Federal Court of Australia

Nipps v Forte Sydney Construction Pty Ltd, in the matter of i-Prosperity Pty Ltd (in liq) (Leave to Amend) [2026] FCA 1003

ORDERS

THE COURT ORDERS THAT:

1.    Subject to any questions of admissibility that may be raised in due course, the defendants have leave to rely on their evidence filed on 27 June 2026.

2.    The defendants’ interlocutory application dated 30 June 2026 be otherwise dismissed.

3.    The defendants pay the plaintiffs’ costs of the interlocutory application on an indemnity basis.

4.    The time for the plaintiffs to file and serve further evidence strictly in reply be extended to 12 August 2026.

5.    Subject to any interlocutory application by the plaintiffs to disallow any aspect of it, the defendants file and serve any further amended defence limited strictly to making any admissions, non-admissions or denials without pleading any further substantive defences by 3 August 2026.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore; revised from transcript)

STEWART J:

1    This proceeding is listed for trial a little more than a month hence, on 2-3 September 2026. The defendants apply for leave to file a further amended defence in order to plead to the plaintiffs’ amended statement of claim. The further amended defence was originally ordered to have been filed eight months ago. Several extensions of time were granted in the intervening period, with the last expiring six months ago.

2    The plaintiffs are the liquidators of i-Prosperity Pty Ltd (IP) and i-Prosperity Group Pty Ltd (IPG) and those two companies. They commenced the proceeding by way of originating process, statement of claim and affidavit in March 2025.

3    The defendants are, in order, Forte Sydney Constructions Pty Ltd (FSC), Forte Sydney Management Pty Ltd (FSM), HNB Capital Group Pty Ltd (HNB) and Forte Sydney Fund Management Pty Ltd (FSF). Later, as I will come to, Forte Sydney Campsie Pty Ltd was added as the fifth defendant.

4    In its original form, the statement of claim contained a number of claims. First, there is a claim for repayment of a loan to IP in the sum of approximately $5.5 million. Second, there is a claim for repayment of a loan to FSM in the sum of $173,000. Third, there is a claim for repayment of a loan to HNB in the sum of approximately $600,000. The loan claims are pleaded by giving details of numerous individual transactions making up the loan amounts. Fourth, it was pleaded that in March 2020, IP, IPG, FSC, FSF and other entities entered into a “Deed of Settlement and Release” (Deed) which is voidable, and that it should be declared so, under s 588F(2) of the Corporations Act 2001 (Cth) as being an insolvent transaction within the meaning of s 588FC and was entered into during the six months ending on the relation back day.

5    After having missed a deadline and been given an extension, the defendants filed their defence in May 2025. In respect of the loans, the defendants in essence admitted the various payments pleaded by the plaintiffs and pleaded in respect of them that where they were loans that had been repaid or they denied that they were loans but were rather in the nature of investments or payments for goods and services. The defendants simply denied that the Deed is voidable.

6    The plaintiffs filed a reply in June 2025.

7    Also in June 2025, the plaintiffs and the defendants gave discovery pursuant to orders requiring that they do so. The matter was at that stage apparently proceeding on a sensible path towards trial.

8    In August 2025, the defendants filed an amended defence pursuant to leave after having missed and earlier deadline to do so. The amended defence presents a more detailed transaction-by-transaction analysis and comprehensively pleads a factual basis for a s 588FG(2) good-faith defence to the liquidators’ uncommercial transaction claims in relation to the Deed. In September 2025, the defendants provided further particulars to their amended defence.

9    On 23 October 2025, I made orders by consent requiring the plaintiffs to file an amended originating process and amended statement of claim by 27 October 2025 and the defendants to file a defence to the amended statement of claim by 24 November 2025, that is a further amended defence. In agreeing to that timetable, the defendants had had notice of the plaintiffs’ proposed amendments and were therefore in a position to properly assess how much time they would require in order to be able to plead to the amendments.

10    The plaintiffs filed an amended originating process and amended statement of claim within the required time period.

