Beijing Hua Xin Liu He Investment (Australia) Pty Ltd v Lu

Beijing's pleaded case 11 By its amended statement of claim, Beijing asserts that it entered into an oral agreement to acquire the shares in Singapore in early 2011 in conversations between Mr Lu on the one hand and Yihua Zheng and Shan Chen on behalf of Beijing. Mr Lu was to hold the shares on trust pending a request for the transfer to be completed, but was to provide Beijing with an undated executed transfer form covering the 75 shares. The transfer form was provided in 2011. 12 As to the three tranches of payment, Beijing contends that they are reflected in an email of 15 August 2011 from Mr Lu to Ms Chen which is central to these proceedings. 13 The email in part is as follows: Hello Chen Shan, Following our conversation here is the summary of the account about Zeus acquisition: • Zeus invoices $696,000.00 • Historic payment $347,287.00 • Balance to be transferred $156,713.00 …

May/June 2011 invoice component 14 Beijing says that it was issued with invoices by Zeus and paid those invoices on the basis that they were payments to Zeus for use by Mr Lu. There were four invoices and the details are as follows: Invoice date Amount Amount plus GST 30 April 2011 $116,000 $127,600 30 May 2011 $232,000 $255,200 7 June 2011 $174,000 $191,400 10 June 2011 $174,00 $191,400 Sub-total $696,000 $765,600

Historic payment component 15 Beijing asserts that various cash payments were made by Mr Tu and Mr Zheng to Mr Lu over a period of time and that there was also a series of bank transfers from Mr Zheng at the direction of Mr Lu. The total of those payments is said to be $347,287.

Balance payment component 16 As to the balance payment, Beijing says that Zeus issued it with an invoice at the direction of Mr Lu on 12 September 2011 for the sum of $156,713. It paid this amount together with GST ($172,384.30) from a NAB bank account. It says it paid this amount to Zeus to the use of Mr Lu.

Call for transfer 17 Beijing says it has met its payment obligations to Mr Lu under the sale agreement. In October 2016 it called for the transfer of the shares to be registered. Mr Lu refused to give effect to the transfer of shares.

Estoppel by convention 18 Beijing also asserts that, even if there were no formal agreement, the parties proceeded in their dealings with each other upon the assumption that there was such agreement and that payments (other than the final payment) had been made in that regard. In this manner, it relies on an estoppel by convention. The conduct it relies upon as reflecting that convention is set out in its Reply. In addition to relying on the delivery of the undated transfer form, a related memorandum of director's resolution (Resolution), and the various payments, it relies on the following (adopting the pleading paragraph numbering): 6. By at the latest on or around 4 September 2012, Mr Lu granted Ms Chen internet banking access to Zeus Technology's bank accounts held with the National Australia Bank Limited. 7. By at the latest on or around 4 September 2012, Ms Chen made payments from and on behalf of Zeus Technology to employees of Zeus Technology, in respect of wages and superannuation entitlements owing to those employees by Zeus Technology. 8. From at the latest 30 July 2012, Ms Chen made payments from and on behalf of Zeus Technology to Mr Lu, in respect of wage and superannuation entitlements owing to Mr Lu by Zeus Technology. 9. From on or around 10 July 2012, Ms Chen made payments from and on behalf of Zeus Technology to Zeus Technology's third-party suppliers, in respect of invoices issued by third party suppliers to Zeus Technology. 10. From at the latest 21 August 2012, Ms Chen made payments from and on behalf of Zeus Technology to Beijing Australia, in respect of supplies made by Beijing Australia to Zeus Technology. 11. By an email from Mr Lu to Ms Chen dated 7 May 2014 at 4:01 pm, Mr Lu, in effect, confirmed to Ms Chen that Zeus Technology was now owned by Beijing Australia as its wholesale trading arm. 19 It appears to be an implicit part of the estoppel case that Ms Chen would not have been afforded the particularised access to Zeus and would not have undertaken the identified tasks unless Beijing was understood to be a shareholder or have such interest in Zeus. 20 Beijing pleads that because of the assumption, it made the final payment towards the share acquisition and did not avail itself of any opportunity to clarify the position by entering into a formal agreement.

Mr Lu's pleaded case 21 By his re-amended defence Mr Lu denies that any contract for the sale of his shares in Zeus to Beijing was formed, and contends that at most there was a proposal that an agreement be entered into. He pleads that if there was to be any agreement in principle then such agreement would be subject to prior approval of the third applicant, Jian Tu, and subject to due diligence by Beijing. 22 Mr Lu says the following with respect to the various payments.

May/June 2011 invoice component 23 Mr Lu says that the invoices were issued by Zeus for professional services that were carried out by Zeus at the request of Beijing in relation to its developing solar system business in Australia. Those services were provided between July 2010 and September 2011. Mr Lu denies the payments were made to his use and says they were made to Zeus in payment of the invoices. 24 Mr Lu emphasises that GST was paid on those invoices by Beijing, an obligation that he asserts would have been unnecessary had the payments been only for the acquisition of shares. He pleads that the GST components were declared by Zeus in its BAS statements.

Historic payment component 25 Mr Lu pleads that the reference in the 15 August 2011 email to an 'historic payment component' was 'intended for later accounting' as between Mr Lu and Mr Tu; that Mr Tu had made payments to Mr Lu in the sum of $347,286.50, which Mr Lu rounded up in the email to $347,287; that those monies were not received towards payment for any shares; that the funds were applied by Mr Lu at Mr Tu's direction against expenses incurred in relation to another company in which Mr Tu and Mr Lu were involved, Biostarch Technology Pte Ltd (Singapore); and that neither Mr Lu nor Zeus received any cash payments or deposits by way of bank transfer from Mr Zheng or Mr Tu.

