EQUITY - Fiduciaries - Conflict rule - Profit rule - Liability of fiduciaries and third parties under the rule in Barnes v Addy - Alter ego doctrine - [2024] NSWSC 403 - NSWSC 2023 case summary — Zoe

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EQUITY - Fiduciaries - Conflict rule - Profit rule - Liability of fiduciaries and third parties under the rule in Barnes v Addy - Alter ego doctrine

[2024] NSWSC 403

Supreme Court of NSW|2023-12-21|Before: Williams J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2023-12-21

Before

Williams J

Source

Original judgment source is linked above.

Judgment (113 paragraphs)

[1]

Introduction

Jatcorp Limited (Jatcorp) is a company listed on the Australian Stock Exchange (ASX).
Sunnya Pty Ltd (Sunnya) was incorporated in August 2014 by Mr Yinghan He (also known as Hansun He) and Ms Yanxia Lu (also known as Daisy Lu). By mid-2018, Sunnya's business included the export and sale of formulated milk powder products under the brand name "Neurio". Those products were manufactured in Australia and New Zealand by third party manufacturers under contract with Sunnya. The People's Republic of China was the principal target market for Sunnya's Neurio-branded products. Mr He and Ms Lu were the directors and shareholders of Sunnya.
On or about 13 June 2018, Jatcorp [1] entered into a Share Purchase Agreement with Mr He and Ms Lu pursuant to which Jatcorp agreed to purchase 51 per cent of the shares in Sunnya.
Following completion of the Jatcorp acquisition in about October 2018, Mr He and Ms Lu retained 49 per cent of the shares in Sunnya and remained as directors of the company. Jatcorp appointed two additional directors to Sunnya - Mr Wilton Yao and Mr Anthony Crimmins. In addition to remaining as directors of Sunnya, Ms Lu served as Chief Executive Officer and Mr He served as General Manager.
Mr He and Ms Lu's 49 per cent shareholding in Sunnya was transferred to All168 Pty Limited (All168) on or about 27 January 2022. Mr He and Ms Lu each hold 50 per cent of the shares in All168. All168 is the trustee of the All168 Family Trust. The beneficiaries of that trust include Mr He and Ms Lu.
Guangzhou Aotea Biological Technology Pte Ltd (GABT) is a company registered in the People's Republic of China. The company was established in August 2007 with Ms Lu as its majority founding shareholder, and her brother Mr Yancheng Lu as the company's Executive Director, Manager and Legal Representative. On or about 1 March 2012, Ms Lu ceased to hold any shares in GABT, and Mr Yangcheng Lu and Ms Yanping Lu became the sole shareholders of the company. Ms Yanping Lu is the sister of Ms Lu. On or about 5 March 2021, Mr Yancheng Lu and Ms Yanping Lu transferred 95 per cent of the shares in GABT to Mr He. Mr Yancheng Lu held the remaining 5 per cent of the shares. A company extract for GABT dated 1 November 2022 identified Mr He as the "Major shareholder", "Actual controlling person", and "Ultimate beneficiary". Mr He ceased to be a shareholder of GABT on 10 March 2023. Mr Yancheng Lu has been the sole shareholder of the company since that time. Mr Yancheng Lu has been the Executive Director, General Manager, and Legal Representative of GABT, and Ms Yanping Lu has been the Supervisor of the company, at all times relevant to these proceedings.

The He Parties withdrew their solicitor's authority to act on 26 November 2023. Notices of removal of solicitor were filed in court at the commencement of the hearing on 28 November 2023 and there was no appearance for the He Parties on that day. On the application of the other parties to both proceedings, the hearing was adjourned until 1 December 2023 to enable those other parties to participate in a mediation. The He Parties were notified that the hearing would resume on 1 December 2023, and would continue thereafter, in the absence of the He Parties if they did not appear. There was no appearance for any of the He Parties thereafter until 6 December 2023, when Mr Wilson Shen, solicitor, appeared for Mr He and Ms Lu and applied to adjourn the hearing until some time in early 2024. That application was dismissed. From 7 December 2023, Mr He, Ms Lu, Ms He and All168 were represented by Dr Baron Levi of counsel, instructed by Mr Shen. By that time, the evidence relied on by all parties other than the He Parties had been read, the witnesses called by Sunnya had been cross-examined, and Mr Foreman SC had commenced the cross-examination of Mr Wu, who was giving evidence on behalf of Supermega, Megadairy and NZFDA. A further adjournment application made by Counsel on behalf of Mr He, Ms Lu, Ms He and All168 was dismissed. Evidence adduced in support of the unsuccessful adjournment applications disclosed that Mr He, Ms Lu and Ms He had returned to China. An application for directions for their evidence to be given by audio-visual link from China or Hong Kong was also dismissed. Mr He, Ms Lu and Ms He did not return to Australia. As they were not available for cross-examination, their affidavits were not read. Counsel for Mr He, Ms Lu, Ms He and All168 did not seek to read any affidavits of other witnesses that had been served on behalf of those parties. Counsel did tender a significant volume of documents, together with reports of Mr Nicholas Lopez, an expert forensic accountant.

The matters referred to immediately above, and the reasons for my dismissal of the adjournment applications, and the application for the evidence of Mr He, Ms Lu, and Ms He to be given by audio-visual link, are recorded in judgments delivered ex tempore during the hearing on 6, 7, 11 and 18 December 2023. For reasons that will become apparent, it is relevant to note that the evidence read on behalf of Mr He, Ms Lu, Ms He and All168 in support of their application to adjourn the hearing included an affidavit affirmed by Mr Shen on information and belief on 7 December 2023 that Mr He and Ms Lu wished to return to Australia in order to give evidence at the hearing and, indeed, that they had booked tickets on a flight that would arrive in Sydney on 11 December 2023. However, in support of the application for the evidence of Mr He, Ms Lu and Ms He to be given by audio visual link, Mr Shen affirmed an affidavit on 11 December 2023 on information and belief from Mr He and Ms Lu that they would not return to Australia, even if that meant that they would not be able to give evidence in these proceedings. There was no evidence explaining the fundamental inconsistency between the two affidavits, and counsel for Mr He, Ms Lu, Ms He and All168 was unable to offer any explanation for it. For the reasons set out in my judgment delivered ex tempore on 18 December 2023, there is no explanation that has been accepted by the Court for the conduct of Mr He and Ms Lu in departing the jurisdiction shortly before the commencement of the hearing, and in being prepared to give evidence in the proceedings only by audio visual link from China or Hong Kong. Nor is there any explanation that has been accepted by the Court for Ms He's failure to attend the hearing, in circumstances where she was required for cross-examination and her former legal representatives had informed the Court in the weeks and months leading up to the commencement of the hearing that all of the He Parties' witnesses - including Mr He, Ms Lu and Ms He - would attend Court in person for cross-examination.

[3]

The business of Sunnya in the period up to October 2018

As I have already mentioned, Sunnya's business included the export of Australian and New Zealand-manufactured Neurio-branded formulated milk powder products. The Chinese market was Sunnya's principal market for its Neurio-branded products, although it did sell some products in other markets, including in Australia and New Zealand.
GABT acted as Sunnya's import agent in China from at least 2017. Their import agency arrangements did not involve a sale of the products from Sunnya to GABT. However, Sunnya had a practice of issuing tax invoices to GABT which specified a price per tin for the products exported. The He Parties describe the invoices as "commercial invoices" that were issued "for customs purposes". The He Parties describe the price on the face of the invoices as an "export price".
By mid-2018, Sunnya's Neurio-branded products were manufactured, marketed and sold under one or more of the following trade marks: 1. 2. neurio ; and 3. which, according to certified English translations, is the word "Neurio" in simplified Chinese characters. Those Chinese characters are pronounced "Niu Rui You", with the first character ("Niu") meaning "New", the second character ("Rui") meaning "fortunate" or "lucky", and the third character ("You") meaning "good" or "top quality".
I will adopt the parties' convention of referring to those trade marks as the modern Neurio trade marks.
In mid-2018, Sunnya was not the registered owner of the modern Neurio marks in Australia or elsewhere. Ms Lu was the registered owner in Australia of two different Neurio marks that were no longer in use. [5] I will refer to those trade marks as the historical Neurio trade marks. As referred to later in these reasons, Sunnya registered the modern Neurio trade marks in Australia, New Zealand, and Indonesia in April 2019 for the classes of products relevant to these proceedings. Sunnya allowed the registration of the historical Neurio trade marks to lapse when they fell due for renewal in Australia in October 2021. [6]
Intellectual property searches tendered in these proceedings indicate that, since March 2020, GABT has been the registered owner in China of the first and third modern Neurio trade marks referred to above. Those trade marks were originally registered by Rui Ka Qi (Hangzhou) Health Technology Co Ltd (Rui Ka Qi) in August 2017, and were and assigned to GABT in March 2020. There is evidence that GABT regarded itself as the owner of those trade marks from at least June 2019. [7] GABT remains the registered owner of those two trade marks, which I will refer to as the Chinese Neurio trade marks. There is no evidence that the neurio trade mark has been registered in China, but there is no evidence in these proceedings that the neurio trade mark is in use in China, Australia, New Zealand or elsewhere. It is the other two modern Neurio trade marks that appear on the packaging and marketing materials, photographs of which admitted into evidence in these proceedings. GABT is also the registered owner of the historical Neurio trade marks in China, but there is no evidence that those historical marks have been used in China at any time relevant to these proceedings.

[4]

Jatcorp's acquisition of a majority shareholding in Sunnya in October 2018

As I have already mentioned, Jatcorp entered into a Share Purchase Agreement on or about 13 June 2018 pursuant to which it agreed to purchase 51 per cent of the shares in Sunnya from Mr He and Ms Lu. Mr He and Ms Lu (as vendors) and Jatcorp (as purchasers) were the only parties to the Share Purchase Agreement.
The Plaintiffs rely on a six-page document which they contend recorded the nature of Sunnya's business, its revenue, and its profitability at the time of the negotiations for Jatcorp's acquisition of 51 per cent of Sunnya. The index to the documentary tender bundle prepared jointly by the parties attributes the date 1 April 2018 to the document. The document identified various infant formula and health food brands that Sunnya was exporting to China, or in relation to which Sunnya was acting as an export agent to China, or as a distributor in Australia. In relation to the Neurio brand, the document stated: [8] "Neurio brand It is owned by Yanxia Lu in Australia, and owned by Guangzhou Aotea Biological Technology Pte Ltd in China. Currently, the ODM products including Nurio lactoferrin, DHA, and probiotics. The products have been sold to the Chinese market since April 2017, with the annual sales volume of about 210,000 AUD and profit of 31,500 AUD in 2017-2018. Sunnya is expected to make a profit of 90,000 AUD in 2018-2019, with the sales of Nurio reaching 600,000 AUD."
The document recorded that Sunnya had earned revenue of AUD$3,581,776 and profit (before tax) of AUD$457,216 in 2017. For the 2018-2019 financial year, the document forecast that Sunnya would earn revenue of AUD$45,500,000 (of which AUD$600,000 was attributable to the Neurio-branded products) and profit of AUD$2,882,000 (of which AUD$90,000 was attributable to the Neurio-branded products).
On 23 May 2018, Mr He sent two emails to Mr Yao attaching various certificates for trade mark registrations in Australia and China. Insofar as the certificates related to Neurio, they included Australian trade mark registration certificates only for the historical Neurio trade marks that were no longer in use by mid-2018, as referred to at [51] above, and Chinese trade mark registration certificates for the same historical trade marks. The Australian certificates for those historical marks recorded Ms Lu as the registered owner from 24 August 2012, and the Chinese certificates recorded Guangzhou Aoeta Import and Export Trading Co Ltd (as GABT was then known) as the registered owner. The certificates were consistent with the information in the six-page document dated 1 April 2018 about the ownership of the Neurio brand.
On 23 May 2018, Mr Yao sent an email to Mr Brett Crowley attaching a document that Mr Yao had prepared as a summary of the "key points of Sunnya acquisition". That document referred to the different product lines relevant to Sunnya's business, including Neurio. In relation to Neurio, the document stated: "Sunnya will have 100% right in both Australia and China after the acquisition completed. Products are currently selling in China."
The evidence does not disclose the basis of the statement that Sunnya would have "100% right in both Australia and China" after the completion of Jatcorp's acquisition of 51 per cent of Sunnya.
Clause 2 of the Share Purchase Agreement recorded the AUD$6,500,000 consideration payable by Jatcorp for 51 per cent of Sunnya, of which AUD$3,500,000 was to be satisfied by the issue of 35,000,000 shares in Jatcorp to Mr He and Ms Lu. Certain additional amounts were payable in the event that specified conditions were satisfied after completion.
Clause 5.3 of the Share Purchase Agreement provided: . "(a) On Completion, SUN must procure the appointments of: (i) Anthony Crimmins as a director of SUN and chairman with a casting vote; and (ii) Wilton Yao as an executive. (b) JAT agrees that Yanxia Lu will remain as CEO for three years and director of SUN. Her salary package will $100,000 per annum plus superannuation and reviewed annually, the first review to take place for the 12 months period commencing one year after Completion. (c) JAT agrees that Yinghan Le will remain as a Director of SUN. His salary package will $70,000 per annum plus superannuation and reviewed annually, the first review to take place for the 12 months period commencing one year after Completion. (d) The Vendors agrees that a representative of JAT will be employed on a salary package $70,000 per annum plus superannuation."
The Share Purchase Agreement uses the abbreviations SUN to refer to Sunnya, and JAT to refer to Jatcorp. I infer that "Yinghan Le" in clause 5.3(c) is a typographical error and should read "Yinghan He".
It appears that Jatcorp, Mr He and Ms Lu proceeded on the common understanding that Jatcorp's entitlement under clause 5.3 to have Mr Yao appointed as an "executive" of Sunnya was an entitlement to have him appointed as a director of the company. [9]
Completion was to occur five days after satisfaction of certain conditions precedent set out in clause 3.1 of the Share Purchase Agreement, including the parties obtaining shareholder approval and all other approvals required for the transaction, and Mr He and Ms Lu each entering into an employment agreement with Sunnya on terms suitable to Jatcorp.
Clause 4.1 of the Share Purchase Agreement required Mr He and Ms Lu to cause Sunnya's business to be carried on in the usual and ordinary manner until completion or termination of the agreement. Without limiting the generality of that obligation, clause 4.2(a) provided that Mr He and Ms Lu would cause Sunnya's business to continue to own and carry on a list of specific operations before and after completion, including: "(a) the right to sell Neurio -Health products in Australia and China, including any further registered infant formula"
Although Sunnya was in fact selling Neurio-branded products in China by June 2018 using the modern Neurio trade marks, Sunnya was not the registered owner of any Neurio trade mark in China. GABT was the registered owner of the historical Neurio trade marks in China, and would later become the registered owner of the modern Neurio trade marks in China as Rui Ka Qi's assignee. Sunnya exported its Australian and New Zealand manufactured Neurio-branded products to China, and distributed and sold those products in China, under a cooperation relationship with GABT, which I refer to in more detail below.
Clause 6.1 of the Share Purchase Agreement relevantly provided that Mr He and Ms Lu represented, warranted and undertook in favour of Jatcorp that each of the "Vendor's Warranties" set out in Schedule 2 to the agreement is accurate and not misleading, and will be accurate and not misleading for each day up to and including completion. The Vendor's Warranties related to Sunnya's corporate existence and ability to own assets and carry on business, Sunnya's employees, Sunnya's accounts and compliance with its taxation obligations, the "Assets", and legislative compliance, litigation, and solvency. The term "Assets" was defined as including goodwill, but was not defined as including trade marks or other intellectual property, or licences or other rights to use any trade marks or other intellectual property.
Clause 10 of the Share Purchase Agreement provided for each shareholder to have a right of first refusal to purchase the shares of any other shareholder wishing to transfer those shares to another party. Compliance with that right of first refusal process is the only restriction on a shareholder transferring their shares in Sunnya. The Share Purchase Agreement does not require the transferring shareholder to procure any purchaser to enter into a deed acceding to the Share Purchase Agreement.
On 13 June 2018, Jatcorp announced its acquisition of 51 per cent of Sunnya to the ASX. The announcement stated: "The Board of Jatenergy Limited (JAT) is pleased to announce that it has agreed, subject to shareholder approval, to purchase a controlling 51% interest in Sunnya Pty. Ltd (Sunnya), an Australian exporter with a portfolio of milk powders and health products currently selling in China. 'The acquisition of Sunnya will broaden our in-house product range substantially,' JAT Executive Director Wilton Yao said. 'We see great potential, combining Sunnya products and JAT distribution capacity. These products are already selling into China and we will boost their sales by combining our own Chinese online platforms and offline distribution channels.' Sunnya has developed branded product ranges for health, maternal and baby markets in China. Key product ranges include: a) NEURIO - Lactoferrin Milk Powder, DHA Algae Oil Softgel, and Probiotics Liquid, primarily selling in maternal and baby stores and local supermarkets; b) RAICARE Goat Premium Infant Formula …"
After referring to Sunnya's 2017 revenue of AUD$3,581,776 and profit of AUD $457,216, the announcement stated that: "The Directors of JAT and Sunnya are confident that, working together the businesses will achieve significantly higher growth rates and profitability. The acquisition is expected to result in JAT achieving significant and constant cashflow."
On 18 June 2018, Ms Lu signed a "Trademark Transfer Agreement", which recorded that Ms Lu was the owner of the Neurio trade marks in Australia, and that she agreed to transfer those trade marks to Sunnya for no monetary consideration, subject to Ms Lu reserving "the right to reclaim the Neurio trademarks at any time or designate another party", in which case the agreement provided that Sunnya must "transfer the trademarks back unconditionally" for no monetary consideration. [10] Mr He signed the agreement on behalf of Sunnya. The Trademark Transfer Agreement dated 18 June 2018 was submitted to IP Australia, and registration of the historical Neurio trade marks was duly transferred to Sunnya. The utility of the transfer is unclear, given that those trade marks were no longer in use by June 2018. As stated at [51] above, Sunnya did not renew the registration of those trade marks when they fell due for renewal in October 2021.
The general meeting of Jatcorp to approve its acquisition of 51 per cent of Sunnya was convened for August 2018. In the meantime, Jatcorp entered into arrangements to purchase Neurio-branded products from Sunnya, which Jatcorp then contracted to sell to third parties for ultimate retail sale to customers in China. These arrangements were the subject of various ASX announcements made by Jatcorp during June 2018. On 4 July 2018, Jatcorp made an ASX announcement that JD Global had approved the sale of Sunnya's Neurio-branded range of products to Chinese consumers on JD Global's online cross-border and supermarket platforms. The announcement described JD Global as China's largest retailer by revenue.
The terms of those announcements state that the arrangements were negotiated by Jatcorp utilising its existing distribution networks, and significantly increased the sales of Neurio-branded products. For example, Jatcorp's announcement on 26 June 2018 stated that it had entered into a distribution agreement under which the distributor, Cyclone E-Commerce Co Ltd, had agreed to purchase 300,000 tins of Neurio-branded products from Jatcorp over the next twelve months at the best market price, which was expected to bring in revenue of AUD$7,500,000. The forecast revenue from that agreement alone represented many multiples of the revenue of AUD$600,000 that Sunnya had forecast from the sale of Neurio-branded products for 2018-2019 prior to Jatcorp's acquisition of 51 per cent of Sunnya. [11]
The Share Purchase Agreement was completed on 10 October 2018.
Jatcorp directors Mr Yao and Mr Crimmins were appointed as directors of Sunnya on completion of the Share Purchase Agreement. As I have already mentioned, Mr He and Ms Lu remained as directors of Sunnya, and were also employed by Sunnya. From about July 2020, the annual value of their remuneration packages was approximately AUD $200,000 each, plus superannuation.

[5]

Registration of modern Neurio trade marks from April 2019

On 17 April 2019, Sunnya applied for registration of the three modern Neurio trade marks in Australia for class 5 products (including milk powder for foodstuffs for babies, powdered milk foods for infants, and mineral preparations for use as nutritional additives to foodstuffs for humans), class 29 products (including foods made from milk products), and class 30 products (including instant powder for making coffee-based, tea-based or cocoa-based drinks). Sunnya was registered as the owner of those trade marks in relation to those classes of products on 7 January 2020, with effect from the filing date of 17 April 2019. IP Australia allocated the following registration numbers to the trade marks for classes 5, 29 and 30 (the Australian Neurio trade marks): 1. - registration number 2003876; 2. neurio - registration number 2003877; and 3. registration number 2003878.
On 1 June 2021, Sunnya filed for registration of the Australian Neurio trade marks in Australia for additional classes of products, being various kinds of alcoholic beverages. Sunnya was registered as the owner of those trade marks in respect of those additional classes on 11 January 2022, with effect from the filing date of 1 June 2021. Different registration numbers were assigned by IP Australia for each of those marks in respect of the alcoholic beverages classes of products. [12] There is no evidence that the Australian Neurio trade marks have ever been used in connection with alcoholic beverages.
On 20 February 2020, Sunnya applied in New Zealand for registration of the modern Neurio trade mark - - in respect of class 29 products and class 30 products. Sunnya became registered as the owner of that trade mark in New Zealand on 21 August 2020, with effect from the filing date of 20 February 2020, with registration numbers 1141429 (for class 29 products) and 1141430 (for class 30 products). On 11 September 2020, Sunnya applied in New Zealand for registration of the same trade mark in respect of class 5 products. Sunnya became registered as the owner of that trade mark in New Zealand on 12 March 2021, with effect from the filing date of 11 September 2020, with registration number 1158888. It is convenient to refer to these three registered trade marks collectively as the New Zealand Neurio trade marks.
On 20 February 2020, Sunnya also applied for registration of the trade mark in Indonesia. Sunnya became the registered owner of that trade mark in Indonesia on 14 July 2021 with protection from 20 February 2020, with registration number IDM000872371. It is not clear from the evidence which classes of products are covered by this registration. It is convenient to refer to this trade mark as the Indonesian Neurio trade mark.
According to Mr Wang's evidence, the key trade marks that Sunnya and its agents have utilised in China include the Australian Neurio trade marks and the New Zealand Neurio trade marks. As I have already explained GABT is the registered owner of those trade marks in China.
The evidence tendered in these proceedings includes a document entitled "Letter of Statement" that Mr Wang located amongst Sunnya's books and records. The document states: [13] "This is to certify that Guangzhou Aotea Biological Technology PTE Ltd, owner of the trademark 'Niu Rui You' and Sunnya Pty Ltd, Australian owner of the trademark Neurio, are in a cooperation relationship. Also, Guangzhou Aotea Biological Technology PTE Ltd is taking steps to transfer the trademark in China to Sunnya Pty Ltd."
The "Letter of Statement" has no addressee. It bears the date 17 June 2019, and appears to have been signed by Mr Lu under the seal of GABT, and by a director of Sunnya under the seal of Sunnya.
By the time of the hearing, Sunnya had abandoned its contention that the "Letter of Statement" entitled Sunnya to have the Chinese Neurio trade marks transferred to it. Contrary to the representation in the "Letter of Statement", there is no evidence that GABT took any steps to transfer those trade marks to Sunnya at any time. I infer that the "Letter of Statement" was signed for the purpose of persuading Chinese e-commerce platform operators that GABT had authorised the use of the Neurio trade mark on Sunnya's Australian and New Zealand-manufactured products that were marketed and sold through those e-commerce platforms in China, as explained in Mr Zhang's evidence referred to at [177]-[180] below.
In their written submissions relating to the All168 proceedings filed and served after the conclusion of the hearing (with leave), the Plaintiffs asserted that they do not accept that GABT owns the Chinese Neurio trade marks. There is abundant documentary evidence tendered in these proceedings that GABT is, and was at the time of the events giving rise to these proceedings, the registered owner of those Chinese trade marks. The Plaintiffs did not adduce any evidence capable of supporting a finding that GABT holds those trade marks on behalf of or for the benefit of Sunnya. Nor did the Plaintiffs claim any declaratory or other relief in respect of any alleged interest of Sunnya in the Chinese Neurio trade marks. The hearing was conducted on the basis that GABT has been the registered owner of the Chinese Neurio trade marks at all relevant times, and remains the registered owner of those trade marks, whilst Sunnya has been the registered owner of the Australian and New Zealand Neurio trade marks at all relevant times.
There is no direct evidence of the terms of the cooperation relationship between GABT and Sunnya to which I have referred at [65] above. There is no evidence that the relationship imposed on GABT any binding obligation to facilitate Sunnya's distribution and sale of Neurio-branded products in China. Nor is there any evidence of any right for Sunnya to require GABT to facilitate those activities. However, it is plain that the export of Sunnya's Australian and New Zealand manufactured Neurio-branded products to China was a significant part of Sunnya's business, and that GABT did in fact facilitate the distribution and sale of those products in China until October 2022. It was not submitted that the cooperation relationship gave rise to any fiduciary duties owed by GABT to Sunnya, or by Sunnya to GABT.

[6]

Day-to-day management and control of Sunnya after Jatcorp's acquisition of its majority shareholding

As referred to earlier in these reasons, Mr Zhang began working for Sunnya as its General Manager from about 1 December 2019 - a little more than one year after the completion of Jatcorp's acquisition of its 51 per cent shareholding in Sunnya. At that time, Mr He and Ms Lu were the only other people working at Sunnya. Sunnya employed Ms Ruolei Chen (also known as Cassie Lei) as an accountant from about March 2020. Ms Chen took over responsibility for accounting work that had previously been undertaken for Sunnya by a Ms Nicole Fei. As I have already mentioned, Ms He was employed in marketing and media roles from about 15 May 2020.
Mr Zhang continued in the role of General Manager of Sunnya until about June 2022, when he resigned in order to care for a family member.
Mr Zhang's responsibilities as General Manager included managing Sunnya's sales channels.
Mr Zhang gave evidence that Mr He and Ms Lu were in control of the day-to-day management of Sunnya from the commencement of his employment in December 2019 until his resignation in June 2022. When Mr Zhang had questions about the operation of Sunnya, he asked Mr He or Ms Lu. When Mr Zhang required permission for matters relating to Sunnya, he sought that permission from Mr He or Ms Lu.
Ms Chen gave evidence to similar effect. From the time that she commenced her employment with Sunnya in March 2020 until October 2022, Ms Chen reported directly to Mr He and Ms Lu. Ms Chen looked to Mr He and Ms Lu to authorise payments that she processed on behalf of Sunnya. Mr He and Ms Lu provided directions to Ms Chen in relation to her accounting work. Ms Chen did not take directions from any other officer or employee of Sunnya. Ms Chen deposed that, to her observation, Mr He and Ms Lu controlled the day-to-day operations of Sunnya. Ms Chen continues to be employed by Sunnya as an accountant.
The documentary evidence in these proceedings does not include minutes of any Sunnya board meetings prior to October 2022. It appears that Jatcorp may have monitored Sunnya's affairs informally through its Chief Executive Officer, Mr Yao, rather than through meetings of Sunnya's board of directors. The documentary evidence includes many communications between Mr He and/or Ms Lu and Mr Yao in relation to Sunnya's business, including in the period after Mr Yao ceased to be a director of Sunnya in April 2020.

[7]

Manufacture of Sunnya's Neurio-branded products

As I have already mentioned, Sunnya engaged third parties in Australia and New Zealand to manufacture the Neurio-branded formulated milk powder products that Sunnya exported to China.
From about May 2020, Sunnya engaged Supermega to supply its Neurio-branded products, and Supermega procured its related company Megadairy to manufacture those products. Mr Wu gave evidence to the effect that this was the outcome of discussions that had commenced in 2015, which had resulted in Supermega entering into two written agreements with GABT and Sunnya on 9 June 2015 and 9 July 2019.
According to Mr Wu, Supermega, GABT and Sunnya entered into a "Production Sales and Confidentiality Agreement" on 9 June 2015 that he drafted after discussions with Mr Lu. The document is in the following terms: [14] "Background: Guangzhou Aotewa Biotechnology Co., Ltd. and Australia Sunnya Pty Ltd are two of the holders of the corresponding trademarks for the 'Neurio' and 'Neurio' brands around the world respectively. In, the future, corresponding local, companies will be established in New Zealand, Europe, Asia and the Americas by similar teams to manage the brands and product sales. Supermega Market limited and its associated production companies will in future be responsible for the production of a large number of 'Neurio' and 'neurio' products. These products can be ordered by Guangzhou Aotewa Biotechnology Co. Ltd., Australia Sunnya pty Ltd., and the corresponding companies in other parts of the world. Supermega then exports the products to the relevant countries, where the local companies are responsible for sales. For example, if an order is placed by the company in China, Supermega sells the product to the Chinese company. If an order is placed by the company in Australia, Supermega sells the product to the Australian company. And so on for other countries. When Supermega sells products to Guangzhou Aotewa Biotechnology Co., Ltd. in China, all receipts, shipments, documents and related information shall be provided to Guangzhou Otiva Biotechnology Co. Ltd. only and shall not be disclosed to other companies. When Supermega sells products to Australia Sunnya pty Ltd,. Australia, all receipts, shipments, documents and related information shall be provided to Australia Sunnya pty Ltd. only and shall not be disclosed to other companies. And so on for other countries. Failure by Supermega to comply with this agreement may result in the following risks for the management and distribution companies of the Neurio and Neurio brands worldwide, including but not limited to: 1. Information overload, not easy for companies to manage. Each company should only receive and keep information about their own products. 2. If Supermega sends an error message, then all corresponding companies in the world will receive the error message. 3. Payment confusion. Supermega overcharges or undercharges and companies in different countries may overpay or underpay. 4. Quality risk. If there is a quality problem and a recall is necessary, it needs a global recall not a single regional recall. 5. Other risks. Supermega and its manufacturers must therefore strictly adhere to this agreement to ensure that the risks to 'Neurio' and 'Neurio' worldwide are minimised. This agreement is valid for a long time unless all three parties agree to abrogate it."
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that he received an email from Mr Lu on 12 June 2015 attaching a copy of the Production Sales and Confidentiality Agreement signed on behalf of GABT and Sunnya. Mr Wu deposed that he did not know at the time who had signed the document on behalf of Sunnya, and that he assumed that Mr Lu had arranged for the appropriate signatories to sign on behalf of Sunnya. The document appears to have been signed by Ms Lu on behalf of Sunnya. However, Ms Lu stated in her affidavit affirmed on 16 November 2023 that the document "has on it an electronic signature for me which I would not have put on the document and I did not authorise anybody to put on the document". The Plaintiffs tendered that statement as an admission. Mr Wu exhibited to his affidavit a copy of the email that he says he received from Mr Lu, together with its attachment (and a certified translation of the email and the attachment). The email bears the date and time 12 June 2015 at 1.10pm.
At the time when Mr Wu says this document was signed in June 2015, Supermega was not manufacturing any products for GABT or Sunnya. According to Mr Wu, he did not even expect in June 2015 that Supermega would receive orders from GABT or Sunnya in the foreseeable future, because Supermega did not have sufficient manufacturing capacity.
Mr Wu acknowledged that it was unusual to enter into an arrangement of this kind, but gave evidence that both he and Mr Lu "thought that it was a good idea to do so in this situation because of the involvement of two buyers for the same brand". Mr Wu could not recall whether the idea originated with him, or with Mr Lu. Mr Wu gave evidence that it was his understanding at this time that Mr Lu "was in ultimate control of the 'Neurio' brand and was the decision maker for making purchase orders". Mr Wu understood based on his discussions with Mr Lu that "Sunnya was effectively the Australian branch of GABT or perhaps something like a franchise". However, Mr Wu gave evidence that he did not have any detailed conversations with Mr Lu about the timing or purpose of the establishment of Sunnya, and he did not consider the issue carefully or make further inquiries about it.
Mr Wu gave evidence that, after signing the Production Sales and Confidentiality Agreement in June 2015, he spoke to Mr Lu via WeChat about once a year until July 2019, when Mr Wu says that GABT and Sunnya signed the "Brand OEM Authorized Letter" referred to below. Mr Wu gave evidence that he informed Mr Lu about his manufacturing capacity at the time and invited him to place orders, and Mr Lu indicated that he would place orders "but not just yet".
According to Mr Wu's evidence, the Chinese market expects that lactoferrin formulated milk powder products will be sold in tins, with individual portions in correct dosages packaged in sachets inside the tin. By 2019, Megadairy had developed the capacity to manufacture formulated powder products packaged in sachets. Mr Wu gave evidence that Mr Lu introduced him to Ms Lu at about this time, and that Ms Lu in turn introduced Mr Wu to Mr He. Ms Lu told Mr Wu that she wanted Sunnya to place product orders with Mr Wu's companies. All of these communications occurred via WeChat.
Mr Wu gave evidence that he received an email sent by Mr Lu to a Supermega email account on 9 July 2019, which attached a signed letter in English in the following terms: "Brand OEM Authorized Letter Authorized brand or Trademark: 'Neurio' Authorizer party Guangzhou Aotea Biological Technology Pte Ltd (China) Sunnya pty ltd (Aus) And other companies run by above companies for other countries e.g. NZ Authorized party Supermega market liited. Megadairy limited And other companies run by above companies for other products e.g. drops and soft gel Authorization term 08/07/2019 to 08/07/2025 Authorized content: product development, formulating, manufacturing, packing, exporting Authorized area: Manufacturing in New Zealand and exporting Authorization date: 08/07/2019 Next renewal date: 08/07/2025"
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that, at this time and during his subsequent dealings with GABT and Sunnya, "my understanding was that GABT was the primary company and held the registrations for the Chinese Neurio trade marks, and that Sunnya held the registrations for the Australian and New Zealand Neurio trade marks, but I did not check the position". Mr Wu deposed that he noted that the letter referred to both GABT and Sunnya, but deposed that he "did not discuss with any of Mr Lu, Daisy Lu, Mr He, or anyone else, whether any agreement existed between GABT and Sunnya". It is difficult to make sense of that evidence, in light of Mr Lu's evidence in the same affidavit that GABT and Sunnya were both parties to the Production Sales and Confidentiality Agreement that Mr Wu says was drafted by him and signed on 9 June 2015. [15]
Mr Wu gave evidence that, after July 2019, he had many discussions with Mr He about the technical and commercial aspects of manufacturing the Neurio products before Sunnya began placing orders with Supermega in about May 2020.
The Plaintiffs dispute the authenticity of the Production Sales and Confidentiality Agreement and the "Brand OEM Authorized Letter" referred to at [93]-[94] and [99] above.
Mr Wu's evidence about each of those documents is inconsistent with an affidavit that he affirmed for the purpose of these proceedings on 1 March 2023, which the Plaintiffs tendered on a limited basis. In that affidavit, Mr Wu deposed that: "I am not aware of what arrangements, if any, there are between GABT and Sunnya. However, to my mind, neither Supermega nor Sunnya could lawfully produce, export, or sell Neurio products to China without the authorisation of GABT (as the registered trademark holder of the Neurio brand in China), and without the distribution channel of [GNT]."
That is inconsistent with Mr Wu's evidence in his affidavit affirmed on 15 September 2023 that: (1) he had drafted, and Supermega, GABT and Sunnya had entered into, the Production Sales and Confidentiality Agreement, which provided, amongst other things, that Supermega would, in the future, produce a large volume of Neurio-branded products, which could be ordered by GABT and also by Sunnya; [16] and (2) he had received the Brand OEM Authorized Letter signed by GABT and Sunnya on 9 July 2019, which stated that Supermega and Megdairy were authorised to manufacture Neurio-branded products in New Zealand and to export those products. [17] Irrespective of whether the terms of those documents (if they are genuine) are read as permitting Supermega to export to China Neurio-branded products manufactured for Sunnya in New Zealand, or whether they are read as merely permitting Supermega to export such products to Sunnya in Australia, the documents (if they are genuine) constitute arrangements between GABT and Sunnya of which Mr Wu claims to have been aware in his 15 September 2023 affidavit.
Mr Whitbourn undertook a forensic analysis of the email that Mr Wu says he received from Mr Lu on 12 June 2015 attaching the signed Production Sales and Confidentiality Agreement referred to at [93] and [94] above. The process of analysis, and Mr Whitbourn's opinions based on that analysis, are set out in his second report dated 26 October 2023, which was tendered by the Plaintiffs without objection.
Mr Whitbourn gave evidence that the email conforms to the Internet Message Format (or "IMF"), and was sent using the Simple Mail Transport Protocol (or "SMTP"). The email therefore contains headers that can be analysed to reveal information about the origination and transmission of the email between the sender and recipient. These headers includer sender, recipient, sent date, received date, and trace headers. Trace headers describe the traversal of emails sent with SMTP between origination and their destination. Received trace header fields are added by SMTP servers as they receive an email enroute to its destination, with a timestamp recording the date and time of receipt by that server. Other kinds of trace headers added by SMTP servers include authentication operations performed by the server to verify the source of the email and avoid malicious sources of email. Some such trace headers also include timestamps recording the date and time that the server performed the operation. Some timestamps within trace headers are typical, human-readable dates and times. Others are Unix timestamps, which are recorded inside trace headers as internal file metadata dates, and so are not human-readable without the requisite expertise and programs to access and interpret that metadata. Unix is a particular form of date and time representation used in computing that measures time by the number of seconds that have elapsed since 00:00:00 UTC on 1 January 1970. I understand "UTC" to be a reference to Coordinated Universal Time.
Mr Whitbourn gave evidence that trace headers can be used to identify the dates and times when an email has interacted with an SMTP server between its origination and its destination. As trace headers are prepended sequentially after an email is originated or sent, the timestamps are chronological from the earliest to the latest date and time on which the email has interacted with an SMTP server. If an email contains trace header timestamps that are chronologically inconsistent - that is, if they go backwards and forwards in time, either within the trace headers or when compared with the sent date - then it is not possible to definitively determine the date and time of the origination of the email.
Mr Whitbourn used a program known as Forensic Email Intelligence (or "FEI"), which provides an interface for analysing email header and trace header information, to review email headers and trace headers in the email that Mr Wu says he received from Mr Lu on 12 June 2015 attaching the signed Production Sales and Confidentiality Agreement referred to at [93] and [94] above. Mr Whitbourn's analysis revealed the following trace header information: REF Header Timestamp Timestamp (UTC +0) 1 Sent Date Fri, 12 Jun 2015 11:10:34 +0800 12/06/2015 03:10:34 2 DKIM Signature 1679823095 26/03/2023 09:31:35 3 Received 2015.06.11.20.11.40 12/06/2015 03:11:40 4 Received Thu, 11 Jun 2015 20:10:42 -0700 (PDT) 12/06/2015 03:10:42 5 ARC Seal 1679823102 26/03/2023 09:31:42 6 X-Received 1679823102680 26/03/2023 09:31:42 7 X-Received Thu, 11 Jun 2015 20:10:42 -0700 (PDT) 12/06/2015 03:10:42 8 Received Date Thu, 11 Jun 2015 20:10:43 -0700 (PDT) 12/06/2015 03:10:43

[8]

Mr Whitbourn gave evidence that the timestamps marked as references 1, 3, 4, 7 and 8 in the table above are human-readable timestamps, whereas the timestamps marked as references 2, 5 and 6 in the table are Unix timestamps. As shown in the table, all human-readable timestamps correspond to between UTC 03:10:34 and 03:11:40 on 12 June 2015, whereas the Unix timestamps correspond to between UTC 9:31:35 and 9:31:42 on 26 March 2023.
Mr Whitbourn opined that there are three indicia of manipulation of the date of creation or origination of the email that Mr Wu says he received on 12 June 2015: 1. the non-chronological order of the trace header timestamps, which jump multiple times backwards and forwards between dates in 2015 and 2023; 2. the fact that the human-readable dates are 2015 dates, whereas the Unix timestamps that require technical knowledge to recognise and interpret are 2023 dates; and 3. the signed Production Sales and Confidentiality Agreement which Mr Wu says was attached to the email is a pdf document that Mr Whitbourn's forensic analysis revealed was created on 23 March 2023, more than seven years after the human-readable sent date timestamp on 12 June 2015.
Although Mr Whitbourn reported that he could not definitively determine when the email was sent and received due to the non-chronological trace header timestamps, he opined that the three 26 March 2023 Unix timestamps suggest that the email was in fact sent on 26 March 2023.
Mr Whitbourn also undertook a forensic analysis of an electronic copy of the email that Mr Wu says was received to a Supermega email account on 9 July 2019 with the attached Brand OEM Authorized Letter referred to at [99] above. Those electronic copies of the email and attachment formed part of the NZ Parties' discovery in these proceedings. Mr Whitbourn's process of analysis, and his opinions formed on the basis of that analysis, are set out in his third report dated 28 November 2023, which was tendered by the Plaintiffs without objection.
Mr Whitbourn's analysis of the email revealed the following trace header information: REF Header Timestamp Timestamp (UTC +0) 1 Sent Date 9 Jul 2019 11:10:48 +0800 9/7/2019 3:10:28 2 X-QQ-MID Webmail327t1679812669t8010663 26/3/2023 06:37:49 3 DKIM Signature 1679812670 26/3/2023 06:37:50 4 Received 8 Jul 2019 20:10:51 -0700 9/7/2019 3:10:51 5 Received 2019.07.08.20.10.50 9/7/2019 3:10:50 6 ARC Seal 1679812671 26/3/2023 06:37:51 7 X-Received 8 Jul 2019 20:10:48 -0700 9/7/2019 3:10:48 8 X-Received 1679812671556 26/3/2023 06:37:51 9 Received Date 8 Jul 2019 20:10:48 -0700 9/7/2019 3:10:48

[9]

Mr Whitbourn gave evidence that the timestamps marked as references 1, 4, 5, 7 and 9 in the table above are human-readable timestamps, whereas the timestamps marked as references 2, 3, 6 and 8 in the table are Unix timestamps. As shown in the table, all human-readable timestamps correspond to between UTC 03:10:28 and 03:10:51 on 9 July 2019, being the date on which Mr Wu says that a Supermega email account received the email from Mr Lu. By contrast, the Unix timestamps correspond to between UTC 06:37:49 and 06:37:51 on 26 March 2023.
Mr Whitbourn's analysis of the "Brand OEM Authorized Letter"attached to the email revealed that it was a pdf document created on 23 March 2023 and was last modified on the same date, almost four years after the date 8 July 2019 that appears on the face of the document.
Mr Whitbourn noted that, without access to the source mailbox containing the email, he was unable to verify the date and time of creation and modification of the email and its attachments. However, Mr Whitbourn opined that the trace header timestamps referred to above suggest that the email was sent on 26 March 2023, contrary to the sent date of 9 July 2019 in the human-readable sent email header.
Neither the He Parties nor the NZ Parties adduced any evidence of a computer and digital forensics expert. Mr Whitbourn was not cross-examined.
Mr Wu was cross-examined about the Production Sales and Confidentiality Agreement, the Brand OEM Authorized Letter and the emails by which he deposed to having received those documents on 12 June 2015 and 9 July 2019, respectively.
Mr Wu denied that he created the Production Sales and Confidentiality Agreement on or about 23 March 2023, and denied that he had manipulated the email, or caused someone else to manipulate the email, by which he says that he received that signed agreement in order to make the email appear to have been sent in 2015. Mr Wu argued with the cross-examiner about whether the email purportedly dated 12 June 2015 had been manipulated at all, and maintained that the email had been sent in 2015.
Mr Wu also denied that he created the Brand OEM Authorized Letter on or about 23 March 2023, and denied that he had manipulated the email, or caused someone else to manipulate the email, by which he says that he received that signed agreement in order to make the email appear to have been sent in 2019.
Mr Wu denied that the reason that he had not referred to the Production Sales and Confidentiality Agreement and the Brand OEM Authorized Letter in his 1 March 2023 affidavit was because he had not yet created those two documents. [18]
It is common ground that Supermega and Megadairy began manufacturing Neurio-branded products for Sunnya in May 2020. As I understand the evidence, Supermega and Megadairy were the only manufacturers of Sunnya's Neurio-branded products from that time until mid-November 2022. Supermega and Megadairy manufactured the Neurio-branded milk powder products in sachets, which were in turn packaged into tins. The tins, which bore the Neurio trade mark and displayed nutritional information about the contents, had been manufactured elsewhere and supplied to Supermega and Megadairy by Sunnya (or by the manufacturer of the tins, at Sunnya's direction).

[10]

Sales and distribution of Sunnya's Neurio-branded products in China

Some of Sunnya's Neurio-branded products were sold by Sunnya directly to, or on consignment with, large retail stores and online platforms. For consignment selling arrangements, Sunnya sent its own employees to the retail stores or to work for the online platform. Sunnya paid fees to the retailer or online platform for the marketing and promotion of the Neurio-branded products. Sunnya had approximately 20 sales and administration staff in China.
However, a far greater proportion of Sunnya's Neurio-branded products were sold to distributors in China. These sales occurred through one of two different sales channels, referred to by the parties as the general trade channel and the cross-border channel. I will adopt the same terminology.
In the cross-border channel, Sunnya sold its Neurio-branded products to distributors in China, and shipped those products directly to the distributors. Each distributor paid the agreed sale price directly to Sunnya. The distributor then sold the products to retail consumers in China through physical stores, online platforms, or both.
Products sold through the general trade channel were sold by Sunnya to a distributor in China. However, Sunnya shipped those products to its import agent in China, rather than shipping them directly to the distributor. After facilitating the clearance of the products through the Customs Service in China, Sunnya's import agent delivered them to the distributor, which then sold the products to retail consumers in China. As with the cross-border channel, the general trade channel distributors sold to retail consumers through physical stores and/or online platforms in China. Some of the sales contracts with general trade channel distributors were entered into by Sunnya, whilst others were entered into by the import agent on behalf of Sunnya.
JD Global and Tmall Global were two online platforms through which cross-border channel distributors sold Sunnya's Neurio-branded products to retail consumers in China. The similarly named JD platform and the Tmall platform were two of the online platforms used by Sunnya's general trade channel distributors to sell to Chinese consumers.
GNT took over from GABT as Sunnya's import agent in about April 2019. Sunnya's Neurio-branded products sold to general trade channel distributors were delivered to GNT in China on a CIF basis, meaning that Sunnya paid the freight and insurance costs. As Sunnya's import agent, GNT was responsible for paying "customs fees", collecting the goods and delivering them to the relevant distributor after they had cleared Customs in China. GNT collected the price from the distributor, and remitted those moneys to Sunnya. GNT was entitled to 2 per cent of the import contract value as a service fee. GNT was also entitled to retain, by way of reimbursement, an amount equivalent to the customs fees, storage costs, marketing costs, and wages and commission for Sunnya's sales and administration staff in China, which were paid by GNT.
Mr Zhang gave evidence that Sunnya's Neurio-branded products that were exported to China through GNT were packaged in tins on which nutritional and other product information had been printed in English. GNT affixed a Chinese label over that English printing on the tins before delivering the products to the relevant general trade channel distributor. For that reason, Mr Zhang refers to Sunnya's Neurio-branded products sold through the general trade channel as "Chinese label products".
GNT did not purchase Neurio-branded products from Sunnya under the import agency arrangement described above. Nevertheless, consistently with its previous practices, Sunnya issued commercial invoices to GNT "for customs purposes", which stipulated an "export price" for Sunnya's Neurio-branded products exported to China through GNT. GNT did not pay the export price to Sunnya. The export prices shown on commercial invoices issued to GNT were less than the prices for which Sunnya sold the products to its distributors, as explained at [143]-[152] below. I infer that the commercial invoices were issued for the purpose of GNT presenting them to the Customs Service for the assessment of duties and taxes (or "customs fees", to use Ms Lu's term) payable on the importation of the products into China, [19] and that the "customs purpose" of the export price was to facilitate the calculation of those duties, taxes or fees based on the lower export price shown on the commercial invoice rather than based on the higher price that Sunnya charged the distributor for the imported products.
Ms Chen gave detailed evidence about the general trade channel transactions and the manner in which they were recorded in Sunnya's accounts. At the commencement of her employment with Sunnya, Mr He instructed Ms Chen to manage Sunnya's accounts in the same way that they had been managed by her predecessor. Ms Fei instructed Ms Chen that GNT had a practice of emailing to Sunnya details of sales of products to distributor customers, and that Sunnya then created invoice entries in its MYOB system to record the details of those transactions as sales by Sunnya to the distributor. Ms Fei instructed Ms Chen that GNT received the money from the distributor, which GNT then remitted to Sunnya after deducting an amount equal to the amounts invoiced by GNT to Sunnya for marketing and office expenses, and some staff expenses. Sunnya maintained a trade debtor ledger for GNT entitled "Trade Debtor Niurui".
Ms Chen continued to follow Ms Fei's accounting practices from March 2020. Ms Chen created the invoices for sales from Sunnya to customers (i.e. distributors) based on information that she received periodically from GNT setting out details for each transaction, including the name of the distributor, the quantity of products purchased by that distributor, the unit price for each product, the total price paid by the distributor, and the date on which GNT had dispatched the products to the distributor. The distributor paid the total price to GNT, which remitted those moneys to Sunnya after deducting any amounts owing by Sunnya pursuant to the invoices that GNT issued to Sunnya. Ms Chen maintained the running Trade Debtor Niurui ledger by entering the total of the invoice entries into the ledger each month, and by deducting from the ledger balance any payments that Sunnya received from GNT and any amounts that GNT invoiced to Sunnya. Ms Chen paid no regard to commercial invoices in creating and maintain these accounts. All deductions for amounts invoiced by GNT to Sunnya, and any payments that fell to be made by Sunnya to GNT from time to time, were approved by Mr He and by Jatcorp before Ms Chen processed the relevant deduction or the payment to GNT. According to Ms Chen's evidence, the same approval process applied to any payments made by Sunnya to GABT in the course of Sunnya's business.
The JD platform had two online stores through which retail customers in China could purchase the Chinese label products - the JD flagship store which was managed by Sunnya's general trade channel distributor under the direction of Sunnya, and the JD retail shop which was managed by JD. Mr Zhang provided instructions and directions to Sunnya's general trade channel distributor in relation to the operation of the JD flagship store, including the prices at which the distributor was to sell Sunnya's Neurio-branded products through that online store, and directions about how and when to run promotions for Sunnya's products. JD purchased from Sunnya's general trade channel distributor the products that were sold to retail customers through the JD retail shop (as opposed to the JD flagship store).
In the period up to September 2020, Sunnya's general trade channel distributor for the JD platform was Guangzhou Bowan Information Technology Limited Co., Ltd. Mr Zhang gave evidence that he is not aware of any written distribution contract between Sunnya and that company.
Sunnya appointed Beijing Yunyingbao Technology Co., Ltd (Yunyingbao) as its general trade channel distributor for the JD platform from September 2020. The contract between Sunnya and Yunyingbao dated 10 September 2020 specified the following prices at which Sunnya would sell its Neurio-branded products to Yunyingbao: (1) RMB115 (approximately AUD$23.95) per tin for Neurio "Blue Tin" products; (2) RMB135 (approximately AUD$28.12) per tin for Neurio "White Tin" products; and (3) RMB145 (approximately AUD$30.20) per tin for Neurio "Gold Tin" products.
The Tmall platform also had two online stores through which retail customers in China could purchase the Chinese label products - the Tmall flagship store which was managed by Sunnya's general trade channel distributor under Sunnya's direction, and the Tmall Supermarket which was managed by Tmall. Mr Zhang provided instructions and directions to Sunnya's general trade channel distributor in relation to the operation of the Tmall flagship store, including the prices at which the distributor was to sell Sunnya's Neurio-branded products through that online store, and directions about how and when to run promotions for Sunnya's products. Tmall purchased from Sunnya's general trade channel distributor the products that were sold to retail customers through the Tmall Supermarket (as opposed to the Tmall flagship store).
In the period up to April 2021, Sunnya's general trade channel distributor for the Tmall platform was a company called Hanhzhou Aowei. Mr Zhang gave evidence that he is not aware of any written distribution contract between Sunnya and that company.
In addition to acting as Sunnya's import agent for the general trade channel, GNT was the exclusive distributor of Sunnya's Neurio-branded products to "Babemax" online and physical retail stores pursuant to a distribution agreement dated 29 March 2019. The agreement also conferred on GNT a non-exclusive right to distribute Sunnya's products through other channels approved by Sunnya. The agreement required GNT to purchase 1.5 million tins of Neurio lactoferrin milk powder over the five-year term of the agreement at the best market price available at the time of placement of each order with Sunnya. GNT was required to make full payment to Sunnya within 14 working days after GNT received payment from its clients. Jatcorp announced this distribution agreement with GNT to the ASX on 1 April 2019.

