Bao v Li

Factual background

1. From at least 2015, Ms Li and Mr Tao were in a de facto relationship. Ms Li's evidence was that she was working for Mr Tao as a personal assistant and co-manager for his Australian and Chinese businesses as well as looking after his children and his younger sister's children.
2. On 20 June 2015, Ms Li was the successful bidder at the auction for the North Ryde Property with a price of $1,712,000. She paid the 10% deposit using a blank cheque belonging to Mr Tao, which he had left in her keeping. Ms Li insisted that she consulted Mr Tao before using the cheque and Mr Tao was prepared to allow her to use the cheque towards any property purchase, because he was a person of substantial financial means, and because of their romantic relationship. Mr Tao denied he was consulted and that he gave Ms Li permission to use the cheque as she saw fit, and instead said that he left the blank cheque with her, along with other "daily living necessities like … shavers … toothpaste and … toothbrush", so that he did not need to carry it around with him, as he was living in Melbourne. If Ms Li identified a suitable property for him, he planned to fly to Sydney for an inspection before considering a purchase. He said this was because he had more experience in property development than Ms Li. He also denied that he signed the blank cheque that Ms Li used.
3. Mr Tao said that, after Ms Li told him about the auction, he was "astonished" and initially planned to cancel the cheque. However, Ms Li assured him that she would speak with her sister, Ms Lee, to resolve the issues. As Mr Tao stated in cross-examination: Q. You thought you could call it off when you found out; is that what you're saying? A. INTERPRETER: To cancel the cheque. Q. Yes, but you didn't do that? A. INTERPRETER: I did not cancel it because she said that she's going to negotiate with her sister; they are going to sort it out. Q. Ultimately, you didn't stop the cheque and you didn't try and stop Cheryl purchasing that property in her own name, did you? A. INTERPRETER: There's no way for me to stop her paying the deposit. It's just a matter of how - who pays for the deposit.
4. A few days later, Mr Tao travelled to Sydney to meet with Ms Li, Ms Lee, and Ms Li's parents so they could discuss a way forward. Mr Tao described the meeting in the following terms: Cheryl was like a child who did something wrong and dare not speak and Jenny, with a very set expression, said that, "My sister has done something stupid. She has purchased this property beyond the market price and this is - and this property is uninhabitable. I know that you will not want this property."
5. Ms Li also gave evidence that she was scolded at the meeting: Q. What was discussed at that meeting between you - you remember a meeting, don't you? … A. What was talked - it's about them to blame me because that's too shabby and the price is too high. I shouldn't have bid this property.
6. At the meeting, Mr Tao indicated that he was not interested in buying the North Ryde Property because it was "uninhabitable", and he could not live there with his son. Ms Lee suggested that the North Ryde Property could instead be developed and re-sold as a profit-making investment for Mr Tao, rather than Ms Li not being able to complete the purchase, losing the deposit and risking bankruptcy. Ms Li's evidence was that the development was Ms Lee's idea, but she did not raise a complaint about the suggestion or "argue with her" at the meeting.
7. Mr Tao said he agreed to allow the purchase with his funds to continue, on the basis that Ms Li held the property on trust for him, and he would fund the rest of the purchase by way of cash or by covering loan repayments. Further, it was agreed that Ms Li and Ms Lee would organise the demolition of the house and the construction of a new home and granny flat on the land, and Mr Tao would fund the development. Ms Li accepted: Tommy promised that he would be responsible so he would be taking over the finance burden from me for that property, because he was happy to do it.
8. At this time in July 2015, Mr Tao had been looking for a home in St Ives, Sydney, so that he could live there, and his son could go to a local school. However, he had concerns about having sufficient cash and borrowings available in Australia to purchase his own home and also fund the purchase and development of the North Ryde Property.
9. Mr Tao asked Ms Lee to prepare an "investment proposal" for the North Ryde Property, which showed estimates of redevelopment costs and potential profit.
10. On 10 July 2015, the Investment Proposal was provided by Mr Tao to his friend Mr Bao with an invitation to invest in the North Ryde Property development. Ms Li accompanied Mr Tao and Mr Bao to look at the North Ryde Property. Ms Li accepted that the Investment Proposal was prepared so Mr Tao could show it to potential investors, such as Mr Bao. She also accepted that she never told Mr Bao that the North Ryde Property was her property alone or that Mr Tao could not grant Mr Bao any interest in that property because she was the owner.
11. In about mid-July, Mr Bao orally agreed to investing on a 50% basis with Mr Tao.
12. On 27 July 2015, Mr Bao prepared a "Draft Cooperation Agreement", which he emailed to Mr Tao and Ms Li. Ms Li accepted that she discussed it with Mr Tao, who only wanted one change to the terms. Ms Li reluctantly accepted in cross-examination that, while she could not recall, it was probable that she or Mr Tao made the change to the agreement that Mr Tao wanted and printed it so it could be signed by Mr Bao. After Mr Tao and Mr Bao had agreed on the terms, Ms Li started including Mr Bao in correspondence regarding the development, including with Rawson Homes, the builder retained to demolish and redevelop the North Ryde Property according to an off-the-shelf plan.
13. On 31 July 2015, Mr Tao signed the contract to purchase the St Ives Property for $3,120,000. Mr Tao's evidence was that, when he signed it, only his name was on the contract and his intention was to purchase the property in his own name. However, at some point, Ms Li's name was added. Mr Tao said he was unaware of how Ms Li's name was added as co-purchaser. Ms Li submitted that, at the time of signing, her name was already on the contract as a co-purchaser and the joint intention was that she would obtain an interest in the property, if not by gift, then by way of the contributions she made towards the purchase of the property by way of liability for the bank loan. Deposits totalling 5% were paid from an account belonging to Ms Lee.