Balance payment component 26 Mr Lu denies that the Zeus invoice dated 12 September 2011 constituted a direction by Mr Lu to Beijing to pay the relevant amount and denies any money was received for his use.

Reason transfer was provided 27 As to the reason why Mr Lu provided the undated share transfer form and related Resolution to Ms Chen, Mr Lu asserts that they were delivered to Ms Chen (in China) on behalf of Beijing on or about 4 July 2011 in order to expedite the process of transferring the shares in the event that a concluded agreement was made after satisfactory completion of due diligence, and having regard to the different geographic locations of Mr Lu and Ms Chen.

Alternative general denial 28 In the alternative Mr Lu pleads that even if the monies were paid they were not paid in satisfaction of any purchase price for the relevant shares. 29 Further Mr Lu asserts that the consent of Mr Tu to any proposed sale was not provided and the due diligence undertaken at the request of Beijing identified problems as to Zeus.

Estoppel by convention 30 Mr Lu denies that there is any basis for a conventional estoppel argument and he asserted by way of submissions that there was no mutually held assumption.

The first summary judgment application 31 The first application was brought in 2017 and initially allowed by the primary judge: Beijing Hua Xin Liu He Investment (Australia) Pty Ltd v Lu [2017] FCA 319 (McKerracher J). The decision was overturned on appeal: Beijing Hua Xin Liu He Investment (Australia) Pty Ltd v Lu [2017] FCAFC 186 (Gilmour, Jagot and Moshinsky JJ). 32 The Full Court considered that the circumstances were such that the contractual claims were not amenable to summary dismissal, stating: [17] The applicants also observed that there are any one of a number of reasons why Beijing and Mr Lu might have chosen for the consideration for Mr Lu's shares to be recorded as $75 on the share transfer form and for the consideration to be paid to Zeus rather than Mr Lu on apparent account of goods and services rendered by Zeus to Beijing. In circumstances where Mr Lu was the author of the 15 August 2011 email which refers to a summary of the 'account about Zeus acquisition' and identifies each of the amounts which Beijing claims it paid as relating to the purchase of Mr Lu's shares in Zeus, the contractual claims, the applicants said, cannot be characterised as fanciful or lacking a real prospect of success. This was supported by the fact that it is apparent that: (1) Zeus and Beijing were in an ongoing commercial relationship, with Mr Lu being both the sole director and shareholder of Zeus but also the company secretary of Beijing. (2) The invoices show that Zeus and Beijing were located within the same office. (3) Each invoice from Zeus bears the same date as the 'Recipient Created Tax Invoice' of Beijing. In other words, the invoice requiring payment and payment seem to have been made on the same day. (4) None of the invoices describe the date on which the services were provided or describe the goods and services provided. (5) Every invoice before that of 12 September 2011 is for a pre-GST amount which is a multiple of $63,800. The 12 September 2011 invoice for a pre-GST amount of $156,713 is the exact amount required to be make the total of $1.2 million, and is not a multiple of $63,800. (6) Mr Lu subdivided the shares immediately on hearing of Beijing's claim that it owned the 75 shares, the effect of which would be to ensure Mr Lu retained control of Zeus if Beijing was the owner of the 75 shares. 33 As to the 15 August 2011 email, the Full Court found that it was reasonably capable of supporting Beijing's case and that Mr Lu had failed to 'explain it away': [23] To the extent that the primary judge considered that it was necessary that an officer of Beijing give evidence about the purpose of the payments, we are unable to agree. This might have been so but for the emails from and to Mr Lu because then Mr Lu's evidence would have been unanswered. Given that the key email of 15 August 2011 is from Mr Lu himself, it was for Mr Lu as the party seeking summary dismissal to explain away the terms of the email which are reasonably capable of being seen as supporting the applicants' case. It was also for Mr Lu to explain the resolution of Zeus approving the share transfer which he signed and gave to Beijing. Mr Lu gave no such explanation, thus leaving all ambiguities to be resolved in favour of the applicants. So resolved, we are unable to agree with the primary judge that the 15 August 2011 email says nothing about a purchase of Mr Lu's shares in Zeus. It is reasonably arguable that the email is concerned with such a sale. It is also reasonably arguable that the email evidences that the consideration would be paid by payments to Zeus as identified in the email. Finally, it is reasonably arguable that the email also evidences that a payment of $347,287 had been made before 15 August 2011, despite Mr Lu's denial of any such amount having been paid.

