Ehrenfeld v Zeng

Judgment

1. MACFARLAN JA: I agree with Emmett AJA.
2. GLEESON JA: I agree with Emmett AJA.
3. EMMETT AJA: This appeal concerns a dispute that arose out of a project (the Project) involving the acquisition of a public listed company, which was to acquire a gypsum quarry in Shandong Province in the Peoples' Republic of China and then to publish a prospectus for a proposed issue of shares to recapitalise the company. The appellant, Mr Gabriel Ehrenfeld (Mr Ehrenfeld), and entities associated with him, were to facilitate the acquisition of the public listed company and the lodgement of a prospectus with the Australian Securities and Investments Commission (the Commission). The first respondent, Mr Zeng Zhao Qin (Mr Zeng), and entities controlled by him, were to procure the acquisition of the gypsum quarry and to acquire a controlling interest in the company. A public listed company, which was originally called Water Wheel Holdings Ltd and changed its name to Shandong Tianye Australia Ltd (SDT), became the intended vehicle for the Project.
4. The proposed arrangements for the Project included payment of the sum of $1,836,000 to an account controlled by the fourth respondent, Mossensons Pty Ltd (Mossensons). Mossensons was an incorporated legal practice controlled by the fifth respondent, Mr Ian Mossenson (Mr Mossenson). The moneys in that account were to be paid out in the circumstances specified in various instruments entered into by the parties. For various reasons, the Project did not reach fruition in accordance with the intentions of Mr Zeng and Mr Ehrenfeld and they fell out. However, a total of $523,677.33 was paid out of the account in accordance with instructions given by Mr Ehrenfeld. Mr Zeng and entities associated with him asserted that the payments were made in breach of trust and claimed reimbursement from Mossensons and Mr Mossenson and from Mr Ehrenfeld and entities associated with him.
5. Before dealing with the issues, it is necessary to describe the instruments that defined the Project. I shall then set out the factual background against which the dispute arose. After that, I shall describe the proceedings commenced in the Commercial List by Mr Zeng and his associated entities against Mossensons, Mr Mossenson, Mr Ehrenfeld and companies associated with Mr Ehrenfeld. The proceedings resulted in judgment being entered, for reasons principally given on 21 August 2014, [1] against Mr Ehrenfeld and entities associated with him. Mr Ehrenfeld then appealed from the orders directing judgment against him. He appeared in person on the hearing of the appeal.

The Instruments Defining the Project

1. The first relevant instrument was made on 26 October 2007 (the Implementation Agreement). The parties to the Implementation Agreement were Mr Zeng and Shandong Tianye Group Co Ltd (Shandong Group China), as "Party 1", and Mr Ehrenfeld, as "Party 2". The Implementation Agreement recited that Party 2 had access to companies listed on the Australian Securities Exchange (the ASX) that were suspended from trading and requiring capitalisation and that the parties to the Implementation Agreement wished to acquire control of such a company and sell a business into the company. The Implementation Agreement outlined three stages of the Project as follows:

• Stage 1: the identification of a suitable company, negotiation with the controllers of the company, compromise of the liabilities of the company in exchange for a settlement involving cash or equity, negotiations with ASX and the Commission and other regulators for approval of the re-quotation of the shares of the company and approval by the company for an issue of shares, so that the existing shareholders would not hold more than 20 per cent;
• Stage 2: the subscription by "Party 1" of $2,000,000 for shares to recapitalise the company and to facilitate the lifting of the suspension of the company on the ASX and the reinstatement of the quotation of the company's shares on the ASX official list;
• Stage 3: the acquisition by the company of suitable mining assets.

1. On 26 August 2008, the parties to the Implementation Agreement entered into a variation agreement (the Variation Agreement). The Variation Agreement effected the substitution of a different mining asset for the mining assets referred to in the Implementation Agreement and provided for an additional capital subscription by "Party 1". A deed of novation was also entered into on 26 August 2008 (the Novation Agreement). The principal effect of the Novation Agreement was to substitute Shandong Tianye Mining Co Ltd (Shandong Mining China) for Shandong Group China as a part of "Party 1" in the Implementation Agreement and the Variation Agreement. A third agreement was entered into in August 2008 (the Controlled Moneys Agreement), under which Mr Zeng and Shandong Mining China agreed to pay the sum of $1,800,036 into a trust account maintained by DLA Phillips Fox.
2. On 17 March 2009, Mr Zeng, Shandong Mining China and Mr Ehrenfeld entered into an agreement in the form of a written memorandum (the Memorandum Agreement). The Memorandum Agreement dealt with a number of matters relevant to the recapitalisation of SDT, including recognition that the shares to be issued to Mr Zeng and his associates would be held by Tilapia Pty Ltd (Tilapia) as trustee for the WWH Distribution Trust and giving Mr Ehrenfeld the right, on certain terms, to a success fee from SDT. The WWH Distribution Trust was a trust related to Water Wheel Holdings Ltd, which was the corporate vehicle chosen for the Project and which became SDT.
3. On 9 June 2010, Mr Zeng and Shandong Mining China, on the one hand, and Mr Ehrenfeld and Tilapia, on the other hand, entered into a further deed (the Warranty Deed). Tilapia entered into the Warranty Deed both in its own right and in its capacity as trustee for the WWH Distribution Trust. The Warranty Deed was executed by Mr Zeng and on behalf of Shandong Mining China by authorised signatories. Mr Ehrenfeld executed the Warranty Deed in his own right, as authorised signatory of Tilapia and as authorised signatory of Tilapia in its capacity as trustee for the WWH Distribution Trust.
4. In the Warranty Deed, Shandong Mining China and Mr Zeng were described as "collectively 'the Principal'" and Mr Ehrenfeld, Tilapia and Tilapia in its capacity as trustee of the WWH Distribution Trust were described as "collectively 'Ehrenfeld'". The principal purpose of the Warranty Deed was to specify the conditions on which money was to be paid into trust by Mr Zeng and his associates and subsequently paid out to SDT, and Mr Zeng and Shandong Mining China were to obtain the benefit of a shareholding in SDT.
5. In September 2010, on a day that is not precisely clear, a further instrument, described as "deed", was executed (the Final Deed). The first party to the Final Deed was SDT. The other parties were described as "the parties referred to collectively in the Warranty Deed as 'the Principal' … and the parties referred to collectively in the Warranty Deed as 'Ehrenfeld' …". In the Final Deed, the parties referred to collectively in the Warranty Deed as "the Principal" were collectively described as "Shandong" and the parties referred to collectively in the Warranty Deed as "Ehrenfeld" were collectively described as "Ehrenfeld". The relevance of those descriptions will become apparent below.
6. The Final Deed recited that Shandong had previously agreed to pay the sum of $1,800,036 to SDT and that Tilapia was the holder of 250,000,000 fully paid ordinary shares in SDT held in the WWH Distribution Trust for Shandong "and/or his nominee/s". The 250,000,000 shares held by Tilapia were referred to as the Trust Shares. By cl 2.1, Shandong agreed to procure that the sum of $1,800,036 that was payable as the balance of the subscription amount of $2,000,000 referred to in the Implementation Deed for the issue of shares in SDT (the Share Money) would be paid to an identified account operated by Mossensons (the Trust Account). Clause 2.2 provided that Shandong must not, before 16 December 2010, or such later date as extended in accordance with the Final Deed, direct Mossensons to release "the funds" to any person except SDT or such other persons as SDT agrees. Clause 2.3 provided that, "as per the Warranty Deed', Ehrenfeld must not (in any capacity), before "the Release Date", direct Mossensons to release the Share Money.
7. The term "Release Date" was defined in the Final Deed as the date on which all of the following had been satisfied: (a) the Trust Shares have been transferred to Shandong and/or his nominee/s in accordance with clause 4.5 of this Deed; (b) Shandong and/or his nominee/s has the opportunity to appoint Directors to SDT if so desired by Shandong and/or his nominee/s (being any number up to 3, and more than 3 if such number would not exceed the proportion that corresponds to the proportion of all shares in SDT held by Shandong and its associates)[. T]he persons nominated by Shandong will be appointed at the later of: the time Shandong directs; and immediately after receipt by SDT of the necessary consents to act. Ehrenfeld is not required to comply with any direction given by Shandong where such direction requires Ehrenfeld to appoint Shandong nominated directors before Shandong is entitled to have the Trust Shares transferred to it; and (c) the Prospectus is lodged with [the Commission] and the other Conditions Precedent have been satisfied (or Shandong has waived in writing the need for compliance with any particular Conditions Precedent).
8. The Final Deed provided, in cl 1.1, that terms used but not defined in it were to have the meaning given to them in the Warranty Deed. The Warranty Deed contained the following definitions: Conditions Precedent means: (a) preparation and completion of a new set of Accounts to 3 December 2009 for [SDT]; (b) preparation of a Prospectus to be issued by [SDT] for the purpose of compliance with ASX requirements in relation to the reinstatement to quotation of [SDT's] securities; and (c) Ehrenfeld procuring subscribers for Ordinary Shares in [SDT] for not less than the subscription amount of $150,000.00. Ordinary Shares means ordinary shares in [SDT] currently on issue, or to be issued pursuant to the Prospectus and/or in conjunction with any other capital raising undertaken by [SDT]. Prospectus means the Prospectus to be issued by [SDT] pursuant to the Conditions Precedent.
9. Clause 4.1 of the Final Deed provided that, after payment of the Share Money to the Trust Account, those funds were to be held by Mossensons in the manner set out in the Warranty Deed. SDT and Ehrenfeld agreed in cl 4.2 that, on transfer of the Share Money to SDT, those funds were to be used only for the purpose of ensuring that the money was maintained by SDT in its bank account in cash for the purposes of ensuring re-quotation and thereafter for other purposes referred to in the Implementation Agreement and the Warranty Deed. However, Shandong agreed that up to $100,000 of the Share Money could be used by SDT for the purpose of ensuring re-quotation.
10. Clause 4.3 provided that, on or after the Release Date, Ehrenfeld was entitled to direct Mossensons to release the Share Money from the Trust Account to SDT "as per the Warranty Deed". Under cl 4.4, if the Release Date had not arisen on or before 16 December 2010, Shandong was entitled to extend the end date or direct Mossensons to release the Share Money to Shandong or its nominee. Clause 4.6 provided that Ehrenfeld would keep Shandong fully informed at all times of all matters relating to SDT, including progress of preparation for the re-quotation of SDT, including preparation of the Prospectus.
11. Clause 4.5 of the Final Deed had the effect that, in circumstances specified in that clause, Shandong could direct that the Trust Shares be transferred to it and/or its nominee/s and that Ehrenfeld must ensure that the Trust Shares be immediately transferred to the person/s nominated by Shandong in or pursuant to such direction. The circumstances specified were as follows:

• on or after lodgement of the Prospectus with the Commission;
• on or after a change in trustee of the WWH Distribution Trust without the consent of Shandong; and
• if, for any reason, the Release Date has not arisen on or before 16 December 2010 or such later date as extended in accordance with the Final Deed.

