intertwined that the outcome of one impacts on the other without exception, as was the case in Lawrence & Hanson.[121] Mr Herskope submitted that there are clear and distinguishing features about the nature of the relief sought in this proceeding and the matters raised by Mr Guan concerning, among other things, the existence of the alleged earlier loan agreement, which take this case outside of the category of cases where the Court must look carefully at the indicia identified by Lockhart J in Sterling.[122]

66 In addition to its submission relating to the lack of overlap between the issues to be determined in the VCAT proceeding and the proceeding in this Court, Rysze also made the following submissions.

67 Rysze submitted that it is in the interests of the administration of justice that the proceeding in this Court should be determined promptly rather than being delayed for a substantial period pending the outcome of the VCAT proceeding. A temporary stay would be inconsistent with the overarching purpose in s 7 of the Civil Procedure Act.[123] It is clear on the evidence that the VCAT proceeding is in its infancy whereas in the proceeding in this Court, pleadings are closed and, save for limited discovery, the proceeding is otherwise ready for the making of pre-trial directions.[124]

68 It is entitled to have its proceeding tried in the ordinary course of the procedure and business of the Court. If the stay sought is granted and Rysze is successful in obtaining a judgment at VCAT against Mr Guan, the proceeding in this Court and the relief sought by Rysze may not be re-enlivened until late 2023 or early 2024. This is the very prejudice that the Civil Procedure Act seeks to avoid in the overarching purpose set out in s 7. It submitted that setting aside the transfer of Mr Guan's interest in the Kew land does not impact on the process that has only recently commenced at VCAT. It submitted that it follows that Mr Guan does not suffer any disadvantage in those circumstances.[125]

69 Rysze submitted that it made a demand on Mr Guan for payment of the outstanding rent on 3 May 2021 and the impugned transfer of the Kew land was registered 11 days later on 14 May 2021, but Mr Guan and Ms Liu have only made a mere denial of Rysze's allegation of an intention to defraud.[126]

70 It is in the public interest that the litigation arising from the impugned transfer and the events surrounding its timing and making be finalised as soon as possible.[127]

71 Mr Herskope also relied on Vickery J's decision in Groeneveld Australia Pty Ltd v Nolten Vastgoed BV[128] in support of his submission that a stay should not be given_._[129] In particular, Mr Herskope highlighted the following passage: 'The Court [in PT Garuda Indonesia Ltd v Grellman [1992] FCAFC 188; (1992) 35 FCR 515] noted that in Victoria, the Elizabethan statute has been adopted in s 172 Property Law Act 1958, and has been adopted in other States and Territories of Australia'.[130]

72 Mr Herskope submitted that since s 172 of the Property Law Act adopts the Elizabethan statute, it is for 'benefit of creditors'.[131] Mr Herskope submitted that there is now the added layer of the existence of third party interest which not only affects Rysze, but also other creditors. Mr Herskope submitted that this is a 'complete answer ... to this notion that this should now sit and wait'.[132]

this proceeding is a proceeding that is brought where the underlying basis is s 172 of the Property Law Act which is adopted from the Elizabethan statute. And Your Honour knows and it's trite and so I don't need to take you to authority, that statue, the purpose of that statute was to avoid delay, hindering or frustrating creditors in relation to dispositions of property.

74 Mr Herskope submitted that there are other matters that have been raised which need to be determined which impact upon all creditors.[134] Mr Herskope submitted that this proceeding does not provide Rysze with any particular priority as a creditor. If the Court concludes that it is a voidable transfer, then there is a transfer back to Mr Guan of his interest and that interest becomes available for all creditors, and not just Rysze.[135]

75 In all of the circumstances, and having regard to the applicable principles I have earlier set out in these reasons,[136] I am satisfied that the proceeding in this Court should be stayed until the resolution or determination of Rysze's claims against Mr Guan in the VCAT proceeding or until further order of this Court. This will facilitate the just, efficient, timely and most cost-effective resolution of the real issues in dispute.

Material effect of VCAT proceeding on the proceeding in this Court

76 First, the determination of the VCAT proceeding is likely to have a material effect on the proceeding in this Court. This is a significant factor in favour of a stay.

77 In Lawrence & Hanson[137] the Court of Appeal granted the appellant a temporary stay of an appeal against a ruling by Rush J ordering the removal of a caveat from land co-owned by the respondents (a Mr and Mrs Young), in part, based upon the following consideration:

24 ... Most significantly the Magistrates' Court proceeding deals with the question as to the existence of a debt allegedly owed by John Young and the identity of the entity to whom that debt is owed.