Events since the dismissal of the first summary judgment application 34 Since the appeal, the matter has progressed slowly. A dispute about particulars and discovery led to leave being granted to Beijing to amend its pleading: Beijing Hua Xin Liu He Investment (Australia) Pty Ltd v Lu (No 2) [2018] FCA 1583 (Beijing (No 2)). 35 As the reasons in Beijing (No 2) indicate at [49]-[54], during the hearing the respondents argued that leave should not be granted for a number of reasons, including due to the effect of two 'new' documents that they asserted revealed that Beijing's underlying claim was untenable. Those documents were an email from Ms Chen to others within Beijing and Beijing Hua Xin Liu He Investment Co Ltd of 24 August 2011, and a due diligence report prepared by Mallesons Stephen Jacques, apparently attached to the email. On its face, the draft report had been prepared for the benefit of Beijing or Beijing Hua Xin Liu He Investment Co Ltd. In its introduction, it refers to a 'proposed transaction' that Beijing acquire 100% of the shares in Zeus. 36 I declined to rely on those documents as a basis for denying leave to amend or otherwise, stating: [52] … The respondents emphasise that the email and report post-date the date on which the pleading states the share sale agreement was reached (in early May 2011). They also post-date some of the payments. [53] By an affidavit of Beijing's solicitor affirmed 28 September 2018, the applicants say: (a) the report is a draft; (b) the applicants do not accept the summary as an accurate summary of the transaction; (c) Mallesons Stephen Jacques was instructed to prepare the report in May 2011; (d) the purpose of obtaining the report was to confirm there were no significant issues before completion; and (e) the report did not refer to any issues of significance and the final payment was made after its receipt. [54] It seems to me that there may well be reasons for the delay in Beijing receiving the report from Mallesons Stephen Jacques. There may well be arguments about waiver. It may be that Beijing decided to proceed with the transaction, albeit that the report was late. It may be that Mallesons Stephen Jacques ascribed the term 'proposed' to the description of the transaction when they received instructions and that the description was simply perpetuated. The description may be, as the applicants allege, incorrect as at August 2011. The email refers somewhat cryptically to the need to 'make a decision' and that too gives rise to questions, but I cannot properly assume what the author was referencing by that expression. [55] Again, these will be matters of evidence at trial relevant to the applicants' onus and standard of proof. Questions arise from the documents. However, I would not be prepared on the basis of those documents to deny leave to amend the statement of claim. Those documents and their purpose are by no means sufficiently clear so as to persuade me that the applicants' claim to have entered into an agreement as at May 2011 is untenable. 37 After leave was granted to amend, the parties embarked on amending the pleadings, providing particulars and discovery. They attended confidential conferences convened by a registrar where it appeared appropriate to attempt to manage disputes that arose. Over a period of some 12 months the registrar addressed various disputes including as to costs issues, discovery and the adequacy of a response to a notice to admit. 38 On 3 May 2021, and after considering evidence and hearing submissions at a case management hearing as to the manner in which evidence might be given at trial, I made orders programming the matter to trial, with the trial initially listed for five days in October 2021. For various reasons it was necessary for the Court to vacate those trial dates with the intention that the trial proceed as a matter of priority anytime in December 2021, January 2022 or February 2022. 39 The trial programming orders included orders as to the filing of affidavits and outlines of evidence, and facilitative orders as to the translation of any filed documents that were not in English. It was anticipated that some witnesses would give evidence from China by video with the assistance of an interpreter. 40 The orders relevantly provided for the filing of affidavits by way of evidence in chief of the witnesses at trial, but with the proviso that evidence of oral statements and conversations involving the deponents or witnesses and any other persons (defined as Controversial Evidence) was not to be included and would be led orally in chief. Outlines of any Controversial Evidence were to be provided to the respective parties but not filed with the Court or tendered as a prior statement. 41 The programming orders as to trial evidence were complied with (after an agreed extension), with the last documents filed on 6 July 2021. The respondents informed Beijing and the Court on 9 July 2021 that they require each of Ms Chen, Mr Zheng and Mr Tu to be available for cross-examination on their statements and Controversial Evidence. 42 Mr Lu filed this application for summary judgment on 30 July 2021, and the parties agreed to stay any compliance with the remaining trial programing orders, being relevantly the filing of reply affidavits, pending the determination of this application. 43 But for this application, there is no reason to believe the trial would not have proceeded at the latest in December 2021, January 2022 or February 2022.

The basis for bringing the second application 44 Mr Lu submitted that the basis for bringing this application was that documents emerged after discovery that were not before the Full Court, being: (a) an email dated 9 May 2011 that suggests no agreement had been made; (b) two electronic funds transfer documents (EFT documents) that evidence payments by Mr Tu to Mr Lu and are the 'real source' of the historic payment component; and (c) tax returns of Beijing that indicate that invoices were paid by Beijing in satisfaction of services provided and not for the purpose of acquisition of the shares. 45 Those documents, it was contended, established that Beijing had no tenable claim against the respondents. 46 It should be noted at this point that the 9 May 2011 email was discovered by way of Mr Lu's discovery affidavit dated 31 December 2019; the EFT documents were discovered by Mr Lu in his discovery affidavit filed 3 February 2020; the Beijing financial statements were annexed to an affidavit of Mr Lu dated 24 April 2018 and discovered by Beijing by its discovery affidavit filed 21 December 2018; and the tax returns were discovered by Beijing by its discovery affidavit filed 21 December 2018.