11    The principal change to the case introduced by the plaintiffs’ amendments was to plead that the Deed was not effective as an agreement between the relevant parties. That is pleaded to be because of incompleteness and uncertainty in the Deed document itself, that it was not agreed to or accepted by certain of the parties and that it was not delivered as required by an implied term to that effect. The amendments also introduced the fifth defendant and a claim that it holds its interest in an identified property on resulting or constructive trust to the extent of IP’s financial contribution of $150,000 to the purchase price of the property.

12    Without explanation, the defendants failed to meet the deadline for filing a further amended defence by 24 November 2025.

13    On the basis that there was no further amended defence, the plaintiffs filed an amended reply to the defendants’ amended defence on 4 December 2025.

14    On 12 December 2025, I extended time for the defendants to file their further amended defence to 30 January 2026 and ordered that they serve their evidence by 29 May 2026. The defendants had sought until 7 February 2026 to file the further amended defence, but I gave them one week less than what they had sought.

15    The defendants failed to file the further amended defence by 30 January 2026 as they were required to do under the 12 December 2025 orders.

16    On 6 February 2026, the defendants’ solicitors, Rosemont Partners (Rosemont), served a notice of intention to cease acting. At a case management hearing on 11 February 2026, the defendants’ solicitor from Rosemont appeared merely for the purpose of seeking further time for the defendants to file a further amended defence but otherwise indicated that Rosemont was shortly to serve a notice of ceasing to act for the defendants. On that day, I again extended time for the defendants to file a further amended defence to 25 February 2026 and made a guillotine order that required leave of the Court to file any further amended defence thereafter.

17    The defendants failed to file a further amended defence by 25 February 2026 as they were required to do under the 11 February 2026 orders.

18    On 26 February 2026, Rosemont filed a notice of ceasing to act. The defendants filed a notice of address for service which meant that they were thereafter still served with relevant material.

19    In March 2026 the plaintiffs gave supplementary discovery, and in April they served their evidence in chief.

20    The defendants failed to file evidence by the deadline of 29 May 2026 that was set by the orders of 12 December 2025.

21    On 4 June 2026, Rosemont filed a notice of acting for the defendants. The following day, on 5 June 2026, Rosemont advised the plaintiffs that it had been re-engaged and proposed orders including that they have leave to file evidence and a further amended defence by 26 June 2026.

22    In view of the guillotine order and no explanation having been offered for leave to be granted to file the further amended defence, I declined to allow the further amended defence to be filed. I listed the matter for trial on 2 and 3 September 2026 with associated programming orders including that the defendants serve evidence by 26 June 2026. That was at a case management hearing on 5 June 2026.

23    The defendants filed their evidence one day late, on 27 June 2026. They seek an extension by one day to regularise that late filing. That is rightly not opposed and it should be granted.

24    On 1 July 2026, the defendants filed and served their interlocutory application seeking leave to file their further amended defence.

25    The plaintiffs oppose leave being granted. The principal ground for opposition is that the proposed further amended defence substantially changes the nature of the case which will inevitably lead for the need for the trial dates to be vacated in order to accommodate necessary further discovery and preparation of evidence. That necessitates considering the effect of the proposed further amended defence.

26    It is undeniable that the proposed amendments very substantially change the defence. Albeit a superficial indication, it is notable that the existing defence is six pages whereas the proposed new defence is 22 pages.

27    Turning to matters of substance, in relation to the plaintiffs’ alleged loans to FSC, the proposed defence pleads an oral agreement in or around late 2015 between Xiaolu (aka Belinda) Li on behalf of FSC and Harry Huang on behalf of IP to investigate and develop properties in the Sydney area for special purpose vehicles set up by IP and IPG. It is then pleaded that FSC and special purpose vehicle companies referred to as SPV1 and SPV2 entered into construction contracts for projects at Burwood and Ryde. It is also pleaded that Ms Li and Mr Huang agreed orally that FSC would undertake a construction project at Mosman, the costs of which would be paid by Mr Huang by way of advance payments. There is then detailed pleading with regard to each of the transactions forming the plaintiffs’ pleaded loan amounts, allocating the payments to the different construction projects with reference to numerous conversations between Ms Li and Mr Huang. Essentially, the contention seems to be that payments from IP and IPG to FSC and FSM in relation to the construction projects would not be repayable until after the projects were completed and income was earned by SPV1 and SPV2 by the sale of units. An estoppel is also pleaded.