25 If the proposed appeal against the decision of the magistrate is unsuccessful, there will be no utility in the appeal in this Court proceeding. This is because there would be no debt for the appellant ultimately to recover in the enforcement of the charge which supports the caveatable interest.

26 On the other hand, if the appeal against the magistrate is successful, the issues with respect to the width of the caveat, and other matters, will remain alive in the appeal in this Court.

27 It is clear that the issues in the Magistrates' Court proceeding and the appeal in this Court are intertwined ...

28 In our view, the termination of the Magistrates' Court proceeding would have a direct impact on the termination of the proceeding in this Court, that is, this appeal.

78 In the event that Rysze's claims against Mr Guan in the VCAT proceeding are unsuccessful, there will be no utility in the proceeding in this Court. This is because there would be no debt for Rysze to recover in an enforcement action against Mr Guan's interest in the Kew land. Rysze's statement of claim in this proceeding states that it is 'prejudiced' by the transfer (within the meaning of s 172 of the Property Law Act) as the transfer deprives Mr Guan of his interest in the Kew land and therefore deprives Rysze of the ability to enforce any judgment it obtains against Mr Guan by recovery out of Mr Guan's interest in the Kew land.[138] On the other hand, if Rysze is successful in its claims against Mr Guan in the VCAT proceeding, the issues concerning the transfer of Mr Guan's interest in the Kew land will remain alive in the proceeding in this Court.

79 I do not accept Rysze's submission that it is 'not in doubt' that Mr Guan's liability in the VCAT proceeding will be for unpaid rent that has accumulated since December 2018. Empire denies it is liable to Rysze for unpaid rent and Mr Guan denies that he is liable under the Lease Guarantee. They have filed detailed points of defence in the VCAT proceeding. The merits of these defences will be heard and determined by VCAT. Upon the present material, I am not satisfied that, in the words of Mr Herskope, the defences have 'no reasonable prospects of success'.[139]

80 Empire and Mr Guan admit in the VCAT proceeding that Empire did not pay rent from 15 November 2018 and that Rysze has already called on a Bank Guarantee provided by Empire in the sum of $42,138.76 with respect to the rent due on 15 December 2018 and 15 January 2019, but allege that the Lease was terminated in about January 2019 or alternatively February 2019. They deny that Empire is liable for any rent since about January 2019, or alternatively February 2019, and that Mr Guan is liable under the Lease Guarantee.

81 Empire and Mr Guan also allege in the VCAT proceeding that to the extent that Rysze retained the right, pursuant to cl 7.2 of the Lease, to sue for unpaid money or damages for breaches of obligations under the Lease, it was required to take reasonable steps to mitigate its loss, which it failed to do.

82 Mr Herskope submitted that Rysze makes a claim at VCAT that 'arises out of' cl 7.2 of the Lease and, with respect to the issue of mitigation, Ms Zhang has given evidence that after Empire vacated the premises in December 2018, she had agents try without success to relet the Melbourne premises.

83 Clause 7.2 concerns circumstances in which the landlord, namely Rysze, has terminated the Lease. In its points of claim, Rysze does not allege that it terminated the Lease and, in fact, its claim is premised upon the Lease terminating at the end of the Lease term.[140] It specifically pleads '14 February 2021, being the date that the Lease ended.'[141] In any event, even if Rysze amended its points of claim in the VCAT proceeding and made a claim based upon cl 7.2 of the Lease, an issue arises as to whether Rysze failed to mitigate its loss, and if so, to what extent. Mr Herskope referred to the evidence of Ms Zhang that after Empire vacated the Melbourne premises, she had agents try without success to relet the premises and then observed '[t]rue it is that that's not then gone into chapter and verse'.[142]

84 The merits of Rysze's claims and Mr Guan's defences are all matters to be heard and determined by VCAT, including whether Rysze terminated the Lease and, if so, whether it failed to mitigate its loss, and if so, to what extent.

85 Mr Herskope also submitted that there are other substantive issues to be determined in the proceeding in this Court which 'need to be determined anyway, and which in no way are the subject of any issue at the VCAT',[143] including the matters involving Mr Guan's father. For reasons I have already given,[144] in the event that Rysze's claims against Mr Guan in the VCAT proceeding are unsuccessful there will be no utility in the proceeding in this Court. This includes determining the issues involving Mr Guan's father.