14. Mr Tao's evidence was that he had a conversation with Ms Li in which they discussed the purchase of the St Ives Property and the fact that his Foreign Investment Review Board application had not been approved. His evidence was that they agreed that: 1. Ms Li would become the legal owner of the property and borrow money for the purchase and hold it on trust for him. 2. He would meet all the expenses and continue to pay for all Ms Li's living expenses, and her family could live in the St Ives Property temporarily. He was not tested on this evidence. Ms Li simply denied the conversation in her affidavit, but did not deny that Mr Tao paid for all her living expenses or that Mr Tao did in fact meet all the costs and expenses of the purchase.
15. On 18 September 2015, Ms Li met Mr Bao and they signed the amended version of the Co-op Agreement. At the meeting, Ms Li made a hand-written change to the document to add her name next to Mr Tao's as "Party A" (shown in italics and bold below). She then signed it. The Co-op Agreement read as follows: 106 Kent Road, North Ryde Draft Cooperation Agreement Party A: Zhiyong Tao/Cheryl Li Party B: Zhong Bao Party A and Party B have agreed to cooperatively invest in the development of the 106 Kent Road project. 1. Party A will be responsible for organising the loan. 2. The balance of the cash input (deposit for the property, construction of the new property, bank loan interest and so forth) will be invested by both parties on a 50/50 basis. 3. All relevant issues and decision-making will be jointly determined by both parties. 4. Neither party is allowed to withdraw the funds used for this project earlier before the project is completed. 5. Project settlement: The net profit after deducting the loan interest and the fees and taxes on the sale proceeds of the property will be shared by both parties on a 50/50 basis. 6. The use of the project funds should be open and transparent and be jointly supervised by both parties. Party A: Cheryl Li (Signature) Date: 18/09/2015 Party B: Zhong Bao (Signature) Date: 18.09/2015
16. On 23 September 2015, the purchase of the St Ives Property completed, and Ms Li was registered on title as the sole owner. Mr Tao and Ms Li moved in with Mr Tao's son.
17. After the signing of the Co-op Agreement, Mr Bao and Mr Tao immediately took steps to comply with its terms, with Ms Li's co-operation and assistance. For example, the following was done which is referable to various operative clauses: 1. Clause 1: While no specific "loan" was identified in the clause, there is no dispute that Ms Li organised a loan for the purchase price and also a construction loan. However, she was only able to obtain the loans and demonstrate an ability to service them with the assistance of funds from Mr Tao's company (TSK Investment Australia Pty Ltd), which were described as a "salary" for a few months. There is no evidence that the "salary" continued after the loan was obtained. Ms Li suggested for the first time in cross-examination that she was also working for "Aussie Home Loans Ashfield" and that she provided one payslip to the bank to obtain the loan, but there was no objective evidence of that, and I do not accept it. Further, the construction loan was insufficient to cover the Rawson Homes contract price, leaving a shortfall of around $53,696, which was funded by Mr Bao. 2. Clause 2: On 21 September 2015, 3 days after the Co-op Agreement was signed, Mr Bao transferred $310,000 to Ms Li, that amount being 50% of the amount of Mr Tao's initial cash contribution to the North Ryde Property, and some interest and insurance payments. Ms Li reluctantly accepted in cross-examination that all the money to finance the North Ryde Property purchase, mortgage and development came from Mr Tao's bank accounts or Mr Bao's deposits. However, she considered that money a gift and part of a usual practice. Instead, I consider Ms Li transferred money from Mr Tao's accounts, over which she had control, when payments were needed for the property in accordance with her agreement with Mr Tao and the Co-op Agreement. Mr Bao also provided funds when they were requested from him by Ms Li. Ms Li's evidence was that Mr Bao was required to pay interest on the loan if required by the Co-op Agreement. 3. Clause 3: Between July and September 2015, Mr Bao was involved with Ms Li and Ms Lee in dealings with the builder, Rawson Homes, about demolition and construction of new dwellings. For example, on 3 August 2015, Mr Bao was present when Ms Li signed the building contract, and Ms Li provided the receipt for the deposit to Mr Bao. Ms Li also authorised Mr Bao to represent her and make decisions with Rawson Homes, which he did. Ms Li accepted that "Nathan is one of the parties on the agreement", but that Rawson Homes could not accept Mr Bao's decisions in all circumstances because he does not have "100% decision-making right overpass [sic] me". The only decisions Ms Li claimed that she made which differed from Mr Bao concerned the shape of a drain, the installation of a pergola and landscaping of the driveway. However, Mr Bao chose the colours, the tiles and kitchen plans.
18. There would appear to be no reason why Ms Li would have behaved in the above ways if she did not consider the Co-op Agreement binding and that Mr Tao owned the North Ryde Property.
19. Most of the development was carried out in 2017 and, by January 2018, the development at the North Ryde Property was complete, except for landscaping and an occupation certificate.
20. By late 2017 or early 2018, Mr Tao and Ms Li's relationship was deteriorating, and they had largely stopped communicating with each other. Mr Tao and Mr Bao requested that Ms Li sell the North Ryde Property, but Ms Li refused.
21. Mr Tao thereafter stopped making payments for the property.
22. Since August 2018, Ms Li has resided at the North Ryde Property or leased it to third parties, including Ms Lee for a 2-year term between 16 March 2018 and 16 March 2020. However, Ms Lee's evidence was that she stopped renting from Ms Li in November 2018 after "severe arguments". Mr Tao says that, around this time, Ms Li also leased part of the St Ives Property (excluding the granny flat) to Ms Lee for $1,200 per week and refused to provide him a copy of the lease agreement. The granny flat was leased out separately.
23. Ms Li gave evidence that she had retained the rental proceeds and some or all of it was used to pay loan interest. However, Ms Li did not bring forward any evidence of receipts of rent or expenses paid in relation to the properties, for example by way of real estate managing agents' statements, bank statements, or tax returns.
24. On 20 August 2020, Mr Bao demanded that Mr Tao cause the North Ryde Property to be sold for no less than market value and for 50% of the net profits to be provided to him in accordance with the Co-op Agreement.