[11]

Changes in the general trade channel sales and distribution processes from April 2021

Mr Zhang gave evidence about changes made to the distribution and sales processes for Sunnya's Neurio-branded products in the general trade channel from April 2021. Rather than selling the products to a distributor, and engaging GNT as the importer of the products, Sunnya began selling the products to GNT. GNT then sold the products to the general trade channel distributors.
Mr Zhang gave evidence that, following these changes in April 2021, Yunyingbao was the general trade channel distributor to which GNT sold Sunnya's Neurio-branded products that were ultimately sold to retail customers through Tmall, JD and various other online platforms. Sunnya had previously sold its Neurio-branded products to Yunyingbao for distribution through the JD platform pursuant to an agreement dated 10 September 2020. [20] According to Mr Zhang, the terms of the arrangements that applied between GNT and Yunyingbao from April 2021 were documented in a "Cooperation Agreement" dated 17 January 2022, pursuant to which GNT appointed Yunyingbao as the distributor for Sunnya's Neurio-branded products through the JD platform, the Tmall platform, the TikTok flagship store, and various other online platforms. Sunnya is not a party to the 17 January 2022 agreement. Clause 1 of agreement states that it has been entered into with Sunnya's consent, and that it supersedes and terminates the 10 September 2020 agreement. The 17 January 2022 agreement provides that GNT will sell Sunnya's Neurio-branded products to Yunyingbao maintaining the prices at which Sunnya had sold those products to Yunyingbao under the 10 September 2020 agreement. Mr Zhang gave evidence that the sale price paid by Yunyingbao was paid to GNT rather than to Sunnya.
Ms Chen gave evidence confirming that Sunnya's sales and distribution processes for its Neurio-branded products changed after April 2021. Ms Chen deposed that Mr He and Ms Lu instructed her in about April 2021 that Sunnya needed to start recording the sales of Neurio-branded products distributed through GNT as sales to GNT at the export prices recorded in the commercial invoices. Ms Chen gave evidence that the commercial invoices were prepared by Mr He and Ms Lu (or at their direction) and stored in an electronic "Export Folder" maintained by Mr He and Ms Lu. From April 2021, GNT sent emails to Ms Chen with details of the total number of Sunnya products that GNT received in each shipment. Ms Chen reconciled that shipment information with the corresponding commercial invoice, and prepared invoice entries in Sunnya's MYOB system recording the sale of products by Sunnya to GNT at the export price recorded in the relevant commercial invoice. Ms Lu sometimes directed Ms Chen to record a $0 price for some portion of a shipment of products that Ms Lu instructed Ms Chen had been designated as marketing or promotional stock. Ms Chen followed any such directions. Ms Chen no longer received any information about the sales of Sunnya's Neurio-branded products to distributor customers in China.
As I have already mentioned, Ms Chen gave evidence that she had paid no regard to the commercial invoices when accounting for Sunnya's sale and distribution processes prior to April 2021.

[16]

The Plaintiffs rely on the evidence of Mr Zhang and Ms Chen referred to at [139]-[145] above as establishing that the prices at which Sunnya sold Neurio-branded products to GNT after April 2021 were significantly below the market price for those products.
The Plaintiffs also rely on the expert evidence of their forensic accounting expert witness Mr John Temple-Cole, including the evidence in his joint report prepared together with the forensic accounting expert called by the He Parties, Mr Nicholas Lopez.
In their joint report dated 24 November 2023, Mr Temple-Cole and Mr Lopez set out their respective calculations of the difference between: 1. the "weighted average effective price" of Neurio Blue Tin, Neurio White Tin, and Neurio Gold products sold by Sunnya to its general trade channel distributors immediately prior to April 2021; and 2. the "weighted average effective price" of Neurio Blue Tin, Neurio White Tin, and Neurio Gold products sold by Sunnya to GNT immediately after the changes to Sunnya's sales processes in April 2021.
Mr Temple-Cole and Mr Lopez applied different methodologies in calculating the "weighted average effective price". The principal differences are that: 1. Mr Lopez included products that Sunnya provided free of charge - "promotional give away products" - in the number of each category of products sold before and after April 2021. Mr Temple-Cole did not consider that the inclusion of promotional give away products was appropriate; and 2. in order to arrive at an "effective price" immediately prior to April 2021, Mr Lopez adjusted the actual price for which Sunnya was selling each category of product to its general trade channel distributors by deducting the costs that Sunnya had incurred in paying taxes on those sales in China, and in paying other costs and fees charged by GNT as import agent, prior to April 2021. Mr Temple-Cole and Mr Lopez agreed that those costs amounted to approximately AUD $3.774 million in the period from January 2020 to March 2021, and were essentially eliminated thereafter. [21] Nevertheless, Mr Temple-Cole did not consider that this adjustment should be made, given that the experts had been asked to calculate price rather than profit.
Notwithstanding these differences in methodology, each of the experts calculated that the weighted average effective price of Neurio Blue Tin, Neurio White Tin, and Neurio Gold products sold by Sunnya to its general trade channel distributors in the quarter prior to the April 2021 change was higher than the weighted average effective price for which Sunnya sold those same products to GNT in the quarter immediately after the April 2021 change. The following table summarises the calculations: Mr Temple-Cole's weighted average effective price calculation Mr Lopez's weighted average effective price calculation Jan-Mar 2021 Apr-Jun 2021 Jan-Mar 2021 Apr-Jun 2021 General trade channel customers other than GNT GNT General trade channel customers other than GNT GNT Blue Tin $21.57 per tin $8.00 per tin $9.46 per tin $7.27 per tin White Tin $21.56 per tin $9.00 per tin $13.97 per tin $5.76 per tin Gold Tin $20.62 per tin $16.00 per tin $14.86 per tin $12.56 per tin

[17]

Those comparisons excluded sale prices achieved by Sunnya through its cross-border channel because both experts calculated that average sale prices through that channel exceeded average sale prices through the general trade channel in each quarter for which they had data in the period leading up to April 2021. Sunnya did not change its sales process for the cross-border channel in April 2021.
In their written closing submissions, the He Parties submitted that the prices at which Sunnya supplied Neurio-branded products to GNT through the general trade channel from and after April 2021 were not significantly below the market value of those products. That submission necessarily carries with it an acceptance that those prices were somewhat below the market value of those products.
Mr Temple-Cole and Mr Lopez agreed that Sunnya's income and cost of sales decreased from approximately AUD$21.301 million (income) and AUD$5.917 million (cost of sales) in FY2020 to approximately AUD$11.806 million (income) and AUD$2.942 million (cost of sales) in FY2021. This resulted in a decrease in gross profits from approximately AUD$15.384 million in FY2020 to AUD$8.864 million in FY2021. The general trade channel sales processes were changed in the last quarter of FY2021. In FY2022, Sunnya's income decreased further to approximately AUD$9.650 million, whilst its cost of sales increased to AUD$4.446 million, resulting in a decline of gross profits from approximately AUD$8.864 million in FY2021 to AUD$5.203 million in FY2022. Sunnya's net profits were approximately AUD$9.700 million in FY2020, AUD$2.799 million in FY2021, and AUD$208,716 in FY2022.
There is a difference of opinion between Mr Temple-Cole and Mr Lopez about whether, or to what extent, the reduction in Sunnya's income, gross profits and net profits between FY2020 and FY2022 are attributable to the April 2021 changes to the general trade channel sales processes. Mr Lopez identifies various independent causes based on his instructions, but there is no evidence of the matters recorded in his instructions.

[18]

The He Parties' explanation for the April 2021 changes: the Customs Investigation

The He Parties attribute the April 2021 changes to Sunnya's general trade channel sales and distribution processes to an investigation by the Customs Service of the People's Republic of China that commenced in March 2021 and concluded on 6 January 2022 (the Customs Investigation).
The He Parties tendered the following document addressed to the Customs Service that appears to have been prepared by or on behalf of Sunnya: [22] "To the respected leaders of Guangzhou Customs: Explanation on the cooperation between Sunnya Pty Ltd and Guangzhou Niurui Trading Co., Ltd. Guangzhou Niurui Trading Co., Ltd (hereinafter referred to as 'Guangzhou Niurui') signed an Entrusted Import Agency Agreement (see attachment) with the Australian company Sunnya Pty Ltd (hereinafter referred to as 'Sunnya') on 1 JUL 2019. Guangzhou Niurui has become the Chinese importer entrusted by Sunnya, assisting Sunnya in importing products to China, and assisting Sunnya in managing and storing goods, delivering goods, collecting money, making payments, and paying various fees including tax. Sunnya pays Guangzhou Niurui import service fees and fees for the above services. The main business is in the following aspects, which are explained: 1. Sunnya's products are currently produced in Australia and New Zealand and are imported into the Chinese market with the assistance of Guangzhou Niurui. Based on the business needs of Chinese clients, Sunnya basically signs agency contracts directly with clients. 2. As Sunnya's import agent, Guangzhou Niurui is mainly responsible for preparing import contracts and applying for various certificates required for imported products, connecting with customs declaration companies, assisting customs declaration companies in providing various documents required for customs declaration, and paying taxes, value-added tax and other fees. In addition, Guangzhou Niurui also handles the collection of samples required for various test reports and customs declaration, inspection and quarantine certificates. 3. Guangzhou Niurui is responsible for storing the goods that have been cleared for customs into warehouses for management, as well as receiving and distributing goods. Guangzhou Niurui summarizes the inventory to Sunnya's accountant at the end of each month. 4. Entrusted by Sunnya, Guangzhou Niurui also provides collection and payment services, collecting payments for Sunnya's products sold in China and paying marketing and maintenance fees and taxes for Sunnya's products in China. 5. As the importer of Sunnya, Guangzhou Niurui is also responsible for remitting the payment for Sunnya to Sunnya Company. 6. Sunnya's products are basically shipped to China at CIF price. Sunnya bears the relevant freight costs and Sunnya pays them directly to the foreign freight forwarding company in China. 7. Regarding the regional agency contracts for Sunnya's products in China, they are signed directly by Sunnya with the agencies, such as the cooperation agreement signed between Sunnya and Shandong Rixuan Trading Co., Ltd (hereinafter referred to as 'Shandong Rixuan') (see attached contract). 8. If some online platforms or chain stores must sign contracts with Chinese companies due to business needs, Sunnya then entrusts Guangzhou Niurui to sign contracts with them, such as the contract signed between Babemax and Guangzhou Niurui. However, Guangzhou Niurui only signs contracts, collects and pays money on our behalf, and obtains appropriate service fees from it. 9. Guangzhou Niurui assists Sunnya in purchasing raw materials in the Chinese market, including empty cans and packaging materials, and assists in exporting to foreign companies designated by Sunnya. Sunnya pays Guangzhou Niurui corresponding service fees. The above is a roughly complete list of the business dealings between the two parties. Sunnya Pty Ltd 11 MAR 2021"
I note that the description in that document of the relationship between Sunnya and GNT is generally consistent with the evidence of Sunnya's general trade channel sales and distribution arrangements prior to April 2021 referred to above.
On 12 March 2021 Panyu Customs of the People's Republic of China issued a Notice of Inspection to GNT in the following terms: [23] "In accordance with the 'Customs Law of the People's Republic of China', the 'Customs Inspection Regulations of the People's Republic of China' and other relevant regulations, our customs will conduct an inspection on your company starting from 12th March, 2021. Upon receipt of this notice, please prepare the corresponding account books, documents and other relevant information according to the following scope. During the period of Customs inspection, the legal representative or principal person in charge of your organization or his/her appointed representative shall be present to cooperate with the Customs and provide the necessary working conditions. Scope of the audit: the authenticity and legality of the import and export activities of your company during the period from 13th March 2018 to 12th March 2021. When necessary, the customs can inspect other import and export activities of your company."
In WeChat messages exchanged on 15 and 16 March 2021, Mr Yao asked Ms Lu whether she had received any news from Customs, and asked to be notified when she did receive something. Mr Yao also provided Ms Lu with information about personnel within Customs.
In further WeChat messages sent to Ms Lu on 31 March 2021, Mr Yao said: [24] "Two points: Collection and Payment on behalf of others might incur fines. Has there been export before? There has been no foreign exchange payment on behalf of others, but was there any export? And was there any payment collected for export?"
There is no evidence of any answers from Ms Lu to the two questions posed by Mr Yao. Mr Yao's statement about the possibility of fines was not admitted as evidence of its truth.
On 15 April 2021, Mr Yao sent a series of messages to Ms Lu while he apparently understood that she was in a meeting with officials from the Customs Service. Mr Yao's messages advised Ms Lu to "be polite but stick to the bottom line. Respond vaguely to things you are unsure about." Mr Yao and Mr He then sent the following messages to Ms Lu: [25] "WILTON YAO The original shareholders have become minority shareholders or employees and they no longer have decision-making power. Hansun HE There is no special relationship in business. Hansun HE It's very clear. WILTON YAO The price system in the Australian company is determined by the major shareholders and the board of directors. The relatives and friends have no right to make decisions! These are the facts! Just answer truthfully."
There is no evidence of any response from Ms Lu to these messages from Mr Yao.
On 17 April 2021, Mr Yao sent a further message to Ms Lu in the following terms: [26] "1. In terms of personal level, there is a special relationship; do not admit a special relationship in terms of business, (Since the Australian company was acquired several years ago, the original shareholders have become minority shareholders or employees, and no longer have decision-making power). 2. The price system of Australian companies is indeed decided by the major shareholders and the board of directors of Australia, and the original special relationship no longer has decision-making power! The Australian company will give the guiding price according to the industry and market conditions, but it is not excluded that the Guangzhou company will make certain adjustments in the sales price according to the marketing and related activities, because they are facing customers directly after all;"
On 11 June 2021, Mr He sent an email to a Ms Jennifer Liu, copied to Mr Yao and Ms Chen, which stated: [27] "Due to the impact of the pandemic (COVID-19) and China-Australia relationship, Sunnya Pty Ltd (Sunnya) is facing great difficulties in sales in the Chinese market. Chinese customs and relevant government agencies have also stepped up supervision of Australia companies and their products. Since 11 MAR 2021, Panyu Customs in China has begun to conduct customs inspections on Sunnya Company and its import agency (Guangzhou Niurui Trading Co., Ltd., referred to as Niurui), and proposed that Sunnya Company collected sales profits from the Chinese agent company Niurui and was suspected of smuggling. Sunnya can only charge Niurui's at the purchase price. The case is still in the trial stage and has not yet been concluded. In view of the current situation, Sunnya must adjust its sales strategy and follow the guidance of China Customs. Sunnya's sales will be greatly affected. Notice hereby!"
Mr He's email was admitted into evidence subject to an order under s 136 of the Evidence Act 1995 (NSW) (Evidence Act) limiting its use to evidence of the email communication, and not as evidence of the truth of Mr He's representations in the email.
The matters that Mr He's email described as having been "proposed" by Panyu Customs appear to correspond with the issue raised in Mr Yao's 31 March 2021 WeChat message to Ms Lu: "Collection and Payment on behalf of others might incur fines".
There is no evidence that Ms Liu, Mr Yao or any other representative of Jatcorp replied to Mr He's email, or sought any further information about the Customs Investigation, about the adjusted sales strategy referred to in the email, or about Mr He's opinion that Sunnya's sales would be greatly affected.
Mr Brett Crowley and a person named Xiaofang Liu were the Jatcorp-appointed directors of Sunnya at the time of Mr Yao's communications with Ms Lu in March and April 2021, and at the time that Mr He sent the abovementioned email to Ms Jennifer Liu, Mr Yao and Ms Chen on 11 June 2021. It is not clear from the evidence whether Jennifer Liu is the English name of the director Xiaofang Liu. Mr Yao had not been a director of Sunnya since 23 April 2020. Throughout 2021, Mr Yao was a director and the Chief Executive Officer of Jatcorp, Sunnya's majority shareholder.
There is no evidence that the matters referred to in Mr He's email of 11 June 2021 were raised at any Sunnya board meeting. Indeed, as noted earlier in these reasons, the evidence tendered in these proceedings did not include any minutes of any meeting of the board of directors of Sunnya prior to October 2022. [28]
On 6 January 2022, Panyu Customs of the People's Republic of China issued a sealed statement of "Inspection Outcome" addressed to GNT: [29] "In accordance with the relevant provisions of the 'Customs Law of the People's Republic of China' and the 'Regulations on Customs Inspection of the People's Republic of China', the customs conducted an inspection of your company from 12 March 2021 to 6 January 2022. The inspection outcome is as follows: During the period from 13 March 2018 to 12 March 2021, your company declared the import of Neurio Lactoferrin Modulated Milk Powder and other goods to the customs through general trade, with a total value of $4.659 million US dollars. The customs did not find any violations of customs regulations by your company."
The He Parties plead that, as a result of the Customs Investigation: (1) Sunnya was required to sell its Neurio-branded products to GNT, and could not distribute those products through GNT to "sub-agents" in China; (2) Sunnya was not permitted to receive more than the "import price" and was not permitted to take profits to GNT out of China; and (3) Sunnya's ability to set the price for the Neurio-branded products that it was exporting to GNT in China was "impended".
It is common ground that Sunnya did not fulfill the six contracts that it entered into with GNT after January 2022 for the sale of Neurio-branded products to GNT at prices that the Plaintiffs allege (and the He Parties deny) were significantly under market value for those products.
As referred to later in these reasons, Sunnya ceased selling or supplying its Neurio-branded products to GNT altogether in November 2022.

[20]

GABT's authorisation of Sunnya's use of the Neurio trade marks in China

Mr Zhang gave evidence that Sunnya's distributors who managed e-commerce platform stores were often requested by the platform operator to undertake a certification process confirming that they were authorised to sell Sunnya's products. As Mr Zhang's responsibilities as General Manager of Sunnya included managing sales channels, it typically fell to him to assist Sunnya's customers with these certification processes, and to provide the proof of authority required by the e-commerce platform operators. Mr Zhang deposed that this sometimes involved Sunnya procuring a letter of authority from GABT - as the registered owner of the Chinese Neurio trade marks - confirming that Sunnya was authorised to use those trade marks. As I understand the evidence, a letter of authority from GABT in favour of Sunnya, together with a letter of authority from Sunnya in favour of its distributor, would satisfy the certification requirements of the platform operator in those instances.
By way of example, Mr Zhang referred to a request that he received from Yunyingbao - the operator of the online store on JD's e-commerce platform - in early November 2021 for authorisations from Sunnya in relation to the use of the Chinese Neurio trade marks. After receiving that request, Mr Zhang informed Mr He that JD was asking Yunyingbao for authorisations from the owner of the Chinese Neurio trade marks to confirm Sunnya's authority to sell products using those trade marks. According to Mr Zhang's evidence, Mr He asked him if there were going to be other similar requests from customers or platform operators, and he told Mr He that he thought that it was likely that there would be other similar requests. Mr He then told Mr Zhang to prepare a letter that said that GABT gives Sunnya the exclusive, permanent and global right to use the Chinese Neurio trade marks. Mr He told Mr Zhang that this document could then be used by Sunnya for all e-commerce platforms to answer all future questions about Sunnya's right to use the Chinese Neurio trade marks.
Mr Zhang then prepared a letter from GABT authorising Sunnya to use the Chinese Neurio trade marks. The letter stated: [31] "Letter of Authorisation Guangzhou Aotea Biological Technology PTE Ltd (the authorising party) is the lawful owner of the brands Niu Rui You (in Traditional Chinese), Niu Rui You (in Simplified Chinese) and Neurio (trademark registration certificate No./application No.: 25792637, 37827508, 37806926, 44899346, 34751584, 34752986, 9433654). Sunnya Pty Ltd (address: Suite 315, 33 Lexington Drive, Bella Vista NSW 2153 Australia) is hereby authorised to exclusively have the permanent right to use the trademarks Niu Rui You (in Traditional Chinese), Niu Rui You (in Simplified Chinese) and Neurio globally. Within the scope of authorisation, Sunnya Pty Ltd has the right to use the registered trademarks provided by our company. Date of Authorisation: 1 January 2021."
Mr Zhang emailed the letter to Mr He on 4 November 2021, requesting Mr He to put the seal of GABT on it. Mr He sent a copy of the Letter of Authorisation to Mr Zhang by email bearing the seal of GABT later that same day.
I infer that the Letter of Authorisation was backdated to 1 January 2021 in order to ensure that the letter would suffice to answer all future questions about Sunnya's right to use the Chinese Neurio trade marks. I note that one of the affidavits affirmed by Mr He and served by the He Parties in these proceedings included a statement by Mr He that "it is not uncommon for documents to be backdated so that they suggest there has been a pre-existing relationship." Mr He's affidavit was not read, but that particular statement in the affidavit was tendered by Sunnya as an admission (without objection on behalf of the He Parties).
Sunnya and Jatcorp accept that the Letter of Authorisation was not supported by consideration, and is not a deed according to Australian law. There is no evidence establishing that it is binding on GABT, as a deed or otherwise, under the laws of the People's Republic of China. Questions about whether Australian law or Chinese law applies to the Letter of Authorisation therefore do not arise.

[21]

Registration of the Guamis trade mark in March 2020 and development of the Guamis brand in the period from September 2021

On 21 March 2020, Sunlife applied for registration of the "Guamis" trade mark in Australia and in New Zealand in respect of product classes 5, 29, 30 and 35. Mr He has admitted that Ms He made those applications on behalf of Sunlife at his request. The trade mark was registered in New Zealand on 29 September 2020 with a deemed registration date of 21 March 2020, and was registered in Australia on 29 October 2020 with a priority date of 21 March 2020.
Mr Wu claims that the Guamis trade mark was developed by him, and was registered by Sunlife with his permission.
Mr Wu gave evidence that he began work in 2018 on formulating health supplement products in the form of liquid drops, and that he ultimately received New Zealand government approval to manufacture such products on a commercial basis in 2020. In the meantime, he had developed the name "Guamis" as a brand name for the liquid drops products in about November 2019. According to Mr Wu's evidence, he came up with the idea for that name because it was an "English sounding name that was analogous to 'Jia Min Si'", which was an established Chinese brand. Mr Wu had made inquiries with Mr He about whether he would be interested in marketing liquid health supplements in the Chinese market, and he thought that Mr He would find the "Guamis" name attractive because he (Mr Wu) knew that the Chinese "Jia Min Si" brand was associated with GABT. Mr Wu cannot now recall how he knew about this association, but the evidence establishes that GABT was the registered owner in China of a trade mark for "Jia Min Si" in Chinese characters. Mr Wu gave evidence that he spent over 200 hours developing the Guamis brand and product line.
In his affidavit affirmed on 15 September 2023, Mr Wu referred to a handwritten note that he says he created on 20 November 2019 setting out the idea for the name "Guamis". The handwritten note is entitled "New English name of Jia Min Si" (with "Jia Min Si" written in Chinese characters). This is followed by a repetition of similar Chinese characters with the English word "Jiamis" in brackets, beside which the word "Guamis" is written in English four times. The note bears the date 20 November 2019 and a signature. Mr Wu deposed that he sent a copy of the note to Mr He via WeChat at about the same time that he says that he signed a "Guamis, Jiaminsi Brand Establishment and Business Agreement" with Sunlife on 22 November 2019. Mr Wu refers to this document as the 2019 Guamis agreement.
The 2019 Guamis agreement document states: [32] "1. Background. jiaminsi is a Chinese brand, Guamis is the English brand of jiaminsi designed by me (Easter Wu) for Sunlife. 2. Cooperation reasons. Supermega opened up a line of liquid products and is able to design excellent product formulations. Hansun He and Daisy Lu have excellent sales management experience. They are able to create factories and get a lot of orders and now they are entrusted to find cooperation partners. 3. Cooperation method. Easter Wu will design the brand, product formula, as well as the final production. In order to ensure the long-term security of market operation, the brand will be registered by Sunlife or its appointed company (not Sunlife). This establishes a permanent and exclusive partnership between parties."
The 2019 Guamis agreement document bears a signature of Mr Wu beside a handwritten date "22112019" and a signature of Mr He beside a typed date "23/11/2019".
In his affidavit affirmed on 15 September 2023, Mr Wu deposed that he no longer has his original handwritten note referred to at [186] above, and that his only copy of the note is an electronic copy that Mr He sent to him in early 2023 together with an electronic copy of the 2019 Guamis agreement signed by both parties. According to Mr Wu's evidence, he had asked Mr He for a copy of the 2019 Guamis agreement signed by both parties in early 2023 because he had been unable to locate a signed copy in his own records.
Mr Wu gave the following evidence in his affidavit affirmed on 15 September 2023: "110. I allowed Mr He to register the Guamis trade mark to an entity that he nominated. It was my view at this time that it was commercially undesirable for me to register the Guamis trade mark to an entity associated with me because my customers might come to consider that I had come into competition with them in the retail market. I believed that if my customers came to think that I was in competition with them they would cease to do business with me as a manufacturer. 111. To the best of my recollection, Mr He asked for Sunlife to become the registered holder of the Guamis trade mark. Mr He did not tell me why he wanted that to occur. 112. I recall him saying words to the effect of 'my daughter is the best person to hold this trade mark'. 113. I was content to accept this arrangement because I was eager to please Mr He so as to further develop my business relationship with him. 114. Also, I though at that time that if any dispute should arise in relation to the Guamis trade mark, it would be straightforward for me to win any disputes about the Guamis trade mark against a young girl. 115. After signing the 2019 Guamis Agreement, I did not immediately receive any orders to produce any Guamis products. This did not occur until 2022. 116. I did not know how Mr He or Sunlife set about marketing Guarmis products and did not concern myself with that matter. I was in business with Mr He because of his skill in marketing products and I left that matter to him."
The Plaintiffs dispute the authenticity of the handwritten note and the 2019 Guamis agreement. Mr Whitbourn's second report dated 26 October 2023 describes the forensic processes by which he analysed the 2019 Guamis agreement document bearing signatures of both Mr Wu and Mr He that the NZ Parties provided to the Plaintiffs in pdf format as part of the discovery process in these proceedings. Mr Whitbourn's analysis concluded that the pdf document was created and last modified on 26 February 2023, and that the signature of Mr He and the date "23/11/2019" beside that signature were inserted into the pdf document on 26 February 2023.
In his affidavit affirmed on 19 November 2023 - after Mr Whitbourn's second report had been served, and less than two weeks before the commencement of the hearing - Mr Wu deposed that he had undertaken further searches of his paper and digital records in November 2023, during which he had found a USB containing a copy of the 2019 Guamis agreement signed only by him bearing the handwritten date 22 November 2019, which was not countersigned by Mr He. That document was tendered in evidence, but was not the subject of any forensic evidence. In cross-examination, Mr Wu accepted that Mr He may have signed the 2019 Guamis agreement in 2023, but said that he (Mr Wu) had not been aware of this prior to Mr Whitbourn's report. Mr Wu maintained that the 2019 Guamis agreement was created and was signed by Mr Wu in November 2019, and reflected the agreement that he made with Mr at that time, irrespective of when Mr He signed in. In support of that contention, Mr Wu relies on the version of the 2019 Guamis agreement bearing only his signature that he says he found in November 2023. It was put to Mr Wu in cross-examination that he lied about finding that document in November 2023 in order to create a false explanation for Mr He's signature having been inserted into the document in February 2023 as determined by Mr Whitbourn. Mr Wu denied this.
In cross-examination, Mr Wu said that he understood that Mr He and Ms Lu controlled Sunnya at the time when he claims to have signed the 2019 Guamis agreement with Mr He. Mr Wu's companies had not yet commenced manufacturing Neurio products for Sunnya at that time. Indeed, as Mr Wu accepted in cross-examination, he had not even met Mr He or Ms Lu in person at that time.
Sunnya's first Neurio/Guamis-branded product was a Modified Student Milk Powder with Phosphatidylserine manufactured in September 2021 by Australian Natural Milk Association (ANMA). Sunnya paid trade mark fees invoiced by Sunlife for the use of the Guamis brand in the manufacture and sale of that product. Mr Wu's companies did not produce any Neurio/Guamis-branded formulated milk powder products for Sunnya.
On 18 May 2022, GABT lodged applications for the registration of the Guamis trade mark in China. GABT issued an invoice to Sunnya on the same date for a "Guamis trademark registration fee". Sunnya paid that fee. According to Mr Wang's evidence, GABT's Guamis trade mark registration application is still under examination.
Mr Wu gave evidence, he first became aware that GABT had applied to register Guamis trade marks in China during the course of these proceedings.
In May 2022,Sunnya placed its first order with Supermega for Neurio/Guamis-branded liquid products in May 2022. I note that some two and a half years had passed since Mr Wu says that he entered into the 2019 Guamis agreement with Sunlife, and approximately two years had passed since Mr Wu obtained New Zealand government approval to manufacture liquid drop health supplement products. The liquid products that Sunnya ordered from Supermega were Neurio/Guamis Fortified Calcium Compound Beverage Syrup, Neurio/Guamis Fortified Iron Compound Beverage Syrup, Neurio/Guamis Fortified Zinc Compound Beverage Syrup, Neurio/Guamis Compound Enzyme Drops, and Neurio/Guamis Lactase Drops. Sunlife issued invoices to Sunnya for trade mark fees for the use of the Guamis brand in the manufacture and sale of those products. Sunnya paid those invoices.
Sunnya marketed its Neurio/Guamis range of products through its website www.neurio.com.au. Screenshots from that website tendered by the Plaintiffs depict photographs of a can of Neurio/Guamis Modified Student Milk Powder with Phosphatidylserine, and photographs of bottles of Neurio/Guamis Fortified Calcium Compound Beverage Syrup, Neurio/Guamis Fortified Iron Compound Beverage Syrup, Neurio/Guamis Fortified Zinc Compound Beverage Syrup, Neurio/Guamis Compound Enzyme Drops, and Neurio/Guamis Lactase Drops, together with the box in which each such bottle is packaged. On each can, box and bottle, the Neurio trade mark is displayed prominently above the Guamis trade mark.
Mr Wu's evidence is silent about how the Guamis brand came to be used in conjunction with the Neurio brand. There is no evidence that this was discussed in the conversations that Mr Wu says he had with Mr He prior to Sunlife's registration of the Guamis trade mark. The 2019 Guamis agreement that Mr Wu says he entered into with Sunlife makes no provision for the use of the Guamis brand in conjunction with the Neurio brand.
In cross-examination, Mr Wu said that he "didn't spend much efforts" after November 2019 in trying to ascertain how Guamis was being marketed by Mr He or Sunlife, or by anyone else, in China. It was put to Mr Wu that his claim to have invested over 200 hundred hours in developing the Guamis brand and product line, only to permit Sunlife to register the trade mark in Australia and New Zealand and to pay no attention to how Sunlife then developed the brand, made no commercial sense. Mr Wu maintained that it did make commercial sense, because his companies would ultimately receive orders from Sunlife for Guamis-branded products and that would have been a very good return on his investment in developing the Guamis brand and product line. However, the only orders that Supermega began receiving for Guamis-branded products from May 2022 were orders placed by Sunnya for Neurio-Guamis branded products. When reminded about this in cross-examination and asked whether this were the kind of orders that Mr Wu had contemplated would be placed pursuant to the alleged 2019 Guamis agreement, Mr Wu said that the 2019 agreement only concerned the establishment of the Guamis brand and registration of the Guamis trade mark, whereas the sales contracts that Supermega entered into with Sunnya commencing from May 2022 were "to decide who will purchase the Guamis products" and "there is no special direct relationship within these two".
As referred to in more detail later in these reasons, Mr Wu asserted in cross-examination that he was entitled to require Sunlife to transfer the Guamis trade mark back to him at any time, even though the 2019 Guamis agreement made no provision for this. [33]
According to sales data recorded by Sunnya at the time, total revenue from the sales of Neurio/Guamis-branded products during the period from September 2021 to October 2022 was AUD$369,497. There is no evidence of Sunnya's costs of manufacturing those products.
Ms Chen gave evidence quantifying the costs that Sunnya has incurred in the period since September 2021 in participating in trade shows at which Neurio/Guamis-branded products have been promoted as part of Sunnya's product range (AUD$114,601), in designing and maintaining its website through which the Neurio/Guamis product range was promoted and conducting web promotions for its products, including the Neurio/Guamis product range (AUD$36,794), and in giving away free samples of those products to third parties (costs totalling AUD$15,335 invoiced by GNT to Sunnya).
As Sunnya's General Manager, Mr Zhang was aware that Sunnya was marketing a Neurio/Guamis product range. However, Mr Zhang was not aware that Sunlife was the registered owner of the Guamis trade mark. Mr Zhang gave evidence that Mr He and the Sunnya staff referred to the Guamis brand as a "sub-brand" of the Neurio brand.
As I have already mentioned, GABT was the registered owner of the Chinese trade mark "Jia Min Si" in Chinese characters before 2018, when Mr Wu says he began developing the idea for the Guamis brand. On 6 September 2021 and 14 November 2022, GABT lodged applications for the registration in China of further "Jia Min Si" trade marks (in Chinese characters) in respect of various classes of goods.

[22]

Supply of Neurio products to GABT and GNT by Supermega and/or Megadairy during the period from March 2022 to January 2023

Section 10(1) of the Trade Marks Act 2002 (NZ) provides that the owner of a registered trade mark has, in relation to all or any of the goods or services in respect of which the trade mark is registered, the rights and remedies provided by that Act, including the exclusive right to use the registered trade mark, and to authorise other persons to use the registered trade mark. Section 7 of that Act defines the word "use", in relation to a trade mark, as including (relevantly): "(b) applying the trade mark to goods or services or to materials for the labelling or packaging of goods or services in New Zealand solely for export purposes; and (c) the application in New Zealand of a trade mark to goods or services to be exported from New Zealand, and any other act done in New Zealand in relation to those goods or services that, if done in relation to goods or services to be sold or otherwise traded in New Zealand, would constitute use of a trade mark in relation to those goods or services for which the use is material under this Act or at common law; …"
It is not in dispute that, by reason of its registered ownership of the New Zealand Neurio trade marks from February 2020, Sunnya had the exclusive right to apply that trade mark to goods manufactured and packaged in New Zealand that were to be exported to another country, including China.
In cross-examination, Mr Wu accepted that he knew in 2022 that Sunnya was the registered owner of the Neurio trade mark in New Zealand, and also in Australia. Mr Wu understood in 2022 - and, indeed, at all times "from the very beginning to the very end", as he said in cross-examination - that Neurio products could not be manufactured in New Zealand without Sunnya's consent.
As I have mentioned earlier in these reasons, [34] Supermega was the sole supplier of Neurio-branded products to Sunnya from May 2020. Those products were manufactured in New Zealand by Supermega's related company, Megadairy, and supplied to Sunnya for export to China under the terms of sales contracts that Supermega entered into with Sunnya.
Supermega entered into the following contracts to supply New Zealand-manufactured Neurio-branded products to GABT for export to China: 1. a sales contract dated 2 March 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful Industrial Co., Ltd (Shanghai Gainful) as importer, for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin (platinum version), each containing 60 sachets of 1g each; 2. a further sales contract dated 2 March 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 3. a sales contract dated 12 July 2022 between Supermega (as seller) and GABT (as buyer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 4. a further sales contract dated 12 July 2022 between Supermega (as seller) and GABT (as buyer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 5. a sales contract dated 14 September 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 6. a further sales contract dated 14 September 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 7. a sales contract dated 31 October 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 50,000 cans of Neurio formulated milk powder with epicor yeast and lactoferrin, each containing 60 sachets of 2g each; 8. a further sales contract dated 31 October 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with epicor yeast and lactoferrin, each containing 60 sachets of 2g each; 9. a further sales contract dated 31 October 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 10. a further sales contract dated 31 October 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 11. a further sales contract dated 31 October 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 12. a further sales contract dated 31 October 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 20,000 cans of Neurio formulated milk powder with epicor yeast and lactoferrin, each containing 60 sachets of 2g each; 13. a sales contract dated 1 November 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio Modified Middle-Aged Milk Powder with probiotics, each containing 30 sachets of 10g each; 14. a further sales contract dated 1 November 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 15,000 cans of Neurio Modified Middle-Aged Milk Powder with probiotics, each containing 30 sachets of 10g each; 15. a further sales contract dated 1 November 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio modified milk powder with bonepep, each containing 60 sachets of 2g each; 16. a further sales contract dated 1 November 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 20,000 cans of Neurio modified milk powder with bonepep, each containing 60 sachets of 2g each; and 17. a sales contract dated 8 November 2022 between Supermega (as seller), GABT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 1g each.
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that, whilst Ms Lu or a staff member of Sunnya placed orders for Neurio-branded products from Supermega, any orders for GABT were placed by Ms Aiping Zhang.
The sixth contract referred to above sets out the representative or contact for each of the parties beneath the name and address of the relevant party. Mr Wu is named as the representative of Supermega, Ms Lu is named as the contact for GABT and a Ms Joy Yu is named as the contact for Shanghai Gainful. The copies of each of the other sale contracts referred to above that were admitted into evidence in these proceedings have blank spaces below the name and address of GABT in the same place in the document where Ms Lu's details as the representative of GABT are set out in the sixth contract. The copy of the fourth contract referred to above that was tendered in evidence in these proceedings contains small horizontal markings in part of the blank space below the name and address of GABT, which suggest that some text may have been imperfectly redacted in that copy of the contract. Whilst some of the contracts tendered in these proceedings specify the name of the contact or representative for Supermega and/or Shanghai Gainful beneath that party's name and address, the name of the contact or representative for GABT does not appear in any of the contracts other than the sixth contract referred to above.
In cross-examination, Mr Wu said he did not know whether there should be some content in the blank spaces referred to above, and denied redacting contact details in those contracts, or directing someone else to redact them, so as to hide Ms Lu's involvement in negotiating contracts on behalf of GABT. Mr Wu protested that this would have been pointless, as the sixth contract referred to above does contain Ms Lu's details as the contact person for GABT. However, Mr Wu also said that he believed that Ms Lu's details appeared on that contract due a mistake by one of his staff in naming Ms Lu as the contact person for GABT. Mr Wu said that, whilst he was aware that GABT and Sunnya were different companies, that Mr He and Ms Lu were associated with Sunnya, and that Supermega's relationships with GABT and with Sunnya "do not interact or overlap with each other", other people in other departments of Supermega may not have such knowledge and it was understandable that they would make a mistake in thinking that GABT and Sunnya "were all Neurio". It is difficult to understand how Supermega could have hoped to comply with the Production Sales and Confidentiality Agreement that Mr Wu says it entered into with GABT and Sunnya in June 2015 if Supermega's staff responsible for sales contracts were not even aware that GABT and Sunnya were separate companies. [35]
As to the association of Mr He and Ms Lu with Sunnya, Mr Wu knew that Mr He and Ms Lu were directors of Sunnya. Mr Wu gave inconsistent evidence about his understanding of the relationship between Sunnya and GABT. In an affidavit sworn by Mr Wu on 1 March 2023 and served in the Sunnya proceedings, Mr Wu deposed that he commenced business dealings in about 2019 with Mr He and Ms Lu: "… including through companies they appeared to control, including the first plaintiff ('Sunnya'), Sunlife Healthfood Pty Ltd ('Sunlife') and a Chinese company known to me as 'Guang Zhou Ao Ti Wa' (which I understand is the same company as the third defendant, Guangzhou Aotea Biological Technology Pte Ltd ('GABT')."
In cross-examination, Mr Wu denied that Mr He and Ms Lu appeared to him to control GABT in 2019, and said that he had always understood that GABT was controlled by Mr Lu, and that he first learned about Mr He's 95 per cent shareholding in GABT during these proceedings. Mr Wu denied that his evidence in cross-examination was inconsistent with his evidence in his 1 March 2023 affidavit, and said that he had intended by that paragraph of his affidavit to convey that Mr He and Ms Lu controlled Sunnya but "I didn't paragraph what I said or segment what I said in this affidavit very strictly".
Mr Wu acknowledged in cross-examination that the interests of Sunnya may be different to the interests of GABT, but said that he "didn't think that far" at the time. It was put to Mr Wu that it was not in Sunnya's interests for GABT to be placing orders for Neurio-branded products. Mr Wu answered: "No, because all the business interests of Sunnya were given by GABT. … if they didn't allow Sunnya to operate in the first place, if they didn't allow Mr He and Ms Lu to establish Sunnya, the company of Sunnya in New Zealand, there won't be the existence of the company Sunnya. If you put both companies on the same level, what you just said also makes sense. According to my understanding, all the business of Sunnya were actually given by GABT. So legally speaking, what you said is correct, but from the rationale of a human being, the son cannot compete with the father in terms of interests because the life of the son was given by the father."
These questions, and Mr Wu's answers, were directed to the period in 2022 during which Supermega and GABT entered into the 17 contracts referred to above.
Supermega entered into a further sales contract with GABT (as buyer) and Shanghai Gainful (as importer) on 25 November 2022 for the manufacture and supply of 61,300 cans of Neurio formulated milk powder with lactoferrin, with each can containing 60 sachets of 2g each. The contract displays the name and contact details of the representatives of Supermega and Shangai Gainful, but there is a blank space below the name and address of GABT where one would expect the details of representative to be set out.
Supermega entered into the following contracts with GNT to manufacture Neurio-branded products in New Zealand to be exported to China: 1. a sales contract dated 7 December 2022 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 61,300 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 2. a further sales contract dated 7 December 2022 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 60,264 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 3. a further sales contract dated 7 December 2022 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 16,476 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 4. a further sales contract dated 7 December 2022 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,625 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 5. a further sales contract dated 7 December 2022 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 23,556 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 6. a sales contract dated 15 December 2022 between Supermega (as seller) and GNT (as buyer) for the manufacture and supply of 100,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 7. a further sales contract dated 15 December 2022 between Supermega (as seller) and GNT (as buyer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with eipcor yeast and lactoferrin, each containing 60 sachets of 2g each; 8. a sales contract dated 5 January 2023 between Supermega (as seller) and GNT (as buyer) for the manufacture and supply of 30,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; 9. a sales contract dated 9 January 2023 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 100,000 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 2g each; and 10. a sales contract dated 12 January 2023 between Supermega (as seller), GNT (as buyer) and Shanghai Gainful (as importer) for the manufacture and supply of 30,696 cans of Neurio formulated milk powder with lactoferrin, each containing 60 sachets of 1g each.
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that, whilst Ms Lu or a staff member of Sunnya placed orders for Neurio-branded products from Supermega, any orders for GNT were placed by Ms Aiping Zhang.
For seven of the contracts referred to above, the copies tendered in these proceedings have blank spaces below the name and address of each party. The copies of the fourth, fifth and tenth contracts referred to above that were tendered in these proceedings do specify the representative or contact person for each party. Mr Wu is named as the representative of Supermega, Ms Aiping Zhang is named as the contact person for GNT, and Ms Joy Yu is named as the contact person for Shanghai Gainful.
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that Supermega or Megadairy prepared a commercial invoice and packing list (or "CIPL") for each shipment of products. The purpose of the CIPL is for Supermega's customer to present it to customs officials in China. Mr Wu deposed that: "60 Throughout my dealings with Sunnya, [GNT] and GABT, no matter which company placed an order with Supermega or Megadairy, the resulting product manufactured by Megadairy did not vary depending on which company had placed the order. 61 Sometimes a Sales Contract was made in the name of one of GABT, Niurui or Sunnya, but the CIPL specified that the purchaser or consignee or notifee was a different company. Both Supermega's and Megadairy's practice was to follow the instructions of the customer on these matters. I did not know why Supermega or Megadairy received such instructions from our customers and I did not question those instructions and staff of Supermega or Megadairy were not instructed to question such instructions. 62 I had no process for identifying whether any particular products to be manufactured, or being manufactured, were to be identified with Sales Contracts placed by any one of GABT, [GNT] or Sunnya. I did not reconcile the manufacture or sale of products with Sales Contracts or the CIPLs."
It is difficult to reconcile this evidence with Mr Wu's evidence given in the same affidavit that Supermega dealt with different people in relation to orders for Sunnya (Ms Lu), and in relation to orders for GABT or GNT (Ms Zhang).
It is very difficult to reconcile Mr Wu's evidence referred to at [222] above with his evidence that Supermega, Sunnya and GABT entered into a Production Sales and Confidentiality Agreement on 9 June 2015, drafted by Mr Wu, which stipulated that products ordered by Sunnya or GABT would be shipped only to that company, and that information and documents concerning such orders and shipments would be disclosed only to the company that had placed the order, and would not be disclosed to the other company. [36] As I have mentioned earlier in these reasons, Sunnya disputes the authenticity of the Production Sales and Confidentiality Agreement.
Mr Wu's evidence referred to at [222] above is also inconsistent with his evidence in cross-examination that Supermega and Megadairy followed a practice in 2022 of keeping separate the two companies' orders, and information relating to those orders. Mr Wu said: [37] "… I do business both at the same time with GABT and Sunnya, two parties. … once I sell milk powder to Sunnya, I - this close, my - the information belongs to Sunnya ... but I don't give this information - Sunnya's information - to GABT. However, when I do the - for the business I made with GABT, I shall not also give their confidential things to Sunnya either. So, both party should have reserve their confidential information. Yeah, that's what I say."
Mr Wu exhibited to his affidavit documents that he described as all of the CIPLs that he had found relating to Neurio-branded products. Those CIPLs include a CIPL that names GABT as the purchaser of 2,194 cartons (weighing 8,000 kg) of Neurio modified milk powder with lactoferrin in 2g sachets, and several CIPLs for Neurio-branded products that name GNT as the purchaser of the products.
According to information provided by Biosecurity New Zealand to Sunnya's solicitors, during the period from October 2020 to October 2022, Supermega or Megadairy exported 22,650 cartons of Neurio-branded products to GNT in China and a further 6,581 cartons of Neurio-branded products to GABT in China.
Mr Wang gave evidence that Sunnya did not request or direct Supermega or Megadairy to export any Neurio-branded products to China from November 2022.
According to information provided by New Zealand Food Safety to Sunnya's solicitors under the Official Information Act 1982 (NZ) in March 2023, Megadairy exported 843 cartons of Neurio-branded products to GNT in China in December 2022, Supermega exported 1225 cartons of Neurio-branded products to Shanghai Gainful and a further 5721 cartons to GNT in China in January 2023, and Supermega exported to Shanghai Gainful in China 1,218 cartons of Neurio-branded products in February 2023 and a further 2,427 cartons in March 2023.
In her affidavit affirmed on 26 October 2023, Ms Chen deposed that she had searched Sunnya's books and records and had not located the contracts between Supermega and GABT referred to above, or any record of Sunnya authorising those contracts or requesting the supply of the Neurio-branded products described in those contracts to GABT. Ms Chen deposed that she had also not been able to identify any income derived by Sunnya from the contracts between Supermega and GABT. Those aspects of Ms Chen's evidence were not challenged in cross-examination.
In cross-examination, Mr Wu relied on the Brand OEM Authorized Letter that he says GABT and Sunnya signed on 9 July 2019 as authorising Supermega to manufacture and export Neurio-branded products for GABT. [38] Mr Wu gave evidence that he regarded the Production Sales and Confidentiality Agreement that he says GABT and Sunnya entered into with Supermega in 2015 as precluding Supermega from seeking Sunnya's consent to Supermega entering into, and fulfilling, contracts with GABT for the manufacture of Neurio-branded products. Mr Wu emphasised that, at the time that Supermega entered into the contracts referred to above to manufacture Neurio-branded products for GABT and GNT, Supermega had not received any communication from Sunnya cancelling the authority that Mr Wu says was conferred on Supermega by the Brand OEM Authorized Letter, or instructing Supermega not to produce Neurio-branded products for GABT or GNT. As I have mentioned earlier in these reasons, Sunnya disputes the authenticity of both the Production Sales and Confidentiality Agreement and the Brand OEM Authorized Letter.
In cross-examination, Mr Wu denied that Ms Lu had negotiated the 17 contracts referred to at [210] above on behalf of GABT. Whilst maintaining that Ms Lu was not involved in the negotiation of the 17 contracts, Mr Wu said that, if she had been involved, he did not think this was dishonest on her part, and that it was just "one of the internal problems happening in those two companies". Mr Wu acknowledged that he did not know whether Sunnya had consented to GABT entering into those contracts for Supermega to manufacture and export Neurio-branded products.
Mr Wu denied that he created the Production Sales and Confidentiality Agreement and the Brand OEM Authorized Letter in March 2023, together with their covering emails purportedly dated 12 June 2015 and 9 July 2019, because he was aware that he had assisted Ms Lu's dishonest conduct in ordering Neurio-branded products on behalf of GABT by causing or permitting Supermega to enter into and fulfill the 17 contracts referred to above.
On 28 March 2023, the High Court of New Zealand made interim orders restraining Supermega and Megadairy from further manufacturing or exporting Neurio-branded products. The High Court made those orders on the papers by consent in proceedings that Sunnya had commenced against Supermega and Megadairy on 21 March 2023.