Preliminary matters 47 Mr Lu relied on three affidavits filed on 16 September 2020, 7 July 2021 and 30 July 2021 respectively. An application made during the hearing for leave to rely on a fourth affidavit of Mr Lu purportedly filed on 1 December 2021 was refused for reasons summarised below. 48 Beijing relied on an affidavit of Mr Tu filed 9 November 2021 and an affidavit of Ms Tenille Kearney filed 10 November 2021. Ms Kearney is a solicitor at Squire Patton Boggs and is involved in the day-to-day care and conduct of the proceedings on behalf of the applicants. 49 It is important to note at this point that this application for summary judgment was filed after Mr Lu had received the applicants' trial affidavits and statements of Controversial Evidence. Those trial affidavits have not been 'read' and do not currently constitute evidence, and accordingly I have not reviewed them for the purpose of this application. Ms Kearney states in her affidavit that outlines of Controversial Evidence were prepared and provided with respect to both Mr Zheng and Ms Chen. 50 Ms Kearney extracted parts of the trial affidavits of each of Mr Tu, Mr Zheng and Ms Chen respectively, and those extracts were relied upon for the purpose of this application. Where I refer to a trial affidavit of those witnesses, I am referring to the extracts attached to Ms Kearney's affidavit. 51 It is apparent from those extracts that there is evidence of oral conversations that is considered Controversial Evidence with respect to a number of matters: (a) conversation between Mr Zheng, Ms Chen and Mr Lu in Singapore in early May 2011; (b) conversation between Mr Zheng and Mr Lu after Mr Zheng had a discussion with Mr Tu about a proposal to buy shares in Zeus and the purchase price; (c) conversation between Mr Zheng and Mr Lu about the share transfer form after the Singapore meeting; and (d) conversations between Ms Chen and Mr Lu about the share transfer form. 52 The following matters relevantly arise from the evidence.

The 9 May 2011 email 53 The 9 May 2011 email referred to by Mr Lu is an internal email from Ms Chen (a director of Beijing) to Mr Zheng (the company secretary of Beijing) with an attachment. 54 That email and attachment (which are in Mandarin) were also attached to a 166 page 'Notice to Admit Facts and Documents' issued by the respondents to Beijing on 14 August 2020. According to Mr Lu, on 14 August 2020 Beijing disputed the authenticity of the 9 May 2011 email and attachment and all documents referred to in the Notice to Admit. 55 Ms Kearney stated that based on her review of discovered documents, the 9 May 2011 email was discovered by Mr Lu by his discovery affidavit dated 31 December 2018. 56 The email (as translated) states: Hi all, Please check the attachment. Can this report be submitted to the village head? I want to clearly understand the matters related to BVI and report them together. He also sent a text message today asking if the matter of Singapore was completed properly. Talked to Louis. He will implement the BVI operation and risk issues we raised. He and I will do what we each should in the Hong Kong office to implement the business operations of Appollo in detail. Shan Chen 57 The attachment is headed 'About Zeus acquisition' and includes reference to three structures for acquisition. The first is 'accept full price proposed by [Mr Lu]' and the stated price is $1.2 million. The second states 'selectively acquire based on [Mr Lu's] offer' and states that if certain items are excluded, the actual payment would be $650,000. The third states 'complete the acquisition phase by phase at the full price'. The attachment then refers to options for the structuring of Zeus after the acquisition and sets out the reasons behind the acquisition, including to 'understand and streamline the Australian business structure' and to invest in and obtain the services of Mr Lu. 58 Mr Lu contends that the email assists his case in that: (a) it indicates there was no concluded agreement as at May 2011; and (b) the question as to whether the report could be submitted to the village head is consistent with Mr Lu's assertion that if any agreement in principle were made then it would be subject to the approval of Mr Tu. 59 Mr Lu retained Dr Allan Watt to undertake a digital forensic examination of the email to ascertain its authenticity. Dr Watt states in his report that he received the email from Mr Lu on 29 April 2021. Dr Watt provided Mr Lu with a report dated 5 July 2021. Dr Watt said the email contained one MS Word document. He concluded that the email was sent and received by the email addresses that appeared on the face of the header, save for one re-direction from a recipient address. Dr Watt also noted an unusual time stamp that suggested it was received 30 minutes before it was sent (there was no indication at the hearing as to whether or not this was relevant). 60 Mr Lu relies on the fact that he sought a forensic review of the email and the late receipt of the report to explain in part why this summary judgment application was not brought until 30 July 2021. There was no evidence as to why the report was not commissioned until 29 April 2021. I accept that there may have been some attempt to resolve the basis of any dispute as to the authenticity or otherwise of the email before the forensic report was commissioned, but even so the fact of the dispute was known since at least August 2020.

Mallesons due diligence reports and Mr Tu's alleged right of veto 61 Mr Lu refers to a due diligence report dated 9 August 2011 (in its footer) and a due diligence report dated 18 August 2011 (in its footer). The latter document is the subject of the judgment extracts at [36] above. The former document appears on its face to be an earlier iteration of the latter. 62 Ms Chen states in her trial affidavit that she commissioned the due diligence report after the Singapore meeting. Mr Zheng asked her to arrange it. Ms Chen recalls asking Mr Lu for some documents for the due diligence. When she received the report from Mallesons it 'confirmed what we had known' and was consistent with what Mr Lu had said. She did not provide it to Mr Tu. She does not recall requesting that the draft report be finalised, but placed it 'on file'. 63 Mr Tu stated in his trial affidavit that it was not necessary for him to use any right of veto when it came to the share acquisition. He said he did not see it as a big investment, and that since Mr Zheng said the deal was doable, he then said 'ok'.