Witnesses

1. As noted above, this case turns on whether Mr Tao and Mr Bao are accepted on one hand, or Ms Li on the other.

Nathan Bao

1. The parties generally accepted, as do I, that Mr Bao was an impressive and credible witness who gave frank evidence. However, counsel for Ms Li sought to rely on a WeChat message from Mr Bao to Mr Tao, in which he provided the total calculation of the money he had invested and indicated that "150,000 had been returned", in circumstances when Mr Bao had claimed a sum in these proceedings which did not account for that $150,000. Mr Bao's explanation of the message was that it was "calculating total investment". Counsel for Ms Li suggested this message constituted an admission by Mr Bao that the effect of the Co-op Agreement with Mr Tao was a loan, not an investment with an expectation of profit. In re-examination, Mr Bao clarified the message: [I]f Tommy going to buy in the property, as we agree, and pay me the money back, investment and the profit, so that's why I wrote this, as a returned. As a part of the - as a return of my money, cause if he's want to buy the property, as agreement. But again, Cheryl refused to sell the property after that, so the deal is off the table.
2. The text message was sent at a time when Ms Li was refusing to sell the North Ryde Property, and Mr Bao wanted it sold or his interest bought out, and his money returned. Therefore, this post-contractual conduct does not, in my view, change the proper construction of the agreement reached in 2015. Even if it was the case that Mr Tao had "returned" $150,000, it would not mean that the Co-op Agreement was not operative and binding, nor that Ms Li was the owner of the North Ryde Property.

Tommy Tao

1. I consider Mr Tao was a generally honest witness. His evidence was made more difficult because the interpreter was replaced half-way through his evidence due to issues of proper translation perceived by all the parties. At times he was verbose and wanted to stray beyond the question as framed in English. I accept that some of that verbosity may be attributable to the exigencies of live interpretation.
2. Ms Li's criticisms of Mr Tao's credit concerned his evidence that he ordinarily did not document trust agreements with family. Mr Tao gave the following evidence, which indicated he would not usually document a trust arrangement with family or friends: Q. Was it the case that you felt you didn't need to document a trust arrangement because you were dealing with family? A. INTERPRETER: Not necessarily. With a trusted friend it can be done as well. Q. You never documented the trust arrangement that you had with Cheryl, did you? A. INTERPRETER: No, it is an expression of trust. We only have an honour agreement. Q. I suggest to you that there was no trust arrangement with Cheryl, was there? A. INTERPRETER: No. […] Q. If it was a trust arrangement, you would have documented it, wouldn't you? A. INTERPRETER: So the thing was between me and my family members and other friends, we don't have the documents, including up to now. I understood the last "no" above to mean he did not agree with the cross-examiner's suggestion.
3. A document entitled "Entrusted Shareholding Agreement" was in evidence and was said to demonstrate that Mr Tao's evidence was wrong and that he did document trust agreements with relatives, so that it could be inferred that there was no trust arrangement between Ms Li and Mr Tao.
4. However, that Entrusted Shareholding Agreement was an agreement whereby Mr Tao conferred 50 shares in his company to his sister Zhilan Tao and required that his sister accepted "the entrusting and transferring back to Zhiyong Tao all shares to the property when he demands for it". The substance and effect of that agreement is not entirely similar to the trust arrangement that would have been documented by Mr Tao and Ms Li in respect of the two properties. However, there was no reason advanced by Ms Li to doubt Mr Tao's explanation that there was initially no documented agreement with his sister, but because his sister's husband had a different opinion, a documented agreement was prepared later.
5. Ms Lee also gave evidence that she had previously held a Melbourne property on trust for Mr Tao and she believed such trust arrangements were documented. There were no such documents in evidence. Even if such trust arrangements were documented, Ms Lee performed some work for Mr Tao as an accountant and Mr Tao may have considered any trust relationship with Ms Lee as "business". The timing of any trust with Ms Lee and Mr Tao's understanding was also not explored.
6. Ms Li also drew attention to parts of Mr Tao's evidence which were inconsistent with Ms Lee's evidence. For instance, Mr Tao gave evidence that he transferred money to Suqun He for tax planning reasons as advised by Ms Lee. Ms Lee denied giving tax planning advice. Mr Tao's understanding of "tax planning" was not explored. I do not place much weight on those inconsistencies in circumstances where they concerned matters irrelevant to the question of intention about the ownership of the properties.