[23]

Meeting between Mr He, Mr Wang and others in October 2022

There were changes to the board and management of Jatcorp during the period from June to September 2022. Mr Bo Qiang (also known as Charlie Qiang) was appointed as a director of Jatcorp on 3 June 2022, and as Managing Director on 17 June 2022. Mr Yao resigned as a director of Jatcorp on 17 June 2022, but continued in the role of Chief Executive Officer of the company. Three other Jatcorp directors resigned or were removed, and three new directors were appointed, during this period. The three new directors of Jatcorp were Mr Wang, Mr Shen, and Mr Zhang. Mr Wang and Mr Shen were appointed on 20 June 2022. Mr Zhang was appointed on 1 September 2022. Mr Wang replaced Mr Qiang as Jatcorp's Managing Director in about October 2022. The new board of Jatcorp removed Mr Yao from his position of Chief Executive Officer of the company on 24 December 2022 on grounds that do not appear to have been related to the business of Sunnya or his conduct as a director of Sunnya.
By 31 August 2022, Mr Qiang was the only Jatcorp-nominated director of Sunnya. Mr Yao had ceased to be a director of Sunnya on 23 April 2020.
In July 2022, Jatcorp appointed its Chief Financial Officer, Ms Yang Li, to supervise the financial affairs of Sunnya.
In about September 2022, Ms Li prepared a summary of Sunnya's financial performance, which she presented to Mr Wang and other directors of Jatcorp. According to Mr Wang's evidence, Ms Li's summary appeared to show that Sunnya's revenue had declined by approximately 55 per cent, its earnings before interest, tax and amortisation (EBITA) had decreased from 46 per cent to 2 per cent of revenue, and that its EBITA ratio for its sales to the market in China had decreased from about 45 per cent to negative 5 per cent, during the period from the 2020 to 2022 financial years. Mr Wang gave evidence that, during that same period, Ms Li's summary appeared to show that Sunnya's sales to GNT had increased from about AUD$156,000 in the 2020 financial year to approximately AUD$6.3 million in the 2022 financial year, and its sales to GNT as a percentage of total sales had increased from about 1 per cent to about 65 per cent within three years.
Mr Wang did not exhibit the whole of Ms Li's summary to his affidavit, choosing instead to exhibit only a one-page extract from that summary. The Plaintiffs did not tender the whole of the summary. Nor did the Plaintiffs tender the underlying financial statements and any other records that Ms Li reviewed for the purpose of preparing her summary. The one-page extract from Ms Li's summary contains no information about the volume of Sunnya's sales to GNT in the 2020, 2021 and 2022 financial years. Mr Wang's evidence of his interpretation of what Ms Li's summary showed in relation to sales to GNT carries little, if any, weight, in circumstances where Sunnya failed to tender the summary itself.
As referred to earlier in these reasons, [39] the expert witnesses Mr Temple-Cole and Mr Lopez agreed that Sunnya's income and cost of sales decreased from approximately AUD$21.301 million (income) and AUD$5.917 million (cost of sales) in FY2020 to approximately AUD$11.806 million (income) and AUD$2.942 million (cost of sales) in FY2021. This resulted in a decrease in gross profits from approximately AUD$15.384 million in FY2020 to AUD$8.864 million in FY2021. In FY2022, Sunnya's income decreased further to approximately AUD$9.650 million, whilst its cost of sales increased to AUD$4.446 million, resulting in a decline of gross profits from approximately AUD$8.864 million in FY2021 to AUD$5.203 million in FY2022. Sunnya's net profits were approximately AUD$9.700 million in FY2020, AUD$2.799 million in FY2021, and AUD$208,716 in FY2022. The changes to Sunnya's general trade channel sales and distribution arrangements that commenced in the last quarter of FY2021 resulted in Sunnya selling its Neurio-branded products to GNT at lower prices than the prices for which it had previously been selling the same products to its general trade channel distributors, as referred to at [139]-[154] above. There is a difference of opinion between Mr Temple-Cole and Mr Lopez about whether, or to what extent, those changes account for the reduction in Sunnya's income, gross profits and net profits between FY2020 and FY2022.
The evidence tendered in these proceedings includes a certified translation of a handwritten note of a meeting on 13 October 2022 at Sunnya's office. No party adduced evidence that identified the author of the note. The note does not include a list of participants in the meeting, but it attributes various topics addressed at the meeting to Ms Lu (referred to as Daisy), Mr Wang (referred to as Jacky or Jack), Mr Zhang (referred to as Scott) and Mr Peng referred to as Dannis). The certified translation of the note reads as follows: "Daisy Fairness of listed companies Profit issue Transparent rules 1. Macro policy Professional manager 2. Global economy Board Principles 3. Pandemic problem

[25]

On the evening of 13 October 2022, Mr Shen sent a WeChat message to Mr He, stating: [40] "Mr He, thanks for the meeting today. As discussed today at the meeting, please send me the Neurio trademark registration document, the documents of authorization to Sunnya Australia and the general agency contract of Sunnya China so I could have a look. In addition, as you mentioned that Sunnya does not own the trademark, we hope that Sunnya could share the marketing and promotion cost of Neurio brand in China, and the Sunnya's various expenses such as staff salaries in China could be greatly reduced. The budge target of 2023 financial year including revenue, cost and profit targets shall be set up by Sunnya's board of directors and reviewed quarterly."
Mr Wang gave evidence that he met with Mr Shen, Mr Zhang and Mr He on or about 20 October 2022 to discuss Sunnya's financial performance and their desire for Jatcorp to increase its involvement in Sunnya. In his affidavit affirmed on 16 August 2023, Mr Wang gave evidence that, at this meeting: "… I asked Mr He the reasons for the large decline in financial performance but Mr He did not provide any meaningful response. I recall Mr He stating that he could transfer profits to Sunnya from China so that Jatcorp could have a dividend but he wanted to be in control of the company and the amount of profit to be transferred to Sunnya is to be further discussed. I was concerned and confused by Mr He's comments."
In his further affidavit affirmed on 26 October 2023, Mr Wang altered his account of Mr He's response to his question about the decline in Sunnya's financial performance. Mr Wang deposed that: "Mr He said … that if money was a problem, he controlled the profits and could get more profit for Jatcorp and could pay Jatcorp $3 million a year. Dennis [Mr Shen] responded to this by saying that Mr He's proposal was not an answer to Jatcorp's concerns and that Jatcorp would still need to have a better understanding of how Sunnya was being managed and operated."
Mr Zhang gave evidence that: "During that meeting I recall that Dennis or Jack asked Mr He a question to the effect that if Sunnya continued to be run the way it was, how would Sunnya be able to make any money. I recall that Mr He responded by saying words to the effect that he would be able to have Sunnya provide profits to Jatcorp every year. I recall that in relation to the profits proposed by Mr He, he referred to a number that was either $3 million a year or $5 million a year."
In his 26 October 2023 affidavit, Mr Wang deposed that he recalled Mr He saying at the meeting words to the effect that "he controlled the Neurio trade marks in China". Mr Wang gave evidence in cross-examination that, prior to this meeting, it had been his "impression" that Sunnya owned all the Neurio trade marks used globally, including in China. There is no evidence that this impression was anything more than an erroneous assumption made by Mr Wang. There is no evidence that Mr Wang been involved in, or had taken steps to inform himself about, any aspect of Sunnya's business before he was appointed as a director of Jatcorp in June 2022. Mr He had disclosed GABT's ownership of the Neurio brand in China during the negotiations for Jatcorp's acquisition of a majority shareholding in Sunnya in 2018. [41] GABT's ownership of the Chinese Neurio trade marks was plain from Sunnya's dealings with various third parties in connection with the sale and distribution of its products in China in the period after Jatcorp became the majority shareholder. This included dealings involving Mr Zhang during his tenure as Sunnya's General Manager. [42] By October 2022, Mr Zhang had been appointed as a director of Jatcorp, and Jatcorp had nominated him for appointment as a director of Sunnya. [43] The fact that Sunnya did not own the Neurio trade marks in China had been raised with Jatcorp again at Mr He's meeting with Mr Shen on 13 October 2022. [44]
In his 16 August 2023 affidavit, Mr Wang also gave evidence that: "At the meeting, I informed Mr He that as major shareholder, Jatcorp wished to exercise its rights to replace Mr Bo Qiang (Jatcorp's then representative director appointed to the Sunnya Board) with three other Jatcorp appointees to the Sunnya board. This would mean that Jatcorp would end up with three directors on the Sunnya board alongside Mr He and Ms Lu. Mr He indicated his opposition to the same and said that he would oppose any request to put on three directors by us because this went against what was agreed in the share purchase agreement."
Mr Shen did not give evidence in these proceedings.
I note that Mr Wang and Mr Zhang refer to the meeting as having occurred on or about 20 October 2022, but neither of them has referred to any diary entry or contemporaneous note recording this date, or to any other event by reference to which they have estimated 20 October 2022 as the date of the meeting. The evidence about the matters discussed at the meeting said to have occurred on or about 20 October 2022 aligns with the subject matters recorded in the 13 October 2022 file note, and in Mr Shen's 13 October 2022 WeChat messages. It is inherently improbable that Mr Wang, Mr Zhang and Mr Shen met Ms Lu and Mr He separately on 13 October and 20 October 2022 to discuss the same issues. It is more probable that there was one meeting which occurred on 13 October 2022, and that Mr Wang took a little time to investigate and consider the information that Sunnya did not own the Chinese Neurio trade marks, which he says was news to him, before formulating Jatcorp's initial response to that information in the notice that Jatcorp issued on 21 October 2022 convening an extraordinary general meeting of Sunnya, as referred to below.

[26]

Notice of Extraordinary General Meeting of Sunnya issued on 21 October 2022

On 21 October 2022, Mr Wang caused Jatcorp to call an extraordinary general meeting (EGM) of Sunnya to be held on 22 November 2022. The notice of meeting, which was emailed to Mr He at 2.17pm on 21 October 2022, stated: "Jatcorp Limited acquired a 51% shareholding in the Company pursuant to a Share Sale Agreement which was executed on or around 13 June 2018 (SSA). The SSA had contemplated Jatcorp Limited appointing Anthony Crimmins as director and chairman of the Company, and Wilton Yao (who at the time was a director of Jatcorp) as an executive. Mr Crimmins has since left Jatcorp and Mr Yao's role has also changed within the management structure of Jatcorp and he is no longer a director. Both of these Jatcorp board nominees have left the board of the Company. Recently, Mr Bo Qiang, a serving director of Jatcorp was appointed as a director of the Company. Jatcorp desires to replace their nominee director Mr Bo Qiang with Mr Peng Shen and replace Mr Brett Crowley with Mr Zhan Wang, both of whom are serving directors of Jatcorp. Jatcorp further desires to appoint Mr Zhiguo Zhang to the board of the Company. Jatcorp requires to obtain full information disclosure about any matter which may hinder the Company's ability to market the Neurio brand products in Australia and China, noting that: - clause 4.2 of the SSA expressly requires the current management (being vendors in the SSA) to ensure the Company's ability to continue to market the Neurio brand in Australia and China; - Jatcorp has received advice from management that a related third party may exercise certain intellectual property rights in China to affect the Company's use of the Neurio brand there."
The notice of meeting set out proposed resolutions for the removal of Mr Qiang and Mr Crowley, and for the appointment of Mr Wang, Mr Zhang, and Mr Shen as directors of Sunnya, and a proposed resolution directing the current directors to provide the new directors with full and unfettered access to all of Sunnya's books and records. The proposed resolution for the removal of Mr Crowley as a director of Sunnya is curious. According to ASIC records, Mr Crowley had ceased to be a director of Sunnya on 31 August 2022.

[27]

Events after the issue of the Notice of Extraordinary General Meeting

At approximately 9.01pm on 21 October 2022, Mr Yancheng Lu sent an email to Mr He attaching a notice in the following terms: [45] "Notice of Ceasing to Holding and Using Trademarks Dear Sunnya Pty Ltd Guangzhou Aotea Biological Technology PTE Ltd. (Party A) has been notified by Sunnya Pty Ltd (Party B) that Jatcorp Limited will hold an Extraordinary General Meeting and vote to resolve the relevant decision of Party B. In accordance with the Authorisation for Using the Trademark and the Agreement for Authorising Trademark registration signed by Party A and Party B in 2014 and 2022 respectively in relation to the trademarks of Niu Rui You (in Simplified Chinese), Niu Rui You (in Traditional Chinese) and Neurio, Party A considers that Party B will violate Party A's interests. Party A has the right to terminate the agreements at anytime, the right to terminate Party B's right to hold the trademarks, and the right to cease Party B's right for using the trademarks. On this 21 October 2022, Party A formally notifies Party B via email that Party B must transfer the trademarks hold by it, being Niu Rui You (in Simplified Chinese), Niu Rui You (in Traditional Chinese) and Neurio, back to Party A, or a third party designated by Party A. Party B must immediately stop using Party A's trademarks and Party B needs to return all goods with Party A's trademarks to Party A within 30 days after the termination of the agreements. Guangzhou Aotea Biological Technology PTE Ltd Seal: (seal affixed) Date: 21 October 2022"
It is convenient to refer to this notice as the GABT Termination Notice.
Mr He was both a director of Sunnya and the majority shareholder of GABT at the time of issue of the GABT Termination Notice. [46]
Mr Wang has given evidence that, before he received a copy of the GABT Termination Notice, nobody had informed him about any agreements between Sunnya and GABT authorising the use of the Neurio trade marks. Mr Wang has given evidence that he first saw a copy of those documents referred to in the GABT Termination Notice when the He Parties served an affidavit in the Sunnya proceedings on 10 November 2022 annexing copies of the following documents: 1. a document entitled "Trademark Registration Authorization Agreement" appearing on the face of it to be an agreement between GABT and Sunnya signed in Guangzhou in China on 16 December 2014; 2. a document entitled "Trademark Usage Authorisation Agreement" appearing on the face of it to be an agreement between GABT and Sunnya signed in Guangzhou in China on 16 December 2014; 3. a document purporting to be an agreement authorising trade mark registration dated 27 January 2020; and 4. a document purporting to be a trade mark commission agreement dated 27 January 2020.
Mr Zhang gave evidence that he had not seen any of those documents until they were shown to him for the purpose of these proceedings. Mr Zhang has not been able to locate copies of the documents in the sent or received folders of the email accounts operated by Mr He, Ms Lu and Mr Yao while they were directors of Sunnya.
Ms Chen gave evidence to the same effect. Ms Chen also deposed that her predecessor, Ms Fei, did not include a copy of any of those documents in the materials that she provided to Ms Chen when briefing Ms Chen on the management of Sunnya's accounts in March 2020. Neither Mr He nor Ms Lu informed Ms Chen about the alleged agreements at any time. Ms Chen was not told about those alleged agreements by any other person at Sunnya.
Sunnya disputes the authenticity of all four of the abovementioned documents. Sunnya contends that the documents are false documents that were manufactured by the He Parties in order to assist their defence of the Sunnya proceedings, including by creating a justification for the conduct of Mr He and Ms Lu in causing Sunnya to transfer the Australian Neurio trade marks to GABT on 23 October 2022, as referred to at [284] and [287] below.
The document entitled "Trademark Registration Authorization Agreement" purportedly dated 16 December 2014 that was annexed to the affidavit served by the He Parties on 10 November 2022 reads as follows: [47] "Trademark Registration Authorization Agreement Signing Location: Guangzhou, China Principal (Party A): Guangzhou Aotea Biological Technologies Pty Ltd Agent (Party B): Sunnya Pty Ltd Party A and Party B, following the principles of voluntariness and good faith, have unanimously agreed to sign this trademark authorisation agreement. 1. Under this agreement, Party A agrees to have Party B act as its agent to assist in registering the Neurio trademark, which is exclusively owned by Party A, with Intellectual Property Australia and Intellectual Property Office of New Zealand. The Chinese trademark registration numbers are 9433608, 9433612, 9433654, and 10484064. 2. Party B agrees and acknowledges that Party A is the sole and actual owner of this trademark. In the event that Party B engages in any infringement or illegal activities during the registration process, Party A reserves the right to hold Party B legally responsible. 3. Because Party A is a Chinese company and does not have subsidiary overseas, Party A agrees to have Party B hold the trademark on its behalf for an extended period. However, Party A retains the right to terminate Party B's holding authority at any time. 4. If Party A terminates Party B's authority to hold the trademark, Party B agrees to, upon Party A's request, submit an application to Intellectual Property Australia and Intellectual Property Office of New Zealand to transfer the trademark back to Party A or to a third party designated by Party A within 15 days. 5. Party B agrees to bear all trademark registration expenses on behalf of Party A. 6. As the agent, Party B is required to notify Party A of the trademark registration results within 5 days after the completion of the trademark registration. 7. Both parties agree to sign a trademark usage authorisation agreement simultaneously with or after signing this agreement. 8. In the event of a dispute between Party A and Party B, both parties unanimously agree to participate in arbitration or file a lawsuit in the People's Republic of China."
According to the certified English translation, the document bears a handwritten signature of Mr Lu on behalf of GABT. The following address is given for GABT beneath that signature: "No. 1102, 8 Jinsui Road, Tianhe District, Guangzhou City". The document also bears a handwritten signature of Mr He on behalf of Sunnya.
The document entitled "Trademark Usage Authorisation Agreement" purportedly dated 16 December 2014, which was annexed to the affidavit served by the He Parties on 10 November 2022, reads as follows: [48] "Trademark Usage Authorisation Agreement Signing Location: Guangzhou, China Trademark Licensor (Party A): Guangzhou Aotea Biological Technologies Pty Ltd Trademark Licensee (Party B): Sunnya Pty Ltd In accordance with Article 40 of the Trademark Law of the People's Republic of China and Article 43 of the Regulations for the Implementation of the Trademark Law, Party A and Party B, following the principles of voluntariness and good faith, have unanimously agreed to sign this Trademark Usage Authorisation Agreement. 1. According to this agreement, Party A allows Party B to use the Neurio trademark owned and registered by Party A. The trademark registration numbers are 9433608, 9433612, 9433654, 9433665, 10484064, 1454093, and 1454096. 2. The form of the authorisation for use is ordinary. 3. The authorisation period for use shall be from 16 December 2014 to 15 December 2034. Upon expiration of the agreement, if an extension of the usage period is required, Party A and Party B shall separately renew the Trademark Usage Authorisation Agreement. 4. Party A has the right to supervise all actions of Party B in the use of the registered trademark. If Party B engages in any actions that Party A deems illegal, unfair, or harmful to Party A's interests, Party A has the right to terminate this agreement at any time and seek compensation from Party B. 5. Party B may not arbitrarily alter the text, graphics, or their combination of Party A's registered trademark and may not use Party A's registered trademark beyond the scope of the authorisation. The scope of this authorisation is limited to Party B's use of products containing Party A's trademarks produced for Party A in Australia and New Zealand. 6. Without Party A's authorization, Party B may not, for any reason or in any form, allow third parties to use Party A's registered trademark. 7. During the authorisation period, Party A and Party B have the right to terminate this agreement with written notice to the other party within 15 days. 8. Upon termination of this agreement, Party B must immediately cease using Party A's trademark, and Party B must return any remaining products containing Party A's trademark to Party A within 30 days of the agreement termination. 9. In the event of a dispute between Party A and Party B, both parties agree to participate in arbitration or file a lawsuit in the People's Republic of China."
According to the certified English translation, the document bears a handwritten signature of Mr Lu on behalf of GABT. The following address is given for GABT beneath that signature: "No. 1102, 8 Jinsui Road, Tianhe District, Guangzhou City". The document also bears a handwritten signature of Mr He on behalf of Sunnya.
GABT failed to comply with this Court's orders made on 10 July 2023 which required GABT to give discovery of categories of documents that included the originals of those alleged 2014 agreements and the alleged 2020 agreements referred to above, together with all board papers referring to any of those documents, and all documents recording communications between any of Mr He, Ms Lu, Sunnya and GABT referring to the alleged 2014 agreements and the alleged 2020 agreements.
The alleged 2020 agreements were not admitted into evidence by order made under s 169 of the Evidence Act, following the He Parties' failure to comply with Sunnya's request made under s 166 of that Act for production of those documents (in original native electronic format and, where a hard copy was to be produced, the original wet ink version), without reasonable cause.
In support of its challenge to the authenticity of the 2014 documents, Sunnya relies principally on three matters. First, the 2014 documents describe an address for GABT that was not the registered address of that company until some time in 2017. Second, the 2014 documents have not been located in searches of Sunnya's records. Third, the He Parties' contention that the documents were entered into in 2014 is inconsistent with the inherent logic of events.
As to the first matter, public records relating to GABT that were admitted into evidence in these proceedings show that, when GABT was established in 2007, its address was at 25 Baogang Road, Haizhu District in Guangzhou City. At some time after 2007, GABT changed its address to 2201C, 13 Huaming Road, Tianhe District, Guangzhou. This address was recorded in GABT's annual reports for the 2014, 2015 and 2016 years. GABT's 2017 annual report is the first record of the company having changed its address to the Tianhe District address in Guangzhou that is recorded in the Trademark Registration Authorization Agreement and the Trademark Usage Authorisation Agreement purportedly executed on 16 December 2014.
The All168 Plaintiffs relied on the 2014 documents in their statement of claim filed in the All168 proceedings on 1 December 2023. In their defence filed on 23 December 2023, the defendants pleaded that the 2014 documents were not genuine documents executed in December 2014 because the address No. 1102, 8 Jinsui Road, Tianhe District, Guangzhou City did not become the registered address of GABT until 2017. In their reply filed on 20 January 2023, the plaintiffs in the All168 proceedings pleaded that GABT had held a lease over those premises in December 2014 when they claimed that the 2014 documents had been executed. King & Wood Mallesons were the solicitors acting for Mr He, Ms Lu and GABT in the Sunnya and All168 proceedings at the time of filing of that reply on 20 January 2023. On 9 February 2023, King & Wood Mallesons wrote to the solicitors acting for Sunnya and for the defendants in the All168 proceedings withdrawing the pleading that GABT had held a lease over those premises in December 2014, and also notifying their ceasing to act in the Sunnya and All168 proceedings.
In an affidavit affirmed on 19 September 2023 and served by the He Parties in these proceedings, Mr He stated that, when the All168 defendants questioned the address shown for GABT in the 2014 documents in their defence filed on 23 December 2023, Mr He and Ms Lu made enquiries about documents recording GABT's address. Mr He stated that Mr Lu told him that GABT had a lease in 2014 of the premises at the address referred to in the 2014 documents. In paragraphs 323 and 324 of the affidavit, Mr He stated: "323. … Yancheng gave me a document which he said he had received from the real estate agent who manages the property and he also said he could not find the original in his own records. I never had any involvement in GABT obtaining leases of office space. 324. Initially, I assumed the document was genuine and I provided it to KWM who referred to it in the Reply which was filed on 20 January 2023 in the All168 proceedings. However, on later examination of the document, it could not have been a lease entered into in 2014 as it contained a template of clauses that referred to legislation that was in force later than 2014, so I withdrew the reference to the document in the Reply and I do not rely on the document. I did not speak to the real estate agent who provided the document. I apologise to the Court for making this mistake. I did not intend to mislead the Court."
Mr He's 19 September 2023 affidavit was not read, but Sunnya tendered the parts of it referred to immediately above as evidence of the explanation propounded by Mr He (and not as evidence of the truth of that explanation).
A rather different account of the events leading to the withdrawal of the All168 plaintiffs' reply is recorded in an email that Mr Hamish Macpherson of King & Wood Mallesons sent to Mr He, Ms Lu, Ms He and Mr Lu on 8 February 2023, which was produced to the Plaintiffs in these proceedings pursuant to an order made by the Court on 20 November 2023. Mr Macpherson's email states (emphasis in original): "Further to my emails with you late yesterday evening, I wish to set out below my understanding of what has occurred and to seek your urgent written responses today to the matters set out. … Background to Jatcorp's allegation of document falsification 1. As you know, the other side in these proceedings (I will refer to them as 'the Jatcorp parties') make a serious allegation in these proceedings that the 2014 Trademark Licence Agreement you rely upon is a forgery (ie its fake). 2. As evidence to support this allegation, the Jatcorp parties point to the fact that the 2014 Trademark Licence Agreement lists premises as the address of one of the parties (GABT), which premises only became GABT's registered office in 2017 (ie about 3 years after the date of the 2014 Trademark Licence Agreement). 3. When we obtained your instructions about this allegation of document falsification, your instructions to us were as follows: a. The allegation is untrue; b. The premises listed in the 2014 Trademark Licence Agreement were GABT's premises; c. Those premises were in fact occupied by GABT as at the date of the 2014 Trademark Licence Agreement; d. There is a lease dated 26 June 2014 evidencing the occupation by GABT as at the date of the 2014 Trademark Licence Agreement; e. The reason why the registered office address was not updated to reflect this 'new' address until 3 years after the date of the 2014 Trademark Licence Agreement was because you simply forgot to update the relevant regulator to update its records. 4. In support of your instructions to us in 3 above, you provided us with a document written in a Chinese language which (when translated) is titled "Guangzhou Property Lease Contract" dated 26 June 2014. At that time you did not tell us that that document was not genuine. 5. Consequently, in reliance upon your instructions in 3 above and the document you provided to us in 4 above, we settled and filed a pleading (namely the Reply dated 20 January 2023) in Supreme Court proceeding numbered 2002/00333557 which denies Jatcorp's allegation that the address stated in the 2014 Trademark Licence Agreement first became GABT's address in 2017 and particularises the Lease Contract by name and date in support of that denial. The facts which emerged fast night 6. Yesterday evening, in a conversation between my partner Esther and Ms Lu and (later) Mr He, Esther first noticed and then raised with you the fact that the document tiled "Guangzhou Property Lease Contract" dated 26 June 2014 in its body referred to legislation which did not come into effect in China until 2021. Esther asked you to explain how it was possible that a document dated 26 June 2014 could refer to legislation which did not come into effect until 2021. 7. Ms Lu then stated to Esther that she was unable to find the real lease document, and so she requested the Landlord to issue a 'new' one and to backdate it to 26 June 2014. Either Ms Lu or one or more of Mr He or Mr Lu then applied your company seal to this 'new' document and signed it. 8. Last night was the first occasion on which this information was provided to KWM. 9. The 26 June 2014 Lease is likely not in fact even a true copy of the original lease document (albeit backdated), because the original lease document would not have referred to legislation which as at that date was not in effect. The consequences of the facts which emerged last night 10. Several consequences flow from the matters set out above: a. First, it is the case that the document which you provided us with (namely the 26 June 2014 Lease) in order to rebut the allegation of document falsification regarding the 2014 Trademark Licence Agreement, is in fact itself a falsified document; b. Secondly, each of you knew at the time that the 26 June 2014 Lease was a falsified document, and yet you nevertheless proceeded to affix your company seal to it and to sign it; c. Thirdly, when you provided us with that document you did not disclose to us that the document was falsified; d. Fourthly, you allowed us to plead that document in the Reply in circumstances where you knew that that document was falsified; e. Fifthly, Mr He swore an affidavit on 20 January 2023 verifying that the matters in the Reply were true. Of course, in light of the facts which emerged last night, that affidavit appears to be false (because the Reply contains matters which are not true); and f. Sixthly, by swearing a false affidavit Mr He has likely committed perjury, which is a criminal offence, and has exposed himself to a contempt charge. He is also likely to have very seriously damaged his credit in the proceedings. 11. If the original, true lease cannot be located and produced to us, then as Australian solicitors we are ethically obliged to inform the Supreme Court that the matters set out in the Reply as regards the 26 June 2014 Lease are not correct, and that part of the Reply will have to be withdrawn. …"
As referred to at [267] above, the relevant part of the Reply was withdrawn.
As to the second matter, Sunnya relies on the evidence of Mr Wang, Mr Zhang and Ms Chen referred to at [255]-[257] above. Mr Wang's evidence that he had not heard anything about the alleged 2014 Trademark Registration Authorization Agreement and Trademark Usage Authorisation Agreement (or, indeed, the alleged 2020 agreements) before he received the GABT Termination Notice on 31 October 2022 has little weight in circumstances where Mr Wang was not a director of Sunnya prior to 31 October 2022, the Plaintiffs adduced no evidence about the nature or extent of any inquiries made by Mr Wang about the arrangements pursuant to which Sunnya used the modern Neurio trade marks to sell products in China when he began looking into Sunnya's business after his appointment as a director of Jatcorp in June 2022. The evidence of Mr Zhang and Ms Chen to similar effect also carries little weight because there is no apparent reason why it would have been relevant for Mr Zhang and Ms Chen to be aware of the 2014 documents, which related to historical Neurio trade marks that were no longer in use by mid-2018, in order for Mr Zhang to discharge his responsibilities as Sunnya's General Manager from December 2019, and for Ms Chen to perform her role as Sunnya's accountant from March 2020.
The evidence of Mr Wang, Mr Zhang and Ms Chen that their searches of Sunnya's records had not located the documents is of negligible probative value in the absence of any evidence about record keeping practices at Sunnya in the period from 2014 to date, and in the absence of any evidence about the nature and extent of the searches that each of those witnesses made.
As to the third matter, the alleged 2014 Trademark Usage Authorisation Agreement purports to authorise Sunnya to use the historical Neurio trade marks that had already been registered to Ms Lu in Australia. [49] The alleged 2014 Trademark Usage Authorisation Agreement dated 16 December 2014 identifies the relevant Australian trade marks by their registered numbers. The alleged 2014 Trademark Registration Authorization Agreement purportedly entered into on the same date as the Trademark Usage Authorisation Agreement is drafted in terms that assume that the trade marks have not yet been registered. That document purports to authorise Sunnya prospectively to register those trade marks on behalf of GABT, notwithstanding that they had already been registered by Ms Lu.
Mr He did not inform Jatcorp or Mr Qiang about the GABT Termination Notice until 31 October 2022.
In the meantime, Jatcorp had declined to authorise a payment of AUD$950,000 out of Sunnya's bank account on 27 October 2022. On 28 October 2022, Jatcorp made arrangements with ANZ to put a hold on Sunnya's bank account for 48 hours, and Mr Wang caused Mr Qiang to write to Mr He in the following terms: "On 27 October 2022, I was informed that you have decided to authorise a payment in amount of approximately $950,000.00 to Guangzhou Niurui Trading Co., Ltd., which is a related company based in China (Proposed Payment). The reason for the Proposed Payment, as I am given to understand, is for the repayment of a purchase order deposit from that party. According to ANZ bank records, the proposed amount is going to transfer into the bank account of HLW Investment Pty Ltd, which is a trustee company of your family trust. For the record and for the time being: ● in my capacity as director for Sunnya, I do not agree to the Proposed Payment; ● Jatcorp also does not agree to the Proposed Payment. Both the timing and the reason for the Proposed Payment is dubious and questionable. I do not have any information before me which suggests that the purpose of the Proposed Payment is legal, appropriate or in the best interest of Sunnya. So far as I can see, the Proposed Payment benefits only the proposed recipient who is a related party to you. Given this latest development, both myself and Jatcorp are very concerned about the management of Sunnya and such concern is heightened by the fact that Jatcorp's representation on the board of Sunnya does not reflect its majority shareholding position. For the purposes of having a more expeditious resolution to the issue of the Proposed Payment and Jatcorp's concern for the board composition and structure, I hereby notify you that Jatcorp intends to bring forward the date for the EGM to 31 October (Monday) 2022 at 11 AM with all other details including contact details being the same as that set out in the EGM notice. The sooner the shareholders and directors get to sit together to discuss and resolve upon the company's affairs, the sooner any concerns or issues will be resolved, including your desire to get my approval and Jatcorp's approval for the Proposed Payment. Please take note that other Jatcorp directors and I will be attending the EGM at the new date and time herein notified and matters will be discussed and resolved on that occasion. It is strongly recommended that you also attend. Finally, I ask that until the EGM, you refrain from engaging in any action which affects Sunnya that is outside its ordinary course of business, which includes any further attempts to transfer significant amounts of the company's money to any related parties."
Mr Qiang sent the letter by email to Mr He and Ms Lu on 28 October 2022.
Mr He replied to Mr Qiang's letter by email sent at 6.21pm on 30 October 2022, to Mr Qiang, copied to Mr Shen and Ms Lu. Mr He wrote: "Please be advised pursuant to s249(H) of the Corporations Act 2001 you will need to provide us with at least 21 days notice before any ordinary member's meeting can be held. Your attempt to bring forward the meeting is in breach of the corporations act and we do not agree. Further, we note your attempt to stop the payment as described in your letter and any further attempt of blocking payments of ordinary business expenses will put Sunnya in default/breach of its contractual obligations. We will refer to the content of this letter as sufficient warning to you in the event Sunnya incurs liability as part of your refusal to provide consent for ordinary business payments."
There is no evidence that Mr He provided any information to Mr Qiang, or to Jatcorp, to support his characterisation of the AUD$950,000 payment to GNT (or to HLW) as an ordinary business expense of Sunnya or a payment that Sunnya was contractually obliged to make.
Mr Qiang replied to Mr He by email sent at 9.31am on 31 October 2022: "As we informed your earlier in the letter, the EGM was brought forward to deal with the current dispute which is urgent. The issues to be addressed and discussed are clearly defined and Jatcorp's position is unambiguous. There is no prejudice to the other shareholders in bringing the meeting forward. On the other hand, your recent actions in attempting to transfer Sunnya's fund to your own family trust's account is a clear breach of duties of the relevant authorising directors and officers and is also an act of indisputable oppression by the relevant shareholders against Jatcorp. There is clearly prejudice to both Sunnya and Jatcorp if the concerns raised with you cannot be expeditiously deal with at an urgent EGM. Accordingly, Jatcorp does not agree with your position on the issue of the EGM and it will be held on an urgent basis as previously indicated."
Mr He replied to Mr Qiang by email sent at 9.53am on 31 October 2022: "Your action against Corporation Act."

[29]

Attempted transfers of the Australian, New Zealand, and Indonesian Neurio trade marks, and application for registration of European Neurio trade mark, in late October and early November 2022

On 23 October 2022, Mr He and Ms Lu, as directors of Sunnya, signed a deed of assignment pursuant to which Sunnya assigned the Australian Neurio trade marks to GABT for no monetary consideration. Mr Lu signed the deed on behalf of GABT. On the same day, Mr He, as a director of Sunnya, signed a request to be lodged with IP Australia for assignment of the Australian Neurio trade marks to GABT.
On 28 October 2022, Ms Lu, as "Legal Representative" of Sunnya, signed a deed of assignment pursuant to which Sunnya assigned the Indonesian Neurio trade mark to GABT for no monetary consideration. Mr Lu executed the deed of assignment on behalf of GABT.
On 1 November 2022, Ms Lu, as CEO of Sunnya, signed deeds of assignment pursuant to which Sunnya assigned the New Zealand Neurio trade marks to GABT for no monetary consideration. Mr Lu executed the deeds of assignment on behalf of GABT. Between 2 and 8 November 2022, the deeds of assignment were submitted to the New Zealand Intellectual Property Office on several occasions with a request for registration of a change of ownership of the New Zealand trade marks.
As I have already mentioned, Mr He and Ms Lu did not inform any other director of Sunnya, and did not inform Jatcorp, of the steps that they were taking to transfer the Australian, New Zealand and Indonesian Neurio trade marks to GABT. Mr Wang undertook a search of IP Australia's database after Mr He sent him a copy of the GABT Termination Notice on the afternoon of 31 October 2022. That search revealed that IP Australia had registered the transfer of the Australian Neurio trade marks to GABT earlier that day. Mr Wang and Jatcorp learned about the steps taken to transfer the New Zealand and Indonesian trade marks to GABT when searches were undertaken on 4 November 2022, immediately after Jatcorp commenced the Sunnya proceedings on 3 November 2022.
In an affidavit of Mr He filed and served in the Sunnya proceedings, and in their defence filed in the Sunnya proceedings, Mr He and Ms Lu have sought to explain their actions in transferring or attempting to transfer the Australian, New Zealand and Indonesian Neurio trade marks as being taken in compliance with the agreements allegedly entered into in 2014 and 2020 referred to at [255]-[274], above and GABT's Termination Notice referred to at [252] above. The Plaintiffs dispute the authenticity of the alleged 2014 agreements, as explained at [265]-[274] above. In any event, as the Plaintiffs submitted, the alleged 2014 agreements concerned only the historical Neurio trade marks and therefore did not give rise to any obligation for Sunnya to transfer to GABT the modern Neurio trade marks of which Sunnya was the registered owner. The alleged 2020 agreements were not in evidence, as explained at [264] above.

[30]

Further events leading to the commencement of the Sunnya proceedings on 3 November 2022

At 6.00pm on 1 November 2022, Mr Wang sent an email to Mr He and Ms Lu attaching a letter in the following terms: "I am writing to you as one of the directors for Sunnya Pty Ltd (Company) as well as representatives for the Company's 51% shareholder Jatcorp Pty Ltd. I am writing to you to raise my very serious concern as to the following matters: 1. Jatcorp had issued a notice calling for an EGM for the Company on 21 October 2022 and we have now discovered that on the day of 23 October 2022, you appeared to have authorised an assignment of the Company's trademarks in the 'Neurio Brand' to your related company Guangzhou AOTEA Biological Technology Pte Ltd. This was done without notice to Jatcorp and without notice to Mr Bo Qiang, Jatcorp's nominee director to the Company. We are not aware of any director's resolution authorising such a transfer and such a transfer was clearly done to benefit the assignee, to the Company's detriment., this assignment was done secretly and was only discovered after we had conducted an IP search earlier today. 2. Since the calling of the EGM, you have also appeared to have authorised on multiple occasions the transfer of funds from the Company to an account held by your related party family trust, HLW Investments Pty Ltd., part of which was made purportedly as a refund of deposit moneys paid to the Company by Guangzhou Niurui Trading Co., Ltd. None of these payments were discussed or authorised by Jatcorp, or its nominee director to the Company and those payments have otherwise been objected to. As far as we can tell your attempts to transfer the funds out of the Company's account are continuing despite our objection. 3. In the period since the issuance of the EGM notice, the Guangzhou Niurui Trading Co., Ltd. appeared also to have issued two adverse correspondence claiming rights against the Company which appear coincidental with the above events. In light of the above, I have formed the view as the director of the Company that you appear to be engaging in conduct as directors, contrary to the Company's interest and in breach of your duties as director by preferring the interest of yourselves or related parties over the company. You are asked to immediately refrain from any further such conduct and to confirm by reply that you will not take any action to authorise the disposal of any further assets of the Company, including authorising any payments to third parties from the Company's bank account, unless you have first obtained a formal board resolution to that effect following consultation with us. To the extent any of your alleged conduct or any other conduct yet to be identified by us, has caused loss and damage to the Company, we put you on notice that action ought to be and will be taken by the Company against you to enforce its rights. I ask for your immediate response to this letter and your agreement to abide by our demands as set out above by no later than 9am on 2 November 2022 failing which I will have no choice but to consider what legal action the company ought to take to protect its rights and to hold you accountable for your actions."
There is no evidence of any response by Mr He or Ms Lu to Mr Wang's letter of 1 November 2022.
At 12.55pm on 2 November 2022, Mr Wang sent an email to Mr He and Ms Lu attaching a notice of meeting of the directors of Sunnya to be held at 4.00pm that day. The notice recorded that: "The newly appointed directors desire to take urgent actions with respect to the management of the Company's affairs given recent events, in particular, various attempts by some current directors to disburse significant amount of the Company's funds to their related party, and, the secret assignment of the Company's key trademarks to their related third party."
The Sunnya board meeting proceeded at 4:00pm on 2 November 2022. Mr Wang, Mr Shen and Mr Zhang attended. Mr He and Ms Lu did not attend. Mr Wang chaired the meeting. The minutes record: "Chair noted and discussed with those present about the urgency in bringing the Board Meeting today due to the unexpected events of current directors Ms Lu and Mr He having arranged for significant amounts of money to be transferred from the company's bank account to a bank account belonging to their related party family trust which Jatcorp has refused and the secret assignment of the Company's key trademarks to their related third party. Directors discussed that there needs to be greater transparency in control over the business operations of Sunnya and also investigations into its affairs given the above issues and also the very significant reduction in revenue and profitability."
The minutes record that it was resolved: (1) to remove Mr He as Company Secretary of Sunnya, effective immediately, and to appoint a Mr Wei Huang (also known as Bill Huang) as Company Secretary; (2) to remove Ms Lu as Chief Executive Officer of Sunnya; (3) to appoint Mr Wang as Managing Director of Sunnya; (4) to cause the accountant and Chief Financial Officer of Sunnya to provide any relevant financial documents or information required by any director of Sunnya, and to direct those persons to report directly to the Managing Director; (5) to appoint solicitors to investigate and take such legal action as the board may approve in relation to the dissipation or potential dissipation of Sunnya's assets; and (6) to require Mr He and Ms Lu not to authorise the disposal or transfer of any asset of Sunnya (including any trade mark registered in Sunnya's name), not to authorise the transfer of any funds from Sunnya's bank accounts, not to enter into any binding agreements on behalf of Sunnya, and not to authorise any ASIC lodgements on behalf of Sunnya.
Signed minutes of the meeting were emailed to Mr He and Ms Lu on 3 November 2022.