Factual Background

1. The shares in SDT, when it was known as Water Wheel Holdings Ltd, were suspended from trading by the ASX in February 2000 when administrators were appointed. Later in 2000, SDT and its creditors entered into a deed of company arrangement. In August 2007, SDT emerged from external administration.
2. Between November 2007 and March 2008, following the entry into the Implementation Agreement on 26 October 2007, Mr Zeng, or companies associated with him, paid the moneys required by the Implementation Agreement. By various payments in September 2008, Shandong Group China paid the initial subscription required under the Variation Agreement.
3. On 28 November 2008, the shareholders of SDT passed resolutions in a general meeting that, inter alia, authorised the issue of shares to a trustee to be held for the purposes of the recapitalisation of SDT. They also passed a resolution authorising the payment to Tilapia of a success fee of 25 per cent of all capital raised.
4. On 24 December 2008, Tilapia entered into a deed of settlement under which it became the trustee of the WWH Distribution Trust. The beneficiaries of that trust included Mr Zeng. However, Tilapia had power to appoint other beneficiaries or cause persons who were beneficiaries no longer to be beneficiaries. On the same day, SDT issued 336,000,000 ordinary shares, 250,000,000 of which were issued to Tilapia as trustee for the WWH Distribution Trust, representing about 70.79 per cent of the then issued capital of SDT.
5. On 20 April 2009, Shandong Mining China paid the sum of $1,800,036 into the trust account of DLA Phillips Fox pursuant to the Controlled Moneys Agreement and Mr Ehrenfeld was notified of the payment. On 7 March 2009, SDT entered into an agreement to acquire the shares in a company associated with Mr Zeng. That company held a prospecting licence for a gypsum mine in Shandong Province.
6. On 7 January 2010, SDT lodged a form of prospectus with the Commission. It lodged a supplementary prospectus on 18 January 2010. This Court was not taken to either of those documents. The primary judge observed that there was "no suggestion that those documents were valid or efficacious". [2] Mr Ehrenfeld took issue with that observation, as indicated below.
7. On 5 February 2010, the shareholders of SDT resolved in general meeting to authorise the transfer from the WWH Distribution Trust to Shandong Mining China of 250,000,000 fully paid ordinary shares on certain conditions. The primary judge did not describe the terms of those conditions and this Court was not taken to them.
8. On 23 June 2010, at the request of Mr Ehrenfeld, Mossensons opened the Trust Account, which was a controlled moneys account. Mr Ehrenfeld gave details of the Trust Account to, relevantly, Mr Zeng and Shandong Mining China. On 21 September 2010, Shandong Group China transferred the sum of $1,800,036 into the Trust Account. On the same day, the sum of $1,277.33 was paid out at Mr Ehrenfeld's direction to Mossensons for legal fees owing to it. On 28 September 2010, the sum of $100,000 was transferred out of the Trust Account to SDT. That payment was permitted under the Final Deed and is not the subject of any complaint by Mr Zeng or the companies associated with him.
9. The "end date" under the Final Deed was 16 December 2010. There does not appear to have been any formal extension of that date. The re-quotation of SDT and the other conditions necessary to satisfy or achieve the Release Date had not been achieved by 16 December 2010. However, it appears that the parties continued to work to endeavour to consummate the Project.
10. In early July 2011, Mr Ji Xin Min, Mr Feng Yu Lu and Mr Zeng signed consents to their respective names being used as proposed directors of SDT "in a disclosure document to be lodged with ASIC and ASX for the offer of securities for the raising of funds for [SDT]". The circumstances in which those consents were signed are not clear. However, it appears that Messrs Ji, Feng and Zeng were to be the nominees of the Zeng interests on the board of SDT.
11. On 27 July 2011, Mr Ehrenfeld sent an email to Mr Ji saying: I attach a draft copy of the prospectus for SDT. Some more amendments will be made tomorrow and then it will be lodged.
12. On 29 July 2011, a form of prospectus was lodged with the Commission on behalf of SDT. The prospectus contained a statement as follows: This Prospectus is authorised by the Company and is lodged with the ASIC pursuant to Section 718 of the Corporations Law. The Directors have consented in writing to this lodgement in the terms of Section 720 of the Corporations Act.
13. On 1 August 2011, Mr Ehrenfeld send an email to Mr Ji saying: Attached please find a copy of the final prospectus. Mr Ji responded on 2 August 2011 saying: Can you confirm that this prospectus has already been lodged with ASIC or not yet? Mr Ehrenfeld replied on 2 August 2011 saying: The first draft I sent you was not lodged at that time. The final prospectus last sent to you has now been lodged. Thus, it is clear that the prospectus that was lodged on 29 July 2011 had not been seen by Mr Ji or, inferentially, the other two prospective directors, who had signed consents earlier in July 2011, prior to the lodgement of that prospectus with the Commission.
14. On 5 August 2011, Mr Ji sent an email to Mr Ehrenfeld relevantly saying as follows: Mr Zeng has reviewed the SDT Prospectus and would like to clarify/revise the following matters before it's lodge[d] under ASX: 1. The number of the directors - the number should be 5 or 7 other than 6 as the directors should be appointed based on percentage of shares (70% and 30%). Currently the Board only has 3 [SDT] Directors, we think it should be more than 3; 2. The Board Secretary, CEO and CFO should be appointed by Shandong Tianye; 3. Please elaborate the Expenditure Item $800,000 under 14.3.1 and $1,130,000 under 14.3.2 - are these two sums of money to be paid from the $2 million raised funds or from other accounts? […]
15. Mr Ehrenfeld responded on 5 August 2011 saying, relevantly: I have no problem with appointing additional directors if you so desire. Please provide information on suitable candidates and we can organise their appointment immediately upon completion of the prospectus process. Alternatively, I am also open to asking one of the existing directors to stand down. […] As part of the listing process, the company has to intend to expend more than 50% of its cash on its projects within two years. This budget is to comply with the required intention. The board may make alternative decisions as it goes along. Other than amounts previously agreed, any cash spent in the relisting process will not come from Mr Zeng's funds but from funds that we obtain in addition to these, so the matter remains neutral to Mr Zeng.
16. Mr Ji responded on 10 August 2011 saying: First of all, thank you very much for making such a progress recently! For the directors, we think it's better for 5 now, please arrange one of your director[s] to stand down from SDT. For the secretary and the CFO of the company, [w]e still insist on [sic] that they should be assigned by [SDT]. […] Mr Ehrenfeld replied on 10 August 2011 saying there was no problem limiting the number of directors to five and that he would organise for one to resign at the time of the appointment of the other director as requested.
17. On 23 August 2011, Mr Ji sent an email to Mr Ehrenfeld saying: We haven't got any correspondences [sic] between you ASIC & ASX, it's nearly end of Aug, we still have no idea for the SDT relisting situation. This is to confirm that prior to any "supplementary" / "replacement" or further prospectus being submitted to ASIC you will need to forward to us a copy for the "proposed directors" signatures and review. Our previous signatures are not to be used for any replacement/supplementary prospectus without our approval in writing as we have not reviewed the said document.
18. The version of the prospectus of 29 July 2011 named Mr Jeffrey Beaumont, Mr Ehrenfeld and Ms Ling Ling Zhang as directors of SDT. None of the nominees of Shandong China was named as a director. However, on 1 September 2011, Mr Ji sent an email to Mr Ehrenfeld relevantly saying that he had just noticed that there were still six directors "in your new Prospectus" and saying that Mr Ehrenfeld should ask one of his appointed directors to resign. Mr Ji said as follows: You sent me the Prospectus today and let [sic] us to sign it right now, but I don't know what you have changed in it, we can't have enough time to study it in such a short time. Can you sent [sic] me email and tell me what is the modified contents in the new prospectus ASAP.
19. On 1 September 2011, Mr Ehrenfeld sent an email to Mr Ji saying: I attach two documents with highlights showing the amendments. Version 002a contains the amendments, and these essentially deal with the issues of the Chinese report including more specific information on the gypsum market and the risks. The second version has a few more additional amendments (in green) mainly relating to dates and the details about the vendor, Jinan. As to the directors, the company has only 3 directors at this time so none can resign, or the company will be non-compliant. The other 3 are proposed directors only. Your request will be complied with prior to re-listing. Please remember to send the consents tonight.
20. Against that background, a replacement prospectus dated 2 September 2011 was lodged with the Commission under s 719 of the Corporations Act 2001 (Cth). That version named the same three directors. On 7 September 2011, a "Supplementary Prospectus" was lodged with the Commission. The Supplementary Prospectus stated that it was to be read together with the prospectus lodged on 29 July 2011 and with the prospectus lodged on 2 September 2011, and that SDT "withdraws the prospectus lodged with [the Commission] on 29 July 2011 in its entirety". The Supplementary Prospectus also stated that various drafts of "a replacement prospectus" had been submitted to the Commission, with the most recent version being a draft submitted on and dated 2 September 2011. The Supplementary Prospectus stated that, in the event that the document submitted on 2 September 2011 was not considered to be a draft document only, SDT also withdrew in its entirety the replacement prospectus lodged on 2 September 2011.
21. Subsequently, a prospectus due diligence committee was established in connection with SDT's application for readmission to trading on ASX. The first meeting of the committee took place on 19 December 2011. The minutes of that meeting record that the chair advised that, in her view, it was unlikely that the prospectus would be lodged with the Commission before the last week in January 2012. Mr Ehrenfeld indicated that he was satisfied with the next meeting being convened during the third week of January 2012.
22. The second meeting of the prospectus due diligence committee took place on 20 April 2012. The minutes of that meeting recorded that the chair advised that a lodgement date of late May or early June would be realistic. The third meeting of the committee took place on 30 April 2012. The action items following the meeting included Mr Ehrenfeld having responsibility for providing proposed amendments to the prospectus by 1 May.
23. The committee met again on 8 May 2012, 21 May 2012, 28 May 2012 and 18 June 2012. Another meeting was to be held on 25 June 2012. The minutes of the meeting on 18 June 2012 record that the chair proposed that a number of members of the committee meet in Perth the following day to discuss the prospectus with the aim of having a finalised draft within the next week. All of that indicates that at no stage was there a prospectus that was capable of being distributed to the public.
24. On 18 July 2012, Mr Zeng and the companies associated with him, purported to terminate the Implementation Agreement, the Variation Agreement and the Final Deed. They relied on various matters, including what was said to be the unauthorised payments made out of the Trust Account. Following the purported termination, SDT offered to transfer from Tilapia to Mr Zeng or his nominee the 250,000,000 shares held in the "WWH Acquisition Trust". On 30 August 2013, SDT was removed from the official list maintained by ASX.