28    In relation to the plaintiffs’ alleged loans to FSM, a partly written and partly oral contract is alleged between FSC and IP with regard to a construction project at Campsie. The pleaded arrangements are complex and include payments to be made to FSM, the sharing of profits between investors, the secondment of an employee of IPG to work for FSM and a set-off of monies. The defendants also seek to plead a resulting or constructive trust.

29    The defendants also seek to introduce detailed pleadings in relation to the plaintiffs’ pleading that the Deed is ineffective, including an estoppel.

30    In considering an application for an amendment in the present circumstances, it is necessary to take account of a number of factors. Drawing on Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 (Aon) at [5] and [30] per French CJ, [71], [90], [93], [94], [98] and [102] per Gummow, Hayne, Crennan, Kiefel and Bell JJ, these include:

(1)    Prejudice to other parties that cannot be adequately compensated by an award of costs, which would include the inevitable prejudice of unnecessary delay where that exists;

(2)    Inefficiencies in the use of the Court as a publicly funded resource arising from the vacation or adjournment of trials;

(3)    The need to maintain public confidence in the judicial system, which has a potential to be lost where the Court is seen to accede to applications made without adequate explanation or justification;

(4)    The objective of doing justice between the parties;

(5)    The objective that the pleadings identify the “real” issues between the parties;

(6)    The overriding purpose of the civil practice and procedure provisions in s 37M of the Federal Court of Australia Act 1976 (Cth), namely to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible; and

(7)    The nature and the importance of the amendment to the party that is seeking it.

31    The principles are not in contest, although the defendants submit that Aon is to be distinguished on the facts because of the very late time at which the amendment application was brought in that case, namely on the third day of a four-week trial. That much can be accepted; each case must inevitably be decided on its own facts. In the present case the defendants have to overcome a guillotine order. As the plaintiffs submit, that is a special burden.

32    It is also the case that in cases of delay it is the litigant’s delay that must be explained. It is the litigant that has failed to comply with a court order. Depending on the nature of the explanation for the delay, it may be that evidence of what the litigant did or knew, or the circumstances that it faced, is required rather than the evidence of what the solicitor did or knew; the client may very well know of matters relevant to the explanation for delay which are not known by the lawyers: Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) [2016] FCAFC 2; 332 ALR 199 at [155] per Gilmour, Perram and Beach JJ. Also, where the delay is in part sought to be explained by a dispute between the client and its lawyers, it may be necessary for the client to demonstrate that that dispute was not of its making by, for example, failing to put its lawyers in funds: Alexiou v Australia & New Zealand Banking Group Ltd [2025] FCA 612 at [46]-[47] per O’Callaghan J.

33    I am satisfied that the proposed amendments would very substantially change the case that is due to be heard in a little over a month from now. If the amendments were allowed, the plaintiffs would need to plead to them by way of a further amended reply. Also, further discovery and affidavit evidence would be required, and more than two days would be required for the trial. In those circumstances, the trial dates would inevitably have to be vacated. The proceeding would not be able to be re-listed for trial until well into 2027 because of the Court’s existing commitments in other proceedings as well as the need to conduct the additional trial preparation already referred to.

34    That delay would amount to substantial prejudice to the plaintiffs. However, there would be the additional prejudice of having to investigate a substantially new and different case in circumstances where the companies are in liquidation and the individuals involved, chiefly Mr Huang, are not available. The defendants say that even if the amendments had been done on time, this would have been necessary. Although that is partly true, had the amendments been done on time the plaintiffs would have been able to deal with the whole of the case in one round of discovery and of evidence. That would have been considerably more efficient and saving of costs than having to do it in the piece-meal way which would be necessitated if leave were granted. Also, the matter would have been able to be listed for trial considerably earlier than will be the case if leave were now granted.