[31]

Events immediately following the commencement of the Sunnya and All168 proceedings

The Sunnya proceedings were commenced in this Court on 3 November 2022. At an ex parte hearing on that day, Jatcorp was granted leave to file in court its originating process naming Mr He, Ms Lu and GABT as the three defendants. Orders were made for short service. Interim orders were made restraining Mr He and Ms Lu from causing, permitting or authorising the disposal or transfer of any asset of Sunnya (including any trade mark or other intellectual property asset registered in the name of Sunnya), from causing, permitting or authorising the transfer of any funds from Sunnya's bank account, and from entering or purporting to enter into any binding agreement on behalf of Sunnya, unless such action is authorised by a unanimous resolution of all directors of Sunnya. The interim orders operated until 7:00pm on 4 November 2022, and the matter was listed for a further hearing at 2:00pm on that day to determine whether to continue those interim orders.
On 4 November 2022, the Court extended the injunction granted against Mr He and Ms Lu on 3 November 2022 until 9 November 2022, granted a further injunction restraining GABT from taking any action to use or exploit, or to prevent Sunnya from using or exploiting, the Australian Neurio trade marks, and listed the matter for further hearing on 9 November 2022.
GABT's efforts to register the transfer of the New Zealand Neurio trade marks to it continued after this Court granted the injunction on 4 November 2022 in relation to the Australian Neurio trade marks. Upon becoming aware of this, Jatcorp issued a notice of extraordinary general meeting of Sunnya to be held at 12:00pm on 8 November 2022, to consider proposed resolutions to remove Mr He and Ms Lu as directors of Sunnya, and invite All168 to nominate a new director for appointment to the board of Sunnya.
On 8 November 2022, this Court made orders in the Sunnya proceedings extending the injunctions previously granted until further order, requiring Mr He and Ms Lu to do all things necessary to cause the withdrawal, cancellation or removal of the request to change ownership of the New Zealand Neurio trade marks, requiring Mr He and Ms Lu to reinstate Sunnya's website to the domain name sunnya.com.au and to refrain from interfering with that website until further order, and standing the matter over until 10 November 2022.
On 8 November 2022, GABT applied to register the modern Neurio trade marks with the European Intellectual Property Office.
On 10 November 2022, this Court made further interim orders in the Sunnya proceedings, including orders requiring Mr He, Ms Lu and GABT to withdraw their request for change of ownership of the New Zealand Neurio trade marks, orders restraining them from making any further request for change of ownership of the New Zealand Neurio trade marks, orders requiring GABT to transfer the Australian Neurio trade marks back to Sunnya, on the basis that Sunnya may use the trade marks until further order but must hold those trade marks without disposal or encumbrance unless permitted by further order, similar orders in relation to any requests made by the defendants in any other jurisdiction to change the ownership of any trade marks registered in the name of Sunnya, and orders requiring Mr He, Ms Lu and GABT to restore the function of the QR code verification system on Sunnya's Neurio-branded products and not further interfere with that system.
According to Mr Wang's evidence, Sunnya's Neurio-branded products were sold overseas with QR codes printed on the packaging that facilitated customers accessing an online portal to verify the source of origin of the product. It appears from promotional materials that were admitted into evidence in these proceedings that this traceability was one of the selling points for Sunnya's Neurio-branded products. Mr Wang gave evidence that Sunnya began to experience problems with the use of the QR code verification system following the commencement of the Sunnya proceedings.
Shortly before the commencement of the Sunnya proceedings, Ms Chen of Sunnya had sent an email to Mr Derek Li of Supermega on 1 November 2022 setting out the following stock levels of Neurio empty tins and products in Supermega's possession as at 31 October 2022 according to Sunnya's records, and requesting that Mr Li check Supermega's records and inventory and advise of any inconsistencies with Sunnya's records: "1. Can - Neurio Modified Milk Powder with LACTOFERRIN 120g (0359) … 1568 2. Can-Neurio 401# NZBonepep (4452) 120g … 26884 3. Can-Neurio 401# NZV1 (4704) - 120g … 153412 4. Neurio products stock - Neurio 401# NZV1 (4704) - 120g. … 17601"
Mr Li had replied to Mr Ms Chen by email later on 1 November 2022 confirming that each of the four stock levels set out in Ms Chen's email above were correct.
On 15 November 2022, Tahota Law Firm wrote to Supermega on behalf of Sunnya. The letter referred to five sales contracts that Sunnya had entered into with Supermega during the period from March to June 2022 for production of Neurio milk powder in 2g sachets, with 60 sachets per can. The letter stated that the goods under four of those contracts had not been delivered to Sunnya, and 5,340 cans remained to be delivered to Sunnya under the fifth contract. The letter sought an update on the estimated delivery time for all of the outstanding products under the five contracts. The letter also stated: "We advise that on 02 November 2022, a board meeting commenced and resolutions have been passed with the following effect: 1. Directors Mr Yinghan He (He) and Ms Yanxia Lu (Lu) are not authorised to dispose or transfer any asset of our client; 2. He and Lu are not authorised to transfer any funds from our client's bank accounts; 3. He and Lu are not authorised to enter into any binding agreements on behalf of our client. We hereby urge that you must not act on any instructions issued by or on behalf of He and Lu for any matters in relation to Contract 1-5, including but not limited to arranging delivery of goods produced under Contract 1-5."
The letter then directed that Supermega direct all future correspondence in relation to the five contracts, and any business arrangements with Sunnya, to Mr Wang.
On 17 November 2022, Mr Wang sent an email to Mr Wu referring to Mr Li's email of 1 November 2022, [50] and asking: "Please explain why the finished products aren't there anymore, where have they gone, who sent you the email for delivery of the goods of our Sunnya company? Also, close to 200k empty cans, you told me they aren't there anymore, may I ask where they have gone?"
Mr Wu replied to Mr Wang on the same day, stating that the numbers in Ms Chen's email did not sound right, and he would "check it out again". Mr Wang responded, reiterating that Sunnya needed to know where the finished products had gone. Mr Wang also stated: "… I want to confirm again, we have lots of payments advanced to you from Sunnya, our new management hopes that the production can continue, is that okay? If so, I want to send someone from the company to meet you, at least to take a look at the equipment as the client before discussions of subsequent cooperation."
Mr Wu replied to Mr Wang's 17 November 2022 email on 18 November 2022. Mr Wu's reply email stated that he had "made a rough inquiry", that "the numbers of the cans do not possibly exist", and that "it appears that Derek didn't double check it, except simply a general reply of 'correct'". Mr Wu stated that he needed to make further inquiries about the finished products, but that Supermega would "make up for" any payments made by Sunnya for which it had not received the goods. Mr Wu also stated that he was willing to continue business cooperation with Sunnya, but did not want to accept additional orders or contracts from Sunnya at that time because Supermega was already very busy at the end of the year, and because: "… I have a rough knowledge of the bigger changes of people inside your company and such changes remain to be there, if we have the contacts in more depth that his moment, it may cause me to offend any of your parties, or disclose any information that shouldn't be disclosed, that's why I will not meet you in the near future, and I am not going to Mr He and Ms Lu either. … I regard you as the representative of Sunya to perform Sunya, and hope you can understand our position as the OEM."
This Court made further interim orders in the Sunnya proceedings on 17 November 2022, including an order requiring Mr He and Ms Lu to provide to Sunnya within 24 hours the formulation details for the Neurio and Neurio-Guamis branded products supplied by Sunnya as part of its business. Documents tendered in these proceedings indicates that Sunnya commenced ordering Neurio-branded products from an Australian manufacturer, rather than from Supermega, at about this time.
On 21 November 2022, Mr Wang, Mr Shen and Mr Zhang resolved that Sunnya would suspend all shipments of products to GNT pending further investigation.
On 22 November 2022, Auyeung Hencent & Day Lawyers wrote to GNT on behalf of Sunnya in the following terms: "We are instructed to raise the following matters of concern with you (Concern): 1. Sunnya has been supplying you with its products for some time; 2. Sunnya's board of directors was recomposed on 31 October 2022, following a shareholders meeting; 3. the newly appointed directors of the board and its newly elected managing director, have investigated the affairs of Sunnya, including its business relationship with you (Investigations); 4. the Investigations has revealed that Sunnya has been supplying you with some of its products at significant under-price (in its view, see below) which includes its 'formulated milk powder with lactoferrin' products sold to you during the course of 2022; 5. the under-pricing is observed from the fact that the 'formulated milk powder with lactoferrin' 60g/can products have been manufactured, packaged, exported and shipped by Sunnya to you at $8.00-$9.00 per unit, when: a. the direct cost to Sunnya of such supply is just about the sale price, without consideration of any overhead costs and marketing costs, leaving Sunnya with no to negative profit; and b. the sale of the same products to other customers in China have generally mandated a per unit price of about $20.00-$22.00, which is more than double of the price applicable to you; 6. the Investigations has also revealed that you appear to be a related party to Sunnya's other directors and stakeholders, Mr Yinghan He and Ms Yanxia Lu, because: a. Ms Lu was a founding majority shareholder of your company, who had contributed 70% of the initial registered capital; b. Ms Lu was a director until as recently as 2019; c. Ms Lu's sibling Ms Yanping Lu , is presently a shareholder of your company; d. You have, on 21 October 2022, demanded Sunnya to transfer an amount of $950,000 to you as a refund of certain deposits, but yet you directed Sunnya to transfer those funds to a company wholly controlled by Ms Lu; 7. the combination of the under-pricing and the beneficiary of that under-pricing being a related party to Mr He and Ms Lu means that Sunnya has a legitimate belief that its interest may have been harmed by the conduct of its directors who have acted in breach of legal duties arising under Australian law, and that your company has been involved in that breach. Whilst the Investigations are continuing, Sunnya believe that it has likely suffered very significant losses as a result of the conduct of Mr He and Ms Lu as described above and in which your company was intimately involved. Sunnya also believes that your involvement in the matters the subject of the Concerns was committed at the direction of, or for the benefit of, Mr He and Ms Lu. As such, Sunnya has decided to withhold further shipment of your orders pending the completion of its investigations, or until further notice. Sunnya has made this decision on the basis that it needs to take all reasonable action to prevent any further losses from arising from the infringing conducts of Mr He and Ms Lu (and from you as their related party). You are welcomed to provide your feedback on the matters raised herein and Sunnya is committed to finding an appropriate way forward in your mutual dealings, past and present. Sunnya's rights are reserved."
GNT did not respond to that letter.
It is difficult to reconcile the allegation in paragraph 4 of the letter that Sunnya had been supplying products to GNT "at a significant under-price … during the course of 2022" with the Plaintiffs' pleaded case in the Sunnya proceedings that, after the conclusion of the Customs Investigation in January 2022, Sunnya entered into only six contracts to supply Neurio-branded products to GNT at export prices, and that Sunnya has not fulfilled any of those contracts. [51]
On 5 December 2022, the Plaintiffs filed their statement of claim, which named GNT as the fourth defendant.
In the meantime, Mr Wang had sent a further email to Mr Wu on 23 November 2022: "I haven't received your reply throughout the time, we are very anxious. Please help to confirm with us the situations of Sunnya company's deposit, packaging material, finished products, and the productions of the orders placed with your company as soon as possible. We will make adjustments of the business arrangements of Sunnya company based on the exact information your company. provides. As we are unable to confirm the exact information with your company, it has affected the business operations of the Sunnya company severely. We hope that, irrespective of what the actual situations are now please help to confirm with us the true situations. All we hope for is to restore Sunnya company's business operations. We understand the trouble brought to you due to the variation of Sunnya's management, but the contact I make with you on behalf of Sunnya company is the normal business behaviour, and I also hope you can tell us the actual situations of our company with your company at the moment. We'll also arrange a visit your company next Thursday and Friday, with the hope to resolved the issues we are now facing with you jointly, for example the issues of the inventory, packaging materials, the funds and the subsequent business operation. If you are busy or it isn't convenient, please arrange the relevant staff to attend to it. Thanks."
Mr Wu replied to Mr Wang by email on 28 November 2022: "1. I've said many times, please do not come to my company until you obtain my consent, if you insist on coming, all I can do is to close the gate and refuse your entry, and if any cost is incurred because of this, I am afraid that I'll hold you liable for it in the future. 1.1 I have already explained the reasons before, it isn't convenient for me, or other staff of my company to offer reception to your company face to face, I only accept email communications in black and white at the moment. The contents of meetings and phone calls aren't able to be fully recorded, any inadvertent communications I have with you may cause my company to face huge financial losses or lose the opportunity to have business cooperation for the long term in the future. 2. In respect of the issues of orders, we have made it pretty clear, for your several orders with us at the moment. They are on hold at this stage, the deposit is paid, but there are no packaging materials (cans and films), the reason why it is inconsistent with your stock 2.1 the quantity is possibly quite small 2.2 There is wastage 2.3 A batch of cans were destroyed as they became invalid due to the defective information on the labels 2.4 As Sunnya didn't continue to make subsequent shipment of correct cans to New Zealand, the productions for these orders did not proceed 2.5 We do not decline the communications with your company on the inventory and the several orders in the future, if you have any specific issues, you can raise them all."
Mr Wang replied to Mr Wu by email on 29 November 2022, asking further questions about what had happened to the number of cans referred to in points 1 to 3 of Ms Chen's 1 November 2022 email which Mr Li had confirmed as correct, and requesting the correct numbers of cans if the numbers in the 1 November 2022 email were wrong. Mr Wang's email stated that the 153,412 empty cans for Neurio "blue diamond" products (product number 4704) referred to in point 3 of Ms Chen's 1 November 2022 email consisted of two containers of cans that had been dispatched from China to Supermega's warehouse on 22 September 2022, and would have arrived at Supermega's factory in New Zealand in October 2022. In relation to the finished products referred to in point 4 of Ms Chen's 1 November 2022 email - 17061 cans of 120g blue diamond immune version Neurio products - Mr Wang noted that the numbers had been worked out by Sunnya's accounting department and confirmed by Supermega staff. Mr Wang asked whether those finished products were in Supermega's warehouse. Mr Wang's email continued: "SUNNYA company has paid the fees for the above empty cans and products, particularly the last products of 17061 cans of immune version, according to the data of our accounting department, the accounts for these products have been settled with your company and payments have been made. our accounting department has all the payments to prove that these are the assets of Sunnya company. If the above empty cans and the goods are no longer in the warehouse of your company, were they picked up by another party, or you aren't able to provide the data due to the coercion from the other party? We can't accept that Sunnya's assets just disappeared like this without any reasons and explanations. Queries towards your following reply: 2.3 a batch of cans were destroyed as they became invalid due to the defective information on the labels May I ask whether you can provide the record of destroying the cans and their numbers? What cans were destroyed? 2.4 As Sunnya didn't continue to make the subsequent shipment of correct cans to New Zealand, productions for these orders did not proceed The cans just arrived in late October, now you simply say they are all gone, was there another party that picked up the container? … Lastly, now that you aren't able to make any productions, can our deposit be refunded to Sunnya company?"
On 30 November 2022, Ms Chen sent a further email to Mr Li, copied to Mr Wang and Mr Wu, attaching Sunnya's spreadsheet showing the calculations behind the stock numbers for empty cans and finished products that had been set out in her 1 November 2022 email. Ms Chen asked Mr Li again to check Supermega's records and stock, and see if there were any inconsistencies with Sunnya's spreadsheet. Mr Li did not respond to that email.
On 1 December 2022, Tahota Law Firm sent a further letter to Supermega stating that Mr He and Ms Lu had resigned from all of their positions with Sunnya, and that they were not authorised to deal with Sunnya's assets. The letter set out the same information concerning the five contracts and the change of management at Sunnya as in the firm's previous letter dated 15 November 2022. [52] The firm then posed the same questions as Mr Wang had put to Mr Wu during their November 2022 email correspondence referred to above, and requested that Supermega provide the information that Sunnya had been seeking by 2 December 2023, failing which Sunnya may commence proceedings against Supermega to recover the loss caused by its failure to provide the information.
Ms Rachel Zhang, the solicitor employed by Tahota Law Firm who caused the 1 December 2022 letter to be sent to Supermega and to Mr Wu, has given evidence that Mr Wu telephoned her in response to the letter on 2 December 2022, and they had a conversation in Mandarin to the following effect: "Mr Wu: All the cans we hold were destroyed because they were unqualified. I received instructions from Sunnya to destroy the cans because they were unqualified, the label on the cans were incorrect. [Ms Zhang]: I see. Mr Wu: It is quite normal for us to destroy the cans which were unqualified because otherwise it would be a waste of space to store them. [Ms Zhang]: Can you please provide me with evidence of destruction of the cans? Mr Wu: Yes, I can provide you with a picture of the destruction. [Ms Zhang]: Can you also provide me with a copy of the instructions you received? Mr Wu: Yes, I will send to you."
Ms Zhang's account of the conversation is consistent with a file note that she made (in English) immediately after the conversation.
Mr Wu gave a different account of the conversation in his affidavit affirmed on 15 September 2023. Mr Wu deposed that he recalled speaking with Ms Zhang, and talking about how Mr Li's inventory numbers were incorrect and that Supermega and Megadairy did not have an exact inventory number. Mr Wu deposed that he recalled talking to Ms Zhang about "possible reasons for the disparity between Sunnya's numbers and Megadairy's numbers", and that, in that context, he said to Ms Zhang that "one explanation for this difference in numbers might be that I destroyed 'some' cans". Mr Wu denied saying to Ms Zhang that he had destroyed all cans.
In cross-examination, Ms Zhang maintained that Mr Wu had told her that he had destroyed all of the cans.
On 5 December 2022, Ms Zhang sent a follow up email to Mr Wu referring to their telephone conversation, and stating: "As discussed, could you urgently confirm: 1. what are the issues in regard to the label, which caused the cans cannot be used; 2. who placed the order for the cans; 3. who notified you that the labels are unqualified and cannot be used, and when did you receive such notification?"
Mr Wu responded to Ms Zhang's questions by email on 7 December 2022, stating: "1, Please receive the detail of the issues plus the attachment of last email. 2, I have no idea whom in Sunnya ordered the cans. 3, We knew the issue about since late July or early Sep not very sure and received from Sunnya staff. 4, We not very sure about what the document means but are waiting for the correct cans to come."
Mr Wu's email attached two documents in Mandarin. According to the certified English translation tendered in evidence, the documents are a report dated 28 September 2022 signed under the seal of GNT and addressed to Nansha Customs concerning "the rectification for the labels on the food imported by our company", together with an attached sample of the rectified label. The report states: "We promise that for imported food, Chinese labels were printed/sticked on every smallest package for sale, and the labels are in compliance with the requirements in relevant laws and regulations of our country …"

[33]

Registration of the NRIO trade mark

On the same day that Mr He and Ms Lu resigned as directors of Sunnya, Sunlife lodged applications in Australia and New Zealand for registration of the following trademark for product classes 5, 29, 30 and 35.
Classes 5, 29 and 30 are the same classes of products in respect of which the Neurio trade marks were registered in Australia and New Zealand. [53] Class 35 is for advertising services.
In their defence filed in the Sunnya proceedings on 22 November 2023, Mr He, Ms Lu, Sunlife and Ms He have admitted that Ms He caused Sunlife to make the applications to register the NRIO trade mark in Australia and New Zealand at the request of Mr He, but say that Sunlife made those applications as agent for Mr Wu or one of his companies on the basis that the trade mark would be transferred to Mr Wu or at his direction or request.
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that he designed and created the trade mark in about 2021. Mr Wu deposed that his idea for the trade mark arose because the business of Supermega and Megadairy included the manufacture of sachets of formulated milk powder which were shipped to China in large cartons, where they would be placed into branded cans before distribution and sale to retail customers. The words "Not for Retail Sale" or "Non Retail Items" were printed on those sachets. Mr Wu gave evidence that he "centralised the concept" of items that were not for individual retail sale to form a brand using the letters "NRi" - an abbreviation of the words "Non Retail Items" - with a broken circle around them. Mr Wu deposed that he had no regard to the Neurio brand when developing the trade mark, and denied that it was intended to sound or appear similar to the name Neurio. Mr Wu refers to the trade mark as "NRI", not "NRIO".
As Mr Wu explained in cross-examination, the objective of Supermega and Megdairy in marking sachets with the words "Not for Retail Sale" or "Non Retail Items" was to ensure that those sachets were not sold to retail consumers individually, and were only sold in cans or other packaging that was labelled with the nutritional and other information required by applicable laws and regulations. Mr Wu does not suggest that the words "Non Retail Items" on sachets manufactured by Supermega and Megadairy were being used as a brand. Mr Wu's evidence does not explain why he says that the manufacture of sachets of milk powder marked as "Non Retail Items" to ensure that they were not sold individually prompted him to abbreviate those words to "NRI", and to develop that abbreviation as a brand. In cross-examination, Mr Wu said that, at the time that he claims to have developed the concept and design for the NRIO trade mark, it "doesn't have any commercial values in the future" and "can only be put together with the packaging of other end products". This raises questions about why Mr Wu went to the trouble of designing the trade mark and discussing it with Mr He, as he claims to have done. No answers to those questions emerge from Mr Wu's evidence.
In his affidavit affirmed on 15 September 2023, Mr Wu referred to a folder of handwritten notes and drawings relating to new ideas about various matters that he has kept throughout the years, including one document that he described as his original handwritten drawings for the design of the "NRI" trade mark. All of the documents in the folder are written in Chinese characters, except the document relating to "NRI" trade mark which is written principally in English.
Mr Wu gave the following evidence in his affidavit affirmed on 15 September 2023: "144. In late 2021 or early 2022, I spoke with Mr He on WeChat. I told him that I had designed the NRI logo. Mr He told me that he was interested in registering a trade mark using that logo. Mr He did not tell me why he was interested to do so. I said to him that it was ok for him to register the trade mark. 145. My view was that I could not register the NRI trade mark myself or through my companies. This is because if I did so, other customers would perceive that I was in direct competition with them. Since I could not register the trade mark, it would have been possible for anyone to register the trade mark once it was in use. To avoid someone else registering the trade mark, I was happy for Mr He to register the trade mark because of my good business relationship with him. 146. I understand that Sunlife registered the NRI logo as a trade mark in New Zealand and Australia."
In cross-examination, Mr Wu gave a different version of the discussion that he says he had with Mr He that resulted in Sunlife applying to register the NRIO trade mark in Australia and New Zealand on 25 November 2022. Mr Wu said that he had made an oral agreement with Mr He, "and this oral agreement is very simple; it only entails the ownership on someone else behalf, which means to own it on behalf of someone else". Elaborating on this version, Mr Wu said: "I owned the brand of NRI and he is interested to have it registered for me and I agreed. To me, that is an oral agreement."
That version is inconsistent with Mr Wu's affidavit referred to above, in which Mr Wu deposed that Mr He was interested in registering the NRIO trade mark, but that he (Mr He) did not tell Mr Wu why he was interested in doing so. Mr Wu's affidavit made no mention of Mr He registering and holding the NRIO trade mark for or on behalf of Mr Wu, and plainly conveys that Mr He had his own interest in becoming the registered owner of the NRIO trade mark. When confronted with this inconsistency in cross-examination, Mr Wu denied that there was any inconsistency whilst at the same time asserting that "[t]he evidence that I am giving now is the most accurate version of what happened".
Paragraph 145 of Mr Wu's 15 September 2023 affidavit extracted above describes reasons why Mr Wu deposed that he was content for Mr He to register the NRIO trade mark. Mr Wu's evidence in cross-examination was inconsistent with paragraph 145 of his affidavit in two respects. First, paragraph 145 refers to a risk that anyone would be able to register the NRIO trade mark once it was in use, and describes Mr Wu's strategy of avoiding this risk by permitting Mr He to register it before it was in use. In cross-examination, Mr Wu gave evidence that he was content for Mr He to register the NRIO trade mark that Mr Wu says he created because "I'm the first one that use this … so I very confident no matter he registered I'm totally entitled to take it back". When the cross-examiner drew to Mr Wu's attention that his suggestion that he had already used the NRIO trade mark before allowing Mr He to register it was inconsistent with paragraph 145 of his affidavit, Mr Wu resorted to a strategy that he deployed on several occasions during his cross examination. Mr Wu initially asserted that there was no inconsistency. When pressed further about the inconsistency, Mr Wu claimed not to understand the question, [54] before arguing that the cross-examiner should reframe the question, and then asserting again that there is no inconsistency and the fault lies with the cross-examiner in failing to understand his (plainly inconsistent) evidence.
Second, paragraph 145 of Mr Wu's affidavit states that he believed that he could not register the NRIO trade mark through one of his companies because, if he did so, customers of his companies would perceive that he was in direct competition with them. In cross-examination, Mr Wu was confronted with evidence that his companies own and promote formulated milk powder products in the Chinese market, in direct competition with customers of Supermega and Megadairy. Those brands are Triamour and Lotcare. When reminded about those brands at this point of his cross-examination, Mr Wu initially said that the use of those two brands was kept "to the minimum level because we simply cannot stifle to death these two existing brands" and that "we had never promoted this. There was no advertisement, there was no exhibition of trade fair… [t]here was no active selling". Mr Wu was then shown a report of an interview that he had given as the Chinese Market Manager for Triamour at the 18th China Children Baby Maternity Expo in Shanghai. Mr Wu then denied that he had given evidence just a short time earlier that the Triamour brand had never been promoted, advertised or exhibited at a trade fair. Mr Wu said: "I didn't say that, that's not what I said … what I said is the trend that we are having now is that we do not have any promotion in relation to that brand". A short time later, Mr Wu said: "I only know that part of the purposes of me participating in this trade fair or exhibition is to promote the brand of Triamour. But this doesn't run against what I just said. I didn't say Triamour just disappeared. I just said that Triamour has not been placed into the, into one of the priorities of the future development of our company, and I also said we have no intention whatsoever, at all, to compete with our customers. These two things are not contradictory."
The cross-examiner put to Mr Wu that his evidence about allowing Sunlife to register the NRIO trademark was untrue. Mr Wu denied this.
As I have already mentioned, Sunlife applied to register the trade mark in Australia and New Zealand on 25 November 2022, approximately one year after Mr Wu says that he agreed to permit Mr He to register the trade mark. In cross-examination, Mr Wu said that, after the agreement that he claims to have made with Mr He, "I did know that it is likely that they are going to have it registered, but I don't know the exact time or date for them to have it registered". Mr Wu's apparent lack of interest in the timing of the application to register the NRIO trade mark is difficult to understand if his agreement with Mr He was an agreement for Sunlife to register the trade mark on behalf of Mr Wu, as Mr Wu claimed in cross-examination (inconsistently with his affidavit).
Sunlife's application was accepted in New Zealand on 14 December 2022 and in Australia on 11 April 2023. As referred to earlier in these reasons, Ms He is the sole director and shareholder of Sunlife. [55] The records of IP Australia describe the trade mark as being for the image shown at [330] above and the word "NRIO".
In cross-examination, Mr Wu said that he knew that Mr He had arranged for Ms He to cause Sunlife to apply for registration of the NRIO trade mark in Australia and New Zealand. I acknowledge Mr Wu's evidence insisting that the trade mark is "NRI" and not "NRIO". However, I will refer to it as the NRIO trade mark in these reasons, consistently with the description in the records of IP Australia.
GABT applied for registration of the NRIO trade mark in China on 6 December 2022. In his affidavit affirmed on 15 September 2023, Mr Wu deposed that GABT's application was not discussed with him before it was lodged, and he became aware of it in about early 2023, after these proceedings had been commenced. In cross-examination, Mr Wu said that he had "no idea" about GABT's application.
On 7 December 2022, Supermega entered into two contracts with Shanghai Gainful (as buyer). Each contract listed Mr Wu as the representative of Supermega. Each contract was for the manufacture and supply of 1g sachets of "NRi" formulated milk powder with lactoferrin to be supplied in 1,500 cartons, with 1,200 sachets per carton. The total price payable under each contract was CN¥480,600. The contracts did not require the sachets to be packaged in cans before being shipped to Shanghai Gainful. Mr Wu gave evidence in cross-examination that he understood that the NRIO-branded sachets to be supplied under these contracts would be placed into cans at some future stage before being sold in the Chinese market. Mr Wu also gave evidence that he understood that Sunlife had applied to register the NRIO trade mark in Australia and New Zealand, but maintained that he did not know that any application had been made for registration of the trade mark in China.
It will be recalled that Shanghai Gainful was named as GABT's import agent in each of the 17 contracts that Supermega had entered into for the manufacture and supply of Neurio-branded products to GABT during the period up to 8 November 2022. Shanghai Gainful was also named as GNT's import agent in each of the ten contracts that Supermega entered into during the period from 7 December 2022 to 12 January 2023 for the manufacture and supply of Neurio-branded products to GNT. Each of those contracts between Supermega on the one hand, and GABT and GNT on the other hand, was for the supply of a specified number of cans of Neurio-branded products, with each can containing 60 sachets. [56] The contract between Supermega and GABT dated 8 November 2022 was for the supply of 30,000 cans, each containing 60 1g sachets of Neurio formulated milk powder with lactoferrin, for a total price of CN¥ 480,600. That equates to a price of approximately CN¥ 16 per can.
The NRIO sachets to be supplied to Shanghai Gainful under the two contracts that Supermega entered into on 7 December 2022 were to be shipped to Shanghai Gainful in cartons, without being packaged into cans. If the sachets had been packaged into cans, with 60 sachets in each can, the total price of CN¥480,600 payable under each contract would have represented an average price per can of CN¥16.
Ms Lu sent a WeChat message to Mr Wu on 6 December 2022, which stated: "Mr Wu, the price is a bit high, like around 17, because it doesn't include the cans."
Mr Wu did not respond in a message, but there were four WeChat audio and video calls between Mr Wu and Ms Lu on 6 December 2022 after Mr Wu received Ms Lu's message.
It was put to Mr Wu in cross-examination that Ms Lu's 6 December 2022 message was part of their negotiations for the two contracts that Supermega entered into on 7 December 2022 for the supply of NRIO sachets to Shanghai Gainful, that the price under negotiation at the time of the message would have represented approximately CN¥17 per can if the contract had required Supermega to package the sachets into cans, and that Ms Lu was negotiating to reduce the price on the basis that Supermega would not be incurring the costs of packaging the NRIO sachets into cans. Mr Wu denied this, and said that he had no negotiations with Ms Lu in relation to NRIO products. Mr Wu went further, and challenged the cross-examiner's interpretation of the 6 December 2022 message as wrongly assuming that prices negotiated under previous contracts for the manufacture of Neurio-branded products had included a price component referable to the supply of the sachets in cans. Mr Wu said that "no matter what business relationships we had or business dealings we had with Sunnya or GABT in relation to milk powder products, the price of the can has never been - has never been included so this is your pure speculation". Mr Wu said that, although he had calculated prices for Neurio-branded products on a per can basis, he had never charged for the empty can, which was shipped to Megadairy by GNT free of charge to Megadairy.
Later in his cross-examination, Mr Wu agreed that, when sachets are required to be shipped to the customer packaged in cans, the canning process involves additional work for Megadairy. Mr Wu said that, in most cases, he would therefore charge more for the same product manufactured in sachets packaged in cans, compared to sachets packaged in cartons. However, Mr Wu almost immediately reversed his evidence, saying that there was "no scope" for a discount to the price for a product merely because it was not required to be packaged in cans. Mr Wu denied that there was any inconsistency in his evidence, and claimed that the interpretation of his answers had been inaccurate, and that this had confused the cross-examiner.
Although he initially denied that the 6 December 2022 We Chat message from Ms Lu related to the NRIO contracts entered into the following day, Mr Wu later said in cross-examination that he simply could not recall what the message was about. However, Mr Wu maintained his firm denial that Ms Lu had played any part in the negotiation of contracts with Supermega for the manufacture and supply of NRIO sachets to Shanghai Gainful.
There is no evidence that Mr Wu objected to, or was even surprised by, Shanghai Gainful purchasing products to be branded with the NRIO trade mark that Mr Wu claims to have developed and, on one version of his evidence, claims to have caused Sunlife to register and hold on his behalf.

[34]

Sale of co-branded Neurio and NRIO formulated milk powder products in China

Mr Wang first became aware of the applications for registration of the NRIO trade mark on about 17 February 2023. He did not appreciate their significance for Sunnya until about late March or early April 2023 when the NRIO trade mark began to appear on Neurio-branded products sold in China.
On 31 March 2023, one of Sunnya's sales consultants in China provided Sunnya with a photograph of a tin of Neurio "Gold" formulated milk powder with lactoferrin which the consultant had recently purchased in China. Neurio Gold tins have a gold-coloured removable lid. According to Mr Wang's evidence, the tin shown in the photograph has Sunnya's updated artwork design of the Neurio Gold tins, which includes the trade mark and a green, blue, yellow and pink diagram in the bottom right section of the front face of the tin. However, the tin shown in the photograph has an NRIO trade mark in addition to the Neurio trade mark. According to Mr Wang's evidence, Neurio-branded products manufactured for Sunnya had never borne the NRIO trade mark on their packaging, and Sunnya had never provided its milk powder manufacturers with Neurio tins bearing the NRIO trade mark alongside the Neurio trade mark. Moreover, Sunnya had only provided Neurio Gold tins with the updated design to milk powder manufacturers engaged by Sunnya in Australia. Sunnya had not provided the updated design Neurio Gold tins to Supermega or Megadairy. The photograph of the back of the tin supplied by Sunnya's sales consultant in China depicts a label containing product information. According to the certified English translation of that information, it identifies New Zealand as the product's country of origin, Megadairy as the manufacturer of the product (by reference to Megdairy's manufacturer registration number in China), and GNT as the distributor of the product in China.
Neurio "Blue" products are packaged in a tin that has a blue diamond-like pattern and a blue-coloured removable lid. On about 4 April 2023, Mr Wang became aware of a notice on the Tmall Supermarket platform - one of the leading e-commerce platforms in China, which hosts online stores for the sale of products by merchants directly to customers. The notice contained pictures of what was described as the "old" and "new" labels for Neurio Blue products. The "new" label depicted in the notice bore the NRIO trade mark in addition to the Neurio trade mark, with the individual sachets contained in the "new" tins displaying the blue diamond pattern with the NRIO trade mark. The "new" sachets did not bear the Neurio trade mark. By contrast, the "old" label Blue tins bore the Neurio trade mark without the NRIO trade mark, and the individual sachets within the "old" tins had a pattern that repeated the word "Neurio" in diagonal lines across the sachet. The notice published on the Tmall Supermarket platform included the following statements (emphasis added): [57] "Upgrade notice for Niu Rui You NRI series blue diamond version lactoferrin products Niu Rui You blue diamond version lactoferrin receives an upgrade to its ingredients and label on the basis of the Niu Rui You Neurio series. The can and the packets now has the NRi trademark. The following upgrades will be applied to Niu Rui You blue diamond modified milk powder with lactoferrin 1. The trademark will be upgraded as what is demonstrated in the pictures below. Besides the original Neurio Niu Rui You trademark, the NRi trademark will be added. The packets will show the NRi trademark and logo for the public account. 2. Change of country of origin The country of origin changes from Australia to New Zealand. 3. Certification logos added on the products HACCP, RMP, GMP, Made in New Zealand logos, logos for New Zealand Food and Drug Safety College and Sensitive Population Manufacturer 4. Upgraded ingredients Niu Rui You blue diamond version upgrades to dual prebiotics …, added immunoglobin 1g/100g. No sucralose added. 5. Adjustments to the nutrition table The figures in the nutrition table are updated accordingly. The figure for lactoferrin remains unchanged. 6. Changes to manufacturer and address. Directly showing the manufacturer in New Zealand and its address. During the transition period, the new version and the old version will be dispatched randomly. Both new and old versions are genuine products of our company. Please use them without any concern. If there is any question, please contact the customer service …"
On 4 April 2023, Sunnya received photographs of a tin of Neurio "Blue" product that, according to Mr Wang's evidence, was purchased in China on 23 March 2023. The tin bears the NRIO trade mark in addition to the Neurio trade mark. The NRIO trade mark appears to have been added by applying a sticker to the tin. The label on the back of the tin, and the stamp on the bottom of the tin, identify Megadairy as the manufacturer of the product. The sachets contained within the tin display the blue diamond pattern with the NRIO trade mark. The sachets do not bear the Neurio trade mark. The QR codes printed on the tin and sachet are linked to the website neurio.com.cn and the Neurio WeChat account. As noted earlier in these reasons, GABT is the registered owner of the domain name neurio.com.cn. GABT is also the registered owner of the Neurio WeChat account. The "contact us" information on the website provides an email address and service hotline telephone number. According to Mr Wang's evidence, the email address is controlled by the He Parties and the telephone number is a number that was previously used by Sunnya that is now being used by the He Parties.
Sunnya tendered copies of three notices extracted by Mr Wang from the "corporate notices" tab of GABT's website neurio.com.cn on 6 April 2023. One notice relates to Neurio Blue products, one notice relates to Neurio Gold products, and one notice relates to Neurio White products. All notices bear a publication date of 4 April 2023. The home page of GABT's website on which the notices were published states: "Welcome to the Official Website of the Australian Brand Neurio". The images and text of the notice relating to Neurio Blue products are the same as in the notice published on the Tmall Supermarket platform referred to above. The notices relating to the Neurio Gold and White products are in similar terms to the notice relating to the Blue products. Those notices refer to the "upgrade" of the Neurio trade mark to include the NRIO trade mark, state that "the new version and the old version will be dispatched randomly" during "the transition period", and state that the "new and old versions are genuine products of our company". [58] The images in those notices show the addition of the NRIO trade mark on the "new version" of the tin, with the graphic design of the label otherwise appearing to be the same as the "old version" of the tin. The "new version" of the labels for each type of tin set out Megadairy's name, address and manufacturer registration number where the "old version" had contained Sunnya's details as the supplier of the products. The notices depict the sachets placed inside each type of tin, with the "new" sachets omitting the Neurio trade mark that appears prominently on the "old" sachets. The "new" sachets display only the NRIO trade mark, but have been enhanced with the same graphic design that appears on the "old" and "new" versions of the tins for the relevant type of Neurio product. For example, the Blue tin sachets bear the NRIO logo together with the same blue diamond-like pattern that is used on the Neurio Blue tin labels. The "new" sachets for each type of tin have QR codes printed on them. The notices do not identify the distributor of the Neurio/NRIO-branded products in China.
In his affidavit affirmed on 15 September 2023, Mr Wu gave evidence that Megadairy manufactured sachets of powdered milk products bearing the NRIO logo which it exported to Shanghai Gainful in China in large boxes. Megadairy did not package those sachets into cans before exporting them. Mr Wu gave evidence he was unsure whether or not the NRIO sachets manufactured by Megadairy had a QR code, because he had personally not seen QR codes on those sachets in his factory. In cross-examination, Mr Wu acknowledged that it was possible that the sachets had QR codes on them, but said that it was impossible for him to be sure about "such trivial details".
Mr Wu gave evidence that he has a general practice of retaining a bag of up to a few hundred sample sachets from most product batches manufactured by Megadairy for quality assurance purposes in case of any quality complaints raised after the products have been shipped to the customer. The samples are retained until the expiry date. Mr Wu's 15 September 2023 affidavit exhibited photographs that he described as having been taken on 11 September 2023 of NRIO sachet samples. Mr Wu deposed that, whilst the samples are undated, it was his recollection that they had been manufactured in 2023. The photographs depict bags of sachets with three different graphic designs, each of which included the NRIO logo. One of the sachet designs incorporates the same artwork as the Neurio Gold tins. Another sachet design shown in the photographs incorporates the blue diamond-like pattern from the Neurio Blue tins. None of the sample sachets depicted in the photographs bear QR codes, dates or manufacturing batch numbers.
It is curious that the samples referred to in Mr Wu's affidavit bore no dates or manufacturing batch numbers, and that Mr Wu gave evidence that he had no records to which he was able to refer to identify the manufacturing date of those samples. The samples could not serve the quality assurance purpose described by Mr Wu if a particular sample could not be associated with a particular product batch manufactured on a specific date.
In cross-examination, Mr Wu denied that he was aware of the content of the notices before they were published on GABT's website, and denied that he knew that the notices would name Megadairy as the manufacturer of the "new" or "upgraded" products. Mr Wu said that he first became aware of the notices published on GABT's website when the Plaintiffs served an affidavit in these proceedings in April 2023 that exhibited copies of the notices. Mr Wu acknowledged that the notices identify Megadairy as the manufacturer of the "new" products. As explained above, the "new" sachets displayed the NRIO trade mark on Neurio graphic designs, and had QR codes printed on them. The following exchange then occurred between Mr Wu and the cross-examiner: "Q… you are listed as the manufacturer. Correct? A. INTERPRETER: Yes. Q. That was the fact. Correct? A. INTERPRETER: It was not the fact. Q. That's just not the truth, is it? A. INTERPRETER: I have evidence to prove what I said in relation to that this is not the fact, if you would like to - if you would like to hear my evidence. Otherwise I don't want to be accused of arguing my case. Q. Mr Gronow can take that up if he wishes, but what I'm putting to you is that manufactured the sachets of the kind that appear at the bottom of 6981. That's the simple truth of the matter, isn't it? A. INTERPRETER: No. Q. They had what you call the NRI logo on them. Correct? A. INTERPRETER: If my previous answer was no and if you - if the follow-up question that you are going to ask are based on the fact that I said no too, then my answers would be no. Q. You know that you manufactured these sachets with what you call the NRI logo on them, don't you? A. INTERPRETER: I did manufactured NRI products. Q. You manufactured what you call NRI products to be placed in Neurio tins. Correct? A. INTERPRETER: I highly doubt it. Q. You're not in a position to deny it. Is that right? A. INTERPRETER: Yes, I'm not in a position to 100% deny this. Q. Even your answer that you highly doubt it, or whatever it was, that's just not a truthful answer, is it? A. INTERPRETER: My answer is truthful."
The issue that the cross-examiner was prepared to leave for Mr Gronow KC to take up was indeed raised with Mr Wu in re-examination. When asked about the evidence that he had wanted to give about why the notices list Megadairy as the manufacturer when Mr Wu maintains that it was not the manufacturer of the NRIO sachets that were packaged into Neurio tins as depicted in the notices, Mr Wu answered: "What I want to say is these things can be written up by anyone, so it is not necessarily the truth. They can also list other companies as the manufacturer and they cannot be stopped by anyone."
Mr Wu gave evidence in cross-examination that, after becoming aware of the notices which he says first came to his attention in April 2023, he did not take any step to complain to GABT or anyone else about the notices identifying Megadairy (incorrectly, according to Mr Wu) as the manufacturer of the NRIO-branded sachets depicted in the notices as being sold in the Neurio/NRIO-branded tins. Mr Wu gave evidence that he did cause one of his employees to "ask some questions to Shanghai Gainful", and the employee replied to him words to the effect of "I don't know", so Mr Wu's position is "I don't know". Mr Wu also gave the following evidence about enquiries that he made with other employees of Supermega and Megadairy: "We have already made inspections in relation to the fact whether the sachets of NRI was actually, sorry, were actually put into the cans that exported into China, and all the, all my colleagues either in the manufacturing process or from the QA department or from the sales department all answered they don't know. So as the director of the company, the information that I gathered from all these answers are those words, 'I don't know,' adding up together. So the information that I have already collected is, 'I don't know.'"
Mr Wu denied that he deliberately refrained from making inquiries directly with GABT, GNT and Shanghai Gainful. He denied that he did not care what was happening with NRIO sachets that Megadairy was manufacturing. The cross-examination continued: "Q. But you didn't have enough interest to ask, is that right? A. INTERPRETER: This is the policy of our companies. We only face the direct complaint and like your case, and I would face it, but we would not process the complaints that we hear about or indirect complaints. Q. You knew that this was part of the plan to associate what you call the NRI logo with Neurio, correct? A. INTERPRETER: Incorrect. Q. That's what you understood what was happening by those notices, correct? A. INTERPRETER: No, that's not the case. Q. You didn't make inquiries because you knew what you'd be told, that's correct isn't it? A. INTERPRETER: No. Personally I didn't want to get involved. And second, the policy of the company prescribes that we don't get involved - sorry, we don't process indirect complaints. And third, my staff members have already made inquiries. Q. Just dealing with that, when you say it's your policy not to get involved in complaints, this was a notice stating that you had manufactured goods, wasn't it? A. INTERPRETER: Yes, those notices are coming from the, at the commercial level. So in terms of level, compared with the complaints in relation to quality, these kind of notices are coming at a very low level. Q. That's not an honest answer is it? A. INTERPRETER: This is definitely an honest answer. If you need my explanation I'm ready to give it to you, and this is the common practice within our industry. Q. You are arguing a case that you think most minimises your liability, that's right isn't it? A. INTERPRETER: No, the policy of our company is to minimise the personal liabilities of myself. We are a company providing food product - sorry, manufacturing food products for millions of customers on a monthly basis. If we deal with every individual gossip, for example someone feels uncomfortable after eating our product, and we get involved in processing or dealing with these complaints, there's no way for our company to survive. So we will only face directly if someone make a direct complaint and we will face these complaints directly. Q. We're not talking here about someone having indigestion after a milk chew are we? A. INTERPRETER: That's correct, but human health is more important. Q. You sought to liken this notice with someone feeling sick after a milk product, didn't you? A. INTERPRETER: Yes, that's what I meant. I think even though there were some complaints or some legal proceedings against our companies in relation to human health, there is no way for us to deal with every individual one of them, let alone those commercial proceedings. Q. What we're talking about here is evidence that was served as part of a court case in which your companies were defendants, correct? A. INTERPRETER: That's correct. Q. And you deliberately refrained from making inquiries of GABT, GNT and Shanghai Gainful, that's right isn't it? A. INTERPRETER: I have to say that I have already had inquiry done within my capacity, within the capacity that my company can verify. If that goes beyond the capacity of our company or companies, all those inspections or inquiries would become invalid, and then in that case my answer to a question may be wrong. Q. You're able to ask GABT aren't you? A. INTERPRETER: Yes, at that time I had the capacity. Q. And you're able to ask GNT, correct? A. Yes, I was able to do so. Q. And you were able to ask Shanghai Gainful as well, correct? A. INTERPRETER: Yes, I would be able to pose a direct question with Shanghai Gainful if I could have access to the contact details of Shanghai Gainful."
Mr Wu confirmed in cross-examination that, after April 2023 when he says that he first became aware of the notices published on GABT's website, Supermega proceeded to supply NRIO sachets to Shanghai Gainful, and to receive payment for those goods.
Mr Wu denied that he knew when Supermega entered into the two contracts for the supply of NRIO sachets on 7 December 2022 that Mr He and Ms Lu had a plan to have NRIO sachets manufactured by Supermega or Megadairy in New Zealand, to be packaged in Neurio tins in China so as to cause the NRIO and Neurio brands to become associated with one another, and to then cause those tins to be sold in China by GABT, GNT or Sunlife. Mr Wu denied that Mr He and Ms Lu's purpose was to continue to divert Sunnya's business in the sale of Neurio products by adding the NRIO trade mark to the Neurio trade mark. Mr Wu denied that it was obvious to him that this was what was happening when he became aware of the notices published on GABT's website referred to above because "I personally don't believe whether the sachets with these QR codes were manufactured in my factory". Mr Wu denied knowing that Mr He and Ms Lu had caused the notices to be published on GABT's website, denied knowing that they were breaching duties which they owed as former directors of Sunnya, and denied knowing that they were not acting honestly.
Mr Wu said that, as the director of Supermega and Megadairy, he did not personally inspect every sachet manufactured by Megadairy and exported by Supermega. He therefore accepted that he could not definitively say that Megadairy had not manufactured the NRIO sachets depicted in the notices, but "generally I believe they don't have QR code". Mr Wu reiterated that he had made inquiries to ascertain whether the NRIO sachets with QR codes had been produced in Megadairy's factories. The cross-examination then continued: "Q. You say that but you also say you were unsure as to whether or not it was manufactured, correct? A. INTERPRETER: First, there's no evidence to prove that we have manufactured these products because the products that we are referring to here have already been exported to the Chinese market. The evidence left for us to make inquiry with refers to the fact that we cannot draw, we cannot say no to the question. But, however, in relation to the fact that whether those products that have already been exported to China, whether there are any of those products, we don't know. A. A. WITNESS: Our result of the inspection was I ask a company person; I said 'Do we have the QR code product?', and they say they don't know. And then we see the retention sample. We find our retention sample doesn't have a QR code. But, however, we already export the product you mentioned in the, in the, in your affidavit, say there's a certain batch number. And this product, most of them already been shipped out. We have no way to do further inspection, is there any of the product contained any QR code sachets. So our inspection result is we don't know. My, my employee told me 'We don't know', so I have to say 'We don't know.' Q. So you say that most of the products were shipped; so not all, is that right? A. WITNESS: I mean all. But normally we keep some called retention sample as some record of the, of the product in case in some quality compliance come, say 'Your, your product have some very bad,' what say, how to say in English, "Ingredient is" - A. INTERPRETER: Poisonous. A. WITNESS: Yeah, and we might still keep a little bit to prove that our products no problem, or we can send them to the lab to do further test and can come back some inspection. But compare with the, the amount we send out, this is a very small portion, for example, a few hundred gram, or hundred sachets, 50 sachets, like that. This is a, this is a, in this industry how we comply with the government requirement. Q. Your answer as to most was correct, wasn't it? A. INTERPRETER: All what I said is correct. Q. You kept some of these sachets for compliance purposes, didn't you? A. INTERPRETER: That compliance requirement is coming from the government. Q. Which is why you complied with it, correct? A. INTERPRETER: Yes. Q. So your answers that you didn't know one way or the other as to whether there was a QR code on these sachets is simply not honest, is it? A. INTERPRETER: My answer is a truthful answer, but I don't understand your question. Q. You know perfectly well that you manufactured sachets with a QR code, don't you? A. INTERPRETER: Of course we don't know - sorry. Of course we didn't know. Q. And your suggestion that none were retained, and therefore you couldn't check, is a false answer, isn't it? A. INTERPRETER: My answer is always truthful one."
It is difficult to reconcile Mr Wu's evidence denying or highly doubting that Megadairy manufactured the "new" NRIO sachets that were distributed and sold in Neurio/NRIO-branded tins in China with his evidence given earlier in his cross examination when Mr Wu admitted that he knew that the NRIO sachets that Supermega exported to Shanghai Gainful in China were eventually packaged into tins with the Neurio brand.
Sunnya also tendered notices extracted by Mr Wang on or about 17 April 2023 from the JD e-commerce platform, the website Neurio.com.cn and the Neurio WeChat account owned by GABT. Those notices contain statements to the effect that counterfeit "Niu Rui You/Neurio" products have been sold through unauthorised shops on e-commerce platforms. The notices implore customers to buy only products with the correct packaging. The notices display images of Neurio-branded products bearing the JAT logo. These are described in the notices as "counterfeits". Mr Wang gave evidence that Sunnya began incorporating the JAT logo alongside the Neurio trade mark on the packaging of Neurio-branded products that were manufactured by Sunnya's manufacturer in Australia from about February or March 2023. The notices published on the Neurio.com.cn also include a notice dated 16 April 2023, which states: [59] "The owner of Niu Rui You brand has recorded the trademark Niu Rui You with the Chinese Customs … Niu Rui You products imported by importers recorded by the Chinese Customs are the only genuine products, and only these products are entitled to the quality guarantee and after-sale services from the owner of the Niu Rui You brand."
On 20 April 2023, Sunnya resolved to temporarily suspend the supply of Neurio-branded products to China. According to Mr Wang's evidence, Sunnya took this step in order to avoid further confusion in the Chinese market, and in order to prevent loss that Sunnya would sustain if goods were confiscated or held up by Chinese Customs.
At the same time, Jatcorp resolved that one of its wholly owned subsidiary companies would transfer to Sunnya the ownership of the registered Australian trade mark "Moroka" and the registered Chinese trade marks "Moroka" and "Mo-Lan-Ka" for nominal consideration. Sunnya issued a public statement in the following terms on 21 April 2023: [60] "Notice of Adjusting the Sales Strategy for Neurio Niu Rui You Products in China Since currently there are many counterfeits of our Neurio Niu Rui You brand products in Mainland China, to maximise the protection of the rights of consumers and reputation of our company, and to prevent the counterfeits from being confused with the genuine products, after much deliberation, our company decides to upgrade and replace the Niu Rui You brand products and make adjustments to the strategies for the Chinese market. The details of the measures are: 1. Temporarily stop supplying Niu Rui You brand products to Mainland China (including international e-commerce and general importation), and completely upgrade Niu Rui You brand to Moroka Mo Lan Ka brand. 2. The packaging and the ingredients of the Neurio Niu Rui You brand products will be upgraded to the packaging and the ingredients of the Moroka Mo Lan Ka brand: a. Niu Rui You platinum version will be upgraded to Moroka Mo Lan Ka platinum version b. Niu Rui You blue diamond version will be upgraded to Moroka Mo Lan Ka blu diamond version c. Niu Rui You immunity version will be upgraded to Moroka Mo Lan Ka immunity version d. Niu Rui You middle-aged and senior version will be upgraded to Moroka Mo Lan Ka middle-aged and senior version The above measures will take place from 18:00 on 21 April 2023. The genuine products purchased by the Chinese consumers (with JAT logo and the kangaroo logo for Australian Made) continue to be protected by the company. The products without JAT logo and the kangaroo logo for Australian Made are all counterfeits. Our company will not be able to guarantee the quality of these products or provide customer services for them. …"
In what appears to have been a reaction to Sunnya's public notice, Megadairy published a notice on 21 April 2023 responding to what it described as defamatory statements and false rumours published by Sunnya. Megadairy's notice included the following statements: [61] "1. The claim made by Sunnya that the Niu Rui You Neurio products produced by our company infringe on their rights is untrue. Since 2019, our company has been authorised by the owner of Niu Rui You Neurio brand in China, Australia and New Zealand, and this authorisation is still in effect at the moment. Meanwhile, we made a long-term supply agreement with the trademark owner of Niu Rui You in China and Australia in 2015, and this agreement is also in effect. Therefore, there is no infringement of rights. … 5. Sunnya defamed our company by claiming that we produced counterfeit products without their authorisation. We believe that the trademark authorisation in the final destination of sale has the strongest legal effect. Sunnya does not have the trademark authorisation for Niu Rui You Neurio in mainland China. Therefore, the products produced by our company are the compliant genuine products in mainland China, while Sunnya's products, which have no authorisation in China, might actually be the counterfeits."
GABT responded to Sunnya's public notice issued on 21 April 2023 by publishing a notice in the following terms under the GABT seal on 22 April 2023 on the Chinese social media app known as "Little Red Book": "Notice in relation to the significant misleading information about the faked Neurio products with JAT logo being upgraded to Mo Lan Ka. The Australian maker of the faked Neurio products with JAT logo released a statement via its right infringing platform and claimed that from 18:00 on 21 April 2023, the Niu Rui You Neurio brand products will be upgraded to Moroka Mo Lan Ka brand, and products with Niu Rui You Neurio brand will temporarily not be supplied to Mainland China (including international e-commerce and general importation). Niu Rui You Neurio brand was established more than 10 years ago and has been following the principle of 'new for you, top priority for health'. Its brand value and product quality has been trusted and supported by the consumers in China and overseas. The owner of Niu Rui You Neurio brand will continue to grow the Niu Rui You brand with imported products in original packaging, and will never change its brand name. Niu Rui You brand has never changed or had any plans to change the names and design of its products. Any allegation that Niu Rui You had changed its name is cheating and misleading. We urge the consumer to buy products with Niu Rui You trademark at the time of purchase. To protect the legitimate interests of the consumers, Niu Rui You Neurio will fight against any counterfeits of Niu Rui You products, and will held the held the behaviours that infringe the interests of Niu Rui You legally accountable and seek monetary damages. We also welcome the consumers to report the counterfeits or infringements. The owner of the Niu Rui You brand will offer assistance. Owner of the Brand: Guangzhou Aotea Biological Technology Pte Ltd 22 April 2023"
Sunnya continues to supply Neurio-branded products to customers outside of China, including in Australia and New Zealand.
During April and May 2023, Sunlife has continued to market and sell Neurio/NRIO-branded products in China, including at the China Import and Export Fair in May 2023 (also known as the Canton Fair). Mr Wang gave evidence that, based on his experience in the industry, the Canton Fair is the largest trade fair in China and is a platform for companies from China and around the world to promote and sell their products, make business deals and distribution arrangements, and explore new markets. At the Canton Fair, Sunlife displayed NRIO-branded sachets together with Neurio/NRIO-branded tins of formulated milk powder products on a display table that bore the NRIO trademarks and an additional logo - "Niuruiyou" in English characters and the equivalent Chinese characters. Ms He was present at Sunlife's booth at the Canton Fair. Neurio-branded products have also been advertised on high-speed rail lines in China. Neurio-branded products continue to be sold to customers in China through e-commerce platforms. On 8 May 2023, an upgrade notice published on the GABT-owned website www.neurio.com.cn stated that the appearance of tins had been upgraded by the "NRi trademark" being printed onto the tins rather than on a sticker affixed to the tins.
Mr Wu gave evidence that, after he learned that "the NRI brand" was the subject of these proceedings, he caused his assistant to send correspondence to Mr He informing him that "we will take back" the Australian and New Zealand "NRi" trade marks, and requesting that Sunlife sign deeds assigning the New Zealand trade mark to NZFDA and the Australian trade mark to South Pole IP. Sunlife transferred the New Zealand NRIO trade mark to NZFDA in late March 2023. In cross-examination, Mr Wu denied that this transfer was instigated by Mr He and Ms Lu to "cover their tracks" in relation to the manufacture, export and sale of NRIO sachets in Neurio-branded tins to assist their defence of these proceedings. Mr Wu also denied that he had invented the story that the NRIO trade mark had its origins in the "Non Retail Item" stamp, and that the trade mark was in fact derived from the Neurio name and intended to be used in conjunction with the Neurio trade mark in China. Mr Wu maintained that NRIO was his trade mark which he had required to be transferred back to him in March 2023 because he lacked confidence in Sunlife's ability to protect the trade mark in these proceedings. There is no evidence that Mr Wu took any steps to "take back" the NRIO trade mark in China that GABT had applied to register.
On 26 May 2023, this Court made further interim orders in the Sunnya proceedings, including orders (1) restraining Mr He, Ms Lu, Sunlife, and Ms He from taking any steps to distribute, manufacture, sell, market, or export any Neurio-branded products to or for any person other than Sunnya (or persons authorised by Sunnya to distribute, manufacture, sell, market, or export such products); (2) restraining Sunlife from selling, transferring, or otherwise dealing with the pending Australian NRIO trade mark; (3) restraining Sunlife from using or authorising any other party to use the pending Australian NRIO trade mark for the purpose of distributing, marketing, manufacturing, selling or exporting any NRIO-branded products; (4) restraining NZFDA from selling, transferring, or otherwise dealing with the registered New Zealand NRIO trade mark; (5) restraining NZFDA from using or authorising any other party to use the New Zealand NRIO trade mark for the purpose of distributing, marketing, manufacturing, selling or exporting any NRIO-branded products; and (6) restraining Mr He, Ms Lu, Sunlife, Ms He, and NZFDA from taking any steps to distribute, manufacture, sell, market, or export any NRIO-branded products to or for any person (including NRIO-branded products that contain QR codes or other links to the GABT-controlled website neurio.com.cn, the GABT-controlled Neurio WeChat account, or any other internet source referring to Neurio, or that are to be sold to ultimate consumers in China in packaging with Neurio branding).

