Fang v Yao [2025] QSC 46

SUPREME COURT OF QUEENSLAND CITATION: Fang v Yao [2025] QSC 46 PARTIES: LINA FANG (First plaintiff) NAXI AGRICULTURE INVESTMENT PTY LTD ACN 634 072 209 (AS TRUSTEE FOR THE NAXI AGRICULTURE TRUST) (Second plaintiff) NAXI @TROUGHTON PTY LTD ACN 634 070 698 (AS TRUSTEE FOR THE NAXI PROPERTY INVESTMENT TRUST) (Third plaintiff) NAXI (CHINA) PTY LTD ACN 616 666 749 (Fourth plaintiff) v WENLIANG YAO (ALSO KNOWN AS WILLIAM YAO) (First defendant) QIUYUE LI (Second defendant) LIANRU ZHAO (Third defendant) NEW AUS GROUP ACN 165 555 733 (Fourth defendant) W HOLDING GROUP PTY LTD ACN 619 024 341 (Fifth defendant) BRISBANE VALLEY INVESTMENTS PTY LTD ACN 623 094 306 (BOTH IN ITS OWN RIGHT AND AS TRUSTEE FOR THE BRISBANE VALLEY INVESTMENTS TRUST) (Sixth defendant) AIRHOME BRISBANE PTY LTD ACN 624 970 501 (Seventh defendant) ANXIN CAPITAL PTY LTD ACN 632 712 675 (Eighth defendant) DEPUTY COMMISSIONER OF TAXATION (Ninth defendant) FILE NO: BS 13370 of 2022 DIVISION: Trial Division -- 1 of 14 -- 2 PROCEEDING: Interlocutory application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 21 March 2025 DELIVERED AT: Brisbane HEARING DATE: 29 November 2024 JUDGE: Hindman J ORDERS: 1. Leave to amend the Yao and Zhao defences and to withdraw the admissions in those defences in relation to the ownership admission and the Ms Li licence admission are refused. 2. Leave to withdraw the PRC Citizenship admission, the law firm admission and the language admission are granted. 3. Outcomes of objections to certain paragraphs of the proposed amended Yao and Zhao defences are set out in the table at the end of the reasons. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COURT SUPERVISION – AMENDMENT – ORIGINATING PROCESS, PLEADINGS ETC – where certain defendants seek leave to amend their defences and withdraw admissions – where those defendants wish to plead to deny an allegation in the statement of claim which had initially been admitted, and to make new allegations – where a key allegation is not admitted in the defence of another defendant – where trial dates had been previously vacated once and granting leave to amend or withdraw admissions may result in trial dates being vacated a second time – where the adequacy of the explanation given as to how the admissions came to be made initially is in issue – whether leave to amend defences or withdraw admissions should be granted Uniform Civil Procedure Rules 1999 (Qld), rr. 5, 165(2), 166(3), 188, 375 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 DJ & MA Hose Pty Ltd ATF The Hose Family Trust v Wide Bay Insurance Broking Pty Ltd ATF The Wide Bay Business Trust [2022] QSC 191 Hanson Construction Materials Pty Ltd v Norlis Pty Ltd (2010) 79 ACSR 668 Hartnett v Hynes [2009] QSC 225 Rigato Farms Pty Ltd v Ridolfi [2001] 2 Qd R 455 COUNSEL: D de Jersey KC with P Ahern for the plaintiffs -- 2 of 14 -- 3 T Pincus with A Campbell for the first, third, fourth, fifth and sixth defendants J Byrne for the ninth defendant SOLICITORS: Clayton Utz for the plaintiffs Bartley Cohen for the first, third, fourth, fifth and sixth defendants McInnes Wilson Lawyers for the ninth defendant Introduction [1] Mr Yao is the first defendant in the proceeding. He, together with the fourth and fifth defendants, are referred to as the Yao defendants. [2] Ms Zhao is the third defendant in the proceeding. She, together with the sixth defendant, are referred to as the Zhao defendants. [3] The Commissioner of Taxation (ATO) is the ninth defendant in the proceeding. It holds certain garnished funds totalling approximately $28m that were garnished from a bank account belonging to Mr Yao and Ms Zhao. Mr Yao and Ms Zhao agree they have no interest in those garnished funds. [4] The Yao and Zhao defendants apply for leave to amend their defences (rule 375 UCPR) and to withdraw admissions (rule 188 UCPR). Some of the proposed amendments, including the withdrawal of some admissions, are not opposed by the plaintiffs. See the plaintiffs’ primary written submissions at [8] and Schedule 1. [5] In terms of the categories of the admissions sought to be withdrawn by the Yao and Zhao defendants these categories remain contentious: (a) ownership admission: that Ms Fang owned the funds the subject of the proceeding (Yao defence at [26(a)(iv)-(vi)], [26(c)(i)], [50(c)], [52(c)], [61(b)(iii) and (d)(iii)]; Zhao and Yao defences at [82A(b)]); (b) (Zhao defence only) Ms Li licence admission: that Quiyue Li is, and at all times material to this proceeding has been, a licenced real estate