Claims in the Commercial List

1. Proceedings were commenced in the Commercial List on 29 June 2012. Mr Zeng and the other plaintiffs asserted that the proceedings were commenced when they discovered that unauthorised payments had been made out of the Trust Account.
2. In the proceedings commenced in the Commercial List, the plaintiffs were Mr Zeng, Shandong Mining China and Shandong Tianye Group Pty Ltd (together, the Zeng Parties). The first and second defendants in the proceedings were Mossensons and Mr Mossenson (together, the Mossenson Parties). The other defendants (together, the Ehrenfeld Parties) were SDT, Mr Ehrenfeld, Tilapia, Fundamental Capital Pty Ltd, a company associated with Mr Ehrenfeld (Fundamental) and Steinbruck Management Services Pty Ltd, another company associated with Mr Ehrenfeld (Steinbruck). The Zeng Parties claimed a declaration that they, or one or more of them, were the beneficial owners of the funds held in the Trust Account and an order that any funds in the Trust Account be paid out to them. They also claimed a declaration that they, or one or more of them, were the beneficial owners of funds paid from the Trust Account to Steinbruck, SDT and Mossensons and an order that those funds be paid to the Zeng Parties. In addition, the Zeng Parties claimed an order for an account of the funds paid by them to SDT, Mr Ehrenfeld and Fundamental and an order that SDT, Mr Ehrenfeld, Fundamental and Steinbruck make fair and just restitution for the benefits derived by them at the expense of the Zeng Parties. In the alternative, they claimed damages for breach of contract, breach of trust and breach of fiduciary duty.
3. So far as presently relevant, the amended Commercial List statement filed on behalf of the Zeng Parties on 28 October 2013 made allegations, the effect of which was as follows:

• C71: Pursuant to the Final Deed, on or about 20 September 2010, the sum of $1,800,036 (the Trust Money) was paid by or on behalf of Mr Zeng and Shandong Mining China into the Trust Account.
• C72: The Trust Money was held on trust by Mossensons for the benefit of the Zeng Parties and for payment in accordance for the purpose for which the Trust Money was paid into the Trust Account.
• C73: On or about 24 September 2010, on Mr Ehrenfeld's instructions to Mossensons, $100,000, representing the re-quotation allowance, was withdrawn from the Trust Account and paid to SDT.
• C98: Contrary to the terms of the Final Deed, between 21 September 2010 and 31 May 2012, Mr Ehrenfeld instructed Mossensons to transfer parts of the Trust Money to SDT, Steinbruck and Mossensons.
• C100: In breach of the Implementation Agreement (as varied by the Variation Agreement) and the Final Deed, and/or in breach of trust, Mr Ehrenfeld, Tilapia, Fundamental, SDT, Mossensons and/or Mr Mossenson, between 21 September 2010 and 31 May 2012, arranged or authorised $523,677 of the Trust Money to be paid from the Trust Account to SDT, Steinbruck and Mossensons as follows: 1. On 21 September 2010, $1,277.33 was paid to Mossensons; 2. On 5 August 2011, $16,400 was paid to SDT; 3. On 26 August 2011, $66,000 was paid to SDT; 4. On 1 November 2011, $100,000 was paid to SDT; 5. On 21 December 2011, $100,000 was paid to SDT; 6. On 25 January 2012, $45,000 was paid to SDT; 7. On 6 March 2012, $111,000 was paid to Steinbruck; 8. On 3 May 2012, $50,000 was paid to SDT; 9. On 31 May 2012, $35,000 was paid to SDT.
• C101: The Zeng Parties did not authorise the disbursement of the Trust Money referred to in C100.
• C102: Mossensons owed a fiduciary duty to the Zeng Parties: 1. not to conduct itself contrary to the interests of the Zeng Parties; and 2. not to deal with the Trust Money in any manner inconsistent with the Zeng Parties' ownership of the Trust Money, the terms of the Final Deed and the Zeng Parties' direction.
• C103: The disbursement of the Trust Money to SDT, Mossensons and Steinbruck was in breach of trust.
• C104: Mr Ehrenfeld and/or Tilapia had knowledge that the Trust Money had been disbursed in breach of trust.
• C105-C106: The Mossenson Parties, SDT, Fundamental and Steinbruck had knowledge that the Trust Money had been disbursed in breach of trust.
• C107: In the premises: 1. Mossensons has breached and remains in breach of its fiduciary duty to the Zeng Parties, holds any or all of the Trust Money received by it as constructive trustee for the Zeng Parties and is liable to account to the Zeng Parties in respect of those funds; 2. Mr Ehrenfeld, Tilapia, Fundamental, Steinbruck, SDT and Mr Mossenson knowingly assisted and/or were in knowing receipt of the Trust Money and hold any or all of the Trust Money received by them as constructive trustees for the Zeng Parties and are liable to account to the Zeng Parties in respect of those funds.

1. In their Commercial List response of 16 December 2013, the Mossenson Parties said as follows:

• 18. In answer to C98 and C100 of the Zeng Parties' amended Commercial List statement, the Mossenson Parties admitted that Mr Ehrenfeld, for SDT, directed Mossensons to make the payments from the Trust Account.
• 20. In answer to C101, the Zeng Parties did not have authority to direct Mossensons in the disbursement of the Trust Money.
• 21. The Mossenson Parties denied the allegations made by the Zeng Parties in C102, C103, C105 and C107.
• 32. In the alternative, in answer to the matters raised against them by the Zeng Parties, the Mossenson Parties said that, if contrary to the matters contended for in the response, it were found that they acted in breach of trust, they would be entitled to be relieved from any such breach of trust on the basis that they had acted honestly and reasonably, pursuant to s 85 of the Trustee Act 1925 (NSW) or s 75 of the Trustees Act 1962 (WA), that they would be entitled to an indemnity from SDT, Mr Ehrenfeld and the other Ehrenfeld Parties who received payments, pursuant to s 86 of the Trustee Act 1925 (NSW) or s 76 of the Trustees Act 1962 (WA).

1. In the amended Commercial List response filed on 19 November 2013 on behalf of the Ehrenfeld Parties, the following was said:

• C62: The Ehrenfeld Parties admitted the allegations in C71 of the Zeng Parties' amended Commercial List statement.
• C63: The Ehrenfeld Parties said that the payment pleaded in C71 was held on trust for the purposes of re-quotation of SDT and for other purposes set out in the Implementation Agreement, the Warranty Deed and the Final Deed.
• C64: The Ehrenfeld Parties admitted the allegation in C73.
• C86: The Ehrenfeld Parties denied the allegations in C98.
• C88: In answer to the allegations in C100 and C101, The Ehrenfeld Parties said that: 1. any funds paid from the Trust Account were the funds of SDT and for the purposes of re-quotation of SDT and within the intention of the parties; 2. tasks involved to complete the re-quotation were increased by the Zeng Parties; 3. all moneys expended were for the benefit of SDT to complete re-quotation and operate after its re-quotation; 4. all moneys expended were for work and expenses incurred by the party paid with the moneys and for the re-quotation purposes.
• C90: In answer to the allegations in C103, C104, C106 and C107, The Ehrenfeld Parties said that any funds paid from the Trust Account were the funds of SDT and for the purposes of the re-quotation of SDT and within the intention of the parties, and otherwise denied the allegations.