[35]

Manufacture and supply of Guamis products in the period from December 2022

GNT commenced placing orders with Supermega for Guamis products in December 2022. Between 13 December 2022 and 4 January 2023, GNT entered into sales contracts with Supermega to purchase a total of approximately 12,300 cans of Guamis Compound Lactoferrin & Taurine Powder and approximately 100,000 bottles of Guamis-branded health supplements in the form of liquid drops and syrups - Guamis Fortified Calcium Compound Beverage Syrup, Guamis Fortified Iron Compound Beverage Syrup, Guamis Fortified Zinc Compound Beverage Syrup, Guamis Compound Enzyme Drops, and Guamis Lactase Drops. The Guamis liquid products ordered by GNT are the same as the Neurio/Guamis liquid products that Supermega had been supplying to Sunnya, save for the omission of the Neurio brand. [62]
In cross-examination, Mr Wu gave evidence that he was aware of GNT's orders at the time they were placed, and was aware that GNT was selling those Guamis products in China. However, he denied knowing that this was occurring at the direction or request, or with the encouragement or endorsement of Mr He and Ms Lu, although he said that he understood that Mr He controlled Sunlife to some extent. Mr Wu also denied being aware of the almost identical packaging of the Neurio/Guamis products that Supermega had produced for Sunnya prior to November 2022, and the Guamis products that it had commenced producing for GNT from December 2022. Mr Wu said that he simply did not know whether or not the packaging was similar, and his staff would not have paid attention to such matters.
Mr Wang gave evidence that, from about mid-January 2023, he observed that Guamis-branded products were marketed on Chinese social media platforms, and on the website www.guamis.cn, which is controlled by GABT. Screen shots from that website referred to in Mr Wang's affidavit affirmed on 16 August 2023, and tendered by Sunnya, show that the types of products and the packaging of the products sold through the website was the same as the Neurio/Guamis-branded products marketed on Sunnya's website referred to at [198] above, except that the Neurio trade mark had been removed from the packaging.
Mr Wu gave evidence that he became aware for the first time during the course of these proceedings that a GABT-controlled website had been developed promoting the Guamis brand. Mr Wu gave evidence that he has never accessed that website.
As I have mentioned earlier in these reasons, GABT has been the registered owner of the Chinese trade mark "Jia Min Si" since before 2018. GABT applied for registration of the Guamis trade mark in China on 18 May 2022. That application is still under examination. In the meantime, it appears from an article published in or about May 2023 on the GABT-controlled website www.guamis.cn that GABT has been developing an association between the Jia Min Si brand and the Guamis brand. The article refers to the "Guamis Jia Min Si brand".

[36]

Sale of "sticker tins" in the period since February 2023

Mr Wang gave evidence that, in early February 2023 - before the Neurio/NRIO-branded tins began to appear in the Chinese market - Sunnya was informed by one of its agents in China that there appeared to be "some questionable 'Neurio' products in the market, which had an odd sticker applied to them". Sunnya then arranged for one of its agents in China to purchase a can of Neurio White Tin lactoferrin milk powder and a can of Neurio Blue Tin lactoferrin milk powder. The agent did so, and provided Sunnya with photographs of the two cans.
The details printed on the can for the White Tin product, as photographed by the agent, identified Megadairy as the manufacturer of the product, and the date of manufacture as 13 December 2022. The QR code printed on the can itself, as photographed by the agent, was linked to Sunnya's website. However, a sticker that had been applied to the can contained a different QR code that was linked to a WeChat account operated by GABT, and the contact details within that account were telephone numbers and email addresses that Mr Wang believes (on the basis of information provided to him by Mr Zhang) are controlled by the He Parties. The sticker label identified Megadairy as the manufacturer of the product (through its manufacturer registration number in China - CNZL17021908310061) and GNT as the general distributor of the product in China, and contained no reference to Sunnya.
Mr Wu gave evidence that Megadairy manufactured a batch of sachets with the batch number identified on the White Tin can referred to above to fulfill a sales contract entered into on 8 November 2022 between Supermega (as seller) and GABT (as purchaser) for 30,000 1g sachets of Neurio formulated milk powder with lactoferrin, to be supplied in cans with 60 sachets per can. That sales contract is one of the 17 contracts that Supermega entered into with GABT in the period from 31 October 2022 (when Mr He and Ms Lu lost effective management control of Sunnya) and 8 November 2022 (shortly before this Court made interim orders in the Sunnya proceedings on 10 November 2022 requiring Mr He, Ms Lu and GABT to withdraw their request for the assignment of the New Zealand Neurio trade marks to GABT, and restraining them from making any further request). [63] The CIPL for that product batch describes the sachets as having been sh`ipped in boxes. Mr Wu gave evidence that, at some stage between the parties entering into the sales contract and Megadairy receiving instructions to ship the products, Megadairy must have received instructions to ship the sachets in boxes without packaging them into cans. Mr Wu has no record of that instruction, and cannot specifically recall receiving the instruction. Mr Wu gave evidence that he did not authorise those sachets to be packaged into a can bearing Megadairy's manufacturing details. There is no evidence of any reason why Mr Wu's authorisation would have been required, given that the sachets had in fact been manufactured by Megadairy.
The details printed on the can for the Blue Tin product, as photographed by Sunnya's agent, identified Megadairy as the manufacturer of the product, the date of manufacture as 3 June 2022, and the can as being part of batch number NE06220011. The QR codes printed on the can itself, as photographed by the agent, was linked to Sunnya's website. However, a sticker that had been applied to the can contained a different QR code that was linked to a WeChat account operated by GABT, and the contact details within that account were postal and email addresses that Mr Wang believes (on the basis of information provided to him by Mr Zhang) are controlled by the He Parties, and a service hotline telephone number that corresponds with the number published on GABT's website neurio.com.cn. The sticker label identified Megadairy as the manufacturer of the product (through its manufacturer registration number in China) and GNT as the general distributor of the product in China, and contained no reference to Sunnya.
The Plaintiffs tendered a copy of Supermega's CIPL for batch number NE06220011, which records that the batch comprised 2g sachets of Neurio modified milk powder with lactoferrin that were shipped to GNT in 1,225 cartons, with each carton containing 1,500 sachets. The CIPL names GNT as both the purchaser and the consignee for the shipment.
There is no evidence of the volume of Neurio-branded products sold bearing a sticker label the same or similar to the ones referred to above, directing consumers who scanned the QR code to the GABT WeChat account rather than the Sunnya website.
Mr Wu gave evidence that the QR codes form part of the artwork on the cans and labels supplied to Supermega and Megadairy by its customers, and that it was not his practice to check QR codes on cans or sachets. Staff at Supermega and Megdairy were not instructed to check those codes and, so far as Mr Wu is aware, it was not their practice to do so.
In his affidavit affirmed on 16 August 2023, Mr Wang gave evidence suggesting that the Blue Tin can photographed by the agent was one of the 153,412 empty cans that Sunnya believed was held by Supermega, which it had unsuccessfully endeavoured to locate in its November 2022 correspondence with Mr Wu. [64]
First, Mr Wang deposed that he had "caused for Sunnya's records to be checked" and "I observe that … there are no records of Sunnya having authorised Supermega or Megadairy for the manufacture and sale of batch number NE06220011". There is no evidence about Sunnya's processes for authorising the manufacture and sale of products, the nature and extent of any records typically maintained by Sunnya of the authorisation of the manufacture and sale of products by batch number, the period for which any such records were typically retained, the nature and extent of the "checks" that Mr Wang caused to be undertaken of Sunnya's records, and the person who carried out those checks. In the absence of any evidence about those matters, Mr Wang's evidence that "there are no records" carries very little weight. and, in my view, does not provide a proper basis for a finding that no such records existed at the time of the manufacture of the batch, or at the time of the "check" that Mr Wang caused to be undertaken.
Second, after "observing" that Sunnya had purchased a container of 73,568 cans for Neurio Blue Tin lactoferrin (NZ) (product number 4704) in April 2022 that was delivered to Supermega in May 2022, and a further container of 73,568 cans for Neurio Immune Edition'(product number 4704) in May 2022 that was delivered to Supermega in early July 2022, Mr Wang deposed that "the appearance of the cans appears to match with the cans held by Supermega and/or Megadairy which formed part of the Missing Goods". Mr Wang did not identify a particular feature of the appearance of the cans that he considered was a "match" for the cans that he describes as the "Missing Goods". I infer that the "matching" feature was simply that 153,412 of the empty cans about which Sunnya had corresponded with Mr Wu in November 2022 were cans for product number 4704. [65] To the extent that Mr Wang was suggesting that the two containers of cans delivered to Supermega in May and July 2022 are likely to have been used for batch NE06220011, and that those two containers of cans constituted the "Missing Goods", Mr Wang's evidence is inconsistent with his 29 November 2022 email to Mr Wu, in which Mr Wang told Mr Wu that the 153,412 "missing" empty cans for product number 4704 were two containers of cans that had been dispatched from China to Supermega's warehouse on 22 September 2022, which would have arrived at Supermega's factory in New Zealand in October 2022. [66] Neither Mr Wang's 16 August 2023 affidavit, nor his November 2022 email correspondence with Mr Wu, identified any link between the "Missing Goods" referred to in that email correspondence and containers of cans delivered to Supermega in May and July 2022.
Third, Mr Wang deposed that Sunnya did not authorise the IT company managing Sunnya's QR code verification system to activate the code for Neurio-branded products in batch number NE06220011, or for Neurio-branded products manufactured on 3 June 2022. This statement is described in Mr Wang's affidavit as an "observation" based on Mr Wang having "caused for Sunnya's records to be checked". Again, the statement carries very little weight and, in my view, does not provide a proper basis for a finding that Sunnya did not authorise the IT company, in the absence of evidence about Sunnya's processes for authorising the IT company to activate QR codes, the nature and extent of any records typically maintained by Sunnya of such authorisations, the period for which any such records were typically retained, the nature and extent of the "checks" that Mr Wang caused to be undertaken of Sunnya's records, and the person who carried out that check.

[37]

Alleged unauthorised sale of "written off" Neurio-branded products batch NE04220009

Mr Wang gave evidence that Sunnya's books and records include an electronic folder containing documents relating to a shipment of Neurio-branded products that Sunnya ordered from Supermega, including products manufactured on 12 April 2022 identified as batch number NE04220009. The name of the electronic folder describes these products as "quality problems not dispatched". The searches that Mr Wang caused to be undertaken of Sunnya's records did not identify any record of that batch of products being paid for by Sunnya, being dispatched (or authorised by Sunnya to be dispatched) from Megadairy's premises, being stored at any location, or being assigned, transferred or sold to GNT, GABT or any other party. Nor have those searches identified any record of batch NE04220009 being destroyed or disposed of by Sunnya or Megadairy, which is what Mr Wang contends should have happened if the products had quality problems.
Ms Chen was initially also unable to locate any such records in her emails or in the "Export Folder" maintained by Mr He and Ms Lu. [67] However, Ms Chen subsequently located documents within Sunnya's records indicating that batch NE04220009 was manufactured to fulfill a sales contract that Sunnya entered into with Supermega on 14 January 2022 for the manufacture of 30,000 cans of Neurio-branded modified milk powder with lactoferrin for a total price of NZD$204,000, that Sunnya had paid a deposit of approximately 50 per cent of that total price to Supermega on 19 January 2022, and that Sunnya had made further payments to Supermega in June and August 2022 when products comprising batch NE04220009 were ready for shipping.
Mr Wu gave evidence that he has no record or recollection of batch number NE04220009 being written off, or of notifying Sunnya that the batch had been written off. Mr Wu found two Megadairy CIPLs for products from batch number NE0422009, the first of which identifies GABT as the purchaser of 936 cartons of products from that batch, and the second of which identifies GNT as the purchaser of 260 cartons of products from that batch. The CIPL is a document that Supermega or Megadairy had a practice of producing at the end of the manufacturing process recording the volume of product that was to be exported. According to Mr Wu's evidence, Supermega or Megadairy would complete the details of the products in the "Commodity and Specification" section of the CIPL, and all other details (including the name of the purchaser and consignee) would be completed in accordance with information supplied by the customer for whom Supermega or Megadairy manufactured the goods. The CIPL would ultimately be presented to customs officials in China by the named purchaser or consignee. Mr Wu gave evidence that products manufactured by Supermega or Megadairy under a sales contract with GABT, GNT or Sunnya were sometimes recorded in CIPLs that named a different company as the purchaser or consignee. Mr Wu gave evidence that the practice of Supermega and Megadairy was simply to follow the instructions of the customer as to the name of the purchaser or consignee to be specified in the CIPL. Supermega and Megadairy did not question such instructions.
As I have observed earlier in these reasons, it is very difficult to reconcile Mr Wu's evidence that Supermega caused Neurio products ordered by Sunnya to be shipped to GABT or GNT, or vice versa, if instructed to do so by "the customer", with Mr Wu's evidence that Supermega, Sunnya and GABT entered into a Production Sales and Confidentiality Agreement on 9 June 2015 which stipulated that products ordered by Sunnya or GABT would be shipped only to that company, and that information and documents concerning such orders and shipments would be disclosed only to the company that had placed the order, and would not be disclosed to the other company. Sunnya disputes the authenticity of the Production Sales and Confidentiality Agreement. [68]
Mr Wang gave evidence that, in February 2023, he became aware that the Taobao.com online store appeared to be selling products within batch NE04220009 in China. Through that online store's website, Mr Wang obtained a copy of a "Certificate of Inspection and Quarantine for Imported Goods" issued by the People's Republic of China Entry-Exit Inspection and Quarantine in respect of Neurio-branded lactoferrin milk powder batch NE04220009 manufactured on 12 April 2022. According to the certified English translation of the certificate, Megadairy was the sender, and GABT was the recipient, of that batch, which arrived at Nansha Port on 26 July 2022. Through the Taobao.com online store website, Mr Wang also obtained a copy of a "Certificate of Authorisation" issued by GNT, certifying that the Xiao Liu Mang Sou Luo Chang shop is the Taobao shop that is authorised by the Neurio brand, and that is responsible for selling Neurio-branded products, for the period from 30 November 2022 to 29 December 2022.

[38]

New Zealand trade mark notices filed on 8 March 2023

As referred to earlier in these reasons, interim injunctions granted by this Court shortly after the commencement of the Sunnya proceedings restrained Mr He, Ms Lu and GABT from permitting or causing the ownership of the New Zealand Neurio trade marks to be transferred to GABT. Sunnya remains the registered owner of those trade marks in New Zealand. [69]
Section 10(1) of the Trade Marks Act 2002 (NZ) provides that the owner of a registered trade mark has, in relation to all or any of the goods or services in respect of which the trade mark is registered, the rights and remedies provided by that Act, including the exclusive right to use the registered trade mark, and to authorise other persons to use the registered trade mark. Section 7 of that Act defines the word "use", in relation to a trade mark, as including (relevantly): "(b) applying the trade mark to goods or services or to materials for the labelling or packaging of goods or services in New Zealand solely for export purposes; and (c) the application in New Zealand of a trade mark to goods or services to be exported from New Zealand, and any other act done in New Zealand in relation to those goods or services that, if done in relation to goods or services to be sold or otherwise traded in New Zealand, would constitute use of a trade mark in relation to those goods or services for which the use is material under this Act or at common law; …"
Section 137 of the Trade Marks Act 2002 (NZ) provides: "A person who is the owner of a registered trade mark may give a notice in writing to the chief executive that - (a) claims that he or she is the owner of a trade mark that is registered in respect of the goods specified in the notice; and (b) requests the chief executive to detain any goods, on or in physical relation to which an infringing sign is used, that are, or at any time come into, the control of the Customs."
On or about 8 March 2023, Mr Wang caused the solicitors acting for Sunnya in New Zealand to file notices under s 137 of the Trade Marks Act 2002 (NZ) in respect of the trade mark for product classes 5, 29 and 30.

[40]

Transfers of funds from Mr He and Ms Lu to HLW during the period from 15 February 2023 to 3 March 2023

In an affidavit affirmed on 27 September 2023 and served by the He Parties in the Sunnya proceedings, Mr He admitted that, during the period from 15 February 2023 to 3 March 2023, he caused twelve payments totalling AUD$4,213,126.88 to be made to HLW from bank accounts that he holds jointly with Ms Lu.
In that affidavit, Mr He described the payments to HLW as loans that he and Ms Lu made to HLW in order to put HLW in funds to make payments under five sales contracts that Mr He said that HLW had entered into with Mega Aqua for the manufacture of products to be exported to China. Mr He identified the following documents as the five sales contracts referred to in his affidavit: 1. sales contract no. 15122022GAAU dated 15 December 2022 for 48,000 bottles of Guamis Vitamin D Drops (400IU); 2. sales contract no. 16122022MAAU dated 16 December 2022 for 314,000 bottles of Morenz Vitamin D Drops (400IU) and 330,000 bottles of Morenz Vitamin D Drops (1000IU); 3. sales contract no. 19122022MAAU dated 19 December 2022 for 81,000 bottles of Morenz DHA Gel Candies (30 candies per bottle); 4. sales contract no. 22122022MAAU dated 22 December 2022 for 160,000 Morenz Vitamin D Softgel Capsule (30 capsules per bottle); and 5. sales contract no. 24122022MAAU dated 24 December 2022 for 70,000 Morenz Vitamin C Tablets (30 tablets per bottle), for 90,000 Morenz EpiCor Tablets (30 tablets per bottle), and for 65,000 Morenz Colostrum Tablets (100 tablets per bottle).
After identifying those sales contract documents in paragraph 24 of his 27 September 2023 affidavit, Mr He stated: "25. The Sales contracts with Mega Aqua are for the production of various different health related products. The contracts required payment of a deposit of 50% of the total value of the contract with the balance payable on loading the ship. … 26. When an order is made under one of the sales contracts, Mega Aqua issues a contract of purchase, which is like a purchase order. A copy of the contracts of purchase that have been issued by Mega Aqua to HLW is at annexure 'L'. None of the orders are for Guamis products. Some time after the Sales Contract for Guamis Vitamin D Drops was entered into on or around 15 December 2022, I rang Mr Wu and told him not to manufacture the Guamis products. 27. HLW has paid the 50% deposits for all of the orders that have been made. HLW has received some samples of the products. The products themselves were expected to start becoming available in about July 2023 but there have been delays because of these proceedings and also because Megdairy is in the process of getting transferred to it the category 29 MORENZ trademark in China."
Annexure L to Mr He's 27 September 2023 affidavit comprised 23 documents described contracts of purchase, which were admitted into evidence. Those contracts of purchase bear dates between 16 January 2023 and 4 February 2023. Each contract of purchase describes the name and specification of the goods. None of those descriptions correlate with the descriptions of the goods and specifications in the five sales contracts referred to above. Indeed, there is no indication on the face of any of the contract of purchase documents that it relates to one of the five sales contracts referred to above. The sales contract numbers referred to above do not appear on any of the contracts of purchase. Each contract of purchase also sets out a price per unit for the goods described in the contract of purchase, the total price for the specified number of units, and the amount of deposit calculated as 50 per cent of the total price. All of those sums are in New Zealand dollars.
In his affidavit affirmed on 27 September 2023, Mr He admitted that HLW had made 24 payments to Mega Aqua totalling approximately AUD$2,989,584.33 between 10 February 2023 and 2 March 2023. Mr He described these payments as deposits for HLW's orders under the five sales contracts. All but five of those payments were in the amount of AUD$150,000.
This Court made freezing orders against Mr He and Ms Lu on 3 March 2023, and freezing orders against HLW on 8 March 2023.
Mr He's affidavit affirmed on 27 September 2023 was not read, but Sunnya tendered the parts of the affidavit containing Mr He's explanation for the AUD$4,213,126.88 payments to HLW as evidence of the explanation advanced by Mr He (and not as evidence of the truth of that explanation). Sunnya disputes the authenticity of the five sales contracts referred to at [407] above, and disputes that HLW entered into sales contracts with Mega Aqua on the terms of those documents on or about the dates that appear on the face of the documents. I will therefore refer to these documents as the five disputed sales contracts.
On or about 18 October 2023, the Plaintiffs served Mr Whitbourn's first report. Mr Whitbourn had been provided with zip files containing electronic copies of the five disputed sales contracts, together with the 23 contracts of purchase referred to above, in the form in which they had been produced as part of Mr He's discovery in these proceedings. Mr Whitbourn's analysis of those electronic documents determined that they were scanned copies of printed documents that were originally in some other electronic form. Mr Whitbourn opined that the scanned copies of each of the five sales contracts had been created on 23 March 2023, and the scanned copies of each of the 23 contracts of purchase had been created on 7 March 2023. Plainly, the materials provided to Mr Whitbourn did not enable him to express an opinion about the date of creation of the original electronic form of each of the five disputed sales contracts and the 23 contracts of purchase.
However, the service of Mr Whitbourn's report elicited a further affidavit affirmed by Mr He on 18 November 2023 and served by the He Parties, in which Mr He sought to explain the creation dates of the sales contracts and contracts of purchase identified in Mr Whitbourn's first report. Mr He admitted that his explanation of the sales contracts, contracts of purchase, and payments between HLW and Mega Aqua in his 27 September 2023 affidavit had created "an incorrect impression" that HLW had entered into the five sales contracts, that Mega Aqua had issued each contract of purchase after the relevant sales contract was entered into, and that HLW had made each payment to Mega Aqua after receiving the relevant contract of purchase from Mega Aqua. Mr He admitted that this "impression" was incorrect because: "… In fact, the payments were made by me or by my daughter, Yaqing, on my instructions on behalf of HLW to Mega Aqua before the Contracts of Purchase were provided by Mr Wu and I received the 5 Sales Contracts from Mr Wu after I received the Contracts of Purchase ..."
Mr He admitted that he first received one of the five disputed sales contracts, together with many contracts of purchase, from Mr Wu on 7 March 2023 after Mr He sent a message to Mr Wu asking when the contracts would be ready. Mr He admitted that Mr Wu did not send him the remaining disputed sales contracts until some time after 7 March 2023.
Mr He's affidavit affirmed on 18 November 2023 was not read, but Sunnya tendered the admissions to which I have referred above.
In his affidavit affirmed on 19 November 2023, Mr Wu gave evidence that Mega Aqua had received 24 transfers from HLW in the period from 10 February 2023 to 3 March 2023. The banking records of HLW and Mega Aqua tendered in these proceedings establish that those receipts correspond to the 24 payments admitted by Mr He and referred to at [410] above. Mr Wu gave evidence that he understood that the payments were deposits for Mega Aqua to produce and supply health supplement products such as gels, tablets and drops (as opposed to milk powder products that he understood to be the subject of these proceedings). Mr Wu deposed that he was "not involved in the decision by Mr He or Ms Lu to transfer the money across numerous transactions".
Mr Wu deposed that, after receiving those moneys, he had discussions with Ms Lu about the details of the products that "they" wished to have Mega Aqua produce. Those discussions took some time, as they concerned the development of new products, and it takes time to formulate precise details and labelling for new products. Mega Aqua and HLW then exchanged sales contracts and contracts of purchase.
Mr Wu exhibited to his affidavit documents that he described as "all such sales contracts and contracts of purchase which I have found as at 18 November 2023". Those exhibited documents comprised 24 sale contracts bearing dates between 16 January 2023 and 14 February 2023, and 23 contracts of purchase bearing dates ranging from 16 January 2023 to 4 February 2023.
The sales contracts exhibited to Mr Wu's affidavit did not include the five disputed sale contracts exhibited to Mr He's 27 September 2023 affidavit, which bear dates ranging from 15 to 24 December 2022.
The dates on the sales contracts and contracts of purchase exhibited to Mr Wu's 19 November 2023 affidavit - ranging from 16 January 2023 to 14 February 2023 - mostly pre-date the period from 10 February 2023 and 2 March 2023 during which HLW made the 24 payments totalling approximately AUD$2,989,584.33 to Mega Aqua. I note that this is inconsistent with Mr Wu's evidence in the same affidavit that the payments were made before Mega Aqua and HLW exchanged sales contracts and contracts of purchase and, indeed, before Mr Wu had even discussed with Ms Lu the products that HLW proposed to order from Mega Aqua. In cross-examination, Mr Wu said that he had commenced those discussions with Ms Lu before HLW made the payments to Mega Aqua, and that those discussions had continued after Mega Aqua received those payments (that is, before the sales contracts and contracts of purchase were exchanged).
In cross-examination, Mr Wu was shown the five disputed sales contracts bearing December 2022 dates that Mr He had referred to in his 27 September 2023 affidavit, and also in an earlier affidavit affirmed on 8 May 2023. As I have already mentioned, Mr Wu did not refer to those five sales contracts in his 19 November 2023 affidavit, notwithstanding that he had signed a letter on 24 May 2023 providing "confirmation and assurance regarding the products ordered by HLW Investments Pty Ltd ACN 605 527 982 (HLW) pursuant to sales contracts referred to in the Affidavit of Yinghan He dated 8 May 2023". In cross-examination, Mr Wu said that the letter had been drafted and presented to him for signing by Mr He or Ms Lu. Mr Wu had understood that the letter would be used for "legal purposes", but he had not read Mr He's 8 May 2023 affidavit referred to in the letter in order to identify the sales contracts in respect of which Mr Wu was providing "confirmation and assurance" by signing the letter. It seems that, when he affirmed his 19 November 2023 affidavit, Mr Wu did not appreciate that Mr He's 8 May 2023 affidavit had identified the five disputed sales contracts as the contracts for which HLW had made the AUD$2,989,584.33 payments to Mega Aqua.
When Mr He's 8 May 2023 affidavit was shown to Mr Wu in cross-examination - at which point, it must have become apparent to Mr Wu that there was a discrepancy between Mr He's evidence identifying five sales contracts dated or purportedly dated December 2022, and Mr Wu's evidence identifying 24 sale contracts bearing dates between 16 January 2023 and 14 February 2023, as the contracts in respect of which HLW had made the AUD$2,989,584.33 payments to Mega Aqua during the period from 10 February 2023 and 2 March 2023 - Mr Wu, with visibly shaking hands, began rifling through the folder of contracts that the cross-examiner had presented to him.
It was put to Mr Wu that the five disputed contracts referred to in Mr He's 8 May 2023 affidavit had been created in March 2023, and not in December 2022. Mr Wu denied this.
Mr Wu was also shown the contracts of purchase identified by both Mr He and Mr Lu, which were dated or purportedly dated between 16 January 2023 and 4 February 2023. It was put to Mr Wu that those contracts of purchase had also been created in March 2023, after the AUD$2,989,584.33 payments had been made by HLW to Mega Aqua. Mr Wu said that this "might be possible". Mr Wu later said that this was a "high possibility".
Mr Wu denied that he created, or instructed his staff to create, the contracts of purchase to match the payments that Mega Aqua had received from HLW in order to create a false explanation for those payments in circumstances where he knew that Mr He and Ms Lu were trying to get money out of their own hands so as to remove it from the reach of their creditors. Mr Wu denied knowing that Mr He and Ms Lu were trying to do that.
Mr Wu was then taken to the bank statements of HLW and Mega Aqua recording each of the payments by HLW, and the corresponding receipt by Mega Aqua. As I have already mentioned, those records show that almost all of the payments made by HLW were amounts of AUD$150,000.00, and that the equivalent NZD amount was then credited to Mega Aqua's account. The NZD amount varied slightly with each payment.
Mr Wu gave evidence that he personally did not create the contracts of purchase, but that it was very likely that they had been created by his staff. Mr Wu said that the contracts of purchase might have been created in March 2023 to match the NZD amount of each payment that Mega Aqua had received from HLW. Mr Wu said that there would be nothing wrong with this because the contracts of purchase were receipts.
It was put to Mr Wu that his suggestion that the contracts of purchase were receipts was a lie. The documents do not refer to any money having been paid by HLW or received by Mega Aqua. On the contrary, each contract of purchase document states: "Terms of Payment, 50% deposit to be paid; balance to be paid before dispatch". Mr Wu denied that he had lied when describing the contracts of purchase as receipts. It was put to Mr Wu that, after Mega Aqua received each payment from HLW, he had created or instructed his staff to create a false, backdated contract of purchase document corresponding to the NZD amount received in order to make the transaction look legitimate. Mr Wu denied this.
When his cross-examination resumed the following morning, Mr Wu resiled from his evidence that the contracts of purchase were receipts. Mr Wu then advanced the following arguments about the contracts of purchase: "Q. One thing you do know, don't you, is that the documents we went to yesterday, headed "Contracts of purchase", don't indicate that there's been payment, do they? A. INTERPRETER: That's correct. But I would want to remind you that I have a new finding - so I realise that the headings of those documents are "Contract of purchase". So in fact, that means that HLW is actually the purchase, or the purchasing party. That's why the contract of purchase is for them. We are actually the selling party. So that piece of document is actually for the benefits of HLW; not for us. They are the purchasing party. That's why these documents were generated in the first place. These documents were generated when HLW continuously made payments. So at that time, it could be either Mr He or Ms Lu who asked Mega company, by saying "Please send us the documents and tell us for what purpose each payment is for." And that is why one of my employees or staff members would then produce such a document. And that is why this document - these documents are called "Contract of purchase". In fact, these document were generated in order to prove to HLW, not to prove for - not - for the sale - the fact that we sell these products. I'm sorry, I didn't bring up this statement in Court yesterday because of my understanding due to my limited English proficiency. And after that I - sorry, at that point I didn't realise that these two concepts of purchase and sales respectively are actually contrary concepts. Q. Can you just explain to me again what you say the contrary concepts are? A. INTERPRETER: When the transaction took place Mega Aqua was the selling party, and that is to say when there was a contract. SO when the contract was generated what happened would be as follows. First, the sales would take place. So before that the sales contract would be generated and then payments made. And after that perhaps it is because there were a series of payments, not - and these payments were not coming in a stable amount of in a fixed amount as prescribed in those sales contracts. And that is why we need to - sorry, that is why when these payments were made HLW would ask for Mega Aqua to provide a similar - sorry, to provide documents similar to the receipt or for the purpose to prove that we have already received these payments. And secondly, these documents were generated in order to make sure that each individual payment could match the amount prescribed - sorry, could match the amount of products and type of products prescribed in the sales contract. And that is why these documents were generated individually. And that is my - according to me, the most reasonable explanation to those scenarios."
When pressed, Mr Wu acknowledged that this "explanation" was not based on any recollection of the circumstances in which the contracts of purchase were created. Mr Wu maintained that he personally had not been involved in the creation of the contracts of purchase. He said that he had advanced the explanation because he believed it was likely to be correct, and he "couldn't find any other possibilities".
The following exchange then occurred between the cross-examiner and Mr Wu, through the interpreter: "Q. The other possibility is that after receiving a series of payments from HLW you invented a document, a backdated document to make it look like a genuine transaction. That's actually what happened, isn't it? A. INTERPRETER: No, that's not the case. There's no - sorry - there's - because there's no need to match it. For what purpose of this matching? First of all, the sales contract which were - which was generated by our company, which is ten pages long, had already existed. Q. Sorry, I'll just stop you there. That is not a true statement, is it? A. INTERPRETER: It is definitely a genuine statement. Q. You know it's not true, don't you? A. INTERPRETER: I know this is true. Q. Because the sales contracts that you're referring to, the longer documents, were in fact created after the contracts were purchased, [70] weren't they? A. INTERPRETER: No, that's impossible because on 10 February when HLW make the payment, they have already put the contents of the sales contract into the content of the transaction, and they have already put the content containing the words of Guamis vitamin tablets in the transaction record and this was actually generated back in February . So, how could they actually put the content of the sales contract that would happen in March in the transaction record that was generated in February? Is this absurd? Is this part of the scientific fantasy? Q. Mr Wu, it's part of the fraud that you perpetrated with Mr He and Ms Lu, isn't it? A. INTERPRETER: What fraud? How is the fraud done? Q. Adding a description in the transfer to make it look like it was a genuine purchase? A. INTERPRETER: So, how can I - how can it be added? How can it be - so, what's the meaning of doing that addition? That is not a reasonable at all, so how could Mr He and Ms Lu finalising the document in March and there could be - the only explanation is that they could be taking the time - they could be travelling in the time machine back to February when they actually made a - made the payment for the purchase and added those content in the sales contract back into the record of transaction. …"
I note that Mr Wu's evidence in cross-examination that the sales contracts were entered into before the payments were made directly contradicts his evidence in his 19 November 2023 affidavit that HLW made the payments to Mega Aqua before they exchanged sales contracts and contracts of purchase.
By the end of Mr Wu's cross-examination, it was clear that transaction descriptions in the international money transfers generated by HLW for each payment to Meqa Aqua - which descriptions also appeared in Mega Aqua's bank statement entries recording the receipt of each payment from HLW - were the sole basis of Mr Wu's denial that the sales contracts had been created in March 2023. Mr Wu insisted in cross-examination (contrary to his 19 November 2023 affidavit) that the sales contracts must have been created before HLW made the payments to Mega Aqua because HLW could not otherwise have included the transaction description in each international monetary transfer. However, those transaction descriptions are generic descriptions such as "liquid drops", "capsule deposit" and "tablet deposit". The transcription descriptions did not identify the brand or specific type of product referred to in the five disputed sales contracts.

[41]

Transfers of funds made by Mr He and Ms Lu to Ms He during the period from 21 February 2023 to 3 March 2023

On or about 21 February 2023, Mr He and Ms Lu transferred the sum of AUD$200,000 to Ms He, and HLW transferred the sum of approximately AUD$151,000 to Ms He. On 2 March 2023, HLW transferred further sums to Ms He totalling approximately AUD$50,000. These matters are not in dispute.
At the time those payments were made, Ms He was neither a party to the Sunnya proceedings nor a respondent to any freezing order application. However, the Plaintiffs' solicitors had notified the solicitors acting for Ms He and Ms Lu on 17 February 2023 that they intended to seek leave to amend their pleadings to join Ms He as a defendant to the Sunnya proceedings.
In their defence filed in the Sunnya proceedings, Mr He, Ms Lu, HLW and Ms He plead that the payments were in partial repayment of a loan of AUD$1,176,000 made by Ms He to Mr He pursuant to an oral agreement between them made on or about 28 June 2022.
The Plaintiffs tendered extracts from affidavits affirmed by Mr He and Ms He, and served by the He Parties in the Sunnya proceedings, in which they explained the alleged oral loan agreement and its genesis in the manner set out immediately below. Those extracts were admitted on a limited basis as evidence of the explanation proferred by Mr He and Ms He, and not as evidence of the truth of that explanation.
On 1 April 2022, Sunnya declared a dividend of AUD$2,400,000, of which AUD$1,176,000 was payable to All168 as the 49 per cent shareholder of Sunnya.
Mr He is the sole director of All168, which is the trustee of the All168 Family Trust. On 28 June 2022, Mr He held a board meeting of All168, at which Ms Lu and Ms He were also present. Mr He resolved to distribute the whole of the AUD$1,176,000 dividend to Sunlife. A resolution to that effect is recorded in a document tendered by the He Parties entitled "Corporate Trustee Resolution", which bears Mr He's signature a type-written date 28 June 2022.
On the same date, Sunlife entered into a loan agreement with Ms He (as borrower) and Mr He (as guarantor), pursuant to which Sunlife loaned the sum of AUD$1,176,000 to Ms He. The He Parties tendered a copy of that loan agreement. The execution page bears the date 28 June 2022 and contains signatures of Ms He as director and company secretary of Sunlife, and as borrower, the signature of a witness to Ms He's signature as borrower, the signature of Mr He as guarantor, and the signature of Ms Lu as witness to Mr He's signature.
According to Mr He's affidavit that was tendered by the Plaintiffs, he asked Ms He whether she could on-lend that sum to him so that he could transfer them onto "our mortgage", and Ms He agreed to do so. Ms He's affidavit that was tendered by the Plaintiffs contained substantially the same account of the conversation with Mr He in which she agreed to lend him the dividend sum of AUD$1,176,000. According to Ms He's affidavit, All168 transferred the money directly to her parents' mortgage offset accounts.
According to Ms He's affidavit that was tendered by the Plaintiffs, her parents had not repaid any part of the loan before 21 February 2023.
Ms He admits receiving a total sum of AUD$351,000 from Mr He and Ms Lu on 21 February 2023 and a further sum of AUD$50,000 from HLW on 2 March 2023. Mr He admits ceasing each of those payments to be made to Ms He.
The Plaintiffs dispute the authenticity of the resolution and loan agreement documents referred to at [440] and [441] above.
Mr Whitbourn conducted a digital forensic examination of each of those documents in the electronic pdf form in which they were provided to the Plaintiffs' solicitors in Ms He's discovery. Based on the examination process described in his report dated 18 October 2023, Mr Whitbourn opined that the resolution document was created on 27 March 2023, and that Mr He's signature and the typewritten date of 28 June 2022 were inserted into the resolution document at some time between 27 March 2023 and 30 March 2023. Mr Whitbourn opined that the loan agreement document was created on 22 March 2023 and that the signatures and the date 28 June 2022 were inserted into the loan agreement document at some time between 22 March 2023 and 3 May 2023
The He Parties did not adduce any digital forensic expert evidence in response to Mr Whitbourn's evidence.
Mr Whitbourn was not cross-examined.

[43]

Activities in relation to the Guamis brand in the period from March 2023

On 9 March 2023, this Court made interim orders: (1) restraining Mr He and Ms Lu from taking any steps to manufacture, sell or export any Guamis-branded products to or for any person other than Sunnya (or persons authorised by Sunnya to manufacture, sell or export such products); (2) restraining each of GABT and GNT from taking any steps to have Guamis-branded products manufactured in Australia or New Zealand for its benefit; (3) restraining Sunlife from taking any steps to manufacture, sell or export any Guamis-branded products to or for any person other than Sunnya (or persons authorised by Sunnya to manufacture, sell or export such products); and (4) restraining each of Supermega and Megadairy from taking any steps to manufacture, sell or export any Guamis-branded products to or for any person other than Sunnya (or persons authorised by Sunnya to manufacture, sell or export such products).
On 20 March 2023, Mr Wu caused his assistant to send an email to Mr He informing him that "we will take back" the Australian and New Zealand Guamis trade marks, and requesting that Sunlife sign deeds assigning the New Zealand trade mark to NZFDA and the Australian trade mark to South Pole IP Holding (NZ) Limited. Mr Wu gave evidence that he did this because, as a result of these proceedings, he became worried about the future of the Guamis brand because he did not see Sunlife taking action in these proceedings to protect the Guamis brand.
In cross-examination, Mr Wu acknowledged that the alleged 2019 Guamis agreement did not confer any right for him to require Sunlife to transfer the Guamis trade mark to him. Mr Wu said that it was not necessary to include any such right in the alleged agreement because it merely provided for Sunlife to register the trade mark, and did not confer ownership of the trade mark on Sunlife. Mr Wu said that there would be no dispute about his right to have the trade mark transferred to him on request, comparing such a request to "like I put my child or my pet under the care of someone else, and then I ask my child or the pet, which, who was under the care of others, to be returned to me".
However, Mr Wu affirmed an affidavit in the Sunnya proceedings on 1 March 2023 which was served by the NZ Parties for the purpose of opposing the Plaintiffs' application for interim orders restraining Supermega and Megadairy from taking any steps to manufacture, sell or export any Guamis-branded products to or for any person other than Sunnya - being one of the interim orders made by the Court on 9 March 2023. In that affidavit, Mr Wu had deposed that, to the best of his knowledge, Sunlife is the owner of the Guamis trade marks in Australia and New Zealand, Supermega and Megadairy wish to be able to fill any orders for the manufacture of Guamis products if such orders are placed by Sunlife (or other entities associated with Mr He and Ms Lu), and the interim injunction sought by the Plaintiffs would cause serious financial losses to Supermega and Megadairy by depriving them of profits from the manufacture of Guamis products for persons or entities other than Sunnya.
It was put to Mr Wu in cross-examination that he had changed his story about his understanding of the alleged 2019 Guamis agreement in order to justify his call for the New Zealand Guamis trade mark to be transferred to NZFDA after the Court made the interim orders on 9 March 2023, and the subsequent transfer of that trade mark to NZFDA on 21 March 2023 as referred to below. Mr Wu denied that he had changed his story. Mr Wu also denied that NZFDA had accepted the transfer of the Guamis trade marks from Sunlife at the request of Mr He or Ms Lu, or with their encouragement or endorsement, because NZFDA was not then a party to the Sunnya proceedings, and was therefore not affected by the interim orders made on 9 March 2023, and Mr He and Ms Lu wanted to have the Guamis trade mark transferred to an entity through which they could divert Sunnya's business of exporting and selling Guamis-branded products manufactured in New Zealand. It was not until 28 April 2023 that NZFDA was joined as a defendant to the Sunnya proceedings.
On 21 March 2023, Sunlife lodged an application with the New Zealand Intellectual Property Office to register a transfer of ownership of the New Zealand Guamis trade mark to NZFDA. The transfer was registered on 31 March 2023.
Sunnya tendered a screen shot of the GABT-controlled website www.guamis.cn downloaded by Mr Wang on 6 April 2023, which describes Sunlife as the owner of the Guamis brand.
From about April 2023, the Guamis brand has been promoted through the GABT-controlled website www.guamis.cn. Guamis-branded products products were promoted from Sunlife's booth at the Canton Fair. Guamis-branded products have been sold to customers in China through e-commerce platforms. During the same period, photographs of Neurio/Guamis-branded products continued to be displayed on GABT's www.guamis.cn. website, and Neurio/Guamis-branded products were marketed and sold through the Neurio flagship store operated by GNT on the Tmall online platform.
On 26 May 2023, this Court made further interim orders in the Sunnya proceedings, including orders (1) restraining Sunlife from selling, transferring or otherwise dealing with the registered Australian Guamis trade mark; (2) restraining Sunlife from using or authorising any other party to use the registered Australian Guamis trade mark for the purpose of distributing, marketing, manufacturing, selling or exporting any Guamis-branded products; (3) restraining each of Ms He and Sunlife from taking any steps to distribute, manufacture, sell, market or export any Guamis-branded products to or for any person other than Sunnya (or persons authorised by Sunnya to distribute, manufacture, sell, market or export Guamis-branded products); (4) restraining NZFDA from selling, transferring or otherwise dealing with the registered New Zealand Guamis trade mark; and (5) restraining NZFDA from using or authorising any other party to use the registered New Zealand Guamis trade mark for the purpose of distributing, marketing, manufacturing, selling or exporting any Guamis-branded products.

[45]

Overview of claims

The Plaintiffs claim that Mr He and Ms Lu contravened one or more of ss 180, 181 and 182 of the Corporations Act, breached fiduciary duties that they owed to Sunnya by reason of their position as directors of Sunnya, and/or breached fiduciary duties that they continued to owe to Sunnya after resigning as directors of the company, by: 1. causing or permitting the changes to Sunnya's general trade channel sales and distribution arrangements in April 2021 that are described at [124]-[142] above (the under value sales claims); 2. causing Sunnya to engage in the practice of issuing the commercial invoices referred to at [124]-[142] above (the commercial invoices claims); 3. allegedly directing, requesting, encouraging or endorsing Supermega and GABT to enter into the sales contracts referred to at [210] above during the period from March to November 2022 for the supply of Neurio-branded products to GABT (the improper Neurio contracts claims); 4. taking the steps referred to at [284]-[288] above during the period from 23 October to 1 November 2022 to transfer the registered ownership of the Australian, New Zealand and Indonesian Neurio trade marks from Sunnya to GABT (the trade mark transfer claims); 5. allegedly requesting, directing, encouraging or endorsing GABT to apply to register the Neurio trade marks with the European Intellectual Property Office as referred to at [299] above (the European trade mark claim); 6. requesting Sunlife to register the NRIO trade mark in Australia and New Zealand and by allegedly diverting to GABT Sunnya's business of selling Australian and New Zealand-manufactured Neurio products in China by the use of that NRIO trade mark in the manufacture of formulated milk powder products in New Zealand, the packaging of those products in co-branded Neurio/NRIO tins in China, and the marketing, distribution and sale of those products in China as new or upgraded versions of Neurio (the Neurio/NRIO claims) [71] ; 7. allegedly directing, requesting, encouraging or endorsing Supermega and/or Megadairy to release to entities other than Sunnya some or all of the empty Neurio tins and/or finished Neurio products that the Plaintiffs allege Supermega and/or Megadairy held in stock as at 1 November 2022 (the sale of destroyed products claims) [72] ; 8. allegedly directing, requesting, encouraging or endorsing the distribution and sale of Neurio-branded products in China by GABT, GNT and/or Sunlife in the period since November or December 2022, without any payment or benefit to Sunna (the improper Neurio products claims); [73] 9. allegedly directing, requesting, encouraging or endorsing Supermega and/or Megadairy to release to GABT and GNT the Neurio products comprising batch number NE04220009 which the Plaintiffs claim Mr He and Ms Lu had recorded in Sunnya's records as written off (the sale of written off products claims) [74] ; and 10. causing or permitting Sunnya to market and develop the Guamis brand by co-branding certain products with the Neurio and Guamis trademarks (the Guamis claims) [75] .
The Plaintiffs claim that each of the other defendants was knowingly concerned in Mr He and Ms Lu's alleged contraventions of ss 180, 181 and 182 of the Corporations Act and/or knowingly assisted Mr He and Ms Lu's breaches of fiduciary duty, which the Plaintiffs alleged were dishonest and fraudulent schemes, and/or knowingly received property of Sunnya as a result of Mr He and Ms Lu's breaches of fiduciary duty.
The Plaintiffs also claim that the payments made by Mr He and Ms Lu to HLW referred to at [406]-[434] above, and the payments made by Mr He and Ms Lu to Ms He referred to at [435]-[448] above, were made with intent to defraud creditors of Mr He and Ms Lu, and are voidable at the instance of Sunnya pursuant to s 37A of the Conveyancing Act (the s 37A claims).
I have considered all of the parties' written and oral submissions in the process of determining their respective claims and defences in the manner recorded below.