agent (Zhao defence at [6]). [6] The ownership admission was the focus of much of the argument; that is, whether Ms Fang was in fact the owner of the funds that the plaintiffs seek to recover by this -- 3 of 14 -- 4 proceeding. The Yao and Zhao defendants have admitted on the current pleadings that Ms Fang was the owner of the funds. They have also admitted an allegation made in [64] of the statement of claim that a letter was sent by Mr Yao’s and Ms Zhao’s solicitors to the ATO on 21 July 2022 stating to the effect that they held the funds garnished for Ms Fang. [7] The Yao and Zhao defendants now wish to plead to deny that Ms Fang was the owner of the funds, and, based on that denial, make new allegations referred to in the proposed defences as the Non-Ownership Reason, the Transfer Purpose, the No Gift Reason and the No Fang Transfer Reason. [8] In the circumstances of this case, leave to amend the Yao and Zhao defences and to withdraw admissions in relation to the ownership admission and the licence admission are refused. Whilst that conclusion involves a consideration and weighing of various relevant factors, important to the outcome in respect of the ownership admission is that the Yao and Zhao defendants have not adequately explained how the admission came to be made in the first place. The outcome in relation to particular paragraphs of the proposed amended defences is set out in the tables at the end of these reasons. Nature of the proceeding [9] The statement of claim reveals a complicated set of arrangements and money transfers. In essence the plaintiffs allege that monies belonging to Ms Fang were transferred to Australia and used to purchase properties in Australia and that the plaintiffs have claims against the defendants as a consequence. Such claims include claims for monies had and received, damages for deceit, equitable compensation, for an account, for monies held on trust, for damages pursuant to the Australian Consumer Law (ACL), for damages for breach of fiduciary duty and so on. The amounts involved exceed about $80m. Conduct of the proceeding [10] The plaintiffs commenced the proceeding on 31 October 2022. The Yao and Zhao defendants defended the proceeding. Certain admissions were made in the defences originally filed. -- 4 of 14 -- 5 [11] The plaintiffs obtained interim freezing orders on 31 March 2023 and interlocutory freezing orders on 17 May 2023. [12] There have been some amendments to the pleadings and the joinder of additional parties. The ATO was joined as a defendant to the proceeding in July 2023. [13] In the ATO’s defence of 30 October 2023 at [27] and [31], the ATO responded to an allegation about the true owner of garnished funds being Ms Fang (see [82A] and [82F] of the statement of claim). The response of the ATO was to plead a non- admission. [14] The proceeding was placed on the commercial list on 19 May 20231 and has been managed since that time. Consistent with the objectives of the commercial list to give commercial list matters early certainty with respect to trial dates, on 22 December 2023 the matter was listed for a trial (even though it was not then ready for trial) commencing 28 October 2024, and directions made to have the proceeding ready for trial by that date. [15] On 24 September 2024 the Yao and Zhao defendants applied for the trial to be adjourned on the basis that they had not finalised their investigations into the ownership of the relevant funds and may seek to amend their defences to assert that Ms Fang was not the owner of the funds. On 30 September 2024, after a contested hearing, the trial dates were vacated and directions made. New trial dates were tentatively set – 6 weeks commencing around 21 July 2025 (to be confirmed once the court calendar for the second half of 2025 is published). [16] On 25 November 2024 the application for leave to amend and to withdraw admissions was filed. The application was heard on 29 November 2024. Relevant legal principles [17] The relevant legal principles to be applied on an application of this nature are largely not in dispute between the parties. The relevant legal principles are set out in: 1 CDI 49. -- 5 of 14 -- 6 (a) DJ & MA Hose Pty Ltd ATF The Hose Family Trust v Wide Bay Insurance Broking Pty Ltd ATF The Wide Bay Business Trust [2022] QSC 191 at [45]- [47] as to an application with withdraw admissions made in a pleading; (b) Hartnett v Hynes [2009] QSC 225 at [27] as to the exercise of the court’s discretion to permit proposed amendments to a pleading. [18] In respect of the latter, regard is to be had to the twelve principles derived from Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, which were helpfully distilled by Applegarth J in Hartnett v Hynes [2009] QSC 225 at [27]: 1. An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. 