1. In their amended Commercial List cross-claim statement filed on 1 August 2014, the Mossenson Parties claimed from the Ehrenfeld Parties equitable compensation, damages for misleading and deceptive conduct and damages for breach of warranty of authority. The Mossenson Parties also claimed an order that SDT and Steinbruck restore the Trust Money to the extent of all amounts paid to them from the Trust Account.
2. In support of the relief claimed in their cross-claim, the Mossenson Parties made the following relevant allegations:

• 3: SDT retained Mossensons to open the Trust Account as a controlled moneys account and instructed Mossensons that the Trust Account must attract interest (the retainer).
• 4: Pursuant to the retainer, Mossensons caused National Australia Bank Ltd to open the Trust Account.
• 5: On or about 20 September 2010, the sum of $1,800,036 (namely, the Trust Money) was deposited into the Trust Account.
• 6: Pursuant to the written instructions of SDT, contained in an email from Mr Ehrenfeld, Mossensons caused $1,277.33 to be transferred from the Trust Account to its general account in discharge of its invoice for fees and disbursements addressed to SDT.
• 7-22: The other eight payments were made on the instructions of SDT by emails from Mr Ehrenfeld.
• 26: If, which was denied, the Trust Money was held on trust for the benefit of the Zeng Parties, in giving instructions for those eight payments, each of SDT and Mr Ehrenfeld engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, contrary to s 18 of the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)).
• 27: In the alternative, in directing Mossensons to make the eight payments, each of SDT and Mr Ehrenfeld warranted to the Mossenson Parties that SDT was authorised to direct Mossensons to disburse the Trust Money and, if, which was denied, the Trust Money was held on trust for the benefit of the Zeng Parties on the terms identified in the Final Deed, then in breach of the said warranty, SDT was not authorised to direct Mossensons to disburse the Trust Money.
• 28: If, which was denied, either of the Mossenson Parties was liable to the Zeng Parties or any one of them for damages or compensation or to restore the Trust Money disbursed from the Trust Account, that liability was caused by SDT's and Mr Ehrenfeld's conduct in contravention of the Australian Consumer Law or alternatively breach of warranty, and by reason thereof, the Mossenson Parties have suffered and will suffer loss and damage.
• 29: If, which was denied, Mossensons held the Trust Money on trust for the Zeng Parties or any one of them and the eight payments were made in breach of trust or of a fiduciary duty owed by either of the Mossenson Parties to the Zeng Parties, or any one of them, which was denied, then, since SDT, by Mr Ehrenfeld, directed Mossensons to make the payments, each of the Ehrenfeld Parties knowingly assisted in the breach of trust or breach of fiduciary duty by either of the Mossenson Parties, and each of SDT and Steinbruck knowingly received moneys in breach of trust, and each of the Ehrenfeld Parties is liable to contribute in equity to any liability that either of the Mossenson Parties may have to the Zeng Parties or any one or more of them for breach of trust or breach of fiduciary duty.

Proceedings before the Primary Judge

1. On 8 November 2013, the proceedings were provisionally fixed for hearing for ten days commencing on 11 August 2014. The trial commenced on 11 August 2014 and ran intermittently until 21 August 2014. On commencement, the Zeng Parties and the Mossenson Parties announced that they had reached a compromise concerning the claim by the Zeng Parties against the Mossenson Parties. The compromise involved judgment for the Zeng Parties against the Mossenson Parties in the sum of $360,000 with no further order as to costs. That led to discussion in court as to the further progress of the proceedings. In the light of the compromise, much of the material intended to be relied on by the Zeng Parties as against the Mossenson Parties would not be required. Accordingly, shortly after 2 pm on 11 August 2014, the matter was adjourned until 12 August 2014 to allow the Zeng Parties to identify the documents that they wished to tender.
2. The hearing ran close to the full day on 12 August 2014 with the Zeng Parties and the Mossenson Parties making openings and tendering the documents sought to be relied upon, before Mr Ehrenfeld commenced his opening. Mr Ehrenfeld's opening continued on 13 August 2014. However, Mr Ehrenfeld sought to tender more documents that he had served overnight. Mr Ehrenfeld embraced the suggestion by the primary judge of an adjournment for a limited period, and an adjournment was granted until 2 pm the next day to permit Mr Ehrenfeld to finalise his bundle of documents and provide copies to the other parties.
3. The hearing recommenced at 2 pm on Thursday 14 August 2014 with Mr Ehrenfeld addressing on the documents he had tendered. He continued addressing on Friday 15 August. During the morning session of that day, following an offer from the Court to the parties, the hearing was adjourned until Monday 18 August 2014, when the parties were to commence submissions. Mr Ehrenfeld indicated that that course would assist him. The offer was made in order to give the parties more time to consider issues arising from Mr Ehrenfeld's new tender of documents.
4. On Monday 18 August 2014 the Zeng Parties and the Mossenson Parties made oral submissions. The hearing ran into the afternoon, although a relatively short adjournment was granted for Mr Ehrenfeld's benefit. Mr Ehrenfeld made his closing submissions on 19 August 2014. An adjournment was granted mid-afternoon until the next morning to enable him to complete and deliver a written summary of his submissions. Further submissions were made by the parties on 20 August 2014, and judgment was then reserved.
5. The primary judge delivered his principal reasons on 21 August 2014. After summarising the effect of the various instruments that defined the Project and the events that led up to the dispute, his Honour dealt with various questions concerning the proper construction of the Implementation Agreement, the Novation Agreement, the Memorandum Agreement and the Warranty Deed, his Honour dealt with questions concerning the Final Deed. [3]
6. The first question was whether Mr Ehrenfeld was a party to the Final Deed. His Honour recorded that Mr Ehrenfeld claimed that he signed the Final Deed only as a director of Tilapia and as a director of SDT and was not himself a party to the Final Deed. His Honour accepted that the Final Deed did not provide in terms for Mr Ehrenfeld to execute it in his own right and that Mr Ehrenfeld's signature appeared only as part of the execution by Tilapia and SDT. However, his Honour observed, Mr Ehrenfeld was said to be a party to the Final Deed as one of the parties described as "Ehrenfeld". By that means, his Honour said, the Final Deed purported to impose liabilities on Mr Ehrenfeld: it included agreements by him and in the same way gave him rights and discretions. Thus, his signature, even though not in terms of his own account, must be taken as an acknowledgement by him that he was indeed a party. Accordingly, his Honour considered, it was objectively plain that Mr Ehrenfeld was intended to be a party, was intended to be bound as one of the "Ehrenfeld" parties and was intended to take the rights and benefits given to the "Ehrenfeld" parties: his Honour considered that the clear intention appearing from the Final Deed, read objectively and as a whole, was that Mr Ehrenfeld was to be a party to it. His Honour therefore concluded that Mr Ehrenfeld was bound by the Final Deed. [4]
7. The primary judge then considered the question of "how SDT might get hold of the $1.8 million held in trust". His Honour considered that cl 4.3 of the Final Deed made it clear that SDT could get the money once the "Release Date", as defined, had been achieved. His Honour said that that meant that the three requirements set out in the definition of "Release Date" had been satisfied, or perhaps waived. Those three requirements included the third, being the three "Conditions Precedent", as defined in the Warranty Deed. [5]
8. The primary judge considered that cl 4.5 gave "Shandong" (being Shandong Mining China and Mr Zeng) the right to call for and obtain a transfer of the Trust Shares (being the 250,000,000 shares held by Tilapia), even if the Release Date had not been satisfied and that, if that happened, SDT was able "to get the money". His Honour said that it was only if one or other of those various paths had been traversed to its end that SDT was entitled to the funds held in the Trust Account and that, even if that happened, the money was effectively to be under the control of the Zeng Parties who were to hold the majority of the share capital of SDT. [6]
9. The primary judge then considered whether, to achieve the Release Date, it was sufficient that Tilapia should hold the Trust Shares in trust for "Shandong". His Honour considered that it was plainly not sufficient for a number of reasons. First, the definition of Release Date required the transfer of the Trust Shares. If it were sufficient for the Trust Shares merely to be held in trust, that provision would have no work to do. In addition, the definition assumed or required that Shandong would become the legal owner of the Trust Shares. That was confirmed by cl 3.1. In addition, his Honour considered that the requirement in the definition of Release Date, that the Trust Shares be "transferred … in accordance with cl 4.5", required the transfer of the Trust Shares to Shandong. It recognised that more than a mere beneficial interest was necessary if the Release Date was to be achieved. [7]
10. The primary judge then turned to a number of issues raised by Mr Ehrenfeld that his Honour characterised as being misconceived. His Honour observed that these other issues addressed matters that were either not in issue on the pleadings or, to the extent that they were, were so peripheral that they did not require attention. His Honour observed that Mr Ehrenfeld's approach, which focused on what he said was the overall transaction or "deal", overlooked the fact that what was required was the construction of the various instruments by which the "deal" was intended to be consummated. His Honour referred to Mr Ehrenfeld's stress on what he claimed were repetitive breaches of the agreements by the Zeng Parties. His Honour observed that there was no evidentiary foundation for the submissions made by Mr Ehrenfeld. [8]
11. The primary judge also referred to contentions by Mr Ehrenfeld that the proposed directors of SDT nominated by the Zeng Parties had not acted in good faith or for proper reasons in withholding their consents. His Honour considered that the concerns of the directors were valid and that, when the history was looked at in its entirety, it was plain that Mr Ehrenfeld from time to time imposed extremely unreasonable deadlines on the Zeng Parties. [9]
12. The primary judge concluded that, in all the circumstances, it was open to the Zeng Parties to terminate the agreements when they did for at least one of the reasons that they gave. That reason was the unauthorised, un-notified and unexplained withdrawals that Mr Ehrenfeld directed to be made from the Trust Account in breach of trust and breach of contract. His Honour considered that the breach was "fundamental and repudiatory". His Honour held that the terms of the Final Deed emphasised repeatedly the only circumstances in which SDT could have the benefit of the funds in the Trust Account and emphasised that, when SDT was to become entitled to that benefit, SDT would be under the effective control of the Zeng Parties and would have available to it the sum of $2,000,000, less the sum of $100,000 for re-quotation. However, the payments made to SDT greatly exceeded the authorised amount and there was a further payment to Steinbruck, which was not even a party to the Final Deed. His Honour characterised those breaches as "gross and flagrant". His Honour did not accept that Mr Ehrenfeld could have misunderstood the terms of the Final Deed. His Honour drew the inference that Mr Ehrenfeld had decided that, regardless of any question of legal entitlement, he would treat the funds held in the Trust Account as his own and that he had continued to do so even after the Zeng Parties protested. Mr Ehrenfeld did not disclose that he had done so when it would have been appropriate, for example, at meetings of the due diligence committee, or in response to the Zeng Parties' repeated requests for information. [10]
13. The primary judge found that the money in the Trust Account was held in trust on the terms of the Final Deed, which applied to the balance presently residing in the Trust Account. His Honour held that the Release Date had not occurred and would not ever occur, and that the Final Deed had been terminated. His Honour found that Mr Ehrenfeld and SDT breached the Final Deed in a fundamental and repudiatory way and procured the breach of trust that was committed by Mossensons in permitting the payments to be made out of the Trust Account for which there was no justification. His Honour concluded that the balance in the Trust Account must be refunded to the payers, who were the Zeng Parties. It also followed that SDT, as the recipient of some of the monies wrongly paid out, was liable to repay them, with interest. The same would apply to Steinbruck, but for the fact that it had been deregistered and no longer existed. [11]
14. Further, the primary judge held that Mr Ehrenfeld was liable for the whole of the money in various ways, although not so that the payers could recover more than once overall. First, he was liable to pay by way of damages the amounts paid out in breach of trust. Secondly, he was liable co-ordinately with Mossensons for procuring the breach of trust, which gave rise to liability to account as constructive trustee. It would also give rise to a liability to make equitable compensation. His Honour concluded that, one way or another, the Zeng Parties were entitled to the repayment of the balance held in the Trust Account and to recover the amounts paid out from those who were involved in the payments and the recipients of the payments. [12]
15. The primary judge then dealt with the claim by the Mossenson Parties against the Ehrenfeld Parties. The first issue that his Honour considered was whether the settlement between the Mossenson Parties and the Zeng Parties was reasonable. His Honour observed that Mr Ehrenfeld did not contend otherwise and that, rather, Mr Ehrenfeld contended that Mossensons was liable to the Zeng Parties in full for the misapplied funds. His Honour held that the settlement was objectively reasonable. His Honour considered that Mossensons, as trustee, was obliged to acquaint itself with the terms of the trust and to obey those terms, and that it did not appear to have done the former and certainly did not do the latter. [13]
16. The primary judge observed that, if Mossensons had acted reasonably, and done all that it could to perform its obligations, there might be a case for excusing the breach of trust. However, his Honour said, it was unlikely, on the evidence, that any such excuse would be allowed in circumstances where, although Mossensons was repeatedly warned that the money had been paid on terms, it did not acquaint itself with those terms. His Honour held that, in circumstances where Mossensons had settled for substantially less than the amount of the claim, in circumstances where its liability was clear and its prospects of being excused were not so clear, the settlement was reasonable. [14]
17. The primary judge considered that the real dispute related to the basis of the claim for contribution or indemnity. His Honour observed that Mr Ehrenfeld disputed certain aspects of the claim by the Mossenson Parties and submitted that, notwithstanding the submission that he had directed the payment out of the moneys, it must have been obvious to Mossensons that those payments were in fact made in breach of trust and that its actions were the real source of the problems that followed. However, his Honour said, no such case was pleaded or particularised. Rather, his Honour said, Mr Ehrenfeld appeared to suggest that, in those circumstances, it was inappropriate to conclude that Mossensons had relied on the directions given by him. However, that submission failed to take account of the contrary, unchallenged evidence given by Mr Mossenson, who was not required for cross-examination. His Honour concluded that, to the extent that Mr Ehrenfeld sought to justify his directions to Mossensons, by submitting that SDT was entitled to the money on the proper construction of the Final Deed and the events that had happened, the submission failed. [15]
18. The primary judge concluded that Mossensons was entitled to indemnity from Mr Ehrenfeld, since it was clear, on the unchallenged evidence of Mr Mossenson, that it relied on the instructions given by Mr Ehrenfeld and on the implicit representation that those instructions were authorised, having regard to the purposes for which the money had been paid into the Trust Account. His Honour drew the inference that, if Mr Ehrenfeld had not directed the payments out to be made, they would not have been made. [16]
19. The primary judge did not consider it appropriate to apportion liability in circumstances where the failures on the part of the Mossenson Parties to acquaint themselves with, and to perform, the terms of the trust were not pleaded or particularised. His Honour considered that it was clear that the Mossenson Parties had limited their evidence by reference to the issues as they were disclosed by the pleadings and it was equally clear that if any question of apportionment of responsibility had been raised on the pleadings, the Mossenson Parties could well have taken a very different evidentiary course. His Honour concluded that, on the issues as pleaded, Mossensons had made good its claim for indemnity. [17]
20. Relevantly, for present purposes, the primary judge concluded that the Zeng Parties were entitled to recover from Mr Ehrenfeld the total of $523,677.33 paid out of the Trust Account, together with interest on each of the components of that total from the date it was paid out. [18] His Honour also concluded that Mossensons was entitled to indemnity from SDT and Mr Ehrenfeld for its liabilities to the Zeng Parties under the settlement between them and for its costs of defending the claim by the Zeng Parties. [19]
21. Accordingly, on 28 August 2014, the primary judge made orders, as presently relevant, as follows:

• Judgment for the Mossenson Parties against Mr Ehrenfeld and SDT in the sum of $360,000;
• Order Mr Ehrenfeld and SDT to pay the costs of the Mossenson Parties of the cross-claim and of defending the claim by the Zeng Parties;
• Order that Mr Ehrenfeld pay to the Zeng Parties the sum of $213,677.33, together with interest on the nine amounts paid out of the Trust Account from the date of payment to the date of the order.

Applications for Summary Dismissal of the Appeal

1. On 24 September 2014, Mr Ehrenfeld filed a notice of intention to appeal against the orders made by the primary judge. On 1 December 2014, Mr Ehrenfeld filed his notice of appeal. On 19 December 2014, the Zeng Parties filed a notice of motion seeking an order dismissing the appeal as (inter alia) incompetent.
2. Directions hearings in relation to the appeal were listed for 2 and 4 February 2015. The hearings were adjourned by consent because of outstanding bankruptcy proceedings involving Mr Ehrenfeld. Two further directions hearings were also adjourned by consent for the same reason. On 30 March 2015, the Registrar of the Court issued a notice under r 13.6 of the Uniform Civil Procedure Rules 2005 (NSW) to Mr Ehrenfeld to show cause why the appeal should not be dismissed for his non-attendance on that day. On 17 April 2015, a creditor's petition in relation to Mr Ehrenfeld was dismissed by the Federal Circuit Court.
3. At a directions hearing on 25 May 2015, Mr Ehrenfeld indicated that he wished to amend his notice of appeal. A direction was given that an amended notice of appeal and submissions be filed by 15 June 2015. Mr Ehrenfeld failed to do so. At a further directions hearing on 22 June 2015, Mr Ehrenfeld was ordered to file his amended notice of appeal and submissions by 10 July 2015. Mr Ehrenfeld filed an amended notice of appeal on 10 July 2015.
4. At a directions hearing on 13 July 2015, the appeal was fixed for hearing on 5 November 2015. Directions were given for the preparation and service of appeal books, including the red appeal book, by 5 August 2015. Mr Ehrenfeld did not comply with those directions.
5. At a directions hearing on 26 August 2015, further directions were given for the preparation and service of appeal books by Mr Ehrenfeld. Apart from the service of an index for the red appeal book, Mr Ehrenfeld did not comply with those directions.
6. On 11 September 2015, Mr Ehrenfeld's solicitor filed notice of intention to cease acting for him. On 7 October 2015, Mr Ehrenfeld's solicitor filed notice that he ceased to act for him.
7. By motions filed on 21 September 2015, each of the Zeng Parties and the Mossenson Parties sought summary dismissal of the appeal on the ground that Mr Ehrenfeld had failed to prosecute the appeal with due dispatch. The basis for the motions was the repeated failure by Mr Ehrenfeld to comply with the rules and directions relating to the appeal. At a directions hearing on 23 September 2015, the motions for summary dismissal were stood over to 12 October 2015 for hearing. The motions were listed before Gleeson JA on 12 October 2015. His Honour made orders for service of the red appeal book by 16 October 2015 and the blue, black and orange appeal books by 23 October 2015. The motions were adjourned to 26 October 2015.
8. Mr Ehrenfeld did not comply with the orders made by Gleeson JA. However, on 23 October 2015, he filed and served the red appeal book. At that stage, none of the other appeal books had been served. On 26 October 2015, Mr Ehrenfeld filed a motion for the fixture of the hearing of the appeal to be vacated and for leave to file a further amended notice of appeal.
9. On 26 October 2015, the motions for summary dismissal and Mr Ehrenfeld's motion came before Tobias AJA. His Honour made orders for service of the blue and black appeal books by 30 October 2015 and stood the motions over for hearing on 5 November 2015. Mr Ehrenfeld failed to comply with the orders made by Tobias AJA for service of the blue and black appeal books. The black appeal book was served on 2 November 2015 (although it was filed on 30 October 2015) and the blue appeal books, together with Mr Ehrenfeld's chronology, were served around midday on 4 November 2015, the day before the date fixed for the hearing of the appeal.
10. In the events that happened, the defaults on the part of Mr Ehrenfeld were ultimately rectified to a sufficient extent to enable the hearing of the appeal to proceed on the day fixed. Accordingly, the motions for summary dismissal were dismissed. However, each of the Zeng Parties and the Mossenson Parties sought an order that Mr Ehrenfeld pay their costs of the respective motions.
11. The circumstances in which Mr Ehrenfeld's solicitor ceased to act were not put before the Court. It may be easy enough to draw an inference that Mr Ehrenfeld failed to provide the solicitor with funds in connection with the hearing of the appeal. Be that as it may, it is clear that both the Zeng Parties and the Mossenson Parties were justified in filing their motions on 21 September 2015 and in prosecuting those motions, in circumstances where Mr Ehrenfeld's failure to comply with directions of the Court could fairly be characterised as contumelious. In the circumstances, orders should be made that Mr Ehrenfeld pay the Zeng Parties' costs of their motion of 21 September 2015 and should pay the Mossenson Parties' costs of their motion of 21 September 2015.