[46]

Fiduciary duties of directors

It is well established that the relationship of director and company is a fiduciary one which attracts the proscriptive duties known as the "conflict rule" and the "profit rule". [76]
In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (Foresters), Gageler J (as the Chief Justice then was) described the conflict rule and the profit rule as two overlapping proscriptive duties imposed in equity to give effect to the duty of absolute and disinterested loyalty owed by a fiduciary who has undertaken or assumed a responsibility to act in the exclusive interests of another. [77] His Honour wrote: [78] "67 Each proscriptive obligation, or 'theme', is 'descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies'. 68 'The first', often referred to as the 'conflict rule', 'is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest.' The unconscionability which attracts equitable remedies in circumstances where the conflict rule alone is invoked lies not so much in receipt by the fiduciary of the benefit or gain (over which the fiduciary need not have control) as in retention by the fiduciary of the benefit or gain which in conscience ought to be disgorged to the principal. 69 'The second', often referred to as the 'profit rule', "is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of [the] fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing [the fiduciary's] position for [the fiduciary's] personal advantage.' The unconscionability which attracts equitable remedies in such circumstances lies in pursuit by the fiduciary of self-interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal."
The principles concerning the application of the proscriptive duties to particular facts were succinctly summarised with reference to authority by Gleeson JA in Gunasegaram v Blue Visions Management Pty Ltd (Blue Visions). [79] It is convenient to set out his Honour's summary in full: "144 It has been remarked that the principles governing fiduciary duties are easy enough to state in general terms, but often difficult to apply to concrete facts: Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347; (2016) 116 ACSR 566 at [130] (Bathurst CJ), citing R P Austin and I M Ramsey, LexisNexis, Ford, Austin & Ramsay's Principles of Corporations Law, Vol 2 (at Service 130) at [9.010]. Nonetheless, it is useful to recall some basic principles. 145 First, as Mason J explained in Hospital Products at 96-97, the critical feature of fiduciary relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. Thus, it is said that the other person is vulnerable to abuse by the fiduciary of his or her position. 146 Second, the scope of the fiduciary's duties must be accommodated to the particular circumstances of the underlying relationship that gives rise to the duties in the first place: Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 (Howard) at [34] (French CJ and Keane J); Hospital Products at 102 (Mason J). Thus, when explaining that contractual and fiduciary relationships can co-exist, Mason J remarked in Hospital Products at 97: In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. This statement of Mason J was referred to with approval in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [91]. 147 Third, the basic principle was stated by Mason J in Hospital Products at 103: [a fiduciary] is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect … 148 The principle was affirmed and restated by the High Court in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557-558; [1995] HCA 18 (Warman v Dwyer): A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position. The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves "at a level higher than that trodden by the crowd". The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage. (Footnotes omitted) See also: Breen v Williams (1996) 186 CLR 71 at 93-94 (Dawson and Toohey JJ), 113 (Gaudron and McHugh JJ); [1996] HCA 57; Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165 (Pilmer); [2001] HCA 31 (McHugh, Gummow, Hayne and Callinan JJ) at [74], [78]; Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21 (at [84]); Howard at [31]-[33] (French CJ and Keane J), [56], [62] (Hayne and Crennan JJ). 149 Third, the conflict rule is directed to 'a real sensible possibility of a conflict'; it is not enough to identify 'some conceivable possibility' in events not contemplated which might result in a conflict. In Boardman v Phipps [1967] 2 AC 46 at 124 Lord Upjohn said: In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you can imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict. This passage was cited with approval by the Privy Council in Queensland Mines Ltd v Hudson (1978) 52 ALJR 399 at 400G and in Hospital Products at 103 (Mason J). See also Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408 at [425]. 150 More recently, in Pilmer (at [78]), the plurality in the High Court described the conflict rule as encompassing "a conflict or a real or substantial possibility of a conflict" between personal interests of the fiduciary and those to whom the duty is owed, referring to the remarks of Mason J in Hospital Products at 103. The rule also applies where the alleged conflict is between conflicting duties: Pilmer at [78]. 151 In Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd, Bathurst CJ observed at [4], with reference to the remarks of the plurality in Pilmer at [79] and by Hayne and Crennan JJ in Howard at [60]: [D]ifferent minds may reach different conclusions as to the presence or absence of a real possibility of conflict between duty and interest or duty and duty and the fiduciary doctrine cannot be inexorably applied without regard to the particular circumstances of the relationship. Sackville AJA wrote to similar effect: at [133]. 152 Fourth, it is necessary to focus on the actual functions or responsibilities assumed by the fiduciary to determine the subject matter over which his or her obligations extend, at least for the purposes of deciding whether there is a conflict of interest and duty or a conflict between duties: Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 (Grimaldi) at [179]. 153 Fifth, assuming a conflict of interest, the orthodox view is that "there is no duty to disclose a conflict and when judges refer to a duty to disclose in this context it is no more than a shorthand way of referring to the defence of fully informed consent by the principal": Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 (Blackmagic Design) at [105] (Besanko J, Finkelstein and Jacobson JJ agreeing). On this view, disclosure of a conflict by the fiduciary is simply a means of avoiding a breach, not a duty: Blackmagic Design at [105]. 154 Sixth, the disclosure required for the defence of fully informed consent is all material information of which the fiduciary "is aware or which he has deliberately refrained from acquiring": BLB Corporation of Australia Establishment v Jacobsen (1974) 48 ALJR 372 at 378, where the High Court also remarked that the (so‐called) duty of disclosure "does not extend to matters of which the fiduciary was unaware notwithstanding that prudent inquiry would reveal their existence".
Writing separately in Blue Visions, Meagher JA discussed the concept of duty in the context of the conflict rule, the overlap between the conflict and profit rules, and the operation of the profit rule independently of the conflict rule: [80] "61 … as the Full Court of the Federal Court (Finn, Stone and Perram JJ) explained in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [179]; [2012] FCAFC 6 , in a passage cited by Gageler J in Howard v Cmr of Taxation at [110]: The concept of 'duty' in the 'conflict of duty and interest' formula of the first of these is convenient shorthand. It refers simply to the function, the responsibility, the fiduciary has assumed or undertaken to perform for, or on behalf of, his or her beneficiary. What that function or responsibility is, is a question of fact. It may be narrow and circumscribed, as is often the case with specific agencies; it may be broad and general, as is characteristically the case with the functions of company directors; its scope may have been antecedently defined or determined; it may have been ordained by past practice; it may be left to the fiduciary's discretion to determine; and it may evolve over time as is commonly the case with partnerships. 62 In Grimaldi at [181] the Court noted the overlap between the conflict and profit rules but continued: Importantly, though, misuse of position has an area of independent operation - an area which does not require it to be shown that the fiduciary has assumed some responsibility to his or her beneficiary in relation to the matter in issue. Its concern, as Deane J indicated, is to preclude the misuse of the position the fiduciary has, or of knowledge or opportunity derived from it."
In Howard, Hayne and Crennan JJ identified a company director's diversion of a business opportunity of the company to their own personal advantage as engaging the profit rule, and potentially also engaging the conflict rule. Their Honours said: [81] "63 … regardless of whether the obligation to avoid conflicts is engaged, a critical question presented for consideration in relation to the obligation not to obtain unauthorised benefits will be whether the director has obtained a benefit by reason or by use of the relationship between that director and the company. 64 That question requires careful attention to how and why it is said that the director obtained a benefit by reason or by use of the relationship. And as Regal (Hastings) Ltd v Gulliver demonstrates, if the opportunity came to the director in the course or as a result of holding office as a director, it is not to the point to establish that the company could not or would not have exploited the opportunity. In Regal (Hastings), the directors of the company were held bound to account to the company for their profit despite the company's inability to raise the capital necessary to undertake the venture from which the directors made their profit."
Where a director is found to have diverted a business opportunity of the company to the director's personal advantage in breach of fiduciary duty, their liability to account for any profits thereby made does not depend on the company having suffered a loss, and it is no defence that the company was unwilling, unlikely or unable to pursue the opportunity and make the profits. [82] As explained by Leeming JA in Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) (Murdoch v MDL), it is for the company, acting through directors who are not subject to a conflict between their duties to the company and their own interests, to determine how to respond to the opportunity having regard to the difficulties that stand in the way of the company taking and profiting from the opportunity. [83]
In Xiao, the Court of Appeal noted that the Full Court of the Federal Court of Australia expressed the view in BCI Finances Pty Ltd (in liq) v Binetter [84] (BCI Finances) that the statements made by the High Court of Australia in Breen v Williams, [85] Pilmer v Duke Group Limited (in liq), [86] Friend v Booker, [87] and Howard [88] that fiduciary obligations are proscriptive rather than prescriptive in nature did not suggest that earlier High Court authorities stating that company directors owe a fiduciary duty to exercise their powers bona fide in the interests of the company as whole, were incorrect. [89] In BCI Finances, the Full Court of the Federal Court said: [90] "[596] It has long been accepted that company directors owe a fiduciary duty to exercise their powers bona fide in the interests of the company as a whole. This was accepted by all members of the High Court (Barwick CJ, McTiernan and Kitto JJ) in Harlowe's Nominees at 490, 492-494. The rule has a long lineage: see, eg, Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 135 per Latham CJ; In re Smith and Fawcett Ltd [1942] Ch 304 at 306 per Lord Greene MR; Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261 at 268 per King CJ; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 147-148 per Clarke and Cripps JJA. In the 1957 edition of The Principles of Modern Company Law (Stevens & Sons, London, 2nd ed, 1957) at p 474, Gower referred to this as the first of four facets of the fiduciary duty owed by company directors: The general principle upon which these duties are based is clear and simple. Directors are fiduciaries and must therefore display the utmost good faith towards the company in their dealings with it or on its behalf. But the application of this principle has four facets which are probably best treated as distinct, though in practice they tend to overlap. First, the directors must act bona fide, that is in what they believe to be the best interests of the company. Secondly, they must exercise their powers for the particular purpose for which they were conferred and not for some extraneous purpose, even though they honestly believe that to be in the best interests of the company. Thirdly, they must not fetter their discretion to exercise their powers from time to time in accordance with the foregoing rules. And finally, despite compliance with the foregoing rules, they must not, without the consent of the company, place themselves in a position in which there is a conflict between their duties and their personal interests. [597] The bona fide rule has been described as 'central and foundational in the scheme of directors' fiduciary duties': Langford RT, Directors' Duties: Principles and Application (Federation Press, 2014) at p 57. The rule is reflected in s 181(1) of the Corporations Act 2001 (Cth), but the focus for present purposes is on fiduciary rather than statutory duties. [598] Although the High Court has stated that fiduciary duties are proscriptive rather than prescriptive in nature (see Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at [74] per McHugh, Gummow, Hayne and Callinan JJ), it has not suggested that the earlier authorities of the High Court referred to above are no longer the law and we do not take the High Court to be suggesting this (a matter discussed in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1). We note that, in Howard v Commissioner of Taxation (Cth) (2014) 253 CLR 83, French CJ and Keane J stated (at [37]) that there was no suggestion that the decision of the directors 'involved an exercise of their powers as directors other than in the interests of the company', and Hayne and Crennan JJ (at [58]) stated that no question arose of 'the application of the obligation or obligations, often compendiously described as the duty of directors to act in the interests of the company as a whole, examined and applied in Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL'."
The views expressed by the Full Court of the Federal Court in the passages extracted above were obiter dicta.
In Xiao, it was not necessary for the Court of Appeal to consider the implications of the more recent High Court cases referred to at [469] above for the earlier authorities which accepted that company directors owe a prescriptive fiduciary duty to exercise their powers bona fide in the interests of the company as a whole. Gleeson JA, with whom Mitchelmore JA and Griffiths AJA agreed, refrained from expressing any view about that question after noting the view expressed in obiter dicta in BCI Finances.
As will become apparent below, the Plaintiffs' claims in the Sunnya proceedings have been formulated as including alleged breaches by Mr He and Ms Lu of a prescriptive duty to exercise their powers in the best interests of Sunnya. Although I am not bound by the obiter dicta views of the Full Court of the Federal Court in BCI Finances, I am required to give them great weight. [91] I respectfully consider that the reasons underlying those views explained in paragraph [598] of the Full Court's reasons for judgment extracted above is compelling, and is consistent with Gageler J's description in Foresters of the duty owed by a fiduciary as one of absolute and disinterested loyalty, and the proscriptive duties as a means of imposing that duty. [92] I also take into account that the Court of Appeal, whilst not being required to decide the point in Xiao, referred to the obiter dicta in BCI Finances without any hint of disapproval or disquiet. [93] For those reasons, I proceed on the basis that Mr He and Ms Lu owed a fiduciary duty to exercise their powers bona fide in the interests of the interests of Sunnya as a whole, in addition to the prescriptive duties embodied in the conflict rule and the profit rule. As the Full Federal Court observed in BCI Finances, this duty is also reflected in s 181(1) of the Corporations Act, on which the Plaintiffs also relied in the Sunnya proceedings. [94]

[47]

Continuing fiduciary duties after a director's resignation

Fiduciary duties generally terminate upon the termination of the relevant underlying undertaking. In the present case, that underlying undertaking terminated upon the resignation of Mr He and Ms Lu as directors of Sunnya on 25 November 2022. However, many of the alleged breaches of fiduciary duty concern conduct of Mr He and Ms Lu that occurred after that date.
It is well established that a director's fiduciary duties may preclude them, after their resignation as a director, from pursuing for themselves or another person a business opportunity of the company. In Canadian Aero Service Ltd v O'Malley (Canadian Aero), Laskin J (as the 14th Chief Justice of Canada then was) said: [95] "Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer … is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company. An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired."
This passage has been cited and applied in many subsequent cases, including in Australia.
Referring to the judgment of the Victorian Court of Appeal in Schmidt v AHRKalimpa Pty Ltd (Schmidt), [96] which in turn referred to the judgment of the Court of Appeal of England and Wales in Foster Bryant Surveying Ltd v Bryant (Foster Bryant), [97] the He Parties submitted that the better view is that the fiduciary obligations of a director continue after their resignation only in relation to opportunities in respect of which the director's resignation was prompted or influenced by a wish to acquire the opportunity for themselves, and where it was the director's position with the company rather than a fresh initiative that led them to the opportunity, which they later acquired. The He Parties submitted that this was the view taken by the Court of Appeal of England and Wales in Foster Bryant, and that the Victorian Court of Appeal left that view open in Schmidt.
Contrary to the He Parties' submissions, this interpretation of Canadian Aero finds no support in Schmidt. The Victorian Court of Appeal referred to the passage from Canadian Aero extracted above, before referring to the following observations of Phillips JA in Edmonds v Donovan concerning the passage from Canadian Aero (emphasis added): [98] "In this passage, the contrast is between 'a fresh initiative' leading to the opportunity which the prepositus acquires after his resignation and an opportunity to which he is led by his own position with the company; and the obligation of the director or employee to continue observing after resignation a fiduciary duty which arose before resignation will only be the clearer where that resignation may fairly be said to have been prompted or influenced by the desire to obtain the corporate opportunity: Natural Extracts Pty Ltd v Stotter . In the case under appeal, there can be no doubt at all but that Edmonds and Cahill were led by reason of their participation in the venture with the plaintiffs to the opportunity upon which they latched, and latched so immediately after 12 August."
The other members of the Victorian Court of Appeal in Edmonds v Donovan agreed with the judgment of Phillips JA interpreting the principles articulated in Canadian Aero as requiring only that the former director's position with the company led them to the opportunity. It is not necessary to establish that the director's resignation was prompted or influenced by a desire to pursue the opportunity for themselves, but in cases where the resignation was so prompted or influenced, it will be clearer that their fiduciary position led them to the opportunity.
In the course of recording the submissions made by the applicants in Schmidt, the Victorian Court of Appeal noted that the applicants relied on a list of principles set out by the Court of Appeal of England and Wales in Foster Bryant, which was in fact a quotation from an earlier judgment of a Deputy Judge of the High Court of England and Wales. [99] The Court in Schmidt then set out the relevant parts of that list, which included the following principle numbered 7 (emphasis added): [100] "A director is however precluded from acting in breach of [his duty to avoid conflict between duty and self-interest], even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself any maturing business opportunities sought by the company and where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired."
However, the Victorian Court of Appeal in Schmidt confirmed that its earlier judgment in Edmonds v Donovan represents the law in Victoria, and that Foster Bryant does not represent the law to the extent that it is inconsistent with Edmonds v Donovan. [101] The Court of Appeal noted that the facts in Edmonds v Donovan fell within principle 7 in Foster Bryant in any event. Contrary to the He Parties' submissions, this observation does not detract from the Court's clear statement that Edmonds v Donovan represents the law, unless and until the High Court of Australia determines otherwise.
I reject the He Parties' submission that the "version of the test" in Foster Bryant is supported by the judgment of the New South Wales Court of Appeal in Nicholls v Michael Wilson & Partners Ltd (Nicholls). [102] After setting out the passage from Canadian Aero referred to at [474] above, Sackville AJA said (emphasis added): [103] "Canadian Aero has frequently been cited with approval in Australia. The passage to which I have referred was quoted with approval (through the intermediary of another Canadian decision) by this court in Mordecai v Mordecai (1988) 12 NSWLR 58, at 65, per Hope JA (with whom Samuels and Priestley JJA agreed). (See also Edmonds v Donovan (2005) 12 VR 513, at [58], per Phillips JA (with whom Winneke P and Charles JA agreed) and cases cited there.) However, it is important to appreciate that, as Phillips JA pointed out in Edmonds v Donovan (at [57]), the contrast drawn by Laskin J is between a fresh initiative leading to the opportunity acquired by the director after his resignation and an opportunity 'to which he is led by his own position with the company'. Phillips JA also pointed out that the effect of Canadian Aero is that the obligation of a director or employee to continue observing a fiduciary duty after resignation, where the duty arises before resignation, will be clearer if the resignation can fairly be said to have been prompted by the desire to obtain the 'corporate opportunity'."
Meagher and Barrett JJA agreed with Sackville AJA.
Contrary to the He Parties' submissions, the more succinct terms in which Sackville AJA later identified the principles in the course of applying them to the particular facts in Nicholls does not detract from his Honour's endorsement of Canadian Aero, as explained in Edmonds v Donovan, in the passage set out above.
The He Parties submitted that the test in Canadian Aero is "absurdly broad" and "obstructive of commerce in this nation" if it is understood as meaning that a director would breach a continuing fiduciary obligation if, upon resignation, they pursued any opportunity that came to them by reason of their former position with the company rather than as a result of some fresh initiative. It was submitted that, if the test were so understood, former directors would be precluded from being hired by a competitor of the company of which they had formerly been a director, merely because their previous position with the company had led the competitor to hire them. It was submitted that a former director would also be precluded from striking out in the same industry after resigning from the company, even in circumstances where they were not using confidential information of the company or breaching any valid restraint of trade.
I reject those submissions, which are founded on a fundamentally flawed understanding of the principle in Canadian Aero as explained in Edmonds v Donovan and in Nicholls. The focus of the inquiry is on any "property or business advantage either belonging to the company or for which it has been negotiating" or that the company has been "actively pursuing" prior to the director's resignation. Moreover, it is necessary to demonstrate that it is the director's former position with the company that has led them to that business advantage or opportunity, which they then acquire for themselves or their associates after resignation. That is the "critical question" identified by Hayne and Crennan JJ in Howard v Commissioner of Taxation. [104] Whether the requisite connection exists between the opportunity and the former directorship will depend on all of the circumstances of the case, including: (1) what if any role the director played in negotiating or pursuing the opportunity on behalf of the company, and what information they obtained about the opportunity, prior to their resignation as a director; (2) the period of time that has elapsed since the director's resignation and the director or their associates acquiring the opportunity; and (3) as stated in Canadian Aero, whether the director's resignation was prompted or influenced by a wish to acquire the opportunity for themselves or their associates. Each case turns on its own facts in relation to each relevant opportunity, but a former director who has merely exploited their general fund of knowledge and expertise derived in whole or in part from their previous position for their own benefit after resignation is unlikely to have breached any continuing fiduciary duty, as Holmes J observed in Rishmont Pty Ltd v Tweed City Medical Centre Pty Ltd. [105]
I am bound to apply the principle in Canadian Aero as explained by the New South Wales Court of Appeal in Nicholls.

[48]

Third party liability under Barnes v Addy

The Plaintiffs rely on the rule Barnes v Addy [106] as giving rise to accessorial liability on the part of Ms He, Sunlife, GABT, GNT, and the NZ Parties for certain alleged breaches of fiduciary duty by Mr He and Ms Lu.
For the purpose of the first limb of the rule, the Plaintiffs accept that they must establish that each relevant defendant has knowingly received company property as a result of a breach of fiduciary duty by Mr He or Ms Lu. [107] A corporate opportunity does not constitute property for this purpose. [108]
For the purpose of the second limb of the rule, the Plaintiffs must establish that each relevant defendant knowingly assisted Mr He and/or Ms Lu in a breach of fiduciary duty that amounted to a dishonest and fraudulent design. [109]
A dishonest and fraudulent design involves a breach of fiduciary duty that is dishonest in the sense that it transgresses ordinary standards of honest behaviour. [110]
A third party who has received company property as a result of a director's breach of fiduciary duty, or who has assisted the director's breach of fiduciary duty, will be liable if they had knowledge of the essential matters that go to make up the relevant breach (and, in the case of the second limb, the dishonest and fraudulent design), even if they did not know that those matters amounted to a breach of fiduciary duty. Knowledge of any of the following kinds will suffice: [111] 1. actual knowledge; 2. wilfully shutting one's eyes to the obvious; 3. wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; and 4. knowledge of circumstances which would indicate the facts to an honest and reasonable person.
Constructive notice - knowledge of circumstances which would put an honest and reasonable person on inquiry - will not suffice. [112]
In Grimaldi v Chameleon Mining NL (Grimaldi), the Full Court of the Federal Court made the following observations about the five categories, after cautioning against their use as rigid formulae: [113] "The first two categories of 'knowledge' require no comment. The third involves such a calculated abstention from inquiry as would disentitle the third party to rely upon lack of actual knowledge of the trustee's or fiduciary's wrongdoing. The fourth reflects what seems to have been accepted provisionally by three judges of the High Court in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398 and 412-13 ; 5 ALR 231 at 252 and 264-5 (Consul). It is, in essence, an understandable, objective, default rule designed to prevent a third party setting up his or her own 'moral obtuseness' as the reason for not recognising an impropriety that would have been apparent to an ordinary person: Consul at CLR 398 ; ALR 252 . It is the surrogate of actual knowledge. The form of constructive notice used in category (v) derives from the bona fide purchaser for value without notice doctrine."
What a defendant knows is distinct from the degree of certainty with which it is known. [114]
Knowledge within one of the four categories referred to above, without more, does not constitute assistance in the fiduciary's breach of duty. It is necessary to show that the third party's actions or, in some cases, failure to act, in circumstances where the third party had the requisite knowledge, has facilitated the fiduciary's breach of duty. The potential ways in which a third party might provide such assistance are myriad. Whether the third party has assisted in a particular breach of fiduciary duty in a particular case is a question of fact. [115]
The liability of a third party knowing recipient or knowing assistant is accessorial in the sense that it is dependent upon there being a breach of duty by the fiduciary and, to that extent, the fiduciary's wrong and the third party's wrong are linked. However, recipient and assistant liability is fault-based, personal liability. That is to say, the liability of the third party is for its own wrong in knowingly receiving or knowingly assisting, and not for the fiduciary's wrong. [116]
A successful plaintiff may therefore be entitled to an award of equitable compensation, an order requiring the fiduciary to account for property misapplied, or an order requiring the fiduciary to account for its profits made by a reason of the breach of fiduciary duty, and, in addition, an award of equitable compensation or an order requiring the third party to account for its profits made by reason of its knowing receipt or knowing assistance. The plaintiff may make a different election between remedies in respect of the fiduciary and in respect of the third party. [117]
Where the plaintiff elects equitable compensation, a sufficient causal connection exists if a loss sustained by the plaintiff would not have been sustained but for the breach. That "but for" connection will suffice, even if other contributing causes might be in play. [118]
Where the plaintiff elects an account of profits, a sufficient causal connection will exist if the benefit or gain to the fiduciary or third party would not have been obtained "but for" the breach. Again, the "but for" connection will suffice, even if there may be other contributing causes. Where the plaintiff elects an account of profits against each of the fiduciary and the third party, the profits for which the fiduciary must account, and the profits for which the third party must account, will not necessarily be equal. [119]

[49]

Liability of an alter ego of the defaulting fiduciary

In addition to relying on the knowing receipt and knowing assistance limbs of Barnes v Addy, the Plaintiffs rely on the "concept" of "alter ego" as a basis for their accessorial liability claims.
The Plaintiffs relied on the passage set out below from the judgment of the Full Court of the Federal Court in Grimaldi under the heading "Third Party Liability: A Digression". After noting that Barnes v Addy does not provide an exhaustive statement of the circumstances in which, and the bases on which, a third party's participation in another's breach of fiduciary duty could render that third party accountable in equity as a constructive trustee, [120] their Honours described several "quite different manifestations of such participation", including: [121] "… where the third party is the corporate creature, vehicle, or alter ego of wrongdoing fiduciaries who use it to secure the profits of, or to inflict the losses by, their breach of fiduciary duty: see eg Cook v Deeks [1916] AC 554 ('Cook') at 565; Queensland Mines Ltd v Hudson (1975-1976) ACLC 28, 658 at 27,709, revsd on other grounds (1978) 18 ALR 1; Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 ('Timber Engineering') at (11); Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32 ('Green v Bestobell'); Gencor ACP Ltd v Dalby [2000] 2 BCLC 734 at [26]; CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704 ('CMS Dolphin') at [97]-[105]. In these cases the corporate vehicle is fully liable for the profits made from, and the losses inflicted by, the fiduciary's wrong. The liability itself is explained commonly on the basis that 'company had full knowledge of all of the facts': Cook, at 565; it is the alter ego of the fiduciary with a 'transmitted fiduciary obligation': Timber Engineering, at (11); or that it 'jointly participated' in the breach: CMS Dolphin at [103]. Liability does not turn on the need to show 'dishonesty', although it often provides the reason for the interposition of the company. Proof of a breach of fiduciary duty will suffice; Green v Bestobell, at 40. And, as was said in CMS Dolphin (at [104]), it is 'rather artificial' to use Barnes v Addy to explain this liability."
Their Honours' remarks are obiter, as the case in Grimaldi had been pleaded and run solely as a Barnes v Addy case. [122] That particular passage from their Honours' judgment has been referred to in many subsequent cases. However, there is a contrary view that the liability of the fiduciary and the corporate accessory controlled by the fiduciary are distinct. [123] In most cases to date where a company has been characterised as the alter ego of the defaulting fiduciary, the company has been held liable under the first or second limb of Barnes v Addy rather than on the alter ego basis. [124]
In Zibara v Ultra Management (Sports) Pty Ltd (Zibara), [125] Derrington J said: [126] "260. Many vague references appear in the authorities which might support the existence of a right against a corporate entity based solely on it being the 'alter ego' of a defaulting fiduciary. Such references are usually in the nature of expressions of obiter and are not fully articulated. However, as yet, no generally accepted principle has established itself as a method by which courts may ignore the separate legal existence of corporate entities. In Cornerstone Property & Development Pty Ltd v Suellen Properties Pty Ltd [2015] 1 Qd R 75 at 96 [101] to [102], Jackson J expressed reservations as to whether there is any principled basis on which an alleged corporate alter ego can be found liable for a breach of fiduciary duty of another party. … 261. His Honour's comments highlight the need for a principled approach to the imposition of liability on a company as the alter ego of a defaulting fiduciary. Whilst a broad brush application of that notion in a difficult case where a litigant has failed to properly plead a cause of action against a corporate entity may satisfy equally broad brush concepts of individual justice in the subject case, it offers little in the way of certainty and nothing in the nature of fairness to defendants who are entitled to understand the case which they are to meet. In the absence of any established principle, it is unclear when or how such liability might imposed. In cases involving participation in a breach of fiduciary duty by a corporate 'alter ego', different justifications are often given for a finding of liability on this basis."
Derrington J then analysed the cases referred to in the passage from Grimaldi extracted above, and opined that few, if any, of them directly supported any clear principle that corporate entities can be held liable for breaches of duty committed by related fiduciaries. [127]
After reviewing those authorities, Derrington J described the concept of a corporate alter ego as "a slippery one, at best". [128] Her Honour acknowledged that the High Court had accepted in Farah Constructions that a corporate alter ego can be liable for a breach of fiduciary duty. Her Honour said: [129] "… that case involved a fiduciary, who, through a company controlled by him, entered into a contract to buy land in breach of his fiduciary duty. The High Court observed that as the individual was liable for the breach, the company was also liable as his alter ego on the basis that 'his mind [was] its mind' (at 148 [128]), citing Hamilton v Whitehead (1988) 166 CLR 121 at 127. The Court's reliance on that case suggests that in instances where a corporation is the 'alter ego' of an errant fiduciary, liability is not truly attributed to the company on the basis of its participation, but rather on the basis that the fiduciary, in breaching its fiduciary duty, was acting as the embodiment of the company, and the company is therefore directly liable. However the Court in Farah was explicit in asserting that each case will depend on its own facts, and that no universal regime of absolute liability applies where a third party is employed by the fiduciary as a 'device'."
In Zibara, a company had been held liable at first instance under the second limb of Barnes v Addy. On appeal, the company contended that a case of knowing assistance in the defaulting fiduciary's dishonest and fraudulent design had not been pleaded and put against it at trial. McKerracher and Anderson JJ rejected that contention. Their Honours also stated that there is a distinction between a company that is the alter ego of the fiduciary, and a "true" third party, referring to the judgment of Leeming JA in Hasler. [130] After setting out the passage from the judgment of the Full Court of the Federal Court in Grimaldi extracted above, their Honours said that the relevant corporate entity in Zibara was fully liable for the profits made from, and losses inflicted by, the defaulting fiduciary's breaches of duty, "whether on the basis that [the company] had full knowledge of the relevant facts, that [the company] was the alter ego of the fiduciary with a 'transmitted fiduciary obligation' or on the basis that it 'jointly participated' in the relevant breaches". [131]
Derrington J dissented, finding that the respondent had not pleaded either a second limb Barnes v Addy case, or an alter ego case, against the company at trial, and concluding that the respondent therefore should not have been held liable on either basis. Having made the observations referred to at [503]-[505] above, Derrington J preferred not to express any conclusive view about the correctness or otherwise of the principle of imposing liability on a defaulting fiduciary's corporate alter ego, or the content of any such principle. [132]
Leeming JA referred to the difficulties in identifying the principle by reference to which liability may be imposed on a company on the basis that it is the alter ego of a defaulting fiduciary in Murdoch v MDL. The following passages from his Honour's judgment explain the manner in which alter ego liability was raised at trial, and refer to the difficulties that his Honour did not find it necessary to determine in that case: [133] "26. Insofar as MDL sued in equity, it was necessary to establish a different basis of accessorial liability. The pleading alleged an elaborate series of claims based on knowing receipt of trust property, which was met by the response that no property of MDL was received. Neither a corporate opportunity nor most forms of confidential information constitute property for the purposes of this form of accessorial liability: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [116] -[121] . This in turn seems to have led to MDL invoking the "alter ego" principles stated in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [243] . This had not been pleaded, but the trial judge accepted the defendants' proper concession that they could point to no prejudice, and concluded at [164]: It seems to me [to] have been established that RKM was Robert's alter ago or vehicle and [Bright Pear] was Stephen's alter ego or vehicle. Mr Bedrossian pointed out that Robert was both the director and major shareholder of RKM at the relevant time, as is accepted by the Robert Murdoch Interests in their Defence; Stephen did not become a shareholder in RKM until about 29 June 2012 and, I interpolate, I have found that Stephen was knowingly involved in the relevant breaches in any event; and there is no suggestion that Robert's wife, who had a minority shareholding in RKM since 2003, took any active role in it, so as to dilute Robert's control over RKM or prevent a finding that RKM is his alter ego. 27. The appeal and cross-appeal were conducted on the basis that throughout that period, RKM was the 'alter ego' of Robert and Bright Pear was the "alter ego" of Stephen for the purpose of accessorial liability in the sense stated in Grimaldi above. Each man and the company he controlled was in substance treated as the same actor, both for the purpose of knowledge and amenability to orders to account. As it was put in Hamilton v Whitehead (1988) 166 CLR 121 at 127; [1988] HCA 65 and Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [128] , his mind was the mind of the company. The approach of the primary judge resembled what occurred in Novoship (UK) Ltd v Mikhaylyuk [2012] EWHC 3586 (Comm) at [529] , where it was said: The account must be against Henriot Finance, who were the immediate earners of the profit, and also against Mr Nikitin, who was the architect of the dishonest assistance effected through him and Henriot Finance, which was both his alter ego and the company which he chose as the immediate destination of the profits. It is not necessary to determine where, as between those two, the profits have ended up. That does not mean that the Claimants are entitled to recover twice: only that both are accounting parties. (original emphasis) 28. That approach passes over the difficulties as to the conceptual basis of the analysis, as noted in J Glister, 'Diverting Fiduciary Gains to Companies' (2017) 40(1) UNSWLJ 4. Is the liability based on agency, or piercing the corporate veil, or some other means such as a trust or the appreciation that a gain by the company is a gain by its sole shareholder? As Professor Glister observes at 21 and 26, the term 'alter ego' is a term which displays both 'elasticity' and 'general flexibility', but if anything detracts from the analysis. But I too shall pass over this, the point not being argued, and the parties proceeding on the basis that no distinction should be drawn, for the purpose of liability and remedy, between Robert and RKM, or between Stephen and Bright Pear. However, I note that on no view of RKM and Bright Pear being 'alter egos' of their principals is Robert liable in equity for profits derived by Bright Pear."
Macfarlan and Gleeson JJA agreed with Leeming JA.
In Twigg v Twigg, [134] the primary judge, applying the statement in Grimaldi extracted above, had held that certain companies were equally liable with the defaulting trustee to account for certain monies that they had received which were proceeds of the breach of trust, on the basis that each company was the alter ego of the trustee. On appeal, Brereton JA rejected the appellants' submission that the obiter statement in Grimaldi should not be taken as establishing a principle that permitted the imposition of liability on the companies as alter egos of the trustee in Twigg v Twigg. Brereton JA considered that the statement in Grimaldi was "entirely congruent with" the judgment of the High Court in Farah Constructions. [135] Brereton JA held that a property acquired by the trustee's corporate alter ego with traceable proceeds of the breach of trust, was itself traceable property. [136]
Bell CJ and Payne JA agreed with Brereton JA's conclusion, on the basis that there had been no challenge on appeal to the primary judge's finding that the company was the alter ego of the defaulting trustee, and that finding was dispositive of the issue. Referring to the judgment of Leeming JA in Murdoch v MDL, their Honours acknowledged that there may be difficulties with an alter ego analysis. However, their Honours did not find it necessary to express a view about that issue, preferring to reserve their position. [137]

[50]

Joint liability of a third party "acting in concert with" a defaulting fiduciary

Subject to limited exceptions, the liability of a knowing recipient or knowing assistant to compensate the principal for the fiduciary's breach of duty is several only. The liability of a knowing recipient or knowing assistant to an account of profits is generally several, and extends only the profits derived by that third party. [138]
One exception to those general rules is the "acting in concert" exception. That exception was explained in the following terms by the Full Court of the Federal Court in Grimaldi: [139] "… if the fiduciary and the third party assistant or recipient act in concert to secure a mutual benefit, be this to misappropriate trust property for a particular mutually beneficial purpose or to participate in a breach of fiduciary duty to secure a mutual advantage (eg a business opportunity), they are jointly and severally liable to the wronged beneficiary/principal to restore the trust or to account for the profits made. In CMS Dolphin, directors were held equally liable with the corporate vehicle they formed to take unlawful advantage of business opportunities they provided to it: '[T]he reason is that they have jointly participated in the breach of trust': at [103] emphasis added; Green v Bestobell; see also the facts in Macdonald v Hauer, above; but cf the criticism in Ultraframe (UK), at [1561]-[1576]. One can readily understand why, when wrongdoers so entangle their affairs, that the law as a matter of legal policy might wish to make it their responsibility - and not a claimant's - to untangle them for accountability purposes."
Thus, "acting in concert" is a basis on which a knowing recipient or knowing assistant may be jointly rather than severally liable with the defaulting fiduciary. It is not a basis on which liability for breach of fiduciary duty may be imposed on third parties who are not either knowing recipients or knowing assistants under the first and second limbs of Barnes v Addy.

[51]

Corporations Act s 180

Section 180(1) of the Corporations Act provides: "(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer."
Section 180(2) sets out the "business judgment rule", which was not relied on by Mr He and Ms Lu in these proceedings.
The duty of care and diligence must be considered in light of the interests of the corporation. If the interests of the corporation are not harmed, or subjected to foreseeable harm, by the impugned conduct of the directors, then there cannot have been any breach of the duty. [140]
The interests of the corporation include its compliance with the law. As Brereton J (as his Honour then was) said in Australian Securities and Investments Commission v Maxwell (Maxwell): [141] "104. There are cases in which it will be a contravention of their duties, owed to the company, for directors to authorise or permit the company to commit contraventions of provisions of the Corporations Act. Relevant jeopardy to the interests of the company may be found in the actual or potential exposure of the company to civil penalties or other liability under the Act, and it may no doubt be a breach of a relevant duty for a director to embark on or authorise a course which attracts the risk of that exposure, at least if the risk is clear and the countervailing potential benefits insignificant. But it is a mistake to think that ss 180, 181 and 182 are concerned with any general obligation owed by directors at large to conduct the affairs of the company in accordance with law generally or the Corporations Act in particular; they are not. They are concerned with duties owed to the company. … 110. Generally speaking, therefore, ss 180, 181 and 182 do not provide a backdoor method for visiting, on company directors, accessorial civil liability for contraventions of the Corporations Act in respect of which provision is not otherwise made. This is all the more so since the Corporations Act makes provision for the circumstances in which there is to be accessorial civil liability. Whether there were in this case breaches of the directors' duties - and, in particular, of their duty of care and diligence - depends upon an analysis of whether and to what extent the corporation's interests were jeopardised, and if they were, whether the risks obviously outweighed any potential countervailing benefits, and whether there were reasonable steps which could have been taken to avoid them."
Those observations of Brereton J have been referred to with approval and applied in many subsequent cases. [142] In DSHE Holdings Ltd (receivers and managers apptd) (in liq) v Potts, the Court of Appeal referred to the passages from Brereton J's judgment extracted above as authority that: [143] "113. It is necessary in such a case to keep in focus that the relevant contravention is of the director's duty owed to the company. Merely because an action of a company is likely to breach, will breach, or does in fact breach some other legal norm does not necessarily establish a breach of the duties owed by the directors to the company. Conversely, just because an apprehended breach did not in fact occur does not necessarily establish that there was no failure to comply with the duties of directors"…
As the wording of s 180(1) reinforces, whether or not a director has breached the duty depends on the particular facts of the case, including the corporation's circumstances, the director's statutory responsibilities, and any other specific responsibilities that have in fact been conferred on the director. [144]
Section 180(1) does not require the conduct to have caused loss in order for the section to have been contravened. [145]

[52]

Corporations Act s 181

Section 181(1) of the Corporations Act provides: "(1) A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose."
Section 181(1) imposes two separate duties in sub-sections (a) and (b). [146]
The statutory duty in section 181(1)(a) is a composite obligation to act in good faith in the best interests of the corporation.
There is a divergence of views in the authorities about whether a director's conduct is to be assessed against s 181(1)(a) subjectively (so that the sub-section will be contravened only if the director engaged deliberately in conduct that they knew was not in the company's best interests), or objectively (so that the sub-section will be contravened if the director's conduct was not in the company's best interests, objectively assessed, notwithstanding that the director subjectively believed they were acting in the company's best interests). [147]
The Plaintiffs submitted that the objective approach is to be preferred. The He Parties submitted that the subjective approach is correct, referring to the judgment of Brereton J in Maxwell. [148] Neither submission engaged in any meaningful discussion of the different approaches. The He Parties' submission made no reference to the many cases subsequent to Maxwell in which the Courts have applied an objective approach in which the director's subjective belief about the best interests of the company at the time of the impugned conduct is treated as a relevant factor to be considered in the process of the Court's objective assessment of the company's best interests.
For reasons that will become apparent, it has not been necessary to resolve the controversy between the two approaches in the present case.
Section 181(1)(b) will be contravened if a director does not exercise their powers for the purpose for which they were conferred, or exercises them for an improper purpose. The substantial purpose for which a power has been exercised is a question of fact. I accept the He Parties' submission that any evidence of the directors' subjective reasons for exercising the relevant power, including evidence of circumstances for which those reasons may be inferred, will be relevant to the determination of that question of fact. [149] Whether or not the purpose was improper is then determined objectively. [150] The Plaintiffs bear the onus of proving that the purpose was improper.

[54]

Involvement in breaches of statutory duty

I respectfully adopt Gleeson J's summary in Re IW4U Pty Ltd (in liq) of the principles applicable to determining whether a person has been "involved" within the meaning of s 79 of the Corporations Act in another's contravention of that Act: [153] "38. The concept of being 'involved' in a contravention is defined in s 79 of the Corporations Act which provides that a person is involved in a contravention if, and only if, the person, among other things, has aided, abetted, counselled or procured the contravention (subpar (a)), or has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention (subpar (c)). 39. The principal authorities dealing with accessorial liability of persons involved in a statutory contravention are Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65; Giorgianni v R (1985) 156 CLR 473; [1985] HCA 29; and Pereira v Director of Public Prosecutions [1988] HCA 57; (1988) 82 ALR 217. It is well-established that actual knowledge of the essential facts constituting the contravention is necessary: Yorke at 669-670, 676; Giorgianni at 506-507; and Pereira at 220. See also Lifeplan Australia Friendly Society Ltd (ACN 087 649 492) v Ancient Order of Foresters in Victoria Friendly Society Ltd (ACN 087 648 842) [2017] FCAFC 74; (2017) 120 ACSR 421 at [104]. 40. Proof of actual knowledge may be inferred from the person's actual exposure to the obvious that they had knowledge of the essential elements of the contravention, however mere constructive knowledge is not sufficient: Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 at [209]."
Whilst knowledge of the matters comprising the elements of the contravention is required, it is not necessary for the plaintiff to establish that the defendant knew that those matters constituted a contravention. [154]
It may be possible to infer actual knowledge of the relevant essential matters from a combination of suspicious circumstances and a failure to make enquiries. However, not every deliberate failure to make enquiries will suffice. As White J explained in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (ActiveSuper): [155] "402 … only actual knowledge of the essential matters will be sufficient but that that knowledge may be able to be inferred from a defendant's knowledge of matters raising suspicion, together with a deliberate failure to make the enquiries which may have confirmed those suspicions. 403 The determination that a person has actual knowledge in this manner is not always easy. Amongst other things, it requires consideration of the defendant's knowledge of matters giving rise to suspicion, the circumstances in which the defendant did not make the obvious enquiry, and the defendant's reasons, to the extent that they are known, for not making the enquiry. It is necessary to keep in mind that it may not be every deliberate failure to make enquiry which will support the inference of actual knowledge. In several cases, including Official Trustee in Bankruptcy v Mitchell(1992) 38 FCR 364 at 371; Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681 at 693-4; Australian Securities and Investments Commission v Adler [2002] NSWSC 171 ; (2002) 168 FLR 253 at [209], this court has referred with approval to a passage from the advice of Lord Sumner in The Zamora (No 2)[1921] 1 AC 801 at 812-3, in which his Lordship noted two senses in which persons may be said not to know something because they do not wish to know it: A thing may be troublesome to learn, and the knowledge of it, when acquired, may be uninteresting or distasteful. To refuse to know any more about the subject or anything at all is then a wilful but a real ignorance. On the other hand, a man is said not to know because he does not want to know, where the substance of a thing is borne in upon his mind with a conviction that full details or precise proofs may be dangerous, because they may embarrass his denials or compromise his protests. In such a case he flatters himself that where ignorance is safe, 'tis folly to be wise, but there he is wrong, for he has been put upon notice and his further ignorance, even though actual and complete, is a mere affectation and disguise. In the former circumstance described by Lord Sumner, the person will not have actual knowledge of the matter. In the latter circumstance, the person does have that knowledge but deliberately refrains from asking questions or seeking further information in order to maintain a state of apparent ignorance. That is not a circumstance of constructive or imputed knowledge, but of actual knowledge reduced to a minimum by the person's wilful conduct: Richardson & Wrench at 694 (Burchett J). It stands in contrast to the circumstance of 'honest ignorance' to which Brennan J referred in Yorke v Lucas at 677. 404. Although courts have held on several occasions that actual knowledge by a person of the essential elements of a contravention may be able to be inferred from proof that the person had knowledge of suspicious circumstances but deliberately refrained from making enquiry (Richardson & Wrench at 693-4; Cassidy at [71]; Compaq Computer Australia Pty Ltd v Merry(1998) 157 ALR 1 at 5; Australian Securities and Investments Commission v PFS Business Development Group Pty Ltd [2006] VSC 192 ; (2006) 57 ACSR 553 at [390]; Forge v Australian Securities and Investments Commission [2004] NSWCA 448 ; (2004) 213 ALR 574 at [202], there are few instances of actual knowledge being found to exist in those circumstances. This has the consequence that there is relatively little practical analysis in the authorities of the way in which actual knowledge can be inferred on the basis of knowledge of suspicious circumstances and a failure to make enquiry. 405. The requisite actual knowledge must be present at the time of the contravention. A later acquisition of knowledge of the essential matters is not sufficient: Australian Investors Forum at [113]-[118]."

[56]

Inferences to be drawn from the failure of Mr He, Ms Lu and Ms He to give evidence

The Plaintiffs submitted that the rule in Jones v Dunkel [159] is engaged by the failure of Mr He, Ms Lu and Ms He to give evidence in these proceedings.
The rule is that a party's unexplained failure to call a witness permits an inference, not that the evidence that the witness could have given would have been positively adverse to that party, but that the evidence would not have assisted that party. [160]
A party's failure to call a witness may also permit the court to draw with greater confidence any inference unfavourable to that party that is available on the evidence that is before the court, if the uncalled witness would presumably be in a position to cast light on whether the inference should be drawn. [161] Such an inference will only be available if there is evidence before the court of circumstances that supports the inference on the balance of probabilities. Evidence that merely gives rise to conflicting inferences with an equal degree of probability will not suffice. The court does not engage in "mere conjecture or surmise". [162] The nature and cogency of the evidence that is required to discharge a party's onus of proving a disputed fact on the balance of probabilities will be informed, in part, by the gravity of the allegation. [163] As the Court of Appeal succinctly stated in Jagatramka v Wollongong Coal Ltd, a party's failure to call a witness "cannot fill gaps in the evidence, as distinct from enabling an available inference to be drawn more comfortably". [164]
Counsel for the He Parties submitted that Mr He, Ms Lu and Ms He had prepared and served affidavits in these proceedings, and had applied to give evidence by audio-visual link. Counsel did not cavil with the Court's reasons for refusing that application. Counsel accepted that the conduct of Mr He, Ms Lu and Ms He in departing the jurisdiction, and in making themselves available to give evidence in these proceedings only by audio-visual link from a foreign country, was not the subject of any explanation that had been accepted by the Court. It was nevertheless submitted that their failure to give evidence was not unexplained in a sense that engages the rule in Jones v Dunkel, and that the Court should not infer that evidence that could have been given by Mr He, Ms Lu or Ms He would not have assisted the He Parties in these proceedings.
I reject the submission that the failure of Mr He, Ms Lu and Ms He to give evidence is not unexplained. Their failure to give evidence is the consequence of their affidavits not being read in circumstances where the Plaintiffs required them for cross-examination, they failed to attend court in person for that purpose, and their application to give evidence by audio-visual link was dismissed for reasons that included the absence of any credible evidence of any reason why they were unwilling or unable to attend court in person for cross-examination. Only one week prior to the hearing of their application to give evidence by audio-visual link, the solicitor for Mr He, Ms Lu and Ms He had given evidence on information and belief that his clients would return to Australia to attend court and give evidence, and that they had booked airline tickets for that purpose.