Cheryl Li

1. I considered Ms Li an unimpressive witness. She often said that she could not remember when asked about key facts or inconsistencies in her evidence. For example, when asked about whether there were documents to support her case, she said there were messages on her phone, but she had not had time to find them because of the litigation: Q. Where are these other messages, Cheryl? Where are they? A. It's in my mobile phone-- … Q. Why haven't had he been produced to this Court? A. There are tonnes of them. Q. I'm sure you would have picked out the good ones for you and you didn't do that? Can I suggest to you there are no such good ones? A. I haven't got opportunity to do them yet. Q. This has been going on for four years, this case? A. Yes, but I have two court cases, one from Jenny and one from Nathan and Tommy against me. Q. Can I suggest to you that there's no such messages that help your case, otherwise they would have been produced to this Court now? A. No, you can't suggest that. I do not accept that any such messages exist.
2. Similarly, she often advanced a suggestion that evidence in her favour existed but could not remember where it was, nor explain why it was not in evidence. For example: Q. You weren't saying, "As promised, I was going to have these properties". You didn't say that to him, did you? A. Because he knows. Q. Just answer the question, please, Cheryl. You didn't say to him in this message, "As promised by you, these properties are mine". A. In this message, I didn't. Q. There's no message that you've said that. Do you agree with that? A. I don't agree. Q. Where are they? A. I don't remember.
3. She also displayed resistance to basic propositions, even when the alternative was absurd: Q. If there's no document that's been produced, you agree it's unlikely that there is any reference to a gift? A. I don't agree. Q. You don't agree with that? There is somewhere in the never-never there's some reference to a gift, is there? A. Yes, it could be.
4. She also wavered in her evidence in relation to important topics, for example, saying variously that: 1. she made all the transfers from Mr Tao's accounts into her own; 2. she and Mr Tao made them "50-50"; or 3. she "mostly" made the transfers. I consider Ms Li made all the transfers to her account as and when she needed funds for expenses and loan repayments for the properties.
5. As detailed further below, I prefer Mr Tao's evidence and Mr Bao's evidence to Ms Li's evidence.

Jenny Lee

1. Ms Lee gave evidence to the effect that conversations between Mr Tao and Ms Li were as Mr Tao alleged. Counsel for Ms Li suggested that Ms Lee was tailoring her evidence to help Mr Tao because Mr Tao was assisting Ms Lee in her own ongoing litigation in other proceedings against Ms Li concerning interests in another property (No 23). For those reasons, counsel for Ms Li submitted that Ms Lee's evidence was not reliable. Ms Li relied on a text message exchange between Ms Li and Ms Lee: Cheryl: If you stand with me and we unite together, he cannot do anything. Jenny: If you want me to help you, give me back my No. 23 … If you don't want to return. I will go and help Tao! Cheryl: Then I don't need it. Jenny: You'll see. Cheryl: You just go and help Zhiyong Tao! Jenny: Alright! However, I do not think that Ms Lee saying she will "help Tao!" ought to be equated with giving false evidence to assist Mr Tao. There are many other available and, in my view credible, explanations of Ms Lee's words. Other "help" could include trying to negotiate with Mr Tao, as had occurred after Ms Li used Mr Tao's cheque, or assisting with the collation of evidence or documents in favour of Mr Tao's case, noting that Ms Lee was involved in the North Ryde Property development from the outset. Ms Lee herself said in cross-examination that she wanted to emphasise that she "will fight with her on the Court."
2. Ms Li also relied on a text message exchange between Ms Lee and Mr Tao: Jenny: Anyway, you have promised me that No. 23 is 100% mine, you know that! You will be in big trouble if you dare to touch my No. 23! Tommy: My dear, what do you want me to do? Like what you have said, she has to be satisfied! I did not agree with lawyer's suggestions today, but the lawyer cannot instruct the court. The court will know her name is on the title easily. I hope you can remove her name from the title of No. 23 as soon as possible. Jenny: I have said and she doesn't listen. I will go with you to collect the car back on Sunday morning! If she does not want to give, then call the police! After you take the car, change the sponsorship or pay off the loan, just don't get me involved anymore.
3. Counsel for Ms Li also submitted that Ms Lee had a clear interest in giving evidence which was partisan to Mr Tao's case because she was the beneficiary of a promise by, or agreement with, Mr Tao that No 23 would be 100% hers.
4. I do not consider that the exchange amounted to an agreement that, in exchange for Ms Lee giving evidence in favour of Mr Tao, Mr Tao would tailor his evidence in Ms Lee's case against Ms Li about No 23. Instead, it is consistent with Ms Lee's evidence that Mr Tao had agreed that he would not put a caveat on that property or seek an interest in that property because of his dispute with Ms Li: Q. Well, you said to him, "You have promised me that." You wouldn't have said that unless he had promised you; would you? A. Because he - he said he might put Arthur Street on caveat because of the dispute with Cheryl. I said, "You can't do that because Arthur Street got nothing to do with you."

Was a trust intended in relation to the properties?