Application for Leave to Amend Grounds of Appeal

1. No further amended notice of appeal had been provided by Mr Ehrenfeld in connection with his motion for leave to file a further amended notice of appeal. However, in an affidavit sworn on 26 October 2015 in support of the application, he outlined three additional grounds as follows: 1. The primary judge erred in including amounts that he and the Zeng Parties agreed were the funds of SDT, and indisputably not the funds of the Zeng Parties, in the amounts to be paid by Mr Ehrenfeld to the Zeng Parties; 2. The primary judge erred in including amounts that he, the Zeng Parties and the Mossenson Parties agreed were the funds of SDT, and indisputably not the funds of the Zeng Parties, in the amounts to be paid by Mr Ehrenfeld to the Mossenson Parties; 3. The primary judge erred in finding that the effect of a payment of a success fee would be to reduce the cash available to SDT on re-quotation by about $800,000.
2. At the commencement of the hearing of the appeal, Mr Ehrenfeld was invited to address the Court in support of his application for leave to amend. At that stage, he provided a draft further amended notice of appeal which included four additional grounds.
3. The first two additional grounds that Mr Ehrenfeld sought to agitate were in terms substantially identical to grounds (a), (b) and (c) foreshadowed in his affidavit. In addition, the draft further amended notice of appeal included a third additional ground that the primary judge erred in finding that Mr Ehrenfeld was a party to the Final Deed and that he was bound by it. That ground had never been previously foreshadowed as a ground of appeal. After some argument, Mr Ehrenfeld abandoned the proposed fourth additional ground concerning total failure of consideration.
4. The Court refused leave to file the further amended notice of appeal or to rely on any of the proposed additional grounds. The Court indicated that it would give reasons subsequently. The reasons are as follows.

The Funds Belonged to SDT

1. Mr Ehrenfeld, in the course of oral argument, clarified the first two of the additional grounds. The substance of his complaint was that, under the arrangements contemplated by the various instruments relating to the Project, SDT was to be entitled to the interest on the funds placed to the credit of the Trust Account and it had not been demonstrated that the impugned payments were not payments of interest to which SDT was entitled.
2. As I have said, in their amended Commercial List statement, the Zeng Parties alleged (at C100) that, in breach of the Implementation Agreement (as varied by the Variation Agreement) and the Final Deed, or in breach of trust, Mr Ehrenfeld and Mossensons or Mr Mossenson arranged or authorised $523,677 of the Trust Money to be paid to SDT, Steinbruck and Mossensons. They alleged that the disbursement of those amounts was not authorised by the Zeng Parties.
3. I have indicated that the response that the Ehrenfeld Parties made to those allegations was that any funds paid from the Trust Account were the funds of SDT and were for the purposes of re-quotation of SDT and within the intention of the parties, that all moneys expended were for the benefit of SDT to complete re-quotation and operate after its re-quotation and that all moneys expended were for work and expenses incurred by the party paid with the moneys and for the re-quotation purposes. In the light of that response, there is now no basis for contending that the primary judge erred in not treating the payments as payments of interest to which SDT was entitled. No such allegation was made by Mr Ehrenfeld to his Honour.
4. Other evidence before the primary judge was, in any event, quite inconsistent with the contention that Mr Ehrenfeld sought to raise so belatedly. On 24 September 2010, Mr Ehrenfeld sent an email to Mossensons confirming that interest should be credited each month to an account of SDT's, less fees for which Mossensons had accounted. On Friday 5 August 2011, Mr Ehrenfeld sent an email demanding that the interest for "the last two months" be credited to the company's account "today or on Monday". The email said that, "in addition to any interest payments", instructions were given for the separate transfer of the amount of $16,400 to the account of SDT so that it could pay its listing fees. One of the impugned payments was a payment of $16,400 on 5 August 2011.
5. On 7 June 2011, SDT wrote to Mossensons in connection with the audit of its financial report for the periods ended 3 December 2009 and 3 December 2010. SDT requested Mossensons to provide its auditors with confirmation that Mossensons was acting in connection with the opening of a bank account to hold funds in trust for SDT pending the completion of its recapitalisation. The letter sought confirmation that Mossensons was currently holding $1,700,000 in trust and that interest was remitted monthly, less costs where deduction was authorised. Mossensons responded on 8 June 2011 confirming the information concerning the opening of a bank account to hold moneys in trust pending completion of the recapitalisation. Mossensons confirmed that it held an amount of $1,698,758.67 in trust upon which interest was remitted to SDT monthly.
6. In the light of the material briefly outlined above, Mr Ehrenfeld could not possibly establish an error on the part of the primary judge in failing to consider whether the impugned payments could be justified as payments of interest. There could be no possible utility in granting leave to amend to include grounds to that effect.

Success Fee

1. In his reasons, the primary judge observed that it appeared that the Commission or ASX was not satisfied as to aspects of the prospectus. His Honour said that it was clear that the Zeng Parties were unhappy with the prospectus because of the provision for the payment of a success fee, the effect of which would be to reduce the cash available to SDT by about $800,000. [20] His Honour referred to a continuing "bone of contention" concerning the form of the prospectus as being that the Zeng Parties were still concerned that matters, including the success fee to be paid to Mr Ehrenfeld and the negative impact that that would have on the cash available to SDT on re-quotation. [21] His Honour referred to the fact that Mr Ehrenfeld pointed to the recognition, in the Memorandum Agreement, of his entitlement to a success fee. His Honour observed, however, that the entitlement was subject to a condition that, after payment of the success fee, SDT would have, on re-quotation, available cash of $2,000,000 less about $50,000 for listing fees and other charges. His Honour said that the ultimate success fee proposed and authorised would have had a much more significant impact on the available cash than that which was authorised by the Memorandum Agreement. [22]
2. Mr Ehrenfeld complained that his Honour's observations (as summarised above) reflected a misapprehension as to the way in which the success fee was to operate. Thus, he said, it was clear that the payment of a success fee of $800,000 would not reduce the funds available to SDT below $2,000,000. He pointed out that the success fee approved by the shareholders of SDT was payable on the basis that Mr Ehrenfeld undertook to ensure that, after the payment of any success fee, SDT would have cash of at least $2,000,000, less listing and other fees. It is clear enough that the primary judge recognised that in the observations referred to above. His Honour did not make any finding that the payment of the success fee would reduce the funds available to below $2,000,000.
3. On the other hand, it was also clear that the Zeng Parties were unclear as to the effect of the proposed success fee. They sought clarification of it. Thus, in his email of 5 August 2011, [23] Mr Ji sought elaboration as to the way in which the success fee would operate, asking whether that sum would be paid from the $2,000,000 raised or from other accounts. As I have indicated above, Mr Ehrenfeld responded that the amounts in question would not come from the funds of the Zeng Parties. There is no substance in the contention raised in the second proposed new appeal ground. Accordingly, there would be no utility in granting leave to amend the notice of appeal in that respect.

Mr Ehrenfeld as a Party to the Final Deed

1. The contention that Mr Ehrenfeld was not a party to the Final Deed, and was therefore not bound by its terms, is also completely without substance. True it is that Mr Ehrenfeld only purported to sign the Final Deed on behalf of Tilapia. However, the document clearly states that the parties included the parties referred to collectively in the Warranty Deed as "Ehrenfeld". Mr Ehrenfeld indubitably executed the Warranty Deed as a party in his own right. In their Commercial List statement, the Zeng Parties alleged (C67) that on or about 13 September 2010, SDT, Mr Zeng, Shandong Mining China, Mr Ehrenfeld and Tilapia, in its own capacity and as trustee for the WWH Distribution Trust, entered into the Final Deed. The response filed on behalf of Mr Ehrenfeld (C56) admitted that allegation made in the amended Commercial List statement. In those circumstances, there could be no substance in the contention now sought to be advanced and there would have been no utility in granting leave to amend to raise it.

Adjournment of the Appeal

1. It is not entirely clear whether Tobias AJA refused Mr Ehrenfeld's application to vacate the fixture for the hearing of the appeal. In any event, the Court allowed Mr Ehrenfeld to make an application for adjournment of the hearing. The Court refused the application and indicated that reasons would be given subsequently. The reasons are as follows.
2. The only basis advanced by Mr Ehrenfeld for an adjournment was that he wanted to have legal representation. No indication was given that arrangements had been made for any legal representation. Mr Ehrenfeld had had the assistance of solicitors and counsel at least until 10 July 2015, when his outline of submissions was prepared by Mr Simon Lipp of counsel. No material was provided to the Court as to the circumstances in which Mr Lipp's retainer was withdrawn or, as probably the case, he returned his brief, assuming he had been briefed on hearing. In those circumstances, the Court did not consider that an adjournment could be justified when opposed by both the Zeng Parties and the Mossenson Parties.

Grounds of Appeal

1. Notice of intention to appeal was served on the last of the prospective respondents on 25 September 2014 and notice of appeal was filed on 1 December 2014. The respondents to the appeal are the Zeng Parties and the Mossenson Parties. The Zeng Parties and the Mossenson Parties were separately represented. The Mossenson Parties were not affected by all of the grounds of appeal.
2. The first ground of appeal is that Mr Ehrenfeld was denied procedural fairness and natural justice. Mr Ehrenfeld claims that the primary judge failed to conduct the hearing in a manner that afforded him an opportunity to contest the claims made by the Zeng Parties and the Mossenson Parties properly. In relation to the claims by the Zeng Parties, Mr Ehrenfeld complains that they were allowed to alter significantly the basis of the conduct of their claim at the commencement of the hearing, such that their case was presented by the tender of documentary material exclusively, which thereby, he claimed, deprived him of the opportunity of cross-examining, on matters central to his defence, witnesses who had sworn affidavits for the Zeng Parties. In relation to the Mossenson Parties, Mr Ehrenfeld complains that he was not afforded the opportunity to present any evidence in response to the claim by the Mossenson Parties that the settlement they had reached with the Zeng Parties was reasonable.
3. Mr Ehrenfeld also makes three complaints concerning the conclusions reached by the primary judge. He asserts that his Honour erred in the following respects:

• in finding that there was no suggestion that prospectuses filed by SDT were valid or efficacious in circumstances where he had asserted in his Commercial List response that the prospectuses had complied with the Final Deed and any relevant rules, he had submitted to his Honour that the prospectuses so complied and the prospectuses did in fact so comply;
• in finding that the assertion by Mr Ehrenfeld that a compliant prospectus had been lodged on 29 July 2011 was inconsistent with his pleaded case;
• in finding that no director of SDT had ever given consent to the filing of a prospectus where evidence to the contrary existed.