[57]

Observations concerning the evidence of Mr Wu

Mr Wu gave his evidence through an interpreter. Mr Wu tended to speak very quickly, despite being reminded on several occasions to slow down to allow the interpreter to take a note of what he was saying so that it could then be interpreted. This made the interpreter's task a difficult one.
Mr Wu frequently took issue with the interpretation of the question, or of Mr Wu's answer. When appropriate, the sound recording of the relevant question or answer and the interpretation was played back, and the interpreter was given the opportunity to confirm or correct the interpretation. On a very small number of occasions, that resulted in some relatively minor correction to the interpretation. Mr Wu's complaints about the interpretation of his evidence were so frequent that they became an impediment to the progress of the cross-examination. No application was made by the NZ Parties, on whose behalf Mr Wu was giving evidence, to adjourn the proceedings with a view to engaging a different interpreter. At a relatively early stage during Mr Wu's cross-examination, I invited senior counsel for the NZ Parties to consider whether he wished to make such an application. Senior counsel informed the Court that, having consulted his instructing solicitor and Mandarin-speaking junior counsel, no such application was made. I inferred that the Mandarin-speaking members of the NZ Parties' legal team did not agree with the issues that Mr Wu had been raising about the quality and accuracy of the interpretation. In closing submissions, senior counsel for the NZ Parties confirmed that this was so.
As senior counsel for the NZ Parties candidly accepted in closing submissions, Mr Wu was a difficult witness. His answers to many of the questions asked of him where either non-responsive, argumentative, or speculative in the sense that he was advancing theories that would (if accepted) assist the NZ Parties' defence of the Sunnya proceedings. In some instances, Mr Wu also displayed a willingness to advocate for the interests of the He Parties, with whom he appears to have determined that his business interests are aligned. [165]
Contrary to the submissions of the NZ Parties', the problems with Mr Wu's evidence do not end there. Glaring inconsistencies pervaded his evidence. Some of those inconsistencies lay within the same affidavit, or between different affidavits of Mr Wu. [166] Others emerged during cross-examination. [167] For example, Mr Wu gave evidence in cross-examination about the reasons why he claims to have agreed to allow Mr He to cause Sunlife to register the NRIO trade mark, which was inconsistent with the reasons set out in his affidavit affirmed on 15 September 2023. [168] Mr Wu also gave evidence in cross-examination that was inconsistent with the evidence in his affidavit affirmed on 19 November 2023 about the circumstances in which he claims that Mega Aqua contracted to supply products to HLW in return for payments that the Plaintiffs allege were funded by moneys paid by Mr He and Ms Lu to HLW in an effort to remove funds from the reach of their creditors. [169]
When confronted with an objective fact that appeared to present a potential difficulty for the NZ Parties' defence of the Sunnya proceedings, Mr Wu was quick to advance any speculative theory that he considered might assist that defence. [170] For example, Mr Wu advanced the theory that Megadairy was not in fact the manufacturer of the NRIO-branded sachets that were sold in Neurio/NRIO-branded tins in China, notwithstanding that notices published on GABT's website named Megadairy as the manufacturer, because "these things can be written up by anyone, so it is not necessarily the truth". [171] Mr Wu also advanced two different theories to explain why Mega Aqua and HLW allegedly entered into "contract of purchase" documents in respect of products allegedly ordered by HLW from Mega Aqua in late 2022 or early 2023. [172]
For the reasons explained below, I have found that Mr Wu fabricated, or was involved in or aware of the fabrication of, the Production Sales and Confidentiality Agreement purportedly dated 9 June 2015, the email purportedly dated 12 June 2015, the Brand OEM Authorized Letter and the email purportedly dated 9 July 2019, and that Mr Wu gave false evidence about those documents. [173] I have also found that Mr Wu gave false evidence about the alleged 2019 Guamis agreement, [174] and that Mr Wu gave false evidence about the transactions underlying payments made by HLW to Mega Aqua totalling AUD$2,989,584.33. [175] Irrespective of whether such conduct constitutes an implied admission, as the Plaintiffs contend, it reflects very poorly on Mr Wu's credit.
Taking into account Mr Wu's willingness to give false evidence about those matters, and the inconsistencies within his evidence, I do not accept Mr Wu's evidence in relation to any disputed matter except where his evidence is inherently probable, or was corroborated by a reliable source, or where the evidence was contrary to the NZ Parties' interests in the Sunnya proceedings. I accept the Plaintiffs' submission to that effect.

[58]

Inferences and admissions that may be drawn from the conduct of parties and witnesses in these proceedings

The Plaintiffs submitted that the following principle articulated by the majority of the High Court in Kuhl v Zurich Financial Services Australia Ltd is also engaged in the present case: [176] "… Depending on the circumstances, when a party lies, or destroys or conceals evidence, or attempts to destroy or conceal evidence, or suborns witnesses, or calls testimony known to be false, or fails to comply with court orders for the production of evidence (like subpoenas or orders to answer interrogatories), or misleads persons in authority about who the party is, or flees, the conduct can be variously described as an implied admission or circumstantial evidence permitting an adverse inference. The position must be the same where there is a failure of a party-witness to comply with the duty of a witness to tell the whole truth. There is a reason why failure to call a witness or failure to ask a particular question of a witness supports the possible inference that the witness's evidence would not have assisted the party, while failure of a party-witness to tell the whole truth may support an inference that the party suppressed evidence which would have been damaging to the party-witness. A litigant has no duty to call particular witnesses or to procure that any witnesses called by that litigant are asked particular questions. A litigant who enters the witness box, on the other hand, is under a positive duty to tell the whole truth in answer to the questions asked."
Conduct of the kind described above will not necessarily reflect a consciousness of guilt. Courts must exercise caution in determining whether to treat such conduct as an implied admission. [177] As the NZ Parties submitted, this includes examining the alleged link between the subject matter of the lie or the evidence concealed or fabricated, as the case may be, and the subject matter of the alleged implied admission. Even where those subject matters align, the Court must examine all of the circumstances, bearing in mind that a lie may constitute an attempt to improve a just cause where the liar perceives the result to be uncertain, rather than reflecting a consciousness of guilt. [178]
The Plaintiffs made a general submission that the conduct of Mr He, Ms Lu and Ms He in "fleeing" the jurisdiction, the conduct of GABT in failing to comply with discovery orders, the conduct of the He Parties and Mr Wu in manufacturing evidence and lying about doing so, and the conduct of Mr Wu in failing to "tell the whole truth whilst giving evidence" constituted "an implied admission of their liability or circumstantial evidence permitting an adverse inference".
As counsel for the He Parties submitted, Mr He, Ms Lu and Ms He cannot fairly be said to have "fled" the jurisdiction. They were under no legal obligation to remain in the jurisdiction. They departed the jurisdiction and did not return to give evidence in the proceedings, for reasons that are unexplained. As discussed above, that permits the drawing of inferences that are permissible in accordance with the rule in Jones v Dunkel referred to above. It does not, in my view, constitute an implied admission in respect of any, let alone all, of the allegations made against them in these proceedings.
I do not consider that it is otherwise appropriate to address the Plaintiffs' contention at such a high level of generality. To the extent that the Plaintiffs have submitted that specific conduct of a particular party constitutes an implied admission in respect of a relevant matter, I have addressed those submissions in the course of my reasons below. However, it is convenient at this point to record my findings in relation to each of the documents that the Plaintiffs allege are not authentic, and have been fabricated by the He Parties or by Mr Wu.

[59]

Trademark Registration Authorization Agreement and Trademark Usage Authorisation Agreement purportedly dated 16 December 2014

The evidence relating to these documents is set out at [252]-[274] above.
I find that the Trademark Registration Authorization Agreement and Trademark Usage Authorisation Agreement, each bearing the date 16 December 2014, are not genuine agreements entered into between GABT and Sunnya on or about that date, and were created by the He Parties for the purpose of manufacturing a false basis for Sunnya to transfer the Australian and New Zealand Neurio trade marks to GABT in late October and early November 2022, so as to assist the He Parties' defence of the Sunnya proceedings and the prosecution of the All168 proceedings.
The evidence establishes that the address specified for GABT in each of the two alleged agreements was not GABT's address at the time the alleged agreements are said to have been entered into, and I so find. [179] The He Parties no longer rely on the lease document, which was the sole basis on which they contended that the address shown in the two impugned agreements was GABT's address in December 2014. That lease document was falsified by being signed in 2023, yet dated 26 June 2014. According to Mr He's affidavit evidence about the lease that was tendered by the Plaintiffs, he was not aware of the falsification at the time the He Parties presented the lease document to their solicitors as the basis for the pleading of their reply to the allegation in the All168 proceedings that the alleged 2014 agreements were not genuine. [180] The evidence does not establish who falsified the lease document. It is not necessary to determine whether the solicitors' understanding set out in Mr Macpherson's 8 February 2023 email is correct in all respects, including whether Ms Lu was aware that the lease document was false at the time that it was relied on as the basis for the reply pleading in the All168 proceedings that was later withdrawn. [181] The alleged agreements specifying an address for GABT that did not become that company's address until 2017 cannot have been executed on or about 16 December 2014.
To this may be added the implausibility of GABT and Sunnya entering into two agreements on 16 December 2014, one of which purported to authorise Sunnya prospectively to register two historical Neurio trade marks that had already been registered in the name of Ms Lu, and the other of which purported to authorise Sunnya to use those trade marks, which were identified by the registration numbers that had already been allocated to them when they were registered by Ms Lu. [182]
For the reasons explained at [272] and [273] above, I do not rely on the evidence of Mr Wang, Mr Zhang and Ms Chen in finding that the two alleged agreements are not genuine documents.

[60]

Production Sales and Confidentiality Agreement purportedly dated 9 June 2015, OEM Authorization Letter purportedly dated 8 July 2019, and associated emails

The evidence relating to these documents is referred to at [92]-[121] and [231]-[233] above.
It is inherently improbable that Supermega, GABT and Sunnya entered into the Production Sales and Confidentiality Agreement in June 2015 - four years before Mr Wu says that Supermega or Megadairy even had the capacity to manufacture formulated milk powder products in sachets to meet the requirements of the Chinese market, and five years before Sunnya or GABT placed any order for Neurio-branded products with Supermega. Mr Wu's explanation for this - that he and Mr Lu thought it was a good idea because of the involvement of two buyers for the same brand - is implausible. There was not even one buyer for Neurio-branded products from Supermega or any of its related entities in June 2015.
On the basis of Mr Whitbourn's unchallenged evidence referred to at [105]-[111] above, I find that the email from Mr Lu that Mr Wu deposed to having received on 12 June 2015 was not sent until 26 March 2023.
On the basis of Mr Whitbourn's unchallenged evidence referred to at [112]-[116] above, I find that the email from Mr Lu that Mr Wu deposed was received by a Supermega email account on 9 July 2019, with the Brand OEM Authorized Letter attached, was not sent until 26 March 2023. Mr Whitbourn also analysed the electronic copy of the attachment to that email that was discovered by the NZ Parties, and found it to be a pdf document that was created and last modified on 23 March 2023. I accept Mr Whitbourn's evidence, which establishes that the pdf document attached to that email was not even created until almost four years after Mr Wu says Supermega received the email with the attachment.
Mr Wu's evidence about the document entitled Production Sales and Confidentiality Agreement, the Brand OEM Authorized Letter, and the emails associated with them, was riddled with internal inconsistences, which are a further reason why his evidence related to these documents is not credible. I refer to the inconsistences identified at [100], [103]-[104], [213] and [222]-[225] above. Moreover, Mr Wu's failure to mention the documents in his affidavit affirmed on 1 March 2023 referred to at [103]-[104] supports the conclusion that those documents had not been created, and so were not available to him to deploy at the time that he affirmed that affidavit on 1 March 2023 in the manner that he later did in subsequent affidavits and in cross-examination.
Taking all of those matters into account, I find that the document entitled Production Sales and Confidentiality Agreement is not a genuine agreement entered into between GABT and Sunnya on 9 June 2015, and that the email that Mr Wu deposed to having received from Mr Lu on 12 June 2015 attaching a copy of that document signed on behalf of GABT and Sunnya is fabricated. I further find that the Brand OEM Authorized Letter is not a document that was signed by GABT and Sunnya on or about 9 July 2019, and that the email by which Mr Wu deposed to having received that signed document on 9 July 2019 is fabricated.
Having regard to the manner in which Mr Wu sought to deploy the document entitled Production Sales and Confidentiality Agreement, the email purportedly dated 12 June 2015, the Brand OEM Authorized Letter and the email purportedly dated 9 July 2019 in giving evidence in support of the NZ Parties' defence in the Sunnya proceedings, as described at [92]-[121] and [231]-[233] above, and also having regard to Ms Lu's denial that she placed or authorised the placement of her electronic signature on the document entitled the document entitled Production Sales and Confidentiality Agreement referred to at [94] above, I infer that each of those documents and emails were created by or at the direction of Mr Wu in order to manufacture a false basis for him to endeavour to justify the NZ Parties' conduct in manufacturing and supplying Neurio-branded products to GABT in 2022 without the express consent of Sunnya as the registered owner of the Neurio trade marks in the place of manufacture. I reject Mr Wu's denials of that proposition in cross-examination as utterly implausible in the light of the overwhelming evidence that the documents and emails are not genuine, and in light of the manner in which Mr Wu sought to deploy those documents in his evidence.
After fabricating or directing the fabrication of those documents and emails, Mr Wu then lied: (1) in giving evidence that Supermega, GABT and Sunnya had entered into the Production Sales and Confidentiality Agreement in June 2015; (2) in giving evidence that he had received Mr Lu's email on 12 June 2015 attaching that document signed on behalf of GABT and Sunnya; and (3) in giving evidence that he received the Brand OEM Authorized Letter by email from Mr Lu on 9 July 2019.

[61]

2019 Guamis agreement

The evidence relating to this document is summarised at [183]-[193] and [452]-[454] above.
For the following reasons, I reject Mr Wu's evidence that the document records the terms of an agreement that Mr Wu made with Mr He (on behalf of Sunlife) in November 2019.
First, in his affidavit affirmed on 1 March 2023 at a time when Supermega and Megadairy were opposing the Plaintiffs' application for an interim order restraining them from manufacturing, selling or exporting any Guamis-branded products to or for any person other than Sunnya, Mr Wu deposed that, to the best of his knowledge, Sunlife was the owner of the Guamis brand in Australia and New Zealand. That evidence is fundamentally and irreconcilably inconsistent with Mr Wu's evidence in his subsequent affidavits that were read by the NZ Parties at the final hearing of these proceedings, and with Mr Wu's evidence in cross-examination, to the effect that Mr Wu was the true owner Guamis brand which had been registered in the name of Sunlife on the terms of the alleged 2019 Guamis agreement. It is inherently improbable that the alleged 2019 Guamis agreement existed prior to 1 March 2023, yet Mr Wu failed to mention it in his 1 March 2023 affidavit and, in opposing the interim relief sought by the Plaintiffs, did not rely on the contention that he later propounded in cross-examination that Sunlife held the registered Guamis trade mark on behalf of Mr Wu and was obliged to transfer it back to him on request. Mr Wu's failure to raise that contention and to refer to the alleged 2019 Guamis agreement in opposing the Plaintiffs' application for that interim order gives rise to a strong inference that the alleged agreement did not exist when Mr Wu affirmed his affidavit on 1 March 2023. Mr Whitbourn's unchallenged evidence referred to at [191] above supports that inference. Mr Wu's denial that he had changed his story about the ownership of the Australian and New Zealand Guamis trade marks between his 1 March 2023 affidavit and cross-examination is contrary to the plain inconsistencies between those iterations of his evidence, and I reject that denial as a lie. I also reject as a lie Mr Wu's evidence claiming to have discovered a different version of the alleged 2019 Guamis agreement, signed only by him, after the Plaintiffs served Mr Whitbourn's report.
Second, it is inherently improbable that Mr Wu agreed to permit Mr He to cause Sunlife to register a trade mark that Mr Wu claims to have spent over 200 hours developing, in circumstances where Mr Wu had not met Mr He in person, and Mr He and companies associated with him were not then in any business relationship with Mr Wu. The inherently improbability of these alleged events is compounded by the fact that the alleged agreement refers to a "permanent and exclusive partnership between the parties" to which Mr He and Ms Lu would contribute their "excellent sales management experience", yet Mr Wu gave evidence that he in fact paid no attention to what (if anything) Mr He and Ms Lu were doing to progress towards manufacturing, marketing, selling and exporting Guamis-branded products for some two and a half years after he claims to have entered into the agreement. It was not until May 2022 that Sunlife began placing orders for Neurio/Guamis-branded products with Supermega. There is no evidence to suggest that Mr Wu paid any attention at that time to the fact that Sunlife was using the Guamis trade mark only in conjunction with the Neurio trade mark, rather than developing Guamis as a brand in its own right.
On the basis of all of those matters, considered as a whole, I find that Sunlife applied to register the Guamis trade mark in Australia and New Zealand in its own right on 21 March 2020, and not on behalf of Mr Wu or pursuant to any agreement with Mr Wu. When the Guamis trade marks were registered on 29 September 2020 in New Zealand and on 29 October 2020 in Australia, Sunlife was the owner of those trade marks for its own benefit, and not for the benefit of Mr Wu or any of his companies. Mr Wu was not entitled to require those trade marks to be transferred to NZFDA in March 2023. I find that the alleged 2019 Guamis agreement was created after the Court made the interim orders on 9 March 2023 referred to at [450] above, and after the New Zealand Guamis trade mark was transferred to NZFDA, in an attempt to conceal that the transfer was made in order for NZFDA to hold the trade mark on behalf of Sunlife so as to take it outside the scope of the 9 March 2023 orders, which applied to Mr He, Ms Lu, GABT, GNT, Sunlife, Supermega, and Megadairy. I infer that Mr Wu permitted NZFDA to do this in order to strengthen his business relationship with Mr He and his family. Irrespective of whether the alleged 2019 Guamis agreement was fabricated by Mr He, Ms Lu or Mr Wu, or by one of them with the knowledge, encouragement or endorsement of the others, Mr Wu gave false evidence of the alleged 2019 Guamis agreement.

[63]

The five disputed sales contracts and contracts of purchase

The evidence related to the five disputed sales contracts is summarised at [406]-[434] above.
As referred to at [407]-[408] and [419]-[423] above, Mr He and Mr Wu each identify completely different sales contracts as the contracts pursuant to which they claim that HLW paid moneys totalling AUD$2,989,584.33 to Mega Aqua. If those moneys had been paid by HLW pursuant to sales contracts with Mega Aqua, it is highly improbable that Mr He (who is associated with the buyer, and who claims to have transferred his own personal funds and funds of his wife to the buyer to put it in funds to comply with its obligations under those contracts) and Mr Wu (who is the sole director of the seller) would identify entirely different contracts as the source of the alleged obligation for HLW to make the payments, and the alleged need of HLW for funding from Mr He and Ms Lu to meet its alleged payment obligations.
As referred to at [407]-[416] above, Mr He gave inconsistent evidence about the reasons why he claims to have caused moneys totalling AUD$4,213,126.88 to be transferred to HLW during the period from 15 February 2023. Mr He initially deposed that those transfers were made in order to put HLW in funds to pay deposits that it was obliged to pay under the five disputed sales contracts. After the He Parties were served with Mr Whitbourn's report which called into question the date on which the sales contracts had been created, Mr He changed his evidence and deposed that he had caused the funds totalling AUD$4,213,126.88 to be transferred to HLW, and HLW had made payments to Mega Aqua totalling AUD$2,989,584.33, before Mr He (and, I infer, HLW) had even seen the disputed sales contracts or the contracts of purchase said to have been issued in respect of orders placed under those sales contracts. In my opinion, it is inherently improbable that Mr He and HLW would have made such substantial payments to Mega Aqua in respect of sales contracts that had not even been issued at the time of the payments.
In the first iteration of his evidence about these payments, Mr He described the contract of purchase documents as being like purchase orders that were issued by Mega Aqua to HLW when HLW ordered products under one of the five disputed sales contracts. That is inherently improbable because the five disputed sales contracts identified by Mr He make no provision for the products to be purchased and delivered in instalments. On the contrary, each of those sales contracts requires the seller to deliver the whole of the goods specified in the sales contract to the buyer within 180 days of payment of the deposit, which is required to be paid by the buyer within 90 days of the date of the contract, and which is not refundable.
It is also inherently improbable that the 23 contracts of purchase identified in the affidavits of Mr He and Mr Wu were issued in respect of the five disputed sales contracts because the descriptions of the products in those contracts of purchase bore no resemblance to the products described in the five disputed sales contracts, as I have noted at [409] above.
As referred to at [417]-[434] above, Mr Wu gave inconsistent evidence in his affidavit and in cross-examination about whether the sales contracts and contracts of purchase were exchanged before or after HLW made the payments to Mega Aqua totalling AUD$2,989,584.33. The NZ Parties' submissions failed to grapple with those inconsistences, referring only to the iteration of Mr Wu's evidence in which he said in cross-examination (contrary to his sworn evidence in his 19 November 2023 affidavit) that the sales contracts were issued before the payments were made.
In cross-examination, Mr Wu gave inconsistent evidence about the contracts of purchase documents. Mr Wu initially said that the contracts of purchase were receipts. That is utterly implausible, as the documents make no reference to moneys having been paid by the purchaser or received by the seller. On the contrary, each contract of purchase document contains a term requiring payment of the whole of the price of the goods stipulated in the document. I reject the submission made on behalf of the NZ Parties that the fundamental inconsistency between the purpose of a receipt and the terms of the contracts of purchase is attributable to the fact that the contracts of purchase were "created by non native English speakers". There is ample evidence of the detailed form of sales contract used by Mr Wu's companies, which is written in both English and Mandarin. There is no basis for the contention underlying the NZ Parties' submission that Mr Wu and Mega Aqua lacked the ability or resources to create a document that recorded receipt of a payment made to Mega Aqua for or in connection with the supply of products to HLW if that had been the intention of any of the contracts of purchase.
After reflecting on the matter overnight, Mr Wu offered a slightly different theory about why the contracts of purchase documents had been created. As I understand it, Mr Wu's revised theory was that the contracts of purchase were like receipts that were not generated by Mega Aqua in the ordinary course of its business, but were produced at the request of HLW because the amount of HLW's payments to Mega Aqua, which were typically in the amount of AUD$150,000 did not correlate to amounts stipulated in the sales contracts. Mr Wu's theory was not based on any recollection that he claims to have of relevant events. Rather, his theory was based on the premise that the transaction descriptions generated by HLW at the time of each payment, which are recorded in the banking records of HLW and Mega Aqua, correspond with the transactions described in the sales contracts. As I have explained at [434] above, that is a false premise. I reject the NZ Parties' submission that the generic transaction descriptions created by HLW at the time of each payment corroborate the evidence of Mr Wu and Mr He that the payments were made in connection with the five disputed sales contracts identified by Mr He, or with the different sales contracts identified by Mr Wu.
Mega Aqua is not a defendant in the Sunnya proceedings. In advancing his theory about the contracts of purchase under cross-examination, Mr Wu displayed his propensity to behave in the witness box as an advocate for the He Parties. That is consistent with Mr Wu's willingness on 24 May 2023 to sign a letter at the request of Mr He or Ms Lu, which Mr Wu understood would be used for legal purposes, providing "confirmation and assurance" in relation to products said to have been ordered by HLW from Mega Aqua under contracts referred to in an affidavit of Mr He, without Mr Wu first taking steps to identify and verify those contracts.
On the basis of all of the matters referred to above - the inconsistences within Mr He's evidence, the inconsistencies within Mr Wu's evidence, Mr Wu's willingness to sign the 24 May 2023 letter without verifying the contracts referred to in the letter, and the inconsistences between Mr He's evidence and Mr Wu's evidence, (including but not limited to, their identification of different sales contracts as the contracts that were the genesis for the impugned transfers of funds from Mr He and Ms Lu to HLW so as to facilitate HLW's subsequent payments to Mega Aqua, and Mr Wu's distressed demeanour when this inconsistency became apparent to him in the witness box) - I find that the contracts of purchase were created after Mega Aqua received the payments from HLW totalling AUD$2,989,584.33 to give those payments (most of which were in rounded amounts of AUD$150,000) the false appearance of having been made in respect of transactions undertaken in the ordinary course of business between HLW and Mega Aqua, and to thereby give the AUD$4,213,126.88 payments from Mr He and Ms Lu to HLW the false appearance of having been made for the purpose of putting HLW in funds to make payments to Mega Aqua for the purchase of products in the ordinary course of business. I find that the contracts of purchase were created for those purposes in or about March 2023, after Mr He and Ms Lu had already made those payments to HLW on the eve of the Court determining the Plaintiffs application for freezing orders against Mr He and Ms Lu. Mr He has given false evidence seeking to explain the payments to HLW, and each of Mr He and Mr Wu has given false evidence seeking to explain HLW's payments to Mega Aqua. For the purpose of their respective false explanations, each of Mr He and Mr Wu selected different sales contracts as the alleged reason for the payments. Mr He selected sales contracts bearing dates within 90 days prior to the dates of the payments (consistently with the term of the sales contracts requiring payment of the deposit within 90 days after signing), whereas Mr Wu selected sales contracts bearing dates closer to the dates of the payments. Irrespective of whether the five disputed sales contracts identified in Mr He's affidavit, and the different sales contracts identified in Mr Wu's affidavit, are authentic documents that record genuine contracts that Mega Aqua and HLW entered into on or about the dates shown on the face of those contracts, I find that those contracts have no connection with the payments made by HLW to Mega Aqua totalling AUD$2,989,584.33, and no connection with the payments made by Mr He and Ms Lu to HLW totalling AUD$4,213,126.88.
I now turn to each of the categories of the claims in the Sunnya proceedings. In addressing the claims by reference to the categories delineated in the Plaintiffs' closing submissions, I do not overlook the need to evaluate the evidence as a whole, and to keep in mind that evidence that is principally relevant to one category of claims may also have a bearing on the determination of other categories of claims. By way of example, I accept the submission made by the Plaintiffs that, in order to determine a person's intention at a given time, regard may be had to the person's conduct before and after that time. [183]

[64]

Outline of the parties' contentions

The Plaintiffs allege that Mr He and Ms Lu breached their statutory duties under ss 181 and 182 of the Corporations Act, and breached their fiduciary duties as directors of Sunnya, by causing or permitting Sunnya to supply its Neurio-branded products to GNT from April 2021 at prices that were significantly less than the prices for which Sunnya was selling the same products to other customers.
The Plaintiffs further allege that this conduct was a dishonest and fraudulent scheme devised and managed by Mr He and Ms Lu for the purpose of allowing GNT to achieve greater revenue and profit from the distribution of Sunnya's Neurio-branded products than it would have achieved if it was paying the same price that Sunnya's other customers were paying for those products, thereby diverting that revenue and profit away from Sunnya.
Relying on the evidence of Mr Lopez referred to at [148]-[152] above, the He Parties dispute that the "effective prices" for which Sunnya supplied its Neurio-branded products to GNT from April 2021 were significantly less than the prices for which Sunnya had sold those products to its general trade channel distributors prior to April 2021. The He Parties maintain that it is not relevant to compare the post-April 2021 prices charged to GNT with prices for which Sunnya sold its Neurio-branded products to cross-border channel distributors and customers before or after April 2021. As referred to at [151] above, it is common ground between the expert witnesses that average sale prices to cross-border channel distributor customers were higher than average sale prices to general trade channel distributor customers.
As noted at [143] and [152] above, there is no dispute that the "effective prices" for which Sunnya supplied its Neurio-branded products to GNT from April 2021 were somewhat less than the prices for which Sunnya had sold those products to its general trade channel distributors prior to April 2021, and that the changes made to Sunnya's general trade channel sales and distribution processes in April 2021 reduced Sunnya's sales revenue. I accept the submission made by the Plaintiffs and by the He Parties that it is not necessary at this stage to resolve the methodology dispute between Mr Temple-Cole and Mr Lopez, and to quantify the difference between the pre-April 2021 prices charged by Sunnya to general trade channel distributors and the post-April 2021 prices charged by Sunnya to GNT in respect of the products that GNT then sold to general trade channel distributors. The Plaintiffs' allegations of breach of duty do not depend on the amount of the price differential, which will be relevant to quantum if liability is established.
Irrespective of the amount of the price differential, the He Parties contend that the April 2021 changes were required as a result of the Customs Investigation, and did not involve any breach of statutory or fiduciary duties by Mr He and Ms Lu.
For the purpose of the under value sales claims, the Plaintiffs dispute that the April 2021 changes were required as a result of the Customs Investigation, and dispute that those changes were even a bona fide response to the Customs Investigation.

[65]

Consideration and determination

On the basis of the evidence and admissions summarised at [48], [128]-[132] above, I find that Sunnya did not sell to GNT the Neurio-branded products that Sunnya exported to China through GNT as its import agent from April 2019. Sunnya sold those products to its general trade channel distributors in China. Sunnya nevertheless issued tax invoices to GNT "for customs purposes", which stipulated a price payable by GNT for those products - the "export price". The export prices shown on those "commercial invoices" were less than the prices for which Sunnya had sold the products to the general trade channel distributors to whom GNT was to deliver the goods after they cleared customs in China.
I infer from the issue of the commercial invoices stipulating a price payable by GNT, to whom there had been no sale, which was less than the price payable by the distributor to whom the goods had in fact been sold, that GNT presented the commercial invoices to the Customs Service in China for the assessment of import duties or taxes, or "customs fees" (to use Ms Lu's term), that were payable on the importation of the products into China. I also infer that the "customs purpose" of the export price was to facilitate the calculation of those duties, taxes or fees based on the lower export price shown on the commercial invoice, rather than the higher price payable by Sunnya's general trade channel distributor customer. I draw those inferences more comfortably in the absence of any evidence from Mr He or Ms Lu identifying any other "customs purpose" served by the creation of the commercial invoices stipulating an export price that was not payable by GNT and bore no resemblance to the price payable to Sunnya by its distributor customer.
The evidence summarised above establishes that the commercial invoice practice commenced in 2017 when Mr He and Ms Lu were the sole directors and shareholders of Sunnya, and continued after the Jatcorp acquisition when Mr He and Ms Lu remained in control of the day-to-day management of Sunnya. Ms Chen's unchallenged evidence is that the she did not even have regard to the commercial invoices when accounting for Sunnya's general trade channel sales prior to April 2021, and that the commercial invoices were created by or at the direction of Mr He and Ms Lu. [184] On the basis of that evidence, I find that Mr He and Ms Lu caused Sunnya to adopt the commercial invoices practice, and to maintain that practice during the whole of the period from April 2019, when GNT was engaged as Sunnya's import agent, until April 2021.
There is no evidence of the relevant customs laws and regulations in China during that period from April 2019 until April 2021. However, as I have inferred that the commercial invoices practice facilitated the presentation of false information to the Customs Service in China, I further infer that this involved some departure from customs laws, regulations and/or practices in China at the time. The evidence does not provide a sufficient basis for the drawing of any inference about the seriousness or potential consequences of that departure.
There is no dispute that, on 12 March 2021, the Customs Service in China initiated an investigation into the authenticity and legality of the import and export activities of GNT during the period from 13 March 2018 until 12 March 2021. [185] I reject the submission made on behalf of the Plaintiffs that the Customs Investigation related to GNT, and did not concern Sunnya. As the He Parties submitted, the broad scope of the investigation extended to all of GNT's importing activities during the whole of the time since April 2019 that GNT had been acting as Sunnya's import agent. Moreover, I infer from the detailed written explanation that Sunnya had prepared for the Customs Service on or about 11 March 2021 that the Customs Service had been asking questions about the dealings between Sunnya and GNT even before issuing the Notice of Inspection on 12 March 2021. [186] It is inherently improbable that Sunnya would have prepared the written explanation for the Customs Service otherwise.
The WeChat messages that Mr He and Mr Yao sent to one another and to Ms Lu in the days and weeks after the commencement of the Customs Investigation establish that they were aware of the investigation from the outset. [187] As mentioned earlier in these reasons, Mr Yao was Jatcorp's Chief Executive Officer at this time. It is clear from Mr Yao's messages to Ms Lu that he was concerned that the practice of GNT collecting from general trade channel distributors in China, and remitting to Sunnya in Australia payment for goods at prices that had been determined by Sunnya in Australia, might incur fines. That is essentially what GNT had been doing since April 2019, [188] as Sunnya had informed the Customs Service in its written explanation dated 11 March 2021. The evidence does not provide any basis for inferring that Mr Yao's concern was not genuinely held at the time. There is no evidence of any responsive communication from Mr He or Ms Lu at the time informing Mr Yao that they took a different view or did not share his concern.
It is not in dispute that: [189] 1. Sunnya changed the way in which its Neurio-branded products were sold and distributed in China through the general trade channel in April 2021, approximately one month after the commencement of the Customs Investigation; 2. as a result of those changes, Sunnya sold its Neurio-branded products to GNT, rather than to Sunnya's general trade channel distributors in China, from April 2021; 3. the prices at which Sunnya sold those products to GNT from April 2021 was less than the prices at which Sunnya had been selling those products to its general trade channel distributors immediately prior to April 2021; 4. GNT entered into sale contracts with those distributors, which replaced the contracts that had been on foot immediately prior to April 2021 between Sunnya and the distributors; 5. under those new sales contracts, GNT agreed to sell Sunnya's Neurio-branded products to the general trade channel distributors at or about the same prices for which Sunnya had previously contracted to sell the same products to those distributors; 6. from April 2021, those prices were payable by the distributors to GNT, rather than to Sunnya; and 7. from April 2021, GNT no longer remitted to Sunnya the payments that it collected from the general trade channel distributors for Sunnya's Neurio-branded products.
The effect of those changes was that GNT was no longer collecting from general trade channel distributors in China, and remitting to Sunnya in Australia payment for goods at prices that had been determined by Sunnya in Australia. In other words, the changes addressed the concern that Mr Yao had expressed in his WeChat messages referred to above.
Mr He advised Mr Yao and others by email on 11 June 2021 that the Customs Service had "proposed" that the practice of GNT collecting and remitting the sale price to Sunnya constituted Sunnya collecting and "smuggling" profits that belonged to GNT, and that Sunnya could only charge GNT "the purchase price". I assume that the "purchase price" is a reference to the "export price" stipulated as payable by GNT on the face of the commercial invoices. The terms of the email suggest that Mr He understood that the Customs Service was characterising GNT's remittal to Sunnya of the purchase price collected from Sunnya's general trade channel distributors as "smuggling". Mr He's email concluded that Sunnya "must adjust its sales strategy and follow the guidance of China Customs". [190] The changes described above had already been made in April 2021. It appears that Mr He was advocating in this email for those changes to be a permanent or at least a long-term change in Sunnya's sales strategy.
The evidence does not provide any basis for inferring that the 11 June 2021 email does not record Mr He's genuine understanding of the issues raised by the Customs Investigation, and the "guidance" that the Customs Service had given to Sunnya, at that time.
There is no evidence of any reply by Mr Yao to Mr He's 11 June 2021 email disputing that the Customs Investigation had raised "smuggling" allegations, or questioning the need to adjust Sunnya's sales strategy in response to the Customs Investigation by following the "guidance" of the Customs Service described in Mr He's email that Sunnya could only charge the "export price" to GNT. Nor is there any evidence of any other responsive action by Mr Yao, such as causing the Jatcorp-nominated directors of Sunnya to convene a board meeting of Sunnya to discuss the issues. It is inherently probable that Mr Yao, as the Chief Executive Officer of Sunnya's majority shareholder who had followed the progress of the Customs Investigation from the outset in March 2021, would have replied to Mr He's email, or caused Jatcorp to take some other responsive action, if he had disputed or doubted that Sunnya needed to adjust its sales strategy in the manner described in Mr He's email in response to the Customs Investigation. Jatcorp controlled the Sunnya board through its appointment of two of the directors and the casting vote of the Jatcorp-appointed Chairman. In the absence of any reply or responsive action from Mr Yao to Mr He's email of 11 June 2021, the evidence does not provide any basis for inferring that Mr Yao had an understanding at the time that differed from Mr He's understanding expressed in the email.
The He Parties' plead that, as a result of the Customs Investigation: (1) Sunnya was required to sell its Neurio-branded products to GNT, and could not distribute those products through GNT to "sub-agents" in China; (2) Sunnya was not permitted to receive more than the "import price" and was not permitted to take profits to GNT out of China; and (3) Sunnya's ability to set the price for the Neurio-branded products that it exported to GNT in China was "impended".
It is not in dispute that the Customs Service issued a written notice entitled "Inspection Outcome" on 6 January 2022, which stated that GNT had not been found to have violated customs regulations by importing Neurio-branded products during the period from 13 March 2018 to 12 March 2021. [191] In the absence of evidence of the customs laws and regulations that were applicable in China during the investigation period, it is not clear what (if any) consequences this outcome relating to GNT had in relation to the "smuggling" allegations affecting Sunnya that were described in Mr He's email of 11 June 2021. Even assuming that a favourable outcome for Sunnya necessarily followed from the favourable outcome for GNT, the evidence does not provide any basis for inferring that the outcome notified on 6 January 2022 could reasonably have been foreseen by Mr He and Ms Lu at some earlier time. I therefore reject the submission made on behalf of the Plaintiffs that the outcome per se demonstrates that it was not necessary during the period from April to June 2021 to change Sunnya's general trade channel sales and distribution arrangements in response to the Customs Investigation.
As referred to earlier in these reasons, Sunnya did enter into some sales contracts with GNT after the conclusion of the Customs Investigation on 6 January 2022 on terms that reflected the post-April 2021 general trade channel sales and distribution arrangements. However, it is common ground that Sunnya did not fulfill those contracts. [192]
As a result of the failure of Mr He and Ms Lu to give evidence in these proceedings, there is no direct testimony about the reasons why they caused or permitted Sunnya to make the changes to its general trade channel sales and distribution arrangements in April 2021. I infer that any evidence that they could have given about those reasons would not have assisted their defence of the under value sales claims. However, I do not infer that any evidence that they could have given would have been unfavourable to their defence of those claims. The evidence that is available - particularly the implementation of the changes shortly after the commencement of the Customs Investigation, and the fact that the changes addressed the risks for Sunnya that Mr Yao had identified as emerging from the Customs Investigation in his contemporaneous correspondence with Mr He and Ms Lu - suggests that the changes were made with the intention and for the purpose of addressing those risks or perceived risks. The Plaintiffs' submissions sought to colour the whole of the conduct of Mr He and Ms Lu that is the subject of these proceedings, including their conduct in April 2021, by reference to the events that occurred in and after October 2022. In my view, the conduct of Mr He and Ms Lu in and from October 2022, when the evidence shows that they were opposed to Jatcorp's new appointments to Sunnya's board and the change in effective control of the management of Sunnya that they understood would flow from those appointments, does not provide a sound basis for drawing inferences about their subjective intentions and purposes in April 2021.
The Plaintiffs submitted that, if any change to Sunnya's practices had been necessary during the course of the Customs Investigation, then the appropriate course that was consistent with the obligations of Mr He and Ms Lu as directors of Sunnya would have been to depart from the practice of issuing commercial invoices to GNT stipulating "export prices", and to "instead document the transactions consistently with the substance of the transactions prior to April 2021", rather than to cause Sunnya to make the changes referred to at [598] above which had the effect of "gifting" significant sales revenue and distributor contracts to GNT.
As I understand the Plaintiffs' submission referred to at [607] above, the course for which the Plaintiffs contend would have required Sunnya to change its practices by causing its import agent GNT to submit to customs officials in China invoices that recorded the sale of the imported products by Sunnya to the relevant general trade channel distributor, recorded the price payable by that distributor to Sunnya for those products, and recorded the role of GNT as import agent rather than purchaser.
As I have already mentioned, there is no evidence of the relevant customs laws and regulations that were in force in China during the period from April 2019 to January 2022.
Assuming that the only two courses of action available to Sunnya in the context of the Customs Investigation in April 2021 were to change its documentation going forward to conform with the substance of its general trade channel sales and distribution transactions since April 2019 (as the Plaintiffs contend would have been the appropriate course), or to change its general trade channel sales and distribution arrangements going forward to bring it into conformity with its past documentation practices (being the course that was in fact taken in April 2021), the limited evidence before the Court does not provide a sufficient basis for any finding on the balance of probabilities that one of those two courses was preferable to the other in April 2021, having regard to Sunnya's best interests at the time, objectively assessed. Assuming (without deciding) that the course propounded by the Plaintiffs would have overcome the profit smuggling allegation or concern, it would have revealed Sunnya's past practice of presenting false information to the Customs Service in order to reduce the duties, taxes, or fees payable by Sunnya on the importation of its Neurio products into China. There is no evidence about the potential consequences for Sunnya of such a revelation.
It is plain that the April 2021 changes to Sunnya's general trade channel sales and distribution arrangements reduced Sunnya's sales revenue. [193] I infer that those changes resulted in a corresponding increase in GNT's sales revenue. Neither the Plaintiffs nor the He Parties addressed the question whether this, in turn, increased GNT's profits derived from the distribution of Sunnya's Neurio-branded products in China. The submissions made on behalf of the Plaintiffs merely asserted that the changes delivered increased profits to GNT. For present purposes, I assume (without deciding) that this is so. Contrary to the assumption implicit in the pleadings and submissions of the Plaintiffs, it does not inevitably follow that Mr He and Ms Lu caused or permitted the April 2021 changes with the intention or purpose of increasing GNT's sales revenue and profits at the expense of Sunnya.
The evidence does not establish that Mr He or Ms Lu stood to benefit personally from any increase in GNT's profitability. As referred to at [8] above, family members of Ms Lu were major shareholders in GNT. As the He Parties submitted, there is no evidence that Mr He or Ms Lu personally had any pecuniary interest in GNT. Nor does the evidence demonstrate that Ms Lu's family members controlled and managed GNT in a manner that was directed to the financial benefit of Ms Lu or Mr He. For example, there is no evidence that GNT's shareholders would, or would be likely to, pass on to or share with Ms Lu or Mr He any financial benefit that they received as shareholders of GNT as a result of any increase in GNT's profits. Subject to one qualification, the Plaintiffs did not contend that Mr He or Ms Lu had a pecuniary interest in GNT. The familial links between Ms Lu and the controllers and shareholders of GNT, and the marital relationship between Mr He and Ms Lu, were the sole matters relied on by senior counsel for the Plaintiffs in closing submissions in support of their contention that GNT is the alter ego of Mr He and Ms Lu.
The qualification is that the Plaintiffs' oral closing submission in reply appeared to place some reliance on Mr Wang's evidence referred to at [243] and [244] above that, in response to a general question asked by Mr Wang about the reasons for the decline in Sunnya's financial performance, Mr He said that he "could transfer profits to Sunnya from China" (according to Mr Wang's affidavit affirmed on 16 August 2023), or that "if money was a problem, he controlled the profits and could get more profit for Jatcorp and could pay Jatcorp $3 million per year" (according to Mr Wang's affidavit affirmed on 20 October 2023). As I understood the Plaintiffs' oral closing submissions in reply, they rely on this evidence as establishing that Mr He had the ability to direct or control the distribution of profits of GNT, and thereby supporting an inference that Mr He and/or Ms Lu had a direct or indirect pecuniary interest in GNT.
According to Mr Zhang's evidence of the same meeting referred to at [245] above, Mr He said words to the effect that "he would be able to have Sunnya provide profits to Jatcorp every year" and that Mr He "referred to a number that was either $3 million or $5 million a year".
Mr Shen, who was also present at the meeting, was not called to give evidence, as referred to at [248] above.
Much turns on the precise words that Mr He said in response to Mr Wang's general question because Mr Zhang's version of those words is consistent with a promise by Mr He, as General Manager of Sunnya, to make Sunnya more profitable for its shareholders, whereas Mr Wang's version of those words are consistent with Mr He indicating that he could arrange for profits of a company in China to be paid to, or shared with, Jatcorp. The ability of Mr Wang and Mr Zhang to recall the precise words spoken at the meeting that occurred approximately one year before they affirmed their affidavits is inherently unreliable, [194] and neither of them purported to be able to do so in their affidavits. Given Mr Wang's evidence that he did not regard Mr He's response to his question as a meaningful response at the time, it is doubtful that he had any particular reason to pay attention to Mr He's exact words at the time. His two inconsistent accounts of that response are not supported by any contemporaneous note of the meeting, and are not corroborated by Mr Zhang's evidence. For those reasons, I do not consider that the evidence of Mr Wang and Mr Zhang referred to at [243]-[245] concerning what was said by Mr He at the October 2022 meeting provides a sufficient basis to infer on the balance of probabilities that Mr He and/or Ms Lu had a direct or indirect pecuniary interest in GNT. In my opinion, any such inference would be mere conjecture. I am not bound to accept Mr Wang's account of that meeting merely because it was not challenged in cross-examination, noting that the He Parties were not legally represented in these proceedings and were not appearing at the hearing at the time of Mr Wang's cross-examination.
Mr He and Ms Lu were beneficiaries of the trust for which All168 held 49 per cent of the shares in Sunnya. Any adverse impact of the April 2021 changes on Sunnya's profitability would have a corresponding adverse effect on its ability to pay distributions to Jatcorp and All168 as shareholders.
For all of the reasons at [592]-[617] above, the evidence does not support a finding that Mr He and Ms Lu held the intention or acted with the purpose of increasing GNT's sales revenue and profits, at Sunnya's expense, when they caused or permitted Sunnya to make the changes to its general trade channel sales and distribution processes in April 2021. Indeed, any such intention or purpose would have been contrary to Mr He and Ms Lu's own financial interests, and there is no evidence of any other interest of Mr He or Ms Lu that would have been served by acting with such a purpose in April 2021.
Insofar as the under value sales claims against Mr He and Ms Lu rely on alleged contraventions by each of them of s181(1)(a) of the Corporations Act, the Plaintiffs have failed to discharge their onus of proving that Mr He and Ms Lu failed to exercise their powers and discharge their duties in good faith and in the best interests of Sunnya. That is so, irrespective of whether the compliance with the duty imposed by s 181(1)(a) is to be assessed subjectively or objectively, or requires an assessment that has both subjective and objective elements. [195] For the reasons explained above, the evidence does not establish that either or both of Mr He and Ms Lu acted with knowledge that the April 2021 changes to Sunnya's general trade channel sales and distribution arrangements were not in the best interests of Sunnya. Nor does the evidence establish that the changes were not in Sunnya's best interests at the time, objectively assessed.
The under value sales claims under s 181(1)(b) of the Corporations Act also fail. For the reasons explained above, the Plaintiffs have failed to prove that the substantial purpose for which Mr He and Ms Lu caused or permitted the April 2021 changes was the alleged improper purpose of "gifting" sales revenue to GNT or increasing GNT's profits derived from the distribution of Sunnya's Neurio-branded products in China.
The pleaded contravention of s 182 of the Corporations Act identified increased sales revenue and profits of GNT, and decreased sales revenue and profits of Sunnya, as the effect or consequence of the April 2021 changes. The pleading in relation to s 182 did not identify this as the purpose of Mr He and Ms Lu in causing or permitting those changes to Sunnya's general trade channel sales and distribution arrangements. I reject the He Parties' submission that this pleading deficiency is fatal to the under value sales claims under s 182 of the Corporations Act. [196] The Plaintiffs' allegations as to the purpose of the impugned conduct are clear from the pleading of the under value sales claims read as a whole, particularly the pleading of the alleged dishonest and fraudulent scheme referred to at [587] above. However, it is fatal to the under value sales claims under s 182 that the Plaintiffs have failed to discharge their onus of proving that, in causing or permitting the April 2021 changes to Sunnya's general trade channel sales and distribution arrangements, Mr He and Ms Lu acted with the subjective purpose of increasing GNT's sales revenue and profits at Sunnya's expense.
The Plaintiffs submitted that Mr He and Ms Lu breached their fiduciary duties by causing or permitting the April 2021 changes to Sunnya's general trade channel sales and distribution arrangements because: (1) they were not acting in the best interests of Sunnya; (2) they were pursuing and obtaining a benefit or advantage for GNT "while occupying or acting in a position of conflict with their fiduciary duties to Sunnya"; and (3) they made a profit for GNT "as a result of their fiduciary position in relation to Sunnya".
For the reasons already explained above, the evidence does not provide a sufficient basis for an inference that the April 2021 changes were not in the best interests of Sunnya, or that Mr He and Ms Lu did not believe those changes to be in the best interests of Sunnya, in the context of the Customs Investigation. Nor does the evidence provide a sufficient basis to infer that Mr He and Ms Lu acted for a purpose extraneous to the purpose for which their powers as directors were conferred. The absence of evidence from Mr He and Ms Lu explaining whether or why they thought those changes were in Sunnya's best interests at the time gives rise to an inference that such evidence would not have assisted them, but that inference does not fill these gaps in the Plaintiffs' case.
Save for the oral closing submission in reply referred to at [613] above, the Plaintiffs' submissions did not identify the alleged interests of Mr He and/or Ms Lu that they contend were in conflict, or possible conflict, with their functions or responsibilities as directors of Sunnya in April 2021. As I have said at [611]-[618] above, the evidence does not give rise to a probable inference that Mr He or Ms Lu had a direct or indirect pecuniary interest in GNT or stood to benefit financially or in any other way from any increase in the profits of GNT as a result of the April 2021 changes. (As stated above, I assume, without deciding, that the increase in GNT's sales revenue resulted in an increase in GNT's profits.) As counsel for the He Parties submitted, increased revenue and profits for GNT does not, without more, establish that the conduct of Mr He and Ms Lu in connection with the April 2021 changes involved a breach of their fiduciary duties owed to Sunnya.
The under value sales claims against Mr He and Ms Lu must be dismissed for all of the reasons above. It is unnecessary to address the defences pleaded by Mr He and Ms Lu under s 1317S and s 1318 of the Corporations Act. The claims against GNT do not arise for consideration, as those claims depended on the Plaintiffs establishing a breach of statutory or fiduciary duties by Mr He and/or Ms Lu..