Historic payment 64 As to the historic payment component, Mr Lu says in his affidavit filed 6 July 2021 that: (a) in 2007 he agreed with Mr Tu to receive 'save life money' from him and hold it on his behalf for Mr Tu's emergency use 'in case a highly risky business venture' was not successful; (b) Mr Lu provided his ANZ bank account details to Mr Tu; (c) a few months after the conversation he noticed two deposits to the account in the sum of $347,286.50 from unknown entities (Fu Tong Trading Co and Resorts World BHD) that he assumed were Mr Tu's save life money; (d) the money remained in Mr Lu's account until he transferred all money in that account to another account in his name in 2008; (e) at the time of the first summary judgment application he did not have information about the funds in his possession; (f) he stumbled across the 'documents' in about April 2018 whilst looking at other documents; and (g) the documents are a one page letter from ANZ Bank to Mr Lu dated 4 July 2007 confirming receipt into an account in Mr Lu's name of $196,898.50 from Fu Tong Trading Co and a one page letter from ANZ Bank dated 24 July 2007 confirming receipt into an account in Mr Lu's name of $150,388 from Resorts World BHD (ANZ letters). 65 In a further affidavit filed 30 July 2021 Mr Lu added that: (a) in about July 2008 at a meeting in Perth, Mr Tu told him that he (Mr Tu) was the ultimate source of the $347,286.50 received by Mr Lu in July 2007; and (b) he applied at Mr Tu's request the funds against $450,000 of 'expenses incurred in relation to Biostarch' in December 2010 and April 2011. 66 Mr Tu by affidavit filed 10 November 2021 denies having provided 'save life money' to Mr Lu. He accepts that the payment from Resorts World BHD (which he recognised as a casino) was probably a transfer from him to Mr Lu. His evidence is that he never asked Mr Lu to transfer any 'save life money' from his account for Mr Tu's personal use and that such an idea is 'ridiculous' because he has 'assets worth millions of dollars' in Australia. 67 Mr Tu also deposed to the effect that he had not asked Mr Lu to transfer any moneys to make payments relating to Biostarch. He stated that Biostarch was a company established in Singapore at Mr Lu's suggestion. Mr Tu had a successful degradable materials business in China and in about 2004 Mr Zheng persuaded Mr Tu to involve Mr Lu in the business. Both Mr Zheng and Mr Lu were at that time old friends of Mr Tu. Biostarch was incorporated in Singapore at Mr Lu's request as the company 'doing overseas sales of the degradable materials for my business in China'. Mr Tu was not involved in the day to day business of Biostarch and considered it a minor business. Mr Lu managed Biostarch and was responsible for managing its staff. Mr Tu did things 'according to Mr Lu's suggestion' and Mr Lu sometimes checked with him 'before making a big decision'. 68 In his trial affidavit Mr Tu states that he made cash payments to Mr Lu over various periods of time: first, (mid-90s to the early 2000s) 'to get him started'; and later (2005-2007) when Mr Lu was going through a divorce and he was told that Mr Lu's bank accounts were frozen. Mr Tu does not now recall the details of the payments. 69 Mr Zheng in his trial affidavit states that he gave Mr Lu funds via bank transfer and cash between 2007 and August 2011. Mr Lu had told him he had financial difficulties with a computer business and because he was getting a divorce. He recalls that bank transfers were made from his Standard Chartered Bank (Hong Kong) account to Mr Lu's bank accounts in Australia and Singapore. He cannot get bank records from Hong Kong as they have been destroyed. He was in Australia on various dates during that period. He also recalls giving Mr Lu 'several thousand' at a casino. He cannot recall more specifically the details of amounts given. 70 Ms Kearney deposed that two EFT documents purportedly evidencing the payments from Fu Tong Trading Co and Resorts World BHD were discovered by Mr Lu in his discovery affidavit filed 3 February 2020.

Tax treatment of invoices 71 Mr Lu relies upon a bundle of financial statements and tax returns of Beijing that were discovered in the proceedings for the financial years ending 30 June 2011 and 30 June 2012. He asserts that those records evidence that for the financial year ending 30 June 2011 Beijing treated the first four invoices ([14] above) as management fees or professional fees, and treated the payment of those invoices as business expenses and tax deductible outgoings, not as capital payments for the shares. The position was similar with respect to the fifth invoice but for the financial year ending 30 June 2012. 72 Ms Chen states in her trial affidavit that Mr Lu instructed an external accounting firm to prepare the financial statements of Beijing. 73 Mr Lu also relies on the general ledgers for Zeus, which he states for the relevant years treated payment of the invoices as part of its taxable income. Mr Lu states that he provided the information for the purpose of the Zeus accounts to its accountant and the information was included in the tax returns for Zeus. Extracts from the general ledgers were attached to his 30 July 2021 affidavit. 74 Ms Kearney's evidence was that the Beijing financial statements and tax returns were discovered by Beijing by its discovery affidavit filed 21 December 2018. Ms Kearney also notes that Mr Lu filed an affidavit in this proceeding dated 27 April 2018 to which he annexed Beijing's financial statements for the financial years ending 30 June 2011 and 30 June 2012. The Zeus records referred to by Mr Lu have not been discovered by the respondents. 75 Ms Kearney deposed to the fact that Beijing's tax treatment of the relevant invoices had been raised by the respondents on 3 December 2021 when they foreshadowed amending their pleading to introduce allegations concerning the tax treatment. At a case management hearing before me on 30 April 2021 counsel for the respondents indicated that subject to any comments from the applicants, he proposed to settle a draft further re-amended defence within a week. On 18 June 2021 Squire Patton Boggs wrote to the respondents' solicitors indicating that as no proposed amended defence had been received, they were proceeding on the basis that the respondents did not intend to amend the pleadings. 76 As noted above, on 5 July 2021 the applicants filed their affidavit evidence in accordance with the trial programming orders and also provided outlines of Controversial Evidence to the respondents' solicitors. 77 On 27 July 2021 the respondents' solicitor informed Ms Kearney that their clients had decided not to proceed with any further amendment to the re-amended defence and provided a draft affidavit in support of an intended application for summary judgment. That was the first time the applicants were informed about this application.