2. The discretion is guided by the purpose of the rules of civil procedure, namely the just and expeditious resolution of the real issues in dispute at a minimum of expense. 3. There is a distinction between amendments which are necessary for the just and expeditious resolution of “the real issues in civil proceedings” and amendments which raise new claims and new issues. 4. The court should not be seen to accede to applications made without adequate explanation or justification. 5. The existence of an explanation for the amendment is relevant to the court’s discretion, and “[i]nvariably the exercise of that discretion will require an explanation to be given where there is a delay in applying for amendment”. 6. The objective of the court is to do justice according to law, and, subject to the need to sanction a party for breach of its undertaking to the court and to the other parties to proceed in an expeditious way, a party is not to be punished for delay in applying for amendment. 7. Parties should have a proper opportunity to plead their case, but justice does not permit them to raise any arguable case at any point in the proceedings upon payment of costs. 8. The fact that the amendment will involve the waste of some costs and some degree of delay is not a sufficient reason to refuse leave to amend. -- 6 of 14 -- 7 9. Justice requires consideration of the prejudice caused to other parties, other litigants and the court if the amendment is allowed. This includes the strain the litigation imposes on litigants and witnesses. 10. The point the litigation has reached relative to a trial when the application to amend is made is relevant, particularly where, if allowed, the amendment will lead to a trial being adjourned, with adverse consequences on other litigants awaiting trial and the waste of public resources. 11. Even when an amendment does not lead to the adjournment of a trial or the vacation of fixed trial dates, a party that has had sufficient opportunity to plead their case may be denied leave to amend for the sake of doing justice to the other parties and to achieve the objective of the just and expeditious resolution of the real issues in dispute at a minimum of expense. 12. The applicant must satisfy the specific requirements of rules, such as UCPR 376(4) where it seeks to introduce a new cause of action after the expiry of a relevant limitation period. [19] In respect of the fifth principle above, the plaintiffs submitted that the evidence in support of the withdrawal of an express admission should provide a detailed and clear explanation as to how and why the admissions came to be made – referring to the decision in Hanson Construction Materials Pty Ltd v Norlis Pty Ltd (2010) 79 ACSR 668 at [13]-[14]. [20] The plaintiffs also made specific reference to the decision in Rigato Farms Pty Ltd v Ridolfi [2001] 2 Qd R 455. That was a case concerning the withdrawal of admissions deemed to be made because of the non-response to a notice to admit facts, which had the effect that the defendant’s primary liability for the plaintiff’s personal injuries arising from workplace incidents was taken to be established. The plaintiffs emphasised the following parts of the decision: (a) per de Jersey CJ at [19]-[20]: [19] Asked to exercise the discretion under r. 189(3), a court would ordinarily expect sworn verification of the circumstances justifying a grant of leave. Those circumstances may include why no response to the notice was made as required, the response the party would belatedly seek to make, and confirmation that the response would accord with evidence available to be led at trial. Here none of those matters was so verified. Issues of prejudice may also fall for consideration upon the hearing of such an application. -- 7 of 14 -- 8 [20] There is no principle that admissions made, or deemed to have been made, may always be withdrawn “for the asking”, subject to payment of costs. The discretion is broad and unfettered, as exemplified by Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR738 and Equuscorp Pty Ltd v Orazio [1999] QSC 354. (b) per McPherson JA at [27]: [27] Before permitting the admission to be withdrawn, the first step to be determined here was whether there was a genuine dispute about the defendant’s