Balancing the advantages and disadvantages to the parties

86 It is important to balance the advantages and disadvantages to each party of a temporary stay.

87 Significant time and legal costs will be incurred by the parties, including the defendants, in the proceeding in this Court in continuing to prepare for and appear at a trial. Those costs may be wasted if Rysze's claims against Mr Guan in the VCAT proceeding are unsuccessful.

88 I accept that a temporary stay may cause prejudice to Rysze. This is because the proceeding in this Court may be determined later than it otherwise would be. The VCAT proceeding is listed for a compulsory conference on 20 April 2022.[145] The VCAT proceeding may not be determined until late 2022 or early 2023. However, any prejudice is likely not to be significant:

(a) Rysze's ability to enforce any judgment it obtains against Mr Guan by recovery out of Mr Guan's interest in the Kew land depends upon its claims in the VCAT proceeding; and

(b) pursuant to orders made by the Court on 28 July 2021, Ms Liu is presently restrained from in any way dealing with, encumbering or disposing of the Kew land until the determination of this proceeding or further order.

89 I am satisfied that balancing the advantages and disadvantages to each party of a temporary stay requires that a temporary stay is granted.

Commencement of VCAT proceeding and the proceeding in this Court

90 The proceeding in this Court was commenced prior to the VCAT proceeding and is more advanced in its preparation than the VCAT proceeding. In the present circumstances, I do not consider these to be factors against the grant of a stay. First, the proceeding in this Court was only commenced approximately six weeks prior to the VCAT proceeding.[146] Secondly, Rysze commenced both proceedings.

91 If I am wrong in this view, and it is a factor against the grant of a temporary stay that the proceeding in this Court was commenced prior to the VCAT proceeding and is more advanced in its preparation, I do not consider it to be a factor that outweighs the other factors in favour of a stay I have already set out in these reasons.[147]

92 Mr Herskope also submitted that the impugned transfer affects all creditors, and that the proceeding in this Court is for the benefit of all creditors, and that this is the 'complete answer' to the application for a stay.

93 I accept that any relief that Rysze obtains in the proceeding in this Court may benefit other creditors of Mr Guan. However, I do not accept that this is a 'complete answer' against the grant of a temporary stay. There was no evidence that Mr Guan presently has any other creditors. In any event, a temporary stay of the proceeding in this Court does not prevent any other person, including a creditor, from commencing a proceeding against Mr Guan based upon s 172 of the Property Law Act. In any event, if I am wrong in this view and the interest of any other creditors is a factor against the grant of a stay, I do not consider it to be a factor that outweighs the other factors in favour of a stay I have already set out in these reasons.[148]

94 I am satisfied that the public interest requires a temporary stay of the proceeding in this Court. For the reasons I have already given,[149] this will facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. I accept that it may delay the proceeding in this Court, but for reasons I have already given,[150] I do not consider delay to be a factor that outweighs the other factors.

95 As a result, I do not accept Rysze's submission that it is in the public interest that the litigation arising from the impugned transfer and the events surrounding its timing and making be finalised as soon as possible. In any event, if I am wrong in this view and it is a factor, I do not consider it outweighs the other factors in favour of a stay.[151]

No common issues or risk of inconsistent findings

96 I am satisfied that it is unlikely that common or similar issues will arise in the proceedings or that there is a risk of inconsistent findings. As a result, I do not consider that this is a factor in favour of a stay. A number of allegations are made in the pleadings in this Court that are also made in the VCAT proceeding. For example:

(a) Rysze alleges in the proceeding in this Court the demands for the sum of $286,117.59 that it made of Empire and Mr Guan with respect to the Lease and also pleads: 'which amount was inclusive of unpaid rent and outgoings due and owing by Empire';[152] and

(b) Rysze and Mr Guan both allege matters relating to the Transfer of Lease and also its termination.

(a) Rysze relies upon the making of the demands upon Empire and Mr Guan and not that any sums were then due and owing to Rysze[153] and upon the existence of the Lease Guarantee.[154] Rysze does not rely upon the pleas it makes in this proceeding that Empire owed the amounts stated in the demands made by Rysze. Rysze relies only upon the making of the demands as alleged in paragraph 11(a) of the statement of claim. He submitted that it is not Rysze's case in this proceeding that Empire was liable for any outstanding rent or outgoings; and

(b) the matters pleaded in Mr Guan's amended defence and Rysze's amended reply in the proceeding in this Court concerning the Lease are 'strictly not relevant'[155] and '[i]n one sense those matters go nowhere ... '.[156]

98 I accept that Rysze may conduct its case in this Court without establishing the indebtedness of Empire under the Lease, the liability of Mr Guan under the Lease Guarantee and matters concerning the termination of the Lease.[157]

99 Finally, it would not be appropriate to order a temporary stay until the resolution or determination of the VCAT proceeding given that there are other respondents to that proceeding. The order for a temporary stay must be limited to the resolution or determination of Rysze's claims against Mr Guan in the VCAT proceeding.