1. I do not accept Ms Li's submissions that Mr Tao gifted her all the money for the properties or had a majority interest in the properties. Instead, I consider that Mr Tao and Ms Li agreed to the creation of an express trust in relation to both properties.
2. In reaching that conclusion, I have relied on the following: 1. I preferred Mr Tao's evidence to Ms Li's evidence in relation to the key conversations at the time of purchase of the properties and otherwise. 2. I consider Ms Li's explanation of gift is inherently improbable given the quantum of the contributions, the brevity of the relationship, and the lack of any corroborating documentary or witness evidence. No document was produced that indicated that Mr Tao's contributions were by way of a "gift". 3. Ms Li accepted that, other than the loan amounts, almost all the funds for the purchase and construction costs came from Mr Tao and Mr Bao. I do not accept that money paid into her accounts by Mr Bao and Mr Tao became "her money" to deal with however she pleased. I consider that money was always provided for the purpose of the North Ryde Property's development or the purchase and loan repayments for the St Ives Property. 4. Text messages sent by Mr Bao and Ms Lee to Ms Li indicate their understanding was that Mr Tao was the beneficial owner. For example, in mid-November 2017, Mr Bao sent a message which said, "Tommy wants to retain North Ryde and to sell St Ives" and "He will use the sale proceeds of St Ives to return to me the funds I put in North Ryde". Ms Li accepted that she did not correct Mr Bao nor expressly assert that she was the true owner and the decision to sell was her decision to make. Further, in May 2018, Mr Bao sent a WeChat message to Ms Li describing her as the "nominal holder" of the North Ryde Property and there was no reply from Ms Li clarifying the position. Ms Lee sent a message to Ms Li noting, "Cheryl it is Tommy who owns the house not you". Ms Li said, "I did correct [Ms Lee], but not in this page. It's only showing what Jenny's talking about because she's crazy". Ms Li did not produce any responsive messages contradicting those propositions, despite her claiming in cross-examination that they existed as outlined above. I consider that, had Ms Li truly considered herself the beneficial owner, she would have responded to those messages to that effect and would have produced those messages in her evidence. 5. Messages from Ms Li to Mr Tao indicated that Ms Li considered Mr Tao owned the properties. For example, on 18 October 2017, she suggested to Mr Tao: "Do not sell the property in St Ives hastily" and "Don't keep the property at North Ryde". Later, on 11 April 2018, Ms Li wrote to Tommy on WeChat: "I hope No.7 is under my name and I will pay a management fee of $100,000 for 106", referring to the St Ives and North Ryde properties. Ms Li also wrote: "My request has never changed". These messages are inconsistent with Ms Li considering that she was the owner from the outset. 6. Mr Tao's banking records, from which Ms Li drew money, referenced Mr Tao's investment. For example, transfers into Ms Li's account, from which the bank loan for the North Ryde Property was paid, were variously described as "Zhiyong Invest 106K", or "TaoTo106k", or "ZYTLoanTo106K", or "ZYTLoanTo106Build". While she denied remembering if she provided those descriptions, I do not accept that evidence. I consider the choice to describe the payments in this way further demonstrates Ms Li's understanding that Mr Tao was not gifting money, but it was part of his "investment" in his property. Even if Mr Tao provided the descriptions, as Ms Li suggested might have happened, there is no evidence that Ms Li ever corrected those descriptions or queried what Mr Tao had done. Ms Li also gave similar descriptions to money transferred from Mr Tao's accounts which was used towards the St Ives Property, for example, "Zhiyong Tao 7D Home Loan" and "Zhiyong Tao 7D Interest". 7. Mr Tao agreed to the Co-op Agreement concerning Mr Bao's investment to Ms Li's knowledge, and that agreement is consistent with Mr Tao owning the North Ryde Property and his version of events.
3. It may be that the real motivation for Ms Li's insistence that she owns the properties is a sense of entitlement to a financial settlement with Mr Tao after the conclusion of their romantic relationship; senior counsel for Mr Tao referred to a desire for a "breakup fee". This appears from the following evidence, for example: 1. When asked about her "rights" to furniture in the St Ives Property, Ms Li said: Q. What rights do you have over this furniture? A. The furniture is that we were about - okay. We were - we had a plan to sharing life together and to live together. Q. That stopped, though, didn't it? You broke up. A. So I believe that I'm also entitled to the joint belongings. 1. In October 2017, Ms Li sent Mr Tao messages, including: [j]ust want to know how much am I worth in your perspective. 1. When Mr Tao asked her what she wanted, she responded: I want the property, haven't I said that before? … Isn't lavish property always used as a gift from someone wealthy to his girlfriend? 1. Mr Bao gave unchallenged evidence that Ms Li said she did not want to sell the North Ryde Property until she reached a "financial settlement with Tommy" about their relationship.
4. However, I consider that Mr Tao has established that, in relation to the North Ryde Property, he did not give Ms Li any of the funds in question as a gift, but instead the common position between the parties was that Ms Li would use the funds towards the development and that she would hold the property on express trust for Mr Tao. I do not consider the want of writing assists Ms Li because of the clear intention of trust, and therefore it is appropriate to declare the existence of a trust relationship: see eg Bassett v Cameron [2021] NSWSC 207 at [563]-[565] (Ward CJ in Eq).
5. I also accept that the conversation prior to the completion of the purchase of the St Ives Property between Mr Tao and Ms Li occurred as Mr Tao deposed and that, together with Mr Tao practically funding the purchase and the other evidence, an express trust arrangement has been demonstrated so that it is appropriate to declare that trust relationship.
6. Having found that Ms Li holds both properties on express trust for Mr Tao, I do not need to consider Mr Tao's alternative claims that Ms Li: 1. holds the properties on a joint endeavour constructive trust, such that the remedy ought to take into account their various contributions: Baumgartner v Baumgartner (1987) 164 CLR 137; Muschinski v Dodds (1985) 160 CLR 583; West v Mead [2003] NSWSC 161 at [52]-[64] (Campbell J); or 2. should be declared to hold the properties subject to a charge in his favour securing repayment of his contributions on the basis that it would be unconscionable for her to retain the benefit of those contributions free of any obligation of recoupment: Morris v Morris (1982) 1 NSWLR 61.
7. As noted above, Ms Li has not demonstrated what she has received and expended in relation to the properties. Therefore, it would not have been possible for me to determine the parties' respective contributions.

Other arguments

1. For completeness, I note that Ms Li made two further submissions as to why Mr Tao's trust argument ought to be rejected. I do not accept them for the reasons below.