liability in this action. Drawing on the analogy provided by another branch of the law, it is not enough for that purpose simply to assert that a dispute exists: see Re Brighton Club & Norfolk Hotel Co Ltd (1865) 35 BEAV 204, 205; (1865) 55 ER 873, 874. Some proper basis must be laid for that assertion, which would ordinarily include an explanation of how the earlier admission came to be made and why it should now be permitted to be withdrawn. That is not shown by saying that there has been a change of solicitors, or that it is possible to see that, before the admission was made, the issue of liability was an open question. Here the defendant has not condescended to swear to the circumstances in which the admission came to be made, or to show that it occurred by inadvertence, mistake or some other way that might now justify its withdrawal. (c) per Williams J at [32]: [32] Certainly an admission flowing from the operation of r. 189 should not be withdrawn merely for the asking. In my view a clear explanation on oath should be given as to how and why the admission came to be made and then detailed particulars given of the issue or issues which the party would raise at trial if the admission was withdrawn. Ownership admission Matters favouring the requested leave [21] First, I proceed on the basis that the case sought to be run by the Yao and Zhao defendants’ – that Ms Fang was not the owner of the relevant funds – is a reasonably arguable case, sufficiently particularised and supported by evidence those defendants would seek to adduce at trial. That basis gains some support from the fact that the ATO in its pleading made a non-admission about ownership of the garnished funds. Further, because of that non-admission, the issue of ownership of the garnished funds will be a live one at trial although the ATO will be restricted in the evidence it can adduce in relation to the issue – rule 165(2) UCPR. [22] It is also noteworthy that this is not a case where a new cause of action is sought to be introduced. -- 8 of 14 -- 9 [23] The resolution of the real issues in dispute is a weighty factor to be considered. The resolution of the real issues is dispute is important in the interests of justice. But it should be noted that whether there is in fact a real issue in dispute in a case such as this may be influenced by the explanation as to how the admission came to be made in the first place. [24] Second, whilst the parties appear agreed that a grant of leave will likely result in the existing trial dates being vacated, and that would be the second vacation of trial dates, the trial at the moment is not “imminent” (being likely to be scheduled to commence around 21 July 2025). A vacated trial might still be able to be heard in 2025. [25] Third, additional delay and costs consequent upon leave to amend being granted is not of itself a sufficient reason to refuse leave to amend. The applicants for leave to amend are not to be punished because of any delay in bringing the application. Here there is some explanation for the delay. The issue only appears to have arisen because of enquiries made by the Yao and Zhao defendants’ current solicitor and those investigations have taken some time to advance to a stage permitting him to be able to plead the defences now sought to be advanced. Whilst the investigations have taken a significant period of time, at least some of the delay is to be expected in the circumstances of the proceeding involving an overseas connection. Matters against the requested leave [26] First, as noted above, whilst the trial is not imminent, any grant of leave that results in the trial dates being vacated will be the second vacation of trial dates in the proceeding. That is in circumstances of the proceeding having been on foot since 2022, rule 5 UCPR, freezing orders being in place, and the matter being on the commercial list, all of which point to the desirability of the proceeding being finalised as soon as possible. [27] Second, the Yao and Zhao defendants (and their then solicitors) have not deposed as to how the admission came to be made in the first place. Such an explanation would ordinarily be required. It is even more called for in this case having regard to: (a) information consistent with the admission having been previously communicated to the ATO on behalf of Mr Yao and Ms Zhao; -- 9 of 14 -- 10 (b) the observation that the proposed denial that the relevant funds were owned by Ms Fang seems to rely upon matters that were known, at least to Mr Yao, at the commencement of the