1. Next, Mr Ehrenfeld complains that the primary judge erred in finding that cl 4.5 of the Final Deed required the transfer of the Trust Shares to Shandong Mining China. Mr Ehrenfeld also complains that his Honour erred in finding that he breached the Final Deed or any trust created by the Final Deed. Finally, Mr Ehrenfeld complains that his Honour failed to resolve an issue raised by him to the effect that each of the payments complained of had been authorised or consented to by the Zeng Parties.

Denial of Procedural Fairness Ground

1. There are two limbs to Mr Ehrenfeld's complaint about a denial of procedural fairness. The first relates to the decision taken on behalf of the Zeng Parties not to call any oral evidence and to rely on the tender of documents alone, in circumstances where they had served affidavits by a number of deponents. The second aspect of the complaint concerns the settlement of the proceedings as between the Zeng Parties and the Mossenson Parties.

The Decision to Call No Oral Evidence

1. The assertion of a denial of procedural fairness in relation to the claim by the Zeng Parties has no substance. As I have said, the Zeng Parties had served affidavits by several deponents. Mr Ehrenfeld gave notice that seven of the deponents of the affidavits were required for cross-examination. On the first day of the hearing, counsel for the Zeng Parties informed the primary judge that the witnesses were not available since inadequate notice of the requirement for cross-examination had been given.
2. The written submissions filed on behalf of Mr Ehrenfeld assert that his Honour then invited counsel for the Zeng Parties to consider whether it was necessary to read all of the affidavits, since much of them must have related to the claim against the Mossenson Parties (which claim had been settled). Counsel for the Zeng Parties then indicated that he may be able to "remove a lot of that evidence". The hearing was therefore adjourned to the following day on the basis that the Zeng Parties and the Mossenson Parties would identify the documents that they wished to tender. In the result, the Zeng Parties tendered some seven documents in chief and the Mossenson Parties relied on part only of an affidavit sworn by Mr Mossenson and some annexures to it. No affidavits were read on behalf of the Zeng Parties. It follows, necessarily, that no witnesses were available for cross-examination by Mr Ehrenfeld. Mr Ehrenfeld's written submissions assert that, in allowing the hearing to proceed on the basis just outlined, Mr Ehrenfeld was denied the opportunity of putting a central element of his defence to the deponents of the affidavits served on behalf of the Zeng Parties.
3. The reply filed on behalf of the Zeng Parties in answer to the response of the Ehrenfeld Parties asserted that they never agreed to, authorised or consented to the withdrawal of any part of the Trust Money, apart from the re-quotation allowance of $100,000. Mr Ehrenfeld asserts that that reply joined issue with the crux of his defence, namely, that he was authorised to withdraw more than the sum of $100,000 or at least that the Zeng Parties knew that he was drawing more than that sum and implicitly consented to that course of conduct. He asserts that his defence necessarily involved evidence that was outside the four corners of the Final Deed because it involved matters of words and conduct said to give rise to explicit or implicit consent to his use of the funds. Mr Ehrenfeld asserts that the key aspects of that defence were that the Zeng Parties knew that the impugned payments had been made and were being used to fund the ongoing and expensive listing process and by their conduct or words implicitly or explicitly authorised or consented to the impugned payments. Mr Ehrenfeld says, quite correctly, that that defence could not have been established on purely documentary evidence.
4. The thrust of Mr Ehrenfeld's complaint is that, having regard to the way in which the trial was conducted, there was no proper testing of the case advanced by the Zeng Parties and he was not afforded the opportunity of putting his case to them. He did not consent to the conduct of the hearing in the manner in which it was conducted. He complains that it was not explained to him how the hearing might be conducted.
5. It was not suggested by Mr Ehrenfeld that he was induced not to prepare evidence in reliance upon an expectation that he would be able to establish his case through cross-examination of deponents of affidavits served on behalf of the Zeng Parties. Had the Zeng Parties, by their conduct, induced Mr Ehrenfeld to proceed on the basis that the affidavits would be read, there could have been a basis for complaint. However, no such suggestion has been made. Rather, the history of the preparation of the proceedings for hearing indicates that the preparation of Mr Ehrenfeld's case may have been defective. Over an extended period of time, timetables for the filing and service of evidence had been set by the Court. Mr Ehrenfeld was represented by solicitors at that time. However, he served and filed no evidence in accordance with the original timetable and sought leave to serve and file an affidavit and exhibits by way of evidence for the first time on the second day of the hearing. Leave to rely on that affidavit was refused and the refusal of that leave is not the subject of any ground of appeal.
6. The fact that Mr Ehrenfeld did not have material to establish his asserted defence is, apparently, entirely the result of lack of effort on his part or those acting for him. At the date fixed for the hearing, there was no admissible evidence before the Court to substantiate the defences to the claims brought by the Zeng Parties. As the primary judge observed, the Zeng Parties were not obliged to prove facts that were not in dispute and, for that reason, indicated that he would not allow the hearing to be protracted by irrelevant evidence and cross-examination. However, his Honour made no rulings and gave no directions as to how the Zeng Parties should proceed. The way in which they conducted their case was entirely for them. There was no objection to the documents that were tendered in chief. Further, there has been no suggestion that any of the evidence relied upon was inadmissible.
7. The Zeng Parties took the view that their case could be established by the documentary evidence alone and were entitled to elect not to read or to rely on any of the affidavits that had been filed and served. By doing so, they ran the risk that their case may not be proved. They would have been entitled, as a matter of course, to adduce further evidence in response to any positive defence established by Mr Ehrenfeld. Indeed, further documents were tendered in reply to Mr Ehrenfeld's positive defence of authorisation. However, there is no substance in Mr Ehrenfeld's complaint that he was deprived of the opportunity of cross-examining witnesses whose affidavits were not relied on.
8. Mr Ehrenfeld bore the onus of establishing any defence of authorisation and of adducing evidence in support of that case. The consequence of his failure to adduce evidence in support of his positive defence is that the defence would fail. He cannot blame the Zeng Parties for that failure. I do not consider that there was any substance in the complaint by Mr Ehrenfeld that there was a denial of procedural fairness by reason of the trial proceeding on the basis of documents tendered by the Zeng Parties without reliance on affidavits that had been served.

The Settlement

1. The Zeng Parties had alleged that the Mossenson Parties acted in breach of trust or participated in a breach of trust, in making the impugned payments on the instructions of Mr Ehrenfeld, in circumstances where they were aware of the terms of the relevant instruments, including the Final Deed. In their response to the Zeng Parties' Commercial List statement, the Mossenson Parties denied that they were liable. Thus, the primary stance of the Mossenson Parties was that they were not liable to the Zeng Parties.
2. However, the Mossenson Parties asserted in their cross-claim against the Ehrenfeld Parties that, if Mossensons held the Trust Funds on trust for the Zeng Parties, which was denied, then the Mossenson Parties claimed indemnity from the Ehrenfeld Parties. Mr Ehrenfeld says that he was, therefore, entitled to assume that the proceedings would be conducted by the Mossenson Parties in a fashion that was favourable to his interests. That is to say, it was in his interest, in relation to the cross-claim by the Mossenson Parties against the Ehrenfeld Parties, that the Mossenson Parties should successfully resist the allegation made against them by the Zeng Parties that they had acted in breach of trust.
3. In that sense, the settlement between the Zeng Parties and the Mossenson Parties removed a line of defence for Mr Ehrenfeld. Instead of the Mossenson Parties taking the primary stance that they had no liability to the Zeng Parties, they adopted the stance that they were entitled to indemnity from Mr Ehrenfeld in respect of the liability that they agreed with the Zeng Parties that they had to the Zeng Parties. Mr Ehrenfeld, up to the time of the settlement, was entitled to assume that the Mossenson Parties would advance a case against the Zeng Parties to the effect that they were not liable. Mr Ehrenfeld was then faced with the assertion made against him by the Mossenson Parties that they had made a reasonable settlement with the Zeng Parties in so far as they had agreed to pay approximately half of the claim made against them by the Zeng Parties.
4. The primary judge found that the settlement was objectively reasonable, since Mossensons, as trustee, was obliged to acquaint itself with the terms of the trust and obey them. His Honour found that Mossensons did not appear to have acquainted itself with the trust and certainly did not abide by its terms In those circumstances, it was unlikely that the Mossenson Parties' defence could have been made out. His Honour found that, in circumstances where the Mossenson Parties had settled for substantially less than the amount of the claim and where their liability was clear, but its prospects of being excused were not so clear, the settlement was reasonable. [24]
5. At all times after the filing of the cross-claim by the Mossenson Parties on 6 May 2013, Mr Ehrenfeld must be taken to have been aware that he would need to be ready for a trial at which it was being asserted that he was liable to indemnify the Mossenson Parties in respect of the impugned payments. The settlement did not in fact add to his exposure regarding the impugned payments. The Zeng Parties accepted that, to the extent that they succeeded against him, he would be entitled to credit for the amount recovered from the Mossenson Parties.
6. The written submissions of 10 July 2015 filed on behalf of Mr Ehrenfeld asserted that, during the course of the hearing, it was identified that the Mossenson Parties ought to justify the reasonableness of the settlement that they had agreed with the Zeng Parties. The submissions assert that a claim for indemnity in respect of the settlement was no part of the pleadings and that Mr Ehrenfeld had had no opportunity to put on evidence or submissions in response as to whether the settlement was reasonable. The submissions assert that the proper course was for that part of the hearing to be adjourned, to enable Mr Ehrenfeld to have an opportunity to prepare to meet the assertion that the settlement was reasonable.
7. However, Mr Ehrenfeld did not put in issue before the primary judge any question as to whether or not the settlement was reasonable. Further, he did not ask for an adjournment to give him time to consider whether the settlement was reasonable or to mount a case to suggest that it was not. In the circumstances, there was no denial of procedural fairness in relation to the settlement of the claim by the Zeng Parties against the Mossenson Parties.