Conveyancing Act

1. First, on the third day of the hearing, Ms Li amended her pleading to add a defence based on the want of writing for the creation of a legal interest in land, relying on s 23C of the Conveyancing Act 1919 (NSW). In particular, sections 23C(1)(a) and (b) provide: (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will
2. Section 23C(2) provides that the section does not affect the operation of resulting, implied or constructive trusts. Section 23E(d) provides that s 23C does not affect the operation of the law relating to part performance.
3. The legislative formalities requirement cannot be set up as an "instrument of fraud", where a trust was clearly intended and where there are acts of part performance. Equity will impose a constructive trust to the extent an express trust cannot be enforced: see eg Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51 at [29] (Giles JA, with whom Meagher and Santow JJA agreed); Ciaglia v Ciaglia [2010] NSWSC 341 at [64]-[85] (White J).
4. In Vlahos v Vlahos [2017] VSCA 166, Kyrou JA, with whom Tate and McLeish JJA agreed, observed at [96]: Equity has always guarded against allowing the Statute of Frauds to be used as an instrument of fraud. Accordingly, where a contract does not comply with the requirements of the Statute of Frauds, but a party has altered his or her position in reliance on the contract, the equitable doctrine of part performance operates to prevent another party from improperly invoking those requirements in order to circumvent the real agreement between the parties.
5. The principle of part performance was explained by Gibbs J (with whom Stephen, Mason, Jacobs and Murphy JJ agreed) in Regent v Millett (1976) 133 CLR 679 at 682-683: [W]hen one of two contracting parties have been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money. … [T]he test suggested by the Earl of Selborne LC in [Maddison v Alderson], that the acts relied upon as part performance 'must be unequivocally, and in their own nature, referable to some such agreement as that alleged', has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged … The Earl of Selborne LC's test in Maddison v Alderson (1883) 8 App Cas 467 remains good law in Australia: Pipikos v Trayans (2018) 265 CLR 522 at 535 [44] (Kiefel CJ, Bell, Gageler and Keane JJ).
6. Here, the evidence demonstrates that the parties objectively intended Ms Li to hold the property in name only. Senior counsel for Mr Tao submitted that there were acts referable to two parol agreements. The first agreement was that Ms Li would hold North Ryde for Mr Tao and Mr Tao would pay for the liabilities and expenses associated with North Ryde as quid pro quo for not cancelling the cheque used by Ms Li at the auction. The second agreement was that Ms Li would hold St Ives for Mr Tao and Mr Tao would pay for the liabilities and expenses of St Ives.
7. In relation to North Ryde, I consider the relevant acts of part performance include: 1. Mr Tao did not cancel the cheque used by Ms Li as the deposit; 2. Mr Tao's funds, together with the bank loan, were used to settle the property; 3. Mr Tao, by himself and through his co-investor, Mr Bao, paid for the construction costs and expenses associated with the development of the North Ryde property; 4. Mr Tao caused his company to pay Ms Li money so she could obtain a bank loan; 5. Mr Tao's funds were used to pay for interest payable on the bank loan; 6. Both Mr Tao and Mr Bao demanded that Ms Li sell the property from at least early 2018 when the development was complete so as to realise and distribute profits from the development.
8. In relation to St Ives, I consider the relevant acts of part performance include: 1. Mr Tao's funds were used as a deposit for the purchase of the property; 2. A contract of sale was signed in both Mr Tao's and Ms Li's names, but the property was transferred to Ms Li only for finance purposes; 3. Mr Tao caused his company to pay Ms Li money so she could obtain a bank loan; 4. Mr Tao's funds were used to pay for expenses and interest associated with the St Ives property and Ms Li's living expenses.
9. I am satisfied these acts are inherently and unequivocally referable to agreements in relation to the St Ives and North Ryde properties that Ms Li would hold those properties on express trust for Mr Tao. Accordingly, Ms Li's s 23C defence fails.

Foreign Acquisitions and Takeovers Act

1. Secondly, in opening Ms Li argued that it was impossible for Mr Tao to own the properties because he never sought approval from the Foreign Investment Review Board, and the Court would not make an order that Ms Li holds the properties on trust for Mr Tao because it would "promptly place both [Tommy] and [Mr Bao] into breach of the law", relying on Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA Act). However, section 134 of the FATA Act provides that "[a]n act is not invalidated by the fact that it constitutes an offence against or contravention of a civil penalty provision of this Act". I accept Mr Bao and Mr Tao's submissions that a defence of a similar kind was rejected by Robb J in Meshumar v Otmy (2018) 97 NSWLR 615; [2018] NSWSC 125 at [478]; see, to similar effect, Ikeuchi v Liu [2001] QSC 54 at [97]-[106] (Muir J); Szetu v Situ (No 2) [2019] NSWSC 1312 at [33] (Emmett AJA); and Huang v Fu [2011] NSWSC 316 at [29]-[41] (Rein J). As accepted in closing by Ms Li's counsel, I do not consider the FATA Act provides an impediment to Ms Li holding the properties on trust for Mr Tao.

Can Mr Bao enforce the Co-operation Agreement against Ms Li?

1. Ms Li submitted that the Co-op Agreement did not bind her, and that it was not effective because it was headed "draft" and was otherwise too vague or uncertain. I deal with each submission below.