proceeding, the pleaded matters having occurred between 2016 and 2021 – see Yao proposed defence at [24(h)], [18D], [18E], [41A], [1(bb)]; (c) the late nature of the application for leave to amend, particularly in circumstances where a trial in the proceeding has once been vacated. [28] Whilst the Yao and Zhao defendants’ counsel candidly acknowledged the lack of evidence in that regard, it was submitted that the lack of evidence could be explained by (T1-17, LL39-41): …my submission is it’s obvious that everyone just assumed, as Mr Cohen did and deposed that he did, that this having been admitted and there being no apparent contest, that that was the case. [29] However, that submission says nothing about what the actual defendants knew, and what they told their solicitors which led to the admission being made (effectively in two different forms – the pleadings and the letter to the ATO). [30] The Yao and Zhao defendants’ counsel went on to assert that an inference was available that, in making assertions to the ATO about the monies being Ms Fang’s (see above at [6]) that (T1-18, LL7-10): Mr Yao’s primary concern at the time being to make clear that it wasn’t his money, and so that the Ms Fang question was not really front of mind and your Honour has a basis for an inference to that effect. [31] I do not accept there is a proper evidentiary basis deposed to in order for such an inference to be drawn. The explanation provided by counsel goes no higher than speculation. [32] Third, as already noted, the basis for the proposed denial that the relevant funds were owned by Ms Fang seems to rely upon matters that were known, at least to Mr Yao, at the commencement of the proceeding, the pleaded matters having occurred between 2016 and 2021 – see Yao proposed defence at [24(h)], [18D], [18E], [41A], [1(bb)]. [33] Fourth, the plaintiffs have put on evidence as to prejudice if leave is granted. I accept that significant prejudice would be suffered – particularly in terms of delay and -- 10 of 14 -- 11 additional cost in responding to the proposed amended defences. There is no proposal put by the defendants as to how such prejudice might be practically alleviated. It is noted that whilst there are freezing orders in place in respect of the Yao and Zhao defendants’ assets, the assets within jurisdiction in value are far below the amount of the claim, and any assets in China (where those individual defendants are now located) are likely to be beyond reach. Other matters [34] There were some other matters mentioned by the parties that I have decided should be given no weight in this application. [35] First, it was submitted for the plaintiffs that something should be made of the fact that the Yao and Zhao defendants have not reverted to the ATO to correct their previous assertions that the relevant funds belonged to Ms Fang. The inconsistency in position was highlighted. I do not consider that is a matter of any weight. Insofar as the ATO is concerned it has not admitted ownership of the funds and so whatever the Yao and Zhao defendants have previously communicated to it is of no particular consequence. [36] Second, the Yao and Zhao defendants say the admission sought to be withdrawn should be viewed in the context of the plaintiffs’ pleading in the statement of claim about her ownership of the relevant funds being “obtuse” (T1-19, L16-17). It was noted that the first reference in the pleading to the relevant monies being Ms Fang’s monies is at [25(g)] of the statement of claim and is little more than a reference in passing. It was submitted therefore that (T1-20, LL15-33): And so one can see why someone dealing with this proceeding might not have been caused to address front and centre at that point the question of ownership. It’s not pleaded explicitly at that point that it is Ms Fang’s moneys. It’s pleaded not as a material fact, but just by way of a definition of “the moneys”. It’s not until there’s a joinder of the ATO – and they’re referred to, you know, as “the moneys”, for example, at paragraph 47 and in other what might be seen as tellingly obtuse ways until the ATO is joined … …but my proposition was that it’s unusually obtuse not to plead – where one seeks, for example, the return of moneys that are yours, to plead that they are yours explicitly as a material fact. That’s not done until the ATO is joined, and as your Honour knows, the response to that puts this point in issue at 82A, and again it’s part of a rolled-up allegation that Ms Fang is the true owner of the funds…. -- 11 of 14 -- 