35    It is obvious that the defendants have shown little regard to the orders that it required them to put on their further pleading a long time ago – by 24 November 2025, then by 30 January 2026, and then by 25 February 2026 when the blade of the guillotine fell. It was only four months later that the defendants eventually filed and served an application for leave to file their further amended defence. Indeed, the defendants have shown contumelious disregard for the Court’s orders.

36    That necessarily turns attention to the defendants’ explanation for their conduct. That is to be found in affidavits by their solicitor, Jason Koh, and in small part by Ms Li.

37    First, Mr Koh explains that once the plaintiffs pleaded in the amended statement of claim that the Deed was unenforceable or ineffective, it became necessary for the defendants to investigate the details of the individual transactions going back to 2016 and 2018. That is because it is said that the Deed had the effect of setting-off the claims by the plaintiffs against the claims that the defendants had against SPV1 and SPV2. I accept that there were difficulties in investigating the details of the individual transactions, although for the most part those transactions had to in any event be investigated for the purposes of the original and amended defences filed by the defendants in May and August 2025. Also, it does not explain why the defendants agreed to an order on 23 October 2025 that they file their further amended defence (that is the defence to the amended statement of claim) by 24 November 2025.

38    Perhaps more tellingly, the plaintiffs’ original statement of claim impugned the Deed by characterising it as a voidable transaction. The defendants were content to merely deny that it was voidable. The defences which they now seek to advance in their proposed pleading was just as available to them then as it was after the statement of claim was amended and the Deed was sought to be impugned on an additional basis. In other words, the defendants made a forensic choice not to plead the defences they now wish to plead even though if those defences are good, they were obvious defences to plead at an earlier time.

39    Second, Mr Koh explains that a dispute arose in about mid-January 2026 between the defendants and related entities, on the one hand, and Rosemont, on the other. The dispute essentially concerned the payment of Rosemont’s invoices for work in relation to the present proceeding as well as various other proceedings or matters. The payment dispute led to Rosemont filing its notice of ceasing to act.

40    Mr Koh then says that between March and April 2026, the defendants and related companies sought new legal representation, for the present matter as well as many other matters. He says that the defendants were unable to arrange new legal representation at a reasonable cost or soon enough to meet the then deadline for the defendants’ evidence of 29 May 2026. He says that in late March 2026, Ms Li approached Rosemont about whether Rosemont had capacity to be retained again for the defendants for this proceeding. From about mid-April 2026, discussions commenced about Rosemont’s potential retainer and its terms. Mr Koh says that those discussions ceased due to events that followed.

41    Those events included that on 21 April 2026, Mr Elic Tang, the principal of Rosemont, was arrested on various fraud and fraud-related allegations. As at 30 June 2026, Mr Tang remained in custody and was defending the allegations although I was told today that he is no longer in custody. On 23 April 2026, the Law Society of NSW appointed a manager to manage the legal practice of Rosemont given the incarceration of Mr Tang. That in turn led to many difficulties and inefficiencies in the ability of Rosemont to do the necessary work on behalf of the defendants within a reasonable time.

42    Third, Mr Koh explains that “between early and mid-late May 2026, Ms Li was required to and did travel overseas due to urgent work commitments, and her attempts to secure legal representation ceased during this period”.

43    The principal shortcoming in the above explanations is that Rosemont did not act for the defendants from late February until 4 June 2026 when Rosemont again filed a notice of acting for the defendants. The various difficulties faced by Rosemont between late April 2026 and that date are accordingly not to the point. It should have been apparent after Mr Tang was arrested and a manager was appointed, that Rosemont was not in a position to do the defendants’ work in relation to the present proceeding, in particular since that work was required to be done urgently.

44    Moreover, it was not adequately explained why the defendants were not able to either resolve their disputes with Rosemont early in the year or find alternative representation. Any difficulties in that regard are not identified. As mentioned, in circumstances such as that it is necessary that there is an explanation that demonstrates that the client was not at fault and did not make particular choices, such as not to pay their lawyers, but there is no such explanation. Indeed, Mr Koh explains that the defendants and related companies did engage other legal representation in relation to other matters. The explanation that no such representation was engaged for the present matter is deficient.