The balance payment and access to Zeus's accounts 78 According to Ms Chen's trial affidavit, Mr Lu handled the payment of the acquisition price for the shares himself. At the time (relevantly August 2011) Mr Lu could log in and transfer money from the bank accounts of both Beijing and Zeus. After she received the 15 August 2011 email ([12]-[13] above) and sometime in September 2011, Ms Chen states that she told Mr Zheng that it was a good time for Mr Lu to transfer the balance of the acquisition payment. She did not take any further steps regarding payment of the acquisition price, because she was granted access to the bank accounts of Zeus and began to receive Zeus's financial statements. She was responsible for Zeus's daily payments and paying salaries and superannuation, including that of Mr Lu. Ms Chen stated that if Beijing had not 'acquired Zeus', then there would have been no reason to provide product to Zeus, nor for Ms Chen to be granted access to Zeus's bank account for any reasons or manage its finances in a role 'like that of a cashier'.

Estoppel by convention 79 Ms Chen in her trial affidavit refers to the pleaded matters relating to her authority to deal with the financial matters of Zeus, noting that she was granted access to the bank accounts of Zeus, even before the balance payment component was met. Her evidence is that she believed that Beijing had acquired Zeus and that she was granted access and was provided with financial information so that she could understand its operations (recalling that Ms Chen is a director of Beijing). She assumed responsibility for making payment including salary and superannuation payments. Steps were put in place by Beijing to enhance the operations of Zeus. Funds from Zeus were sometimes used to fund other companies in a group of companies all owned by Beijing. Her understanding and conduct is to be viewed having regard also to Mr Lu's provision of the transfer form (the subject of conflicting evidence between Mr Zheng and Mr Lu).

The principles 80 Section 31A of the Federal Court of Australia Act 1976 (Cth) includes the following: 31A Summary judgment (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. 81 It is s 31A(2), rather than s 31A(1), which is of present relevance. Rule 26.01 of the Federal Court Rules 2011 (Cth) also sets out circumstances in which a party may apply to the Court for an order for summary judgment: (1) A party may apply to the Court for an order that judgment be given against another party because: (a) the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or (b) the proceeding is frivolous or vexatious; or (c) no reasonable cause of action is disclosed; or (d) the proceeding is an abuse of the process of the Court; or (e) the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding. … (4) If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order. 82 The principles relating to these powers are well settled. The principles are set out in cases such as Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118; Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955; Rana v Google Australia Pty Ltd [2013] FCA 60; and C v Commonwealth of Australia [2015] FCAFC 113; (2015) 234 FCR 81. 83 The party seeking summary judgment bears the onus: Windsor v Sydney Medical Service Co-operative Ltd (No 2) [2009] FCA 704 at [38] (Edmonds J). 84 In Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60; (2008) 167 FCR 372 at [124], Gordon J noted that s 31A was introduced in order to extend 'the power of the court to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases'. Even so, the power to give judgment for one party against another is not to be exercised lightly: Spencer at [24] (French CJ and Gummow J), [60] (Hayne, Crennan, Kiefel and Bell JJ); and Tropical Reef Shipyard Pty Ltd v QBE Insurance (Australia) Limited [2011] FCAFC 145 at [31] (Edmonds, Jessup and Robertson JJ). 85 As French CJ and Gummow J continued in Spencer: [25] Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a 'fanciful' prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. 86 There is limited utility in seeking linguistic precision in this area. Again turning to Spencer: [59] In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like 'clearly', 'manifestly' or 'obviously') as 'frivolous', 'untenable', 'groundless' or 'faulty'. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word 'reasonable', in the phrase 'no reasonable prospect', be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a 'frivolous', 'untenable', 'groundless' or 'faulty' claim. [60] Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is 'no reasonable prospect' of success. … 87 In Dandaven Gilmour J usefully summarised some practical considerations: [6] Success under s 31A does not require a demonstration that the case is hopeless or bound to fail. The following principles are of general application to an application under s 31A: (a) the Court must be very cautious not to do a party an injustice by summarily dismissing proceedings; (b) the Court ought not dismiss a claim based on a predictive assessment of prospects, where it is possible that if the claim went to trial, it may succeed; (c) in a case where evidence can give colour and content to allegations, and where questions of fact and degree are important, the Court should be more reluctant to dismiss a proceeding on the face of a pleading; (d) it is not Parliament's intention to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purposes of determining whether or not a proceeding has no reasonable prospects of success. It may be necessary for the opposing party to provide no more than an outline of evidence, sufficient to show that there is a genuine dispute, to prevent the summary application becoming a trial; (e) if there is a real issue of fact or law to be decided, and the rights of the parties depend upon it, it is obviously appropriate that the matter goes to trial. It cannot be said that where there is a real factual dispute and that factual dispute must be resolved to determine whether the claim succeeds that there is 'no reasonable prospect of success'; (g) it ought not be used to shut out proceedings where, on a proposition of law, there may be room for doubt. On questions of law, an inquiry as to their merit should not be for the purpose of resolving them and also not simply to determine whether the argument is hopeless, but in order to decide if it is sufficiently strong to warrant a trial; (h) evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects; (i) in determining if there are real issues of fact in issue so as to preclude summary judgment the courts must draw all reasonable inferences in favour of the non-moving party … 88 In this case, the question of delay and the timing of the application is also relevant. In Australian Competition and Consumer Commission v Billbusters Pty Ltd [2003] FCA 423 Kenny J observed (in the context of O 20 of the former Federal Court Rules 1979 (Cth)): [89] At the hearing of the motion, I was troubled by a further matter. This was whether the motion should be refused, because the ACCC had delayed too long in making its application. Delay on the part of an applicant for summary judgment may constitute a ground for refusing the application: see Tomlinson v Cut Price Deli Pty Ltd (1992) 112 ALR 122, at 125 per Drummond J, referring to Bell v Clare (1989) 23 FCR 274. Bearing in mind the history of the litigation referred to earlier and that Mr Kendrick-Smith has not alleged (and the evidence does not show) that he has suffered any prejudice by reason of the ACCC's delay in making this application, I am of the view that this is not a ground for refusing the relief sought. 89 In Elbe Shipping SA v Giant Marine Shipping SA [2008] FCA 1135 at [11], Dowsett J observed that it is commonly understood that applications for summary judgment should be brought promptly so as to avoid the incurrence of costs in preparing for trial.