100 I will order that this proceeding be stayed until the resolution or determination of Rysze's claims against Mr Guan in proceeding BP1436/2021 at the Victorian Civil and Administrative Tribunal or until further order of this Court.

101 I will hear from the parties on the question of costs.

[1] Exhibit 'RZ-1' to the Zhang affidavit, pgs 15-41.

[5] Points of claim, [11]; points of defence, [11].

[6] Exhibit 'RZ-1' to the Zhang affidavit, pg 56.

[7] Ibid pgs 8-15; Liu affidavit, [2]; points of claim, [12]; points of defence, [12].

[8] Exhibit 'RZ-1' to the Zhang affidavit, pgs 6-7; Liu affidavit, [2]; points of claim, [4]; points of defence, [4].

[9] Exhibit 'RZ-1' to the Zhang affidavit, pg 9 (cl 8); points of claim, [17] (the reference to '19 February 2016' appears to be a typographical error); points of defence, [17].

[10] Exhibit 'RZ-1' to the Zhang affidavit, pgs 44-55.

[12] Points of claim [16]; points of defence, [16].

[13] Exhibit 'RZ-1' to the Zhang affidavit, pg 60; Zhang affidavit, [15].

[14] Points of claim, [20]; points of defence, [20].

[15] Points of claim, [18], [21]; points of defence, [18], [21].

[16] Points of claim, [24]; points of defence, [24].

[17] Points of claim, [25]; points of defence, [25(a)].

[18] Exhibit 'RZ-1' to the Zhang affidavit, pgs 61-84.

[22] Statement of claim filed 25 June 2021, [1(b)].

[27] Ibid [9] (The date '28 June 2016' is an error and should be a reference to '28 June 2017').

[30] Ibid [12], particulars to [12].

[34] Order of Attiwill J in Rysze International Pty Ltd v Guan & Anor (Supreme Court of Victoria, S ECI 2021 02229, 29 June 2021).

[35] See, eg, Order of Attiwill J in Rysze International Pty Ltd v Guan & Anor (Supreme Court of Victoria, S ECI 2021 02229, 2 July 2021).

[36] Order of Attiwill J in Rysze International Pty Ltd v Guan & Anor (Supreme Court of Victoria, S ECI 2021 02229, 28 July 2021).

[38] Mr Guan's amended defence filed 29 September 2021, [4].

[47] Ms Liu's defence filed 26 August 2021, [10].

[62] See exhibit 'WL-1' to the Liu affidavit, pg 2.

[63] Exhibit 'MJK-3' to the Kenny affidavit.

[65] Ibid [10]; exhibit 'MJK-1' to the Kenny affidavit.

[66] Exhibit 'MJK-2' to the Kenny affidavit.

[68] [2021] VSCA 120, [121] -[122] (Kyrou , McLeish and Sifris JJA). See also Lonergan v Trustees of The Sisters of Saint Joseph & Anor [2021] VSC 650, [10]-[14] (Keogh J).

[69] Supreme Court Act 1986 s 30 ('SC Act').

[70] (1992) 34 FCR 287; [1992] FCA 72 ('Sterling Pharmaceuticals').

[71] Sterling Pharmaceuticals [1992] FCA 72; (1992) 34 FCR 287, 291; [1992] FCA 72, approved in Lawrence & Hanson Group Pty Ltd v Young [2016] VSCA 69, [22] ('Lawrence & Hanson').

[72] [2009] FCA 868; (2009) 258 ALR 538, 543 [23]; [2009] FCA 868, approved in Lawrence & Hanson [2016] VSCA 69, [23].

[73] [2016] VSC 400; (2016) 51 VR 60, 67-72 [26]-[41] (Hargrave J). See also Ms Liu's submissions filed 6 October 2021, [6].

[74] Ms Liu's submissions filed 6 October 2021, [7].

[78] Ms Liu's submissions filed 6 October 2021, [8(a)(i)].

[79] Transcript of Proceeding, Rysze International Pty Ltd v Guan & Anor (Supreme Court of Victoria, Attiwill J, 15 October 2021) 10.26-11.1 (Mr Silver) ('Transcript of Proceeding').