The Prospectus Grounds

1. Grounds 2, 3 and 4 in the amended notice of appeal take issue with the conclusion by the primary judge that no valid prospectus had been filed, in circumstances where the filing of a valid prospectus was one of the conditions that had to be met before the funds in the Trust Account could be released. Mr Ehrenfeld takes issue with the statement made by his Honour that there was no suggestion that documents filed with the Commission on 7 January 2010 and 18 January 2010 were valid or efficacious. [25] He also takes issue with his Honour's rejection of the contention by Mr Ehrenfeld that a compliant prospectus had been lodged by 29 July 2011. His Honour found that that contention was inconsistent with the pleaded case and, in any event, the proposed directors had never given their consents. His Honour therefore concluded that none of the prospectuses was valid. [26]
2. In their amended Commercial List statement, the Zeng Parties made the allegations to the following effect:

• C77: On or about 29 July 2011, SDT lodged a prospectus with the Commission; the content of the prospectus was not approved by Mr Zeng, Shandong Mining China, Mr Ji or Mr Feng prior to its lodgement with the Commission.
• C78: On 5 August 2011, Mr Zeng and Shandong Mining China raised with Mr Ehrenfeld concerns about the prospectus lodged on 29 July 2011, namely that it was inconsistent with various agreements between the parties.
• C79: On or before 12 August 2011, the Commission placed an interim stop order on the prospectus and issued a statement of concerns to the directors of SDT.
• C80: On 1 September 2011, the Commission advised SDT that it would revoke the interim stop order if SDT lodged a replacement prospectus by 10 am on 2 September 2011.
• C81: On 1 September 2011, Mr Ehrenfeld represented to Mr Zeng, Mr Ji and Mr Feng that consents required from them for a replacement prospectus were only consents for them to be named as proposed directors of SDT and that they would not be assuming any responsibility for the contents of the replacement prospectus by providing those consents.
• C82: The representations made by Mr Ehrenfeld on 1 September 2011 were false, misleading and deceptive.
• C83: On 2 September 2011, SDT lodged a replacement prospectus with the Commission.
• C84: The content of the replacement prospectus was not approved by Mr Zeng, Shandong Mining China, Mr Ji or Mr Feng prior to its lodgement with the Commission.
• C85: On 5 September 2011, the Commission was notified that Mr Zeng, Mr Ji and Mr Feng had not consented to the lodgement of the replacement prospectus.
• C86: On or about 8 September 2011, SDT lodged a supplementary prospectus with the Commission withdrawing the prospectus lodged on 29 July 2011.
• C87: To date, SDT has failed to lodge a prospectus with the Commission that reflects the terms of the agreements between the Zeng Parties and Mr Ehrenfeld and which contains all the information that investors would reasonably require to make an informed assessment of the offer to issue securities in SDT.

1. Mr Ehrenfeld put in issue many of the allegations just summarised. In particular, in C77 of the Ehrenfeld Parties' amended Commercial List response, the response to C87 of the Zeng Parties' amended Commercial List statement referred to a prospectus dated 28 May 2012 that was approved by the Zeng Parties. No reference is made to any earlier prospectus.
2. Nonetheless, Mr Ehrenfeld contends in his written submissions that, in the circumstances, the primary judge should have made an express finding that the prospectus lodged on 29 July 2011 did not comply with the requirement, in the Final Deed, to lodge a prospectus. He asserts that the pleadings show that, even if the prospectus of 29 July 2011 was not compliant with the Final Deed, a prospectus that was not invalidated by the Commission was filed with the ASX on 8 September 2011.
3. The Court was not taken to any prospectus of 8 September 2011. At most, there was the supplementary prospectus of 7 September 2011, whereby the earlier prospectuses were withdrawn. The submission asserts that the primary judge's note of the withdrawal of the prospectus filed on 2 September 2011 [27] did not account for the prospectus of 8 September 2011, by which Mr Ehrenfeld said that he meant the prospectus of 7 September 2011. However, if that prospectus really were compliant, it would be difficult to explain the continuing efforts of the prospectus due diligence committee over the following nine months to finalise and submit a compliant prospectus to the Commission. There is no substance in the grounds relating to the filing of the prospectus.

Requirement for the Transfer of Shares

1. Clause 4.5 of the Final Deed had the effect that "Shandong", as defined, could, in certain circumstances, direct that the Trust Shares be transferred to it or its nominees and that "Ehrenfeld", as defined, must ensure that the Trust Shares are immediately transferred to the persons nominated by Shandong. One of the prerequisites for the Release Date was that the Trust Shares had been transferred to Shandong or their nominees in accordance with cl 4.5. Mr Ehrenfeld's contention appears to be that Shandong had a discretion and that there was no finding made by his Honour that Shandong had required that the Trust Shares be transferred.
2. The primary judge formulated the question as to whether, in order to achieve the Release Date as defined, it was sufficient that Tilapia should hold the 250,000,000 in trust for Shandong. His Honour considered that the answer was plainly "no". [28]
3. First, his Honour considered that the terms of the definition of "Release Date" made it plain that there must be a transfer of the Trust Shares. If it were sufficient for the shares merely to be held in trust, the requirement for a transfer would be otiose. His Honour considered that the definition must be considered in the light of the statement of intention that the sum of $1,800,036 was to be released to SDT at the same time as Shandong was issued with the shareholding that would equate to no less than 70 per cent of SDT. That, his Honour concluded, assumed or required that Shandong would become the legal owner of the shares. Similarly, by cl 3.1 of the Final Deed, the parties agreed that, pursuant to payments made by or on behalf of Shandong under the Implementation Agreement and the Warranty Deed, Shandong was entitled to the Trust Shares and, in certain circumstances, a further 7,000,000 SDT shares, such that Shandong or its nominees would hold 70 per cent of all issued ordinary shares in SDT on a fully diluted basis. Finally, his Honour held that the requirement in the definition of Release Date that the shares be "transferred … in accordance with clause 4.5" required the transfer of the Trust Shares to Shandong and recognised that more than a mere beneficial interest was necessary before the Release Date would be achieved. There was no error in that reasoning. This ground has no substance and must be rejected.

Breach of the Final Deed or Breach of Trust

1. Mr Ehrenfeld's written submissions assert that a conclusion that the Final Deed, or the trust created by it, was breached required an express finding that one of the necessary conditions had not been met. The submissions assert that the primary judge made no finding in respect of the requirement that the Zeng Parties be afforded the opportunity to appoint directors to SDT and rely upon the submission, dealt with above, concerning the condition relating to the transfer of the Trust Shares and the condition concerning the filing of a prospectus. For the reasons indicated above, those submissions must be rejected. It is clear that the conditions set out in the definition of "Release Date" were not satisfied. It must follow that there was a breach of the Final Deed and the terms of the trust established by it. This ground has no substance and must be rejected.

The Authorisation Defence

1. Mr Ehrenfeld asserted in his Commercial List response that the impugned payments were lawful notwithstanding that the conditions in the Final Deed had not been satisfied, because the payments had been authorised expressly or impliedly by the Zeng Parties. He does not now assert that that defence was in fact established or that the primary judge erred in concluding that it had not been. Rather, the complaint appears to be that the procedure adopted at the hearing prevented him from establishing his defence because he was denied the opportunity of cross-examining the deponents of the affidavits filed on behalf of the Zeng Parties.
2. That seems to be another way of putting the complaint of the denial of procedural fairness. It exposes the misconception that appears to underlie the first ground in the amended notice of appeal. It was no part of the case of the Zeng Parties to demonstrate that they had not authorised the impugned payments. Their case, as accepted by the primary judge, was that payments could be made from the Trust Account only if the prerequisites laid down by the Final Deed were satisfied. Their case was that those prerequisites were not satisfied. Mr Ehrenfeld's case was that, notwithstanding that those requirements may not have been satisfied, the impugned payments were otherwise authorised. It was therefore incumbent upon him to establish his positive case. He failed to do so. There was no error on the part of the primary judge in that regard.

Conclusion

1. It follows from the above that Mr Ehrenfeld has not made out any of the grounds of appeal. There was no error on the part of the primary judge. The appeal must be dismissed with costs.
2. I propose the following orders: 1. The two motions filed on 21 September 2015 and the motion filed on 26 October 2015 be dismissed. 2. The appellant pay the costs of all three motions. 3. The appeal be dismissed. 4. The appellant pay the costs of the appeal.

Endnotes

1. Zeng v Mossensons [2014] NSWSC 1179.
2. [2014] NSWSC 1179 at [43].
3. [2014] NSWSC 1179 at [86]-[123].
4. [2014] NSWSC 1179 at [97]-[102].
5. [2014] NSWSC 1179 at [106]-[108].
6. [2014] NSWSC 1179 at [109]-[110].
7. [2014] NSWSC 1179 at [111]-[114].
8. [2014] NSWSC 1179 at [115]-[117].
9. [2014] NSWSC 1179 at [121]-[122].
10. [2014] NSWSC 1179 at [124]-[128].
11. [2014] NSWSC 1179 at [136]-[141].
12. [2014] NSWSC 1179 at [142]-[143].
13. [2014] NSWSC 1179 at [157]-[158].
14. [2014] NSWSC 1179 at [159]-[160].
15. [2014] NSWSC 1179 at [161]-[164].
16. [2014] NSWSC 1179 at [165].
17. [2014] NSWSC 1179 at [166]-[168].
18. [2014] NSWSC 1179 at [180].
19. [2014] NSWSC 1179 at [185].
20. [2014] NSWSC 1179 at [45].
21. [2014] NSWSC 1179 at [50].
22. [2014] NSWSC 1179 at [94].
23. Extracted above at [31].
24. [2014] NSWSC 1179 at [158]-[160].
25. [2014] NSWSC 1179 at [43].
26. [2014] NSWSC 1179 at [120].
27. [2014] NSWSC 1179 at [52].
28. [2014] NSWSC 1179 at [111]. 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: 05 February 2016