12 [37] I do not consider that the manner in which the plaintiffs pleaded ownership of the relevant funds was “obtuse” in any way that would mean that the Yao and Zhao defendants’ admission of Ms Fang’s ownership of the funds might be taken to be something less than an admission, or an explanation for an admission that was not intended. First, if the admissions were a mistake, there could have been evidence put on about that and there was not. Second, the fact of Ms Fang being a plaintiff, the nature of the claim and express references at [47(a)] and [48] of the original statement of claim make it sufficiently clear that the plaintiffs’ claim was based on the allegation that Ms Fang was the owner of the relevant funds. [38] And insofar as [82A] of the amended statement of claim made the position even clearer, that did not result in the Yao and Zhao defendants’ seeking to withdraw any admission made then. Instead, the admission was maintained in the amended defences filed in March 2024.2 Outcome [39] In my view, in considering the competing factors, leave should not be granted to the Yao and Zhao defendants to withdraw the ownership admission. Particularly important to that outcome is that the Yao and Zhao defendants have not adequately explained how the admissions came to be made in the first place, which leads me to conclude there is not a real issue in dispute that the interests of justice require to be addressed. The Yao and Zhao defendants have had more than an adequate opportunity to plead the defences they wished to maintain and the (second) trial should not now be derailed by a late sought amendment in all of the circumstances of the proceeding. Ms Li Licence admission (Zhao defence only) [40] The Yao defence does not admit the plaintiffs’ allegation about Ms Li being a licenced real estate agent. The Zhao defence admits the allegation. The Zhao defendants say that was an obvious error as the position should be the same as between those defendants. I accept that the Zhao defendants’ admission was in error. 2 CDI 112 and 113. -- 12 of 14 -- 13 [41] The only point made by the plaintiffs in real opposition to leave to withdraw the admission was that there is no evidence that the Zhao defendants have complied with rules 166(3)(a) and (b) UCPR which would permit a non-admission to be pleaded. [42] That seems correct in circumstances where it might be expected a publicly available licence search of a real estate agent could be readily performed with the relevant government department. [43] Absent some evidence of reasonable enquiries having been performed, I am not satisfied that the admission should be permitted to be withdrawn and replaced with a non-admission. Other proposed amendments [44] Schedule 1 to the plaintiffs’ outline of submissions details all of the plaintiffs’ objections to the proposed amendments to the defences of the Yao and Zhao defendants. The relevance objections were not the subject of extensive submissions. [45] The outcomes of the objections contained in the schedule are as follows: Objections to proposed amendments Paragraph to which objection taken Outcome of objection General Upheld Preliminary paragraph B Upheld 12(bb) Upheld - the relevance of these allegations has not been demonstrated 12A(a)(iii), 12A(b), 12A(c), 12A(d), 12A(e), 12B Upheld - the relevance of these allegations has not been demonstrated 18D(a) to (g) Upheld - the relevance of these allegations has not been demonstrated and I understand the defendants not to seek to include these paragraphs any more 19(b)(i)(D) Upheld - the relevance of these allegations has not been demonstrated 25A(b)(iii) Upheld -- 13 of 14 -- 14 28(da) Upheld - insofar as the proposed paragraph makes reference to the Transfer Purpose, it is not permitted. Otherwise dismissed - it is not clear that the balance of the pleaded matters are irrelevant 28(e)(7A) to (9) Upheld 41A, other than 41A(b)(vi) to (x) and 41(c) Dismissed - it is not clear that the pleaded matters are irrelevant 64(b)(ii)(G) Upheld Zhao: proposed amendments to paragraphs 83 to 126 Upheld - there is no relief claimed against the Zhao defendants in [83]-[126] of the SOC and therefore no reason for those defendants to respond to those allegations Proposed non-admissions Admission Outcome of application to withdraw admission Ms Li licence admission Leave refused Ownership admission Leave refused PRC Citizenship admission No objection, leave granted Law firm admission No objection, leave granted Language admission No objection, leave granted -- 14 of 14 --