45    It is also not explained why Ms Li’s “early and mid-late May 2026” travel was more urgent or pressing than the defendants’ need to prepare its evidence and any further pleading. Indeed, no details are given in respect of those engagements.

46    Ms Li explains in her affidavit that there were significant obstacles to her retrieving the defendants’ files and records for the period of time relevant to the payments in respect of which the plaintiffs claim. Those difficulties include a change in the accounting software that the defendants used which led to the loss of access to many of the records, the misplacement of records given the passage of time and the inadequacy of backups.

47    I accept that evidence in so far as it goes. However, Ms Li does not explain when exactly those difficulties were faced and when they were overcome. Moreover, the explanation faces the difficulty that she affirmed a discovery affidavit on 27 June 2025 in which she said that she had made reasonable inquiries as to the existence and location of documents that would fall within the scope of the order for standard discovery. She also said that to the best of her knowledge, information and belief, there were no documents that had been or were in the control of the defendants other than those in the schedule to her affidavit. However, she exhibits to her affidavit dated 27 June 2026 approximately 500 pages of documents most of which were not previously discovered by her.

48    There is no reason why the scope of the defendants’ discovery obligation changed from when discovery was made in June 2025 and when she was preparing her evidence that was filed in June 2026. That tends to suggest that the defendants were inadequate in complying with their original discovery obligation which rather detracts from their claim that the time that they later took to find additional documents should be weighed in their favour when it comes to an explanation for the delay.

49    But even if the delay between February and June 2026 was regarded as being adequately explained, there is no explanation for the delay between November 2025 and January 2026. There is no explanation for why the further amended defence was not filed by 24 November 2025 in accordance with the orders that the defendants had agreed to.

50    Frankly, the defendants have demonstrated that they have scant regard for their obligation under ss 37M and 37N of the Federal Court of Australia Act to “conduct the proceeding … in a way that is consistent with the overarching purpose”, relevantly “as quickly, inexpensively and efficiently as possible”. To allow the defendants in the circumstances outlined above to now file their further amended defence would be contrary to several of the objectives of the overarching purpose of the civil practice and procedure provisions set out in s 37M(2) of the Act, namely the just determination of the proceeding, the efficient use of judicial resources, the efficient disposal of the Court’s overall caseload and the disposal of the proceeding in a timely way. In my assessment, the delay and other prejudice cannot be adequately compensated by an order for costs.

51    There is an additional consideration. It is that it is not at all clear that the proposed further amended defence offers a reasonably viable defence to the plaintiffs’ claims. The crux of the defendants’ proposed defence is the contention that the majority of the funds advanced by IP (which has far and away the largest claim) were advanced for the purposes of paying for construction and investigation costs incurred by FSC and HNB which would be repaid when units in the properties developed by FSC were sold (proposed para 8(b)(i)(C)). The defendants’ submission in this regard is that they “have expended significant resources on the Burwood Works and the Ryde Works and should not be required to repay money that has been spent for the benefit of the plaintiffs if they can make out this defence”. However, the viability of that defence depends on IP being part of the same group of companies as SPV1 and SPV2 whereas the evidence is to the contrary. Indeed, the defendants accept that IP and IPG have completely separate legal ownership to SPV1 and SPV2 although they have sometimes had overlapping directors, notably Mr Huang.

52    The point is that it is not at all clear on what basis it can be said that the costs expended by FSC in construction of the projects which have not been repaid by the special purpose vehicle companies were for the benefit of the plaintiffs.

53    In the result, I am not satisfied that the amended defence which the defendants belatedly seek to advance is bona fide or has any real merit. There is thus a real question as to the importance of the amended pleading to the defendants.

54    Taking all those matters into account, I am not satisfied that the defendants have established good cause to be granted the leave that they seek in relation to their proposed further amended defence. I accordingly refuse that leave.

[costs discussion]

55    The defendants should pay the costs of their application. That should be on an indemnity basis in view of the defendants’ contumelious disregard for the Court’s orders over a long period of time which led to their application. The plaintiffs should not be out of pocket in having to deal with the application by the difference between party and party costs and indemnity costs.

[case management discussion]

Associate:

Dated:    28 July 2026

SCHEDULE OF PARTIES