Effect of "draft"

1. The inclusion of the word "draft" is, in my view, a mere oversight by the parties. The document had been prepared and signed to demonstrate formality of the oral agreement, and I do not consider that the parties intended a further formal document.
2. If I am wrong, and the better view is that it was "subject to contract", then I consider it falls within the first category of Masters v Cameron (1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ); that is, the parties had reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms. The presence of the word "draft" or similar words does not, in itself, unmake what has been agreed according to the objectively ascertained intentions of the parties: Tooth & Co Ltd v Bryen (No 2) (1922) 22 SR (NSW) 541 at 547-548 (Street CJ in Eq); Air Great Lakes v KS Easter Holdings Pty Ltd (1985) 2 NSWLR 309 at 337 (McHugh JA); GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634 (McHugh JA; with whom Kirby P and Glass JA agreed). I note that no one took any steps to prepare a more formal document, and no one complained that there was no formal document, yet the parties complied with its terms as set out above and exchanged counterparts after signing. Mr Bao's evidence was that the word "draft" was a mistake, but the agreement had been finalised, and I accept that evidence: Q. You've included the word, "Draft", on that document, haven't you? A. Yes. Q. If you were being careful, you would have removed that word, wouldn't you? A. Not important for us as Chinese. Q. Sorry, I didn't catch that. A. It's not that important for us as Chinese. Q. You're saying that the word, "Draft", doesn't mean draft in Chinese? A. It means draft but it doesn't mean that much. It's based on mutual respect and trust. Q. Your evidence today then is that your agreement wasn't necessarily recorded in that document but was based on some other factors; is that right? A. It would be a mistake that I didn't delete the draft as a word on the agreement, but in general that means there's agreement, that we both agree between me and Tommy. Q. You're basing that on the relationship that you have with Tommy? A. Yes. Q. But Cheryl wouldn't have known that you had this separate agreement or belief or understanding with Tommy, would she? A. She's acting on behalf of Tommy.
3. I have already found that Ms Li was completely aware of the formation and amendment and execution of the Co-op Agreement and that her agreement with Mr Tao was that she held the North Ryde property on trust for Mr Tao.

Is the Co-operation Agreement enforceable?

1. Courts are loath to be the destroyer of bargains: see eg Hillas & Co Ltd v Arcos Ltd [1932] 1 All ER 494. Neither Mr Tao nor Mr Bao considered there is any issue of enforceability. Instead, it is Ms Li who raised that issue. That she signed the Co-op Agreement and appeared to comply with its terms is inconsistent with her never raising an issue about its enforceability until she was pressed to sell the North Ryde Property. I do not accept that there is a real issue of enforceability, particularly as the terms have been performed, save as to the distribution of contributions and profit.
2. Ms Li also asserted that Mr Bao only loaned money to Mr Tao for the development of the North Ryde Property ("In my understanding that I know he's going to input money and loan the money to Tommy") and, therefore, was at most entitled to his contribution together with some interest. However, that completely ignores the existence and terms of the Co-op Agreement, which both Mr Tao and Mr Bao assert is binding on them, and which is not in the form of a loan agreement.
3. I consider the Co-op Agreement binds Mr Tao and Mr Bao, and Mr Bao is entitled to orders enforcing that agreement.

Impact of Co-operation Agreement on Ms Li

1. An issue agitated by Mr Bao in his pleading and submissions was that Ms Li was a party to the Co-op Agreement and was in breach by failing to perform that agreement (with Mr Tao), as the North Ryde Property had not been sold and the profits distributed. The objective test for determining who is a party to a contract is not in dispute: see eg Loureiro v Mac Aus Unit Pty Ltd (No 2) [2022] NSWSC 226 at [34]-[38] (Gleeson J).
2. When I challenged that construction, Mr Bao's counsel submitted that it did not matter to the practical outcome whether Ms Li was a party to the agreement or not: 1. if she was, then she would be bound to comply with it, including selling the property, and the entitlement of Ms Li and Mr Tao to profit as "Party A" would be worked out between them; or 2. if she was not, and instead was holding the property on trust for Mr Tao, then she was a trustee with notice of her beneficiary's agreement and obligations and would be required to act in accordance with those terms.
3. I do not consider that Ms Li was a party to the Co-op Agreement. I consider the proper construction is that, as the property was beneficially owned by Mr Tao and not Ms Li, it was an agreement by Mr Tao, as owner, as to the investment funds and the distribution of profit from the property. I consider the following supports that construction: 1. Mr Tao's evidence was that he orally agreed that Ms Li could sign the agreement "on behalf of me and her", and that she was the person holding the North Ryde Property "on trust for me". Mr Bao's evidence was that she signed as a "representative" of Tommy, or she was "signing that agreement for Tommy", and that she was not signing on her own behalf. 2. On Ms Li's evidence, she added her name next to Mr Tao's as "Party A" and initialled that change "to make sure it was effective". She said she signed "on behalf of Tommy" and "he wanted me to sign as an agent for him on that day". I note that such evidence is consistent with Ms Li understanding that she was holding the North Ryde Property on trust for Mr Tao. It may be that Ms Li added her name to "Party A" because she later wanted to assert that she was also entitled to part of the profits, however, that is inconsistent with the position she has taken in this litigation of asserting she owns the whole of the property.
4. I do not consider that either Mr Tao or Mr Bao intended Ms Li to be a party to the Co-op Agreement in her own right, and Ms Li has not claimed to be a party. I do not consider she became a party merely by adding her name next to Mr Tao's. I consider she signed as Mr Tao's agent.
5. I consider the Co-op Agreement is binding and does affect Ms Li because it supports Mr Tao's position that he did not gift money to Ms Li and instead she held the North Ryde Property on trust for him. Mr Tao can require his trustee to deal with the property as he wishes and, as counsel for Ms Li accepted, whether Ms Li then acts in accordance with Mr Tao's directions, including to sell, is not an issue in these proceedings. Whether Ms Li is then entitled to an indemnity for her work as a trustee cannot be determined here, absent any evidence about contributions made by Ms Li to the property or benefits she attained.
6. If I am wrong, and Ms Li is a party to the Co-op Agreement, then she (and Mr Tao and Mr Bao) must abide by its terms. The same outcome could be achieved with different orders.

