I have had before me today two notices of motion in separate proceedings involving only some common parties. The first application in the first set of proceedings in time, Xu v Cao & Du Management Pty Ltd & Anor, is for an expedited hearing. That proceeding is matter-number 2022/00078620 (the 2022 proceedings). The second motion in time is in the matter of Cao v Tung Chit Real Estate Investment Australia Pty Ltd & Anor. That proceeding is matter-number 2024/00320302 (the 2024 proceedings). It seeks an order that the 2024 proceedings be heard together with the 2022 proceedings and that evidence in one stands as evidence in the other with some ancillary orders for case-management.
It is clear that some of the parties are the same. However, the plaintiff in the 2022 proceedings, Mr Xu, is not a party to the 2024 proceedings. The common parties are the cross-defendants joined by the Cao parties to the 2022 proceeding. The claim in debt the subject of the 2024 proceedings could probably have been pleaded in that cross-claim but was not.
Without descending into great detail about the proceedings, given I am dealing with case management issues, the facts in the matter and the general background to the proceedings were fully discussed by my colleague Coleman J in his judgment in the 2022 proceedings, having the medium neutral citation of [2024] NSWSC 1596. That was a successful application by the plaintiff for an interim asset preservation order.
Essentially the facts that were persuasive from his Honour's point of view in making that order form the basis of the application for expedition. They relate to what, on any view of it, must be the individual defendant's perilous or at least extremely attenuated financial position as demonstrated by the evidence before Colman J. That individual is the controlling mind of the corporate defendant in the 2022 proceedings, although his estranged wife apparently still has shares in that corporation.
By the 2022 proceedings, Mr Xu claims recovery of a sizeable debt. It was originally a loan of $3.3 million repayable within a period of two years. The accumulated interest due upon repayment (but not before) was a further sum of $3.3 million. The total being, of course, $6.6 million. It fell due in or about the latter part of 2018 and default interest compounding on a monthly basis has brought the total now due, on the plaintiff's case, to the vicinity of $55 million.
As Coleman J discussed in his judgment, the defendant's case is that the loan agreement is a sham. It was entered into for the ulterior purpose of defeating or evading taxation laws and that, in fact, the capital sum of $3.3 million was an investment in a development project at Greenacre being undertaken by Mr Cao or his company. There seems to be no dispute that the expectation was that the return on the investment would be 100 percent or an additional $3.3 million. However, Mr Cao's case is that sum does not fall due until the successful completion of the development, I infer, the investor bearing the usual commercial risk in the meantime.
The 2024 proceedings are somewhat different although, as I say, some of the parties are common to both proceedings, and as Mr Alkadamani of counsel has explained to me, there is an essential corroborating witness who will give evidence in each of the separate proceedings. The 2024 proceedings relate to a separate loan being an alleged advance by Mr Cao to the cross-defendants in the 2024 proceedings. Whilst the factual matrix is a little complex and I do not propose to delve into it fully, in general terms, the defendants in the 2024 proceedings, the Cao parties, and the cross-defendants in the 2022 proceedings, but not the plaintiff, had been joint venturers in another property development at Magenta Shores, north of The Entrance on the Central Coast. That development followed a tortuous path. The registered proprietor of the land, upon which the development was to be undertaken, defaulted on a mortgage. The mortgagee went into possession and the joint venturers acquired the land by mortgagee-sale. The corporate dispossessed registered proprietor owed moneys advanced by its controlling mind, which it said the joint venturers had a claim to.
The case sought to be made by the plaintiff in the 2024 proceedings is that, due to the impatience of his joint venturers, the cross-defendants in 2022 proceedings, he made a loan to them equivalent to their expected return from the dispossessed registered proprietor. The terms were that the joint venturers would repay the loan either when the dispossessed corporate registered proprietor came good with the money or, in the event that it did not, when it went into liquidation or was deregistered. The defendants in those proceedings acknowledged receipt of the moneys, all barring $20,000, but deny it was a loan and, as I understand it, say it was a readjustment of their interests inter se as joint venturers.
Given the commonality of the parties and what might be said to be the common factual matrix relevant to both sets of proceedings, Mr Alkadamani has argued that they should be heard at the same time with evidence in one standing as evidence in the other. This argument is opposed by Mr Cook of senior counsel for Mr Xu, who argues that far from simplifying matters, joining the proceedings together: (a) is likely to slow down the listing of the 2022 proceedings and (b) is likely to compound the complexity of the proceedings.
I have formed the view that the 2022 proceedings, which seem to be virtually ready for hearing, should be listed for hearing. I am not satisfied that there should be expedition for a number of reasons, although I can accept that since a change of lawyers for Mr Xu, things have proceeded with due despatch. As Mr Alkadamani says, initially there were significant delays. Although the material before me demonstrates that, as I have said, Mr Cao's financial position is at best attenuated and that there is a natural apprehension on the part of Mr Xu that he will lose his money, I am not satisfied that circumstance justifies expedition given the freezing order made by Coleman J. I accept such an order does not provide an iron clad guarantee, but it seems to me that Mr Xu is going to have to take his chances with what appear to be a legion of other creditors of Mr Cao.
Moreover, the 2022 proceedings relate to an allegation of a loan advanced in 2016, default in 2018 and commencement of proceedings in 2022. They really need to be brought on for hearing, given that they have been pending in this Court for three years and, by the time they are listed, it will have been nine years since the conversations upon which Mr Cao relies to challenge the validity of the loan agreement took place. Accordingly, without displacing other matters in the list, I propose to list the matter for hearing. As it turns out the Court, due to early settlements, has time available in September. Normally a matter with a seven or eight day estimate might wait for over 12 months for a hearing date.
So far as joining the proceedings together is concerned, I am not satisfied that the fact there is a common witness in the proceedings or that there is a common factual matrix to the general business relationship between the defendants in the 2022 proceedings and the cross-defendants in those proceedings is of itself sufficiently compelling to direct that there be a joint hearing. In fact, it seems to me that the different nature of the transactions involved and the consideration that the background to them involved different development projects are reasons to suggest that joining the proceedings together (even informally in a concurrent hearing) will only serve to complicate matters and will really amount to imposing upon the trial judge the need to hear what are essentially, when one focuses upon the central issues, two different cases at the same time. That could only complicate the running of the cases and, I think it is relevant to say, complicate the decision-making process involved in the writing of a judgment.
I am not satisfied that there are efficiencies to be had which will further the overriding purpose by joining the cases together. Although I have not granted expedition I will list the 2022 matter for hearing.
Costs are in dispute. It seems to me that there is perhaps something to be said for the arguments put by both Mr Cook and Mr Alkadamani. Essentially, I am of the view that the appropriate order is the costs of each party are costs in the respective cause.
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Decision last updated: 06 March 2025