Consideration 90 I have decided that the summary judgment application should be dismissed. 91 It can be accepted that there have been developments since the Full Court dismissed the previous summary judgment application. Discovery has proceeded and Mr Lu has now received statements as to the evidence likely to be relied upon by Beijing. Mr Lu is perhaps proceeding on the basis that the limits of the evidence that might be given on behalf of Beijing have been revealed. 92 But there is a practical difficulty with that argument. It is apparent from the exchange of trial affidavits and the identification (at least by Beijing) of Controversial Evidence, highlighted by the fact that the respondents informed Beijing and the Court on 9 July 2021 that they require each of Ms Chen, Mr Zheng and Mr Tu to be available for cross-examination on their affidavits and Controversial Evidence, that there are a number of conflicts in the facts deposed to, with the result that 'it is apparent that there are real factual issues in dispute which are required to be tested at trial': Cargill Consulting Ltd v BTAC Coal Pty Ltd [2019] FCA 2070 at [21] (Anderson J). Indeed, most of the critical discussions are contested. 93 Areas of conflicting facts include the following: (a) whether or not any oral agreement was formed during conversations in Singapore, and if so, its terms; (b) what was meant (if anything of substance) by the use of different expressions such as 'report' (to Mr Tu), 'plans', 'proposals', and 'acquisitions', noting that some of the evidence has been translated and there may be subtleties that will be addressed or disclosed by oral evidence including cross-examination; (c) the 9 May 2011 email is not conclusive for this reason - it is not apparent whether as a 'report' it is intended to report on future options or justify a past acquisition, although I acknowledge that on its face it provides some support to Mr Lu; (d) whether Mr Tu 'directed' Mr Lu to apply funds against debts of Biostarch prior to 15 August 2011 - there is a clear conflict of evidence as to this matter and the documentary evidence does not clearly resolve such conflict; (e) whether Mr Lu was involved in instructing the external accounting firm as to the preparations of Beijing's accounts and to what extent, a matter of direct conflict between Mr Lu's evidence and that of Ms Chen; (f) the basis upon which the various invoices and payments in the accounts were described and at whose direction, having regard also to the involvement of external accountants, and their legal status; (g) whether or not Mr Zheng was able to make cash payments to Mr Tu, having regard to geographical limitations and if so, when; (h) whether cash payments were made and received, an issue that may require credibility findings; (i) issues relating to the invoices touched on by the Full Court (see [32] above), some of which remain unexplained but no doubt will otherwise be tested at trial; (j) the fact that ambiguities and conflict still remain as to the effect and terms of the 15 August 2011 email, and such ambiguity is not removed by other unambiguous or persuasive documentary evidence; (k) the content of a conversation between Mr Zheng and Mr Lu after Mr Zheng had a discussion with Mr Tu about a proposal to buy shares in Zeus and the purchase price; (l) the conflicting evidence as to why the signed transfer form was provided; (m) the content of a conversation between Mr Zheng and Mr Lu about the transfer form after the Singapore meeting; and (n) the content of conversations between Ms Chen and Mr Lu about the share transfer form. 94 Further, I have considered whether the documentary evidence upon which Mr Lu seeks to rely is of such probative force that it might properly be said that Beijing has no reasonable prospect of successfully prosecuting the proceeding. 95 If Mr Lu's assertions as to the tax treatment of certain payments is correct, Beijing may well have some difficulty at trial in establishing that it paid the relevant consideration for the shares insofar as the May/June 2011 invoice component is concerned. However, that matter remains the subject of contest. Mr Lu, despite suggesting he would place reliance on the alleged tax treatment of the payments and would accordingly amend his defence, did not do so and failed to clarify his position with Beijing. Having regard to the evidence of Ms Kearney, Beijing was therefore left to prepare for trial on a particular assumption. It is therefore not surprising that Beijing's trial affidavits (apparently) did not address that matter in detail. 96 It was disclosed during the hearing that because it was apparent from the evidence in support of this application that Mr Lu continued to rely on the tax treatment of the invoices and payments, Beijing had issued a notice to produce to the respondents in relation to all communications between Mr Lu and Beijing's external accountants, R & D White and Associates, as well as all communications in the possession of Mr Lu between Mr Jagath Jayatissa and R & D White. Mr Jayatissa was Beijing's internal bookkeeper at the relevant times, and is one of the witnesses that Beijing intends to call at trial. The respondents have also given notice that they require Mr Jayatissa for cross-examination. 97 Mr Lu responded to the notice by producing a large bundle of documents at the hearing. I was told from the bar table that the documents had not yet been provided to Beijing or its solicitors. 98 It is not apparent whether any of the documents will shed light on the involvement (if any) of either Mr Lu or Mr Jayatissa in decisions about the recording of the respective invoices and payments in the books and records of Beijing or assist as to whether or not such recordings were correct from an accounting and legal perspective. However, it would be unfair in my view to assume such documents would be of no real assistance to Beijing in circumstances where Beijing had no opportunity to read or consider them before the hearing of the summary judgment application. Mr Lu did not seek to adjourn the hearing. 99 I accept that at least one issue raised by the Full Court about the invoice practices has purportedly been addressed by Mr Lu since the first summary judgment application. He sets out in some detail a narrative of the services that he contends were provided with respect to the period of each invoice. However, not all of the identified issues have been addressed and in circumstances where further documents have only recently been produced by Mr Lu, and in the context of what has been said at [94]-[97] above, I consider the questions raised as to the invoicing practices should be aired and tested at trial. 100 There also remains the conventional estoppel claim. Estoppel by convention permits regard to a course of conduct between the parties which might preclude them from denying a state of facts: Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641 at 674-675. Applied in this case, the argument is that the conduct of the parties was such that Mr Lu is precluded from denying that Beijing has a share interest in Zeus. It is not to the point that the shares are not registered in the name of Beijing. Mr Lu submitted in general terms that there was a lack of any pleaded or evidentiary basis for any common assumption about share ownership. Mr Lu instead emphasised evidence said to be absent (such as a concluded agreement). But Mr Lu did not address all of the particularised evidence of conduct upon which Beijing relies in support of its estoppel claim. For example, although senior counsel for Mr Lu denied one aspect of Ms Chen's contentions (being the contention that absent ownership of Zeus there was no reason to provide products to Zeus), there was no engagement with Ms Chen's evidence that she had a significant role within Zeus that was consistent with Beijing holding the shares in Zeus. There was no analysis of why the conduct and involvement of Ms Chen in Zeus that is relied upon by Beijing viewed collectively would not arguably support a finding that there was a convention between the parties consistent with Beijing's legal or beneficial ownership of shares in Zeus. I accept that the claim may not be without some considerable difficulty for Beijing, but it is a claim that is pleaded and pursued, and having regard to the evidence and the inferences that the Court might be invited to draw from such conduct, I am not satisfied on the evidence that the conventional estoppel claim is amenable to dismissal by summary judgment. 101 The power to give summary judgment for one party against another is not to be exercised lightly, and for the reasons given I am not satisfied that Beijing's prospect of success on its claims is no more than 'fanciful' or that there is 'no reasonable prospect' of success. 102 I am also concerned as to the timing on the part of Mr Lu in bringing this second application and have taken this into account in reaching my decision. The reasons why Mr Lu now submits Beijing's claim against it should be dismissed could have been made the subject of an application long before the parties embarked on their trial preparation. I note in particular that Mr Lu says that he stumbled across the ANZ letters in April 2018 (prior to the hearings before me in September 2018 and October 2018 - Beijing (No 2)). As I have noted above, EFT documents relating to those payments were discovered by Mr Lu in 3 February 2020 and the financial and tax records of Beijing were discovered in December 2018. I acknowledge that Mr Lu chose to commission a forensic report as to the 9 May 2011 email, but that course could have been undertaken earlier. Instead of bringing his application based on such documents earlier, he waited until the parties had undertaken trial preparation, and when after many years of skirmishes the matter was for all intents and purposes otherwise ready for trial. Bringing a summary judgment application in such circumstances is to be discouraged. The resources of the parties and the Court could have been utilised in hearing and determining the trial. The trial has been deferred by this application, and further resources must inevitably be expended. 103 The question of delay may be less significant in a case where there are strong grounds for summary judgment, but that is not this case.