[80] The Kew land is subject to an injunction, not a freezing order.

[81] Transcript of Proceeding (n 79) 9.18-23 (Mr Silver).

[82] Ms Liu's submissions filed 6 October 2021, [8(d)].

[83] Transcript of Proceeding (n 79) 6.4-8 (Mr Silver).

[85] Ms Liu's submissions filed 6 October 2021, [9].

[86] Mr Guan's submissions filed 7 October 2021, [9].

[87] [1992] FCA 72; (1992) 34 FCR 287, 290-1 ('Sterling'). See also Mr Guan's submissions filed 7 October 2021, [10]-[12].

[88] [2009] FCA 868; (2009) 258 ALR 538, 543 [23] ('Bella'). See also Mr Guan's submissions filed 7 October 2021, [13].

[89] Mr Guan's submissions filed 7 October 2021, [14].

[93] Transcript of Proceeding (n 79) 58.21-4 (Mr Lum).

[94] Mr Guan's submissions filed 7 October 2021, [8(b)].

[96] Transcript of Proceeding (n 79) 15.20-23 (Mr Lum).

[97] Mr Guan's submissions filed 7 October 2021, [17].

[98] Transcript of Proceeding (n 79) 23.22-31 (Mr Lum).

[99] Mr Guan's submissions filed 7 October 2021, [18].

[100] Transcript of Proceeding (n 79) 16.10-6 (Mr Lum).

[102] Mr Guan's submissions filed 7 October 2021, [19].

[103] Rysze's submissions filed 12 October 2021, [3]-[4], [6]-[7].

[106] Transcript of Proceeding (n 79) 30.10 (Mr Herskope).

[112] Rysze's submissions filed 12 October 2021, [10(b)].

[113] See, eg, Rysze's amended reply filed 7 October 2021, [2].

[114] Transcript of Proceeding (n 79) 38.6 (Mr Herskope). See also 37.24-38.10 (Mr Herskope).

[116] Ibid 43.23-9, 44.17-24 (Mr Herskope). See also 48.23-49.2 (Mr Herskope).

[117] Rysze's submissions filed 12 October 2021, [10(c)].

[119] Transcript of Proceeding (n 79) 36.13-4 (Mr Herskope). See also 37.4-11 (Mr Herskope).

[121] Ibid 53. 4-15 (Mr Herskope). See also Lawrence & Hanson (n 71).

[123] Rysze's submissions filed 12 October 2021, [10(d)(i)].

[126] Ibid [11]. See also Mr Guan's amended defence filed 29 September 2021, [10]; Ms Liu's defence filed 26 August 2021, [10].

[127] Rysze's submissions filed 12 October 2021, [12].

[128] [2011] VSC 18, [65]-[66] ('Groeneveld').

[129] Transcript of Proceeding (n 79) 51.2-24 (Mr Herskope).

[130] Groeneveld (n 128) [66] (citations omitted).

[131] Transcript of Proceeding (n 79) 50.4-6 (Mr Herskope).

[134] Transcript of Proceeding (n 79) 53.28-30 (Mr Herskope).

[136] See above [32]-[33].

[137] (n 71) [24]-[28] (Tate and Beach JJA). See also Everest Project Developments Pty Ltd v Westpac Banking Corporation [2009] VSC 563 (Vickery J).

[138] Statement of claim, particulars to [12].

[139] Transcript of Proceeding (n 79) 30.10 (Mr Herskope).

[142] Transcript of Proceeding (n 79) 75.12-3 (Mr Herskope).

[144] See above [78].

[145] Transcript of Proceeding (n 79) 16.3-7 (Mr Lum).

[146] In addition, Mr Guan submitted that the proceeding in this Court was commenced 'less than a week after [Rysze] applied to refer its dispute with Empire to the Victorian Small Business Commission (as a prerequisite to commencing the VCAT Proceedings)': Mr Guan's submissions filed 7 October 2021, [19]. There was evidence to support this submission.

[147] See above [75]-[90].

[152] Statement of claim filed 25 June 2021, [6].

[153] Transcript of Proceeding (n 79) 43.23-9 (Mr Herskope). See also 48.23-49.2 (Mr Herskope).

[155] Ibid 38.6 (Mr Herskope). See also 37.24-38.10 (Mr Herskope).

[157] This may have required Rysze to amend it pleadings in the proceeding in this Court to accord with the submissions made by Mr Herskope: see above [97].