Property Joint Ventures and Fiduciary Obligations: Lessons from Wang v Yu [2026] NSWSC 1254

By Gorkem Oksuz and Brad Marland

Property development joint ventures bring together parties contributing land, capital, expertise and labour towards a shared commercial objective. Where the arrangement is informal, however, disputes may arise over the nature of the parties’ rights, the use of development assets and the allocation of proceeds.

In Wang v Yu [2026] NSWSC 1254, the Supreme Court of New South Wales held that a property development arrangement, gave rise to fiduciary obligations, despite the absence of shared legal ownership, joint management or conventional profit-sharing. The decision provides a timely reminder that the substance of a joint venture, may carry consequences extending beyond its express terms.

Background to the Dispute

In September 2022, Xinyi Wang and Chi Kit Chao (the plaintiffs), entered into an informal arrangement with Chunying Yu and Gang Ge (the defendants) to redevelop a property in Concord West. The plaintiffs contributed $800,000 and Chao performed substantial unpaid construction and management work over more than two years. In return, they were promised repayment of their investment and an annual profit of $200,000, primarily from the redeveloped property.

No formal joint venture agreement was signed. The plaintiffs had avoided requesting one, as they feared it would suggest distrust of the defendants, with whom they had a close friendship. Nor did the plaintiffs obtain registered ownership, joint control or an agreed percentage of actual development profits.

After delays and a deterioration in relations, the plaintiffs lodged a caveat and asserted an equitable interest in the land. Meanwhile, Yu mortgaged the property to IM Capital Pty Limited to secure borrowing by Prime Modular Group Pty Limited, a company controlled by the defendants. The Court was asked to determine the character of the venture, whether the mortgage breached fiduciary duties and the appropriate relief.

The Court’s Reasoning: Substance Over Form

Applying the principles in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, Parker J emphasised that fiduciary duties do not arise automatically whenever parties enter a joint venture. The question depends on the relationship actually undertaken, including the parties’ contributions, obligations and mutual reliance.

The Court held that the arrangement was a fiduciary joint venture of a quasi-partnership character. Significantly, the guaranteed return did not make the plaintiffs mere lenders. The $800,000 was an investment committed to the development; the annual profit was calculated by reference to the venture’s duration; and the defendants’ personal guarantee was secondary to repayment from the property.

The plaintiffs had contributed both capital and labour, while the defendants provided the land equity, development expertise and building resources. Yu and Ge also controlled the property from which the plaintiffs expected to receive their return. The informality of the arrangement did not negate the relationship of trust and confidence: in the circumstances, it underscored the plaintiffs’ reliance on the defendants to pursue the common undertaking faithfully.

Accordingly, the absence of shared title, management powers or proportionate profits was not decisive. The conclusion remained fact-specific: not every property investment, commercial collaboration or arrangement promising a fixed return creates a fiduciary relationship.

The Mortgage and Equitable Remedies

The Court found that the defendants acted dishonestly by using the development property as security for borrowing unrelated to the venture, at a time when they knew the plaintiffs claimed an interest in it. Their conduct included using an associated company as borrower and backdating settlement instructions. Although Yu was the registered proprietor, she could not exercise control over the property inconsistently with her fiduciary obligations.

Following termination of the venture, the Court imposed a constructive trust over Yu’s interest in the property and appointed an independent trustee to realise it. Net sale proceeds were to be paid first to the plaintiffs, up to $1,194,715.10, with any surplus going to the defendants. The defendants were required to indemnify the plaintiffs against a shortfall, to be assessed after realisation. The order was not an immediate personal judgment for that amount: the property was to be realised first, and questions of additional compensation for delay were reserved.

The Court also ordered the defendants and Prime Modular Group to take all available steps to procure discharge of the mortgage. It did not, however, treat the third-party lender’s advances as trust property or automatically invalidate the lender’s rights. The relief was directed to the established breach and the venture property, rather than unrelated borrowed funds.

Practical Implications for Property Lawyers

Wang v Yu illustrates why joint venture documentation should address both the commercial bargain and the proprietary risks. Where title is held by only one participant, contractual controls over financing and dealings should be established before funds or labour are committed, rather than left to equitable remedies after a dispute. In particular, parties and their advisers should consider:

• The structure of the arrangement: clarify whether contributions are loans or investment capital, the basis of returns, decision-making powers and the parties’ intended obligations.
• Control of development property: regulate sales, refinancing, mortgages and the use of venture land as security for obligations outside the project.
• Security and priority: assess whether a registered mortgage or other enforceable protection is required. A contribution to a development does not, without more, create a caveatable interest.
• Exit arrangements: specify defaults, termination rights, valuation and sale mechanisms, repayment priorities and distribution of proceeds.

Conclusion

The decision confirms that informal development arrangements may give rise to significant fiduciary and proprietary consequences, even where only one participant holds legal title. For developers, investors and property lawyers, carefully drafted agreements and effective asset protections remain the best means of managing those risks before a dispute arises.

Madison Marcus advises property owners, developers and investors on joint venture agreements, property developments and various other transactions.