Chattels

1. Mr Tao also made a claim for delivery up of documents and personal effects and furniture held by Ms Li. As noted above, Ms Li considered she was entitled to the furniture because they were "joint belongings" and said she was not prepared to hand the furniture back, stating, "of course, I have my rights".
2. In her defence to that claim, Ms Li admitted Mr Tao owned some of the items, specifically the bank statements, share certificates and bank cheque books, but claimed she no longer possessed those items. On the other hand, she admitted possessing the furniture sought by Mr Tao and having access to a Hotmail address in Mr Tao's name, but she was not prepared to hand them back. In her affidavit evidence, she stated the furniture was "imported from China by TSK Investment Pty Ltd, not Tommy", which was denied by Mr Tao. However, Ms Li also gave the following evidence: Q. Do you agree that he paid for it [furniture]? A. I agree that he paid for it, or the company paid for it.
3. Mr Tao's evidence was that he imported the furniture and that TSK held the furniture on trust for him. Mr Tao also gave evidence that payment receipts for the furniture were located in the Hotmail account which Ms Li had refused to return to him either by providing the verification code sent to her mobile phone or by restoring the password to an earlier password known by Mr Tao.
4. Counsel for Ms Li submitted that the Court could not make orders in relation to the furniture in these proceedings because the true owner was TSK. TSK was not party to these proceedings and there was no evidence of their value in order to determine actual loss. I do not accept those submissions. Ms Li cannot insist that Mr Tao has no right to the furniture because he is not the true owner. That, in essence, amounts to an argument of jus tertii in circumstances where TSK has made no demand for the chattels or might even have abandoned all claim to the chattels, and Ms Li accepts she had not made any payments to the purchase or importation of the furniture and does not act with TSK's authority.
5. In circumstances where the purported true owner is not here, the question is really who, as between Mr Tao and Ms Li, has a better right to possession.
6. I consider that Mr Tao has better right to the chattels, having imported them and likely purchased them. Although Ms Li currently has possession of the chattels, that is because Mr Tao, as owner (or bailee to TSK), provided them to her as bailee or sub-bailee. Either way, Mr Tao has better title to the chattels than Ms Li.
7. I am prepared to order that Ms Li deliver up the chattels to Mr Tao on the condition that Mr Tao give an undertaking to the Court that: 1. he will hold the property as bailee for TSK, to the extent that TSK asserts it is entitled to the property, pending the resolution of any such claim by TSK; and 2. he will inform TSK that he has the furniture in his possession and of this judgment and the final orders once made and Mr Tao obtains possession.

Hotmail account

1. In his affidavit sworn 14 July 2021, Mr Tao said he has not been able to access a Hotmail account since the end of his relationship with Ms Li, and that Ms Li changed the password and associated mobile number to her personal mobile.
2. While Ms Li's evidence was that the Hotmail account was not in Mr Tao's name, but was a "joint email", she also accepted that the email address contained Mr Tao's Chinese name and had been used by Mr Tao as a personal email prior to the relationship. Ms Li said she changed the password on the Hotmail account during the relationship and continues to use the Hotmail account.
3. On the available evidence, there is no suggestion that Ms Li has represented herself to the world as Mr Tao or engaged in any fraud using the email address. Nor is there any suggestion that Ms Li has infringed Mr Tao's intellectual property rights in any way.
4. No basis for recovery of the email account (or the contents or information in the account) was pleaded: see, eg, James v Faddoul [2006] NSWSC 1330 at [6] (Brereton J). Accordingly, I am not prepared to provide Mr Tao with any relief in relation to the email account.
5. The Hotmail account is nonetheless relevant because it goes to Ms Li's credit, as Mr Tao claims that the Hotmail account contains relevant records which provide evidence of his purchase of, and right, to the chattels: Rosebanner Pty Ltd v Energy Australia [2009] NSWSC 43 at [453] (Ward J, as the President then was). However, I have already determined that Mr Tao has a better right to the chattels than Ms Li.

Conclusion

1. Because of the findings I have made, Mr Tao is entitled to the beneficial ownership of both properties; Ms Li holds both the North Ryde and St Ives properties on trust for Mr Tao.
2. I note that Ms Li did not provide evidence, despite requests, as to the amounts received by way of rent for either property. Nor did she provide evidence of expenses she had incurred in maintaining the properties or paying the mortgages. Those matters and other issues, including in relation to the mechanics of any sale of the properties, need to be considered in final orders, as Mr Tao's senior counsel accepted.
3. Mr Bao is entitled to 50% of the net profit of the North Ryde property, after all expenses (including mortgage) have been paid, and both Mr Tao and Mr Bao have been reimbursed their financial contributions pursuant to the terms of the Co-op Agreement.

Orders

1. Mr Bao and Mr Tao have succeeded in their claims. However, I will accede to the parties' request that they consider my judgment and provide me with their proposed final orders.
2. Therefore, I make the following orders: 1. The parties are to confer and provide agreed short minutes of order reflecting this judgment and appropriate costs orders to my Associate within 7 days of the publication of this judgment. 2. Should the parties not be able to agree, the parties are to provide their competing short minutes together with submissions of no more than 2 pages and any necessary evidence, within 10 days of the publication of this judgment.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 September 2022