Application for leave to rely on late evidence 104 Finally, I note that at the hearing Mr Lu sought leave to rely on a supplementary affidavit that annexed further documents that he asserted revealed the tax treatment of the various invoices and payments in a manner that assisted his case. Although Mr Lu had purportedly filed the affidavit ahead of the hearing, the filing of evidence and submissions had been programmed prior to the hearing, the time for filing evidence had expired, Mr Lu had not sought leave to file further evidence and Beijing opposed such leave being granted. 105 Having heard from the parties I declined to grant leave. I did so because: leave could have been sought at any time prior to the hearing; Beijing was prejudiced in that to the extent it could respond to the affidavit, it had issued the notice to produce to Mr Lu which was answered only in Court on the day of the hearing; although it was possible that any such prejudice might be minimised if senior counsel for Beijing were able to cross-examine Mr Lu, cross-examination on a summary judgment application is unusual and, more to the point, counsel would have been placed in a position where he cross-examined without knowledge of the content of the produced documents; and Beijing did not wish to have the hearing adjourned. I should add that in any event, reliance on the documents attached to the affidavit would not have changed the outcome of the application because in my view the documents tended to shore up certain submissions that Mr Lu sought to make but did not resolve the factual conflicts as to the roles, directions and understanding of Mr Lu, Ms Chen and Mr Jayatissa respectively, and the manner in which instructions were given to R & D White, matters I have summarised above at [94]-[98].

Outcome 106 The application is dismissed and the matter is to be listed for trial. The parties should provide minutes of agreed orders addressing the timing of the reply evidence, the content of the Court Book and outlines of submissions. Absent agreement, competing minutes should be filed within fourteen days. 107 I will hear the parties as to the costs of this application in due course, if they are not agreed. I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.