[67]

Outline of the parties' contentions

The Plaintiffs press the commercial invoices claims only in the alternative to the under value sales claims.
For the purpose of the commercial invoices claims, the Plaintiffs embraced and adopted the He Parties' pleaded contentions that, as a result of the Customs Investigation: (1) Sunnya was required to sell its Neurio-branded products to GNT, and could not distribute those products through GNT to "sub-agents" in China; (2) Sunnya was not permitted to receive more than the "import price" and was not permitted to take profits due to GNT out of China; and (3) Sunnya's ability to set the price for the Neurio-branded products that it exported to GNT in China was "impended". The Plaintiffs submitted that this outcome was attributable to Sunnya's practice directed by Mr He and Ms Lu of issuing commercial invoices to GNT that were used to present to customs officials in China a price that was not the genuine sale price of the imported goods.
The Plaintiffs allege that Mr He and Ms Lu breached their duties under ss 180, 181 and 182 of the Corporations Act, and breached their fiduciary duties as directors of Sunnya, by engaging in the practice of issuing the commercial invoices. The Plaintiffs allege that those breaches of fiduciary duty were a dishonest and fraudulent scheme because the commercial invoices were used to present false sales information to a government authority.
The Plaintiffs allege that GNT was involved in Mr He and Ms Lu's alleged breaches of ss 180, 181 and 182, and knowingly assisted their alleged breaches of fiduciary duty. The Plaintiffs also allege that GNT was deployed as the corporate creature, vehicle or alter ego of Mr He and Ms Lu in relation to their conduct associated with the commercial invoices, and that GNT is therefore jointly and severally liable with Mr He and Ms Lu for losses flowing from their alleged breaches of fiduciary duty.
Mr He and Ms Lu deny the breaches of duty alleged against them. GNT did not defend the proceedings.

[68]

Consideration and determination

The following contentions underpin each of the Plaintiffs' causes of action in respect of the commercial invoices claims: 1. the practice of issuing the commercial invoices for the purpose of presenting a price to the Customs Service in China that was not the genuine sale price exposed Sunnya to a reasonably foreseeable risk of the following kinds of harm: 1. the risk of becoming subject to investigation by relevant government authorities; 2. the risk of being banned from importing goods into China; and 3. the risk of Sunnya only being entitled to charge the export price recorded in the commercial invoices; 1. the risk of an investigation by government authorities materialised; 2. the Customs Investigation necessitated the April 2021 changes to Sunnya's general trade channel sales and distribution arrangements, with the result that Sunnya only charged GNT the export price recorded in the commercial invoices; and 3. the April 2021 changes caused financial loss to Sunnya.
I have found that Mr He and Ms Lu caused Sunnya to adopt the commercial invoices practice, and to maintain that practice during the whole of the period from April 2019, when GNT was engaged as Sunnya's import agent, until April 2021. [197] I have also found that the purpose of the commercial invoices practice was to reduce the import taxes or duties, or "customs fees", that were payable on the importation of Sunnya's Neurio-branded products into China. [198] Although there is no evidence of the relevant Chinese customs laws, regulations and practices during the period from April 2019 to April 2021, I have inferred that the commercial invoices practice, which involved the presentation of false information to the Customs Service in China, involved some departure from those laws, regulations and/or practices. [199] However, as stated above, the evidence does not provide a sufficient basis for the drawing of any inference about the gravity of that departure, or its potential ultimate consequences. [200]
As to the Plaintiffs' first contention, I accept that the findings referred to immediately above support a further finding that the commercial invoices practice gave rise to a reasonably foreseeable risk during the period from April 2019 to April 2021 that Sunnya would be subject to investigation by the Customs Service or some other relevant authority in China.
However, in the absence of any evidence of relevant customs laws and regulations in China at the relevant times, the Plaintiffs have failed to establish that the commercial invoice practice and any resulting investigation exposed Sunnya to a risk of being banned from importing goods into China, let alone that such a risk was reasonably foreseeable during the period from April 2019 to April 2021.
The He Parties admit that the Customs Investigation - which I have found was a foreseeable risk of the commercial invoices practice - necessitated the April 2021 changes to Sunnya's general trade channel sales and distribution arrangements pursuant to which Sunnya only charged GNT the export price recorded in the commercial invoices. [201] However, it does not follow that there was a reasonably foreseeable risk of this outcome from April 2019, or at any time before the Customs Investigation commenced in March 2021, and before the course of the investigation caused Mr Yao and Mr He to identify a risk that Sunnya would be fined or found to have engaged in "smuggling" because GNT had remitted to Sunnya the proceeds of sale of Neurio-branded products sold to general trade channel distributors in China. [202] The evidence does not provide a sufficient basis to draw such an inference, and the failure of Mr He and Ms Lu to give evidence does not fill this evidentiary gap in the Plaintiffs' case.
The Plaintiffs' second and third contentions referred to at [632] above are not in dispute.
I turn to the Plaintiffs' fourth contention. As the He Parties' submitted, the Plaintiffs' pleading does not identify the nature of the loss which they claim that Sunnya has suffered as a result of the impugned conduct of Mr He and Ms Lu in causing or permitting Sunnya to engage in the commercial invoices practice during the period from April 2019 to April 2021. Nor is any counter-factual pleaded. The case articulated in the Plaintiffs' closing submissions was simply that the Customs Investigation necessitated the April 2021 changes, and that Sunnya "suffered loss by reason of having to change the system" (emphasis added).
As counsel for the He Parties submitted, Sunnya's loss in the period after April 2021 of the revenue and/or profits of the magnitude that it had earned from general trade channel sales prior to April 2021 under the commercial invoices practice that the Plaintiffs allege was instigated and directed by Mr He and Ms Lu in breach of their statutory and fiduciary duties, is not a loss that flowed from any such breaches of duty. The relevant counterfactual, which was neither pleaded nor articulated in the Plaintiffs' closing submissions, required a comparison between: (1) Sunnya's actual financial position derived from its general trade channel sales and distribution arrangements including the commercial invoices practice during the period from April 2019 to April 2021, including any savings on import duties and taxes, or "customs fees", that flowed from the commercial invoices practice, together with Sunnya's actual financial position derived from its changed general trade channel sales and distribution arrangements from April 2021; and (2) the financial position of Sunnya in the hypothetical counterfactual scenario where it had not followed the commercial invoices practice during the period from April 2019 to April 2021. That counterfactual directs attention to matters that include the relevant customs laws and regulations in China during the period from April 2019 to April 2021, the practices that Sunnya could have adopted in compliance with those laws and regulations instead of the commercial invoices practice, and the probable impact of such alternative practices on Sunnya's revenue and profits from its general trade channel sales. The Plaintiffs did not adduce any evidence about those matters.
I accept that an analysis of the relevant counterfactual would have been inherently complex and would necessarily have involved some element of imprecision. Such imprecision would not have relieved the Court of the obligation to determine at this stage whether or not Sunnya had suffered some loss as a result of the alleged breaches of statutory and fiduciary duty (if established), and, if so, to assess statutory or equitable compensation for such loss at a subsequent hearing as best it can on the basis of the available evidence, provided that the evidence provided a rational foundation for the Court to make an estimate. [203] However, the Plaintiffs have not adduced any evidence directed to the relevant counterfactual. The deferral of questions of quantum to a subsequent hearing to be conducted in the event that liability is established does not relieve the Plaintiffs of the obligation at this stage to adduce evidence capable of supporting a finding that Sunnya suffered some loss by reason of the alleged breaches of statutory and fiduciary duty, in support of the Plaintiffs' claims for orders for statutory or equitable compensation in an amount to be assessed at that subsequent hearing. Any finding of loss would constitute impermissible speculation.
The Plaintiffs' failure to establish loss is not the end of the matter, as the Plaintiffs' claims for relief include claims for declarations of contraventions by Mr He and Ms Lu of ss 180,181 and 182 of the Corporations Act, declarations of breach of fiduciary duty by Mr He and Ms Lu, declarations of knowing receipt by GNT of the contracts that it has entered into with Sunnya's general trade channel customers since April 2021 and the profits derived therefrom, and an order that GNT holds those contracts and profits on constructive trust for Sunnya or an order that GNT account to Sunnya for those profits.
I have taken the following matters into account in assessing Mr He and Ms Lu's conduct in relation to the commercial invoices practice during the period from April 2019 to April 2021 against s 180 of the Corporations Act: 1. the export of Neurio-branded products to China was a significant part of Sunnya's business by April 2019; [204] 2. Mr He and Ms Lu were the only executive directors of Sunnya, and had day-to-day control over the management of the company; [205] 3. Mr He and Ms Lu were subject to a contractual obligation under clause 4.2 of the Share Purchase Agreement to cause Sunnya's business, after completion of Jatcorp's acquisition of the majority shareholding, to continue to carry on the right to sell Neurio-branded products in Australia and China; [206] and 4. the commercial invoices practice that Sunnya engaged in under the management and control of Mr He and Ms Lu for the purposes of reducing the import taxes, duties or fees payable on the importation of its Neurio-branded products into China involved some departure from Chinese customs laws, regulations and/or practices. [207]
Whether or not the conduct of Mr He and Ms Lu breached their duty of care and diligence under s 180 of the Corporations Act depends on an analysis of whether and to what extent Sunnya's interests were jeopardised by the commercial invoices practice and, if so, whether the risks were obviously outweighed by any potential countervailing benefits, and whether there were reasonable steps which could have been taken to avoid those risks. [208] My finding that the commercial invoices practice gave rise to a reasonably foreseeable risk of investigation is but the first step in this analysis. [209] As explained above, the Plaintiffs have failed to adduce sufficient evidence for the Court to embark on the balance of the analysis. [210]
As a result of those evidentiary deficiencies, the Plaintiffs have also failed to establish that, in causing Sunnya to engage in the commercial invoices practice, Mr He and Ms Lu failed to act in good faith in the best interests of Sunnya, acted for an improper purpose, used their position as directors to gain an advantage for themselves (or someone other than Sunnya), or used their position to cause detriment to the corporation. It is not pleaded, and there is no evidence capable of supporting a finding that, Mr He and Ms Lu caused Sunnya to engage in the commercial invoices practice for any purpose other than to advantage Sunnya by reducing its costs of exporting its Neurio-branded products to China.
The commercial invoices claims against Mr He and Ms Lu under ss 180, 181 and 182 of the Corporations Act fail for those reasons. The Plaintiffs' claims against GNT for alleged involvement in those alleged contraventions do not arise for consideration.
The Plaintiffs submitted that Mr He and Ms Lu had breached their fiduciary duties owed to Sunnya because they did not act in Sunnya's best interests in causing it to engage in the commercial invoices practice. For the reasons I have already explained, the evidence falls short of establishing that the Plaintiffs failed to act in the bests interests of Sunnya at the time, or that they acted for an extraneous purpose. The Plaintiffs did not identify any alleged interests of Mr He and/or Ms Lu that they allege were in conflict, or possible conflict, with their functions or responsibilities as directors in relation to Sunnya's exporting and importing practices during the period from April 2019 to April 2021. Nor did the Plaintiffs identify any alleged unauthorised benefit obtained by Mr He and /or Ms Lu from those practices by reason of their fiduciary positions.
The commercial invoices claims against Mr He and Ms Lu for alleged breaches of fiduciary duty fail for those reasons. The Plaintiffs' claims against GNT as an alleged knowing recipient or knowing assistant in those breaches, or as an alleged alter ego of Mr He and/or Ms Lu, do not arise for consideration.

[70]

Outline of the parties' contentions

The Plaintiffs allege that Mr He and Ms Lu breached their statutory duties under ss 181 and 182 of the Corporations Act, and breached their fiduciary duties as directors of Sunnya, by directing, requesting, encouraging or endorsing the contracts entered into between Supermega and GABT during the period from March to November 2022 for the supply of Neurio-branded products to GABT. These are the 17 contracts referred to at [210] above.
The Plaintiffs allege that Mr He and Ms Lu directed, requested, encouraged or endorsed those contracts by Mr He deploying GABT as his alter ego to enter into the contracts with Supermega and, further or alternatively, by Ms Lu negotiating those contracts on behalf of GABT.
The Plaintiffs contend that the breaches of fiduciary duty were a dishonest and fraudulent scheme, that GABT received the Neurio-branded products supplied under those contracts as the alter ego of Mr He and Ms Lu, and that Sunnya has not received any payment or other benefit from the contracts.
The Plaintiffs allege that Supermega and Megadairy were involved in Mr He and Ms Lu's alleged breaches of ss 181 and 182 of the Corporations Act, and knowingly assisted in Mr He and Ms Lu's allegedly dishonest and fraudulent breaches of fiduciary duty.
The Plaintiffs allege that GABT entered into the 17 contracts with Supermega as the alter ego of Mr He and Ms Lu, was involved in Mr He and Ms Lu's alleged breaches of ss 181 and 182 of the Corporations Act, knowingly received the benefit of the Neurio-branded products supplied under the 17 contracts, and knowingly assisted in Mr He and Ms Lu's allegedly dishonest and fraudulent breaches of fiduciary duty.
Mr He and Ms Lu deny the alleged breaches of duty. Counsel for the He Parties submitted that the evidence does not establish that Mr He or Ms Lu had any involvement in Supermega entering into the 17 contracts with GABT, and that there is no evidence of any way in which Mr He and Ms Lu did, or ought to have, detected these transactions between Supermega and GABT. It was further submitted that the evidence does not establish that Supermega ultimately manufactured and supplied to GABT the Neurio-branded products the subject of the 17 contracts.
Supermega and Megadairy deny that they are liable in respect of any breach of duty that may be found to have been committed by Mr He or Ms Lu. It was submitted on behalf of the NZ Parties that the Plaintiffs' claims against Mr He and Ms Lu fail to take into account that Sunnya's sale of Neurio-branded products in China required the cooperation of GABT as the registered owner of the Chinese Neurio trade marks, and that it appears that the cooperation relationship extended to Sunnya permitting GABT to use the Neurio trade marks by commissioning the manufacture of Neurio-branded products in New Zealand for export to China. Supermega and Megdairy further submitted that, if there was any breach of duty by Mr He and Ms Lu, the bare facts that Mr Wu knew that the products were being ordered by GABT and exported to China is insufficient to make the NZ Parties liable in respect of such breaches, as Mr Wu had no means of penetrating the details of the relationship between Sunnya and GABT, and had no duty to do so. At the relevant times, the appearance of the relationship between Sunnya and GABT was one of cooperation in relation to the Neurio brand, and nothing to the contrary had been communicated to Mr Wu prior to Tahota Law Firm's letter dated 15 November 2022 advising Mr Wu of the restrictions that the Sunnya board had imposed on Mr He and Ms Lu, and directing Mr Wu to direct all future correspondence concerning Sunnya and the five sales contracts that remained on foot between Sunnya and Supermega, to Mr Wang. [211]
GABT did not actively defend the proceedings.

[71]

Consideration and determination

There is no dispute that GABT and Supermega entered into the 17 contracts referred to at [210] above.
The NZ Parties admit that Megadairy manufactured and supplied Neurio-branded formulated milk powder products to GABT from about March 2022. Contrary to the submission made on behalf of the He Parties, there is evidence of such supply. [212]
The He Parties admit that Sunnya did not receive any payment or other benefit from the 17 contracts, or from the manufacture and supply of the Neurio-branded products under those contracts.
On the basis of the evidence referred to at [175]-[176] above, I find that Mr He held 95 per cent of the shares in GABT during the period in which GABT entered into each of the 17 contracts with Supermega. Under GABT's Articles of Association, Mr He's shareholding carried with it the right to participate in major decision-making of GABT, and the right to cast 95 per cent of the votes on resolutions determining the company's business policy and investment plan and resolutions for the election of the company's Executive Director. Mr Lu was the Executive Director of GABT. The Articles of Association designated the Executive Director as the Legal Representative of the company. [213]
Mr He controlled GABT in the sense that he had the ability to determine the outcome of major decisions of GABT, and to determine the business policy and investment plan of GABT, by exercising the voting rights attached to his shares at shareholders' meetings. Mr He's voting power also gave him effective control over the appointment of the company's Executive Director. [214] I infer that Mr He's voting power conferred on him some degree of influence over the Executive Director, Mr Lu, in relation to the affairs of GABT.
However, Mr He was not a director or officer of GABT, and there is no evidence that he was charged with any responsibility for the management of the company, or that he was an agent of GABT either generally or in relation to particular matters.
Whether or not Mr He's control of GABT through his voting rights as the majority shareholder made him the company's directing mind and will, and whether his knowledge about particular matters is to be attributed to GABT, are questions that must be considered separately in relation to each impugned transaction or other conduct relevant to these proceedings, and each of the Plaintiffs' causes of action in respect of each such transaction or conduct. [215] Unless it is determined, at least, that the mind of Mr He was the mind of GABT in relation to a particular transaction or conduct, it cannot be said that GABT was the alter ego of Mr He in respect of that transaction or conduct. [216]
It is not in dispute that, during the period in which GABT entered into each of the 17 contracts with Supermega, Mr Wu was the sole director of Supermega, the ultimate shareholder of Supermega (through his ownership of Supermega's sole shareholder, South Pole BM), and the sole director and shareholder of Megadairy. [217] The NZ Parties accept that knowledge of Mr Wu during that period, and indeed at all times relevant to these proceedings, is attributable to Supermega and Megadairy.
The first six of the 17 contracts referred to at [210] above were entered into during a six month period from March to September 2022. Under those six contracts, Supermega contracted with GABT to manufacture and export a total of 180,000 cans of Neurio-branded products to China.
The remaining eleven of the 17 contracts referred to at [210] above were entered into during a period of nine days from 31 October to 8 November 2022.
Those two groups of contracts were entered into in very different circumstances. It is therefore convenient to consider the Plaintiffs' allegations separately in respect of the two groups of contracts.
I find that Ms Lu negotiated on behalf of GABT the sixth contract dated 14 September 2022 because she is named as the contact person for GABT on the copy of that contract that was exhibited to Mr Wu's 15 September 2023 affidavit and admitted into evidence in these proceedings, as referred to at [212] above. I reject Mr Wu's evidence that Ms Lu was likely to have been named as GABT's contact person due to a mistake made by the Supermega staff member who prepared the contract. That evidence was mere speculation, founded on the premise that Supermega's relationships with GABT and Sunnya were separate, and did not overlap or interact with one another - a matter about which Mr Wu gave irreconcilably inconsistent evidence in these proceedings, as referred to at [213] and [222]-[225] above. For the reasons explained at [542]-[548] above, I am not prepared to accept Mr Wu's evidence unless it is corroborated by a reliable source, inherently probable, or contrary to the interests of the NZ Parties. I am not prepared to accept Mr Wu's speculation.
I find that Ms Lu also negotiated on behalf of GABT the other five contracts dated between March and September 2022. I infer from the inexplicable blank spaces where the name of GABT's contact person would otherwise appear, together with the markings on the copy of the fourth contract dated 12 July 2022 referred at [212] above, that the name of GABT's contact person has been redacted from the copies of those five contracts that were exhibited to Mr Wu's 15 September 2023 affidavit and tendered in these proceedings because it would not be helpful to the defence of Supermega and Megadairy, and/or because it would not be helpful to the He Parties, to disclose the identity of that person. If Ms Lu negotiated the 14 September 2022 contract on behalf of GABT, as I have found, it is inherently likely that she also negotiated the other five contracts that GABT entered into with Supermega during the period from March to September 2022. The mistake lay not in recording Ms Lu as the contact person for GABT in the 14 September 2022 contract, but in failing to redact her name from the copy of that contract exhibited to Mr Wu's affidavit. I draw those inferences more readily in circumstances where Ms Lu has not given evidence. I infer that any evidence that she could have given about whether she negotiated those contracts on behalf of GABT would not have assisted her defence of the Improper Contracts claims.
Ms Lu negotiated those six contracts on behalf of GABT in circumstances where, as the registered owner of the New Zealand Neurio trade marks, Sunnya had the exclusive right to apply those trade marks to goods manufactured and packaged in New Zealand for export to China. [218] As the registered owner of the Chinese Neurio trade marks, GABT facilitated Sunnya's exportation of its New Zealand manufactured Neurio-branded products to China, and Sunnya's distribution and sale of those products in China, under the cooperation relationship. [219] There is no evidence that Sunnya provided any payment or benefit to GABT in direct consideration for GABT's facilitation of Sunnya's activities in China. The evidence indicates that GABT was continuing to facilitate those activities of Sunnya during the period from March to September 2022 in which GABT entered into the six contracts with Supermega.
The Plaintiffs did not articulate any basis for their contention that GABT entered into the six contracts with Supermega during the period between March and September 2022 as the alter ego of Mr He, other than the fact that Mr He owned 95 per cent of the shares in GABT during that period. GABT was established in 2007. GABT carried on business in its own right in China, including the ownership of brands, and exportation and importation of milk food products. [220] The evidence does not provide a sufficient basis for inferring that GABT's decision to enter into any or all of the six contracts was a major decision that had been the subject of a shareholder vote in which Mr He would have cast 95 per cent of the votes. The Plaintiffs' submissions did not identify any evidence capable of supporting an inference that, in the circumstances existing at that time the six contracts were entered into as referred to immediately above, Mr He's mind was the mind of GABT in relation to those contracts. [221] The Plaintiffs have therefore failed to establish that GABT acted as the alter ego of Mr He in entering into the six contracts. The Plaintiffs' submissions did not identify any evidence that would provide any alternative basis for finding that Mr He had directed, requested, encouraged or endorsed the contracts entered into the six contracts between Supermega and GABT during the period from March to September 2022 in breach of his statutory and fiduciary duties as a director of Sunnya.
I accept the Plaintiffs' contention that, by negotiating the six contracts on behalf of GABT, Ms Lu requested or encouraged Supermega and GABT to enter into those contracts. In so doing, Ms Lu requested or encouraged the use of Sunnya's registered Neurio trade marks in New Zealand in the manufacturing, packaging and exporting of the Neurio-branded products the subject of those six contracts for the benefit of GABT. The Plaintiffs' submissions relied on the fact of those benefits to GABT, and the admitted absence of any payment or benefit received by Sunnya directly in return, [222] as establishing that Ms Lu's conduct contravened ss 181 and 182 of the Corporations Act and constituted a breach of her fiduciary duties as a director of Sunnya.
In my opinion, it is relevant that GABT received the benefit of the six contracts with Supermega, and the Neurio-branded products that were subsequently supplied to it under those contracts, at a time when the evidence indicates that Sunnya was enjoying the benefits of GABT facilitating Sunnya's distribution and sale of its New Zealand manufactured Neurio-branded products in China under the cooperation relationship between Sunnya and GABT.
The allegations of breach of statutory duty against Ms Lu rest on the matters referred to at [672] above, and assume that Ms Lu requested or encouraged Supermega and GABT to enter into the six contracts during the period from March to September 2022 in the exercise of her powers as a director of Sunnya (for the purpose of the alleged contravention of s 181 of the Corporations Act) and by using her position as a director of Sunnya (for the purpose of the alleged contravention of s 182).
The Plaintiffs' submissions did not address how Ms Lu could be said to have been exercising her powers as a director of Sunnya in negotiating contracts with Supermega on behalf of GABT. I do not consider that this conduct can properly be characterised as an exercise of Ms Lu's powers as a director of Sunnya. The Plaintiffs' claims under s 181 of the Corporations Act fail for that reason.
Even if I am wrong about that, the matters referred to at [672] above, considered in the context of the benefits of the cooperation relationship to Sunnya, do not establish that Ms Lu requested or encouraged Supermega and GABT to enter into the six contracts knowing that this was not in Sunnya's best interests to do so. Nor do those matters, considered in the context of the cooperation relationship, establish that it was not in Sunnya's best interests, objectively assessed, for Ms Lu to request or encourage Supermega and GABT to enter into the six contracts, or that Ms Lu had an improper purpose in doing so. Indeed, the Plaintiffs' pleading and submissions failed to even articulate an improper purpose for which they allege that Ms Lu requested or encouraged Supermega and GABT to enter into the six contracts during the period from March to September 2022. Those are further reasons why the Plaintiffs' claims under s 181(1)(a) and (b) of the Corporations Act fail.
Turning to the Plaintiffs' claims against Ms Lu under s 182 of the Corporations Act, I accept that Ms Lu was using her position as a director of Sunnya in negotiating the six contracts. That is because Ms Lu's position as a director of Sunnya was likely to cause Supermega to understand her participation in the negotiations as indicating that Sunnya consented to its New Zealand Neurio trade marks being used for the benefit of GABT by manufacturing the Neurio-branded products the subject of the six contracts. However, the matters referred to at [672] above, considered in the context of the apparent benefits of the cooperation relationship to Sunnya, do not establish that Ms Lu's use of her position in those negotiations, which plainly conferred a benefit on GABT, was improper. The evidence does not provide a sufficient basis to conclude that Ms Lu's conduct transgressed the standards that reasonable persons, with knowledge of the registered ownership of the Neurio trade marks in New Zealand and in China, Sunnya's business in selling its New Zealand-manufactured Neurio-branded products in China, and the cooperation relationship, would expect of a director in Ms Lu's position. Nor do the matters referred to at [672] above provide a sufficient basis for concluding that Ms Lu's conduct, and the resulting six contracts, caused detriment to Sunnya when its affairs and interests are considered as a whole in the context of the cooperation relationship.
For all of the reasons explained at [668]-[677] above, the Plaintiffs have failed to establish that Mr He and Ms Lu breached their duties under ss 181 and 182 of the Corporations Act in relation to the six contracts that GABT entered into with Supermega during the period from March to September 2022. The Plaintiffs' contentions that each of GABT, Supermega and Megadairy were involved in those alleged contraventions within the meaning of s 79 of the Corporations Act do not arise for consideration.
The Plaintiffs' claim that Mr He breached his fiduciary duties in relation to those six contracts rested on their contention that GABT entered into those contracts as the alter ego of Mr He. The Plaintiffs have failed to establish that contention for the reasons explained at [671] above, and have therefore failed to establish any breach of fiduciary duty by Mr He in connection with the six contracts that GABT entered into with Supermega during the period from March to September 2022.
The Plaintiffs submitted that Ms Lu breached her fiduciary duties as a director of Sunnya by negotiating the six contracts on behalf of GABT because: (1) she was not acting in the best interests of Sunnya in doing so; (2) she was preferring her own interests and those of Mr He (as the 95 per cent shareholder of GABT) over the interests of Sunnya; (3) she was pursuing or obtaining a benefit or advantage for GABT in a position of conflict that arose due to Mr He's shareholding in GABT; and (4) she used her fiduciary position to make a profit for GABT.
For the reasons explained at [668]-[677] above, the Plaintiffs have failed to establish that Ms Lu was not acting in the interests of Sunnya in negotiating the six contracts on behalf of GABT. The Plaintiffs' submissions conflate the personal interests of Ms Lu with the personal interests of Mr He as a shareholder of GABT. Assuming that the interests of Mr He and Ms Lu were aligned during the period from March to September 2022 in that Ms Lu would benefit directly or indirectly from profits of GABT distributed to Mr He as its 95 per cent shareholder, the Plaintiffs have failed to establish that, in the context of the ongoing cooperation relationship between Sunnya and GABT, there was a real conflict, or substantial possibility of conflict, between the interests of Sunnya and the interests of Mr He and Ms Lu (through Mr He's shareholding in GABT). Assuming that GABT profited from the contracts that it entered into with Supermega, the evidence does not provide a sufficient basis for an inference that Ms Lu negotiated the six contracts on behalf of GABT in pursuit of that profit for GABT (and, indirectly, for Mr He and for herself), rather than in furtherance of the cooperation relationship for the benefit of Sunnya. Nor does the evidence provide a sufficient basis for characterising Ms Lu's conduct in relation to the six contracts as dishonest in the sense of transgressing ordinary standards of honest behaviour in the context of the cooperation relationship.
The Plaintiffs' claims that Mr He and Ms Lu breached their fiduciary duties as directors of Sunnya in relation to the six contracts that GABT entered into with Supermega during the period from March to September 2022 fail for those reasons. The Plaintiffs' claims against GABT for knowing receipt of Neurio-branded products under the six contracts, or for receipt of those products as the alter ego of Mr He, do not arise for consideration. I would not have characterised GABT as the alter ego of Mr He in any event, for the reasons explained at [671] above. The Plaintiffs' contentions that each of Supermega and Megadairy knowingly assisted the alleged breaches of fiduciary duty do not arise for consideration.
I now turn to the remaining eleven of the 17 contracts referred to at [210]-[213] above, which were entered into during a period of nine days from 31 October to 8 November 2022.
I infer that Ms Lu negotiated those contracts for the same reasons as I have drawn that inference in relation to the six contracts discussed above. Those reasons are explained at [669] above.
The contracts that Ms Lu negotiated on behalf of GABT, and that GABT entered into with Supermega, on 31 October 2022 provided for the manufacture and export a total of 190,000 cans of Neurio-branded products to China - more than the total volume manufactured and exported under the six contracts entered into during the six month period from March to September 2022. The remaining contracts that Ms Lu negotiated on behalf of GABT, and that GABT entered into with Supermega during the period from 1 November to 8 November 2022 provided for the manufacture and export of a further 125,000 cans of Neurio-branded products to China.
It is relevant to consider the circumstances in which Ms Lu placed these orders on behalf of GABT in quick succession over a period of nine days for a significantly larger quantity of Neurio-branded products than Supermega had supplied to GABT at any time in the past.
Prompted by a significant decline in Sunnya's revenue and profits in the 2021 and 2022 financial years compared to the 2020 financial year, Jatcorp had determined to exercise greater control over the management of Sunnya by increasing its representation on the board from one director to three directors. Jatcorp representatives met with Mr He and Ms Lu and informed them of its intentions. On the balance of probabilities, that meeting occurred on 13 October 2022. [223]
According to Mr Wang's evidence - which I accept, noting that it is corroborated by a contemporaneous message from Mr Shen to Mr He shortly after the meeting - Mr He reminded Jatcorp that he "controlled the Neurio trade marks in China". [224] I infer that Mr He was referring to his ownership of 95 per cent of the shares in GABT, which was the registered owner of the Chinese Neurio trade marks.
On the evening after the meeting on 13 October 2022, Mr Shen sent a WeChat message to Mr He asking him to "please send me the Neurio trademark registration document, the documents of authorization to Sunnya Australia, and the general agency contract of Sunnya China so I could have a look". [225] There is no evidence that Mr He replied to that message. The documents that the He Parties subsequently relied on in these proceedings in support of their contention that Sunnya held the Australian and New Zealand Neurio trade marks on behalf of GABT, and that Sunnya used those trade marks because it was authorised to do so by GABT, were not provided to Jatcorp or its representatives until after the commencement of the Sunnya proceedings. Ultimately, only two of those documents were admitted into evidence in these proceedings - a document entitled Trademark Registration Authorization Agreement and a document entitled Trademark Usage Authorisation Agreement, both of which are purportedly dated 16 December 2014. I have found that those two documents are false documents that were fabricated by the He Parties to assist their defence of the Sunnya proceedings and their prosecution of the All168 proceedings. [226]
On 21 October 2022, Jatcorp issued to shareholders of Sunnya a notice of EGM to be held on 22 November 2022 to vote on proposed resolutions to remove Jatcorp's existing appointee from Sunnya's board of directors, and to appoint three new directors nominated by Jatcorp - Mr Shen, Mr Wang and Mr Zhang. There was also a proposed resolution that Mr He and Ms Lu provide the incoming directors with full and unfettered access to all of Sunnya's books and records. The notice of meeting specifically referred to the obligations of Mr He and Ms Lu under clause 4.2 of the Share Purchase Agreement to ensure that Sunnya would continue to own and exercise the right to sell Neurio-branded products in Australia and China after Jatcorp's acquisition of its 51 per cent shareholding in Sunnya in October 2018. [227]
The EGM notice was sent to Mr He by email at approximately 2.17pm on 21 October 2022. At approximately 9.01pm that day, Mr Lu sent an email to Mr He attaching the GABT Termination Notice, which asserted that GABT was entitled to terminate Sunnnya's right to hold and use the Neurio trade marks at any time in accordance with "the Authorisation for Using the Trademark and the Authorising Trademark registration". The notice purported to demand that Sunnya transfer the Australian and New Zealand Neurio trade marks to GABT, and deliver up to GABT all goods bearing the Neurio trade marks. [228]
The certified English translation of the GABT Termination Notice that was admitted into evidence states that GABT had been notified by Sunnya that "Jatcorp Limited will hold an Extraordinary General Meeting and vote to resolve the relevant decision of [Sunnya]". [229] The wording is infelicitous - either in the original Mandarin document, in the English translation, or both. Nevertheless, I think it is abundantly clear in the context of the events that immediately preceded the issue of the GABT Termination Notice that those words mean that Sunnya had informed GABT that Jatcorp had called the extraordinary general meeting to pass the resolutions set out in the notice of meeting, which would result in Jatcorp having control of Sunnya's board. I reject the He Parties' submissions to the contrary.
Jatcorp had issued the EGM notice to All168 - the only other shareholder of Sunnya - by Mr Wang sending it by email to Mr He. [230] On the basis of the events that occurred in the ten days following the issue of the GABT Termination Notice referred to below, I infer that it was Mr He who informed GABT about the EGM, the proposed resolutions, and that this would result in Mr He and Ms Lu no longer having effective control over Sunnya because the Jatcorp-nominated directors would be in a position to out-vote Mr He and Ms Lu when board decisions were put to a vote, and that Mr He then used his influence derived from his majority shareholding in GABT to encourage the issue of the GABT Termination Notice.
Compliance with the demands set out in the GABT Termination Notice would have at least three significant adverse consequences for Sunnya's business.
First, Sunnya would lose its rights to manufacture in Australia and New Zealand the Neurio-branded products that it was in the business of exporting to China for sale and distribution in the large Chinese market for formulated powdered milk products with the cooperation of GABT as the registered owner of the Chinese Neurio trade marks. The place of manufacture of Neurio-branded products was an important feature of their marketing and sale in China, as evidenced by a presentation in October 2021, which described the benefits of "the green and pollution-free natural environment and natural resources of Australia and New Zealand as well as its high-quality milk sources".
Second, GABT would no longer require Sunnya's consent or cooperation to manufacture Neurio-branded products in Australia and New Zealand. If GABT owned the Australian and New Zealand Neurio trade marks, in addition to the Chinese Neurio trade marks, GABT would be entitled to manufacture Neurio-branded products in Australia and New Zealand for export to and sale in China entirely on its own account, with no benefit flowing to Sunnya.
Third, Sunnya's inability to manufacture Neurio-branded products in Australia and New Zealand if those trade marks were transferred to GABT would also result in the loss of that component of Sunnya's business that involved the marketing and sale of those products in Australia, New Zealand and countries other than China.
In short, as the Plaintiffs' submitted, Sunnya's rights as the registered owner of the Australian and New Zealand Neurio trade marks were valuable assets of Sunnya's business, which Sunnya would lose if it complied with the demands in the GABT Termination Notice.
Notwithstanding those serious adverse consequences for Sunnya if the GABT Termination Notice was valid, and if Sunnya was required to comply with GABT's demands to transfer the Australian and New Zealand Neurio trade marks, Mr He did not inform the Jatcorp-nominated director of Sunnya, or any other representative of Jatcorp, about the GABT Termination Notice. Nor did Mr He convene a meeting of Sunnya's board to discuss the notice, and Sunnya's response to it. Rather, Mr He withheld the notice from Jatcorp and the Jatcorp-nominated director of Sunnya at the time, for a period of ten days until 31 October 2022. [231]
During that period, Mr He and Ms Lu took steps to cause Sunnya to transfer the registered ownership of the Australian, New Zealand and Indonesian Neurio trade marks to GABT for no consideration. They did so purportedly in their capacity as directors of Sunnya, without informing the Jatcorp-nominated director of Sunnya, or any other representative of Jatcorp, of their actions that would remove the foundation of Sunnya's business. [232]
In these proceedings, the sole justification advanced by Mr He and Ms Lu for their conduct in seeking to transfer the Australian, New Zealand and Indonesian Neurio trade marks to GABT was that Sunnya held the trade marks on behalf of GABT pursuant to the agreements purportedly dated December 2014 and January 2020 referred to in the GABT Termination Notice, and that GABT was entitled to require the trade marks to be transferred to it at any time. I have found that the two 2014 documents are false documents that were created by the He Parties for the purpose of their defence of the Sunnya proceedings and their prosecution of the All168 proceedings. In any event, the agreements purportedly recorded in the 2014 documents related only to the historical Neurio trade marks. Even if they had been found to be genuine agreements, the 2014 documents would not have created any rights or obligations in respect of the modern Australian and New Zealand Neurio trade marks. The two 2020 documents were not admitted into evidence on account of the He Parties' failure to produce them to the Plaintiffs for forensic examination. [233]
During the negotiations for Jatcorp's acquisition of 51 per cent Sunnya, the He Parties told Jatcorp that Ms Lu was the registered owner in Australia and New Zealand of the only Neurio trade marks that had been registered at that time. Ms Lu assigned those trade marks to Sunnya on completion of Jatcorp's share purchase. [234] There is no evidence that Mr He or Ms Lu provided any information to Jatcorp at that time, or when Sunnya subsequently registered the modern Neurio trade marks in Australia in 2019 and in New Zealand in 2020, indicating that Sunnya would be obliged to transfer those trade marks to GABT in the event that GABT required Sunnya to do so at any time.
The He Parties and GABT were the only parties to these proceedings with the means to produce evidence of any right of GABT to require Sunnya to transfer the Australian and New Zealand Neurio trade marks to GABT. In circumstances where they failed to do so, other than by tendering the 2014 documents that I have found to be false, the evidence of the information that Mr He and Ms Lu provided to Jatcorp at the time of its share purchase, together with the transfer of the historical Neurio trade marks in Australia and New Zealand to Sunnya on completion of the Jatcorp acquisition and the subsequent registration of Sunnya as the owner of the modern Neurio trade marks in both of those jurisdictions, is a sufficient basis to find that Sunnya's registered ownership of the Australian and New Zealand Neurio trade marks was not subject to any agreement or arrangement between Sunnya and GABT that obliged Sunnya to transfer the trade marks to GABT. I do so find.
Jatcorp - unaware that Sunnya's Neurio trade marks were in the process of being transferred to GABT - decided to bring forward the date of the EGM to 31 October 2022 due to concerns about payments that Mr He had purportedly authorised to be made from Sunnya to HLW, which had in fact been set up as payments from Sunnya to GNT. Mr He's only response to this development, on behalf of himself and Ms Lu, was to object to less than 21 days' notice of the meeting. [235] There is no evidence of any prejudice to Mr He and Ms Lu that would have flowed from the meeting being brought forward, or any advantage that they would have achieved by insisting on the 21 day notice period, other than that this would have deferred the appointment of Jatcorp's nominees as directors of Sunnya, and thereby delayed Mr He and Ms Lu being required to provide those proposed new directors with access to Sunnya's books and records, which would disclose the actions that had been taken to divest Sunnya of the trade marks. I infer that Mr He and Ms Lu objected to the meeting being brought forward because they wished to maximise the prospects that the transfer of the Australian and New Zealand Neurio trade marks to GABT would be completed before Jatcorp became aware of their actions.
The EGM was held on 31 October 2022, and Mr Wang sent a copy of the minutes to Mr He and Ms Lu and the three newly appointed Sunnya directors that afternoon. It was only then that Mr He informed the Jatcorp-nominated directors of Sunnya about the GABT Termination Notice. Earlier that same day, GABT had become the registered owner of the Australian Neurio trade marks, and had entered into six contracts with Supermega that I have found Ms Lu negotiated on GABT's behalf for the manufacture and supply of 190,000 cans of Neurio-branded products to be exported to China. [236] The deed of assignment of the New Zealand Neurio trade marks to GABT was executed the following day, but has not been registered due to interim orders made by this Court in the Sunnya proceedings on 8 November 2022. [237]
Mr He and Ms Lu failed to respond to Mr Wang's letter of 1 November 2022 calling for an explanation of their conduct in relation to the trade mark transfers and other matters, and failed to attend a Sunnya board meeting convened on 2 November 2022. [238]
Ms Lu continued to negotiate on behalf of GABT for the manufacture and supply of Neurio-branded products in New Zealand for export to China through GABT's nominated importer, Shanghai Gainful. GABT entered into a further five such contracts with Supermega during the period from 1 November to 8 November 2022. [239]
On the basis of all of those matters, considered as a whole, I find that the conduct of Ms Lu in negotiating on behalf of GABT the eleven contracts that GABT entered into with Supermega during the period from 31 October to 8 November 2022 was part of the series of co-ordinated actions described at [693]-[707] above that were undertaken by Mr He and Ms Lu during the initial weeks after they learned of Jatcorp's intention to take effective control of the management of Sunnya. I infer that Mr He and Ms Lu undertook those actions with the intention and purpose of diverting to GABT Sunnya's business of selling Australian and New Zealand-manufactured Neurio-branded products in China, including by encouraging GABT to terminate the cooperation relationship that had hitherto facilitated Sunnya's sale of those products in China, and by transferring to GABT the trade marks that had entitled Sunnya to manufacture those products in Australia and New Zealand. I infer that Ms Lu negotiated on behalf of GABT the eleven contracts that it entered into with Supermega during the period from 31 October to 8 November 2022 in anticipation of the transfer of the New Zealand Neurio trade marks to GABT being registered. Whilst the GABT Termination Notice was ineffective insofar as it purported to require Sunnya to transfer the Australian and New Zealand Neurio trade marks to GABT, it did signal the termination of the cooperation relationship. I further infer that Mr He and Ms Lu's underlying intention and purpose in encouraging the termination of the cooperation relationship, and in diverting Sunnya's business to GABT, was to ensure that the profits of that business would be earned by GABT, which was 95 per cent owned by Mr He, rather than by Sunnya, over which Mr He and Ms Lu were about to lose effective management control, and in which they only had a 49 per cent interest through All168. I draw those inferences based on the obvious consequences of the conduct of Mr He and Ms Lu. Further, I infer from the manner in which their actions were co-ordinated to achieve those consequences that Mr He's actions were done with the knowledge and encouragement or endorsement of Ms Lu, and that Ms Lu's actions were done with the knowledge and encouragement or endorsement of Mr He. I further infer from that cooperation between them that any profits distributed to Mr He by reason of his 95 per cent shareholding of GABT would also directly or indirectly benefit his wife, Ms Lu. I draw each of the inferences above more comfortably in the absence of any evidence of Mr He and Ms Lu to the contrary.
Viewed in that context, Ms Lu's conduct in negotiating on behalf of GABT the 11 contracts that GABT entered into with Supermega during the period from 31 October to 8 November 2022, did not engage s 181(1)(a) or s 181(1)(b) of the Corporations Act. Her actions in negotiating those contracts did not involve the exercise of any power or discharge of any duty as a director of Sunnya.
However, in circumstances where Sunnya remained the registered owner of the New Zealand Neurio trade marks during that period, Ms Lu's negotiation of the further eleven contracts during the period from 31 October to 8 November 2022 did involve the use of her position as a director of Sunnya within the meaning of s 182 of the Corporations Act. Ms Lu's involvement in those negotiations on behalf of GABT was capable of implying to Supermega that Sunnya was aware of, and consented to, its registered Neurio trade mark being used in New Zealand to manufacture and export Neurio-branded products for GABT under the eleven contracts. Mr He's encouragement or endorsement of Ms Lu's actions contributed to the risk of Sunnya's consent being impliedly communicated to Supermega. In short, as the Plaintiffs expressed it in their closing submissions, each of Ms Lu and Mr He thereby encouraged or endorsed Supermega entering into those eleven contracts with GABT, and consequently encouraged or endorsed Supermega's manufacture and supply of Neurio-branded products to GABT under those contracts.
Having regard to all of the matters referred to at [694]-[708] above, I am satisfied that Ms Lu's subjective purpose in negotiating on GABT's behalf the eleven contracts that GABT entered into with Supermega during the period from 31 October to 8 November 2022, and Mr He's subjective purpose in encouraging or endorsing Ms Lu's conduct, was to achieve the objective referred to at [708], which was to the advantage of GABT (and, indirectly, Mr He and Ms Lu) and to the detriment of Sunnya. I am also satisfied that this was an improper purpose according to the standards that reasonable persons with knowledge of the circumstances referred to above would expect of a person in the positions held by Ms Lu and Mr He. The fact that the cooperation relationship between Sunnya and GABT had already been terminated on 21 October 2022 does not assist Ms Lu and Mr He, in circumstances where Mr He (with the knowledge and encouragement or endorsement of Ms Lu) encouraged GABT to terminate that relationship as part of the same series of actions undertaken for the same improper purpose. In any event, the termination of the cooperation relationship did not entitle GABT to use Sunnya's registered Neurio trade mark to manufacture Neurio-branded products in New Zealand for export to China. That was one of the bundle of rights enjoyed by Sunnya, as the registered trade mark owner, to exclusive use of the trade mark. [240] It was not in Sunnya's interests for GABT to exercise those rights without any payment or other benefit flowing to Sunnya, irrespective of whether or not Sunnya would be able to import New Zealand-manufactured Neurio products into China and sell them in the Chinese market without the cooperation and consent of GABT.
I reject the He Parties' submission that the Plaintiffs' claim under s 182(1) of the Corporations Act has not been properly pleaded. [241] The Plaintiffs have expressly pleaded that, by directing, requesting, endorsing or encouraging the contracts between Supermega and GABT, under which no payment or other benefit flowed to Sunnya, Mr He and Ms Lu gained an advantage for someone other than Sunnya, and caused detriment to Sunnya. [242] If it be necessary to plead that this was the subjective purpose of Mr He and Ms Lu, then I consider that to be implicit in what has been expressly pleaded. It is so obvious that the pleaded conduct would deliver an advantage for GABT and cause detriment to Sunnya that Mr He and Ms Lu cannot have engaged in the pleaded conduct without having held that subjective purpose.
On the basis of all of the matters referred to at [694]-[708] above, considered as a whole, I have determined that Ms Lu negotiated the eleven contracts on behalf of GABT with the knowledge and encouragement or endorsement of Mr He, in pursuit of profits for GABT to be earned from selling New Zealand manufactured Neurio-branded products in China. Such profits would flow to Mr He, as the 95 per cent shareholder of GABT, and would directly or indirectly benefit Ms Lu. The conduct of Ms Lu and Mr He encouraged or endorsed Supermega's entry into the eleven contracts with GABT, and encouraged or endorsed Supermega's manufacture and supply of Neurio-branded products to GABT under those contracts, in the manner described above. Contrary to the He Parties' submissions, there is evidence before this Court that supports a finding that at least some of the products the subject of those eleven contracts were in fact supplied to GABT. [243] I do so find. Mr He and Ms Lu pursued for GABT, and indirectly for themselves, the profits that they expected would flow from the sale of those products in China. They did so in circumstances where there was a real conflict between, on the one hand, their interests in GABT taking over and profiting from the business that had hitherto been conducted by Sunnya of selling New Zealand manufactured Neurio-branded products in China, and, on the other hand, the interests of Sunnya in continuing to carry on that business with the cooperation of GABT, or endeavouring to do so without the cooperation of GABT, [244] or exercising its exclusive rights as registered owner of the New Zealand Neurio trade mark to prevent GABT from manufacturing those products in New Zealand at all, or at least without Sunnya having the opportunity to negotiate a payment or other benefit for any such use of its New Zealand Neurio trade mark. Ms Lu and Mr He thereby breached their fiduciary duties as directors of Sunnya. Viewed in the context of the series of actions described at [694]-[707] above, and the underlying purpose and intention of those actions as described at [708] above, I am satisfied that Ms Lu's and Mr He's breaches of fiduciary duty were both fraudulent in the equitable sense, and dishonest in the sense that they transgressed ordinary standards of honest behaviour.
Thus, in relation to the eleven contracts that GABT entered into with Supermega during the period from 31 October to 8 November 2022, the Plaintiffs have failed to establish the alleged contraventions of s 181(1) of the Corporations Act by Mr He and Ms Lu, but have succeeded in establishing that Mr He and Ms Lu contravened s 182(1) of the Corporations Act, and breached their fiduciary duties as directors Sunnya, and that those breaches of fiduciary duty were a dishonest and fraudulent design. The Plaintiffs are entitled to the declaratory relief sought in respect of those contraventions of s 182(1) and those breaches of fiduciary duty, insofar as they relate to the eleven contracts. The Plaintiffs are also entitled to the orders sought that Mr He and Ms Lu pay compensation under s 1317H for damage to Sunnya that resulted from the contravention of s 182(1), and for equitable compensation, in an amount to be determined at a subsequent hearing. The Plaintiffs' pleadings and submissions stated that Sunnya did not receive any payment or other benefit from the eleven contracts or from the manufacture and supply of Neurio-branded products to GABT under those contracts. This was admitted by the He Parties. No other loss was pleaded or identified in submissions. It was not pleaded or submitted that Sunnya would have entered into those eleven contracts if Mr He and Ms Lu had not contravened s 182(1) and had not breached their fiduciary duties. Thus, the loss in respect of which the amount of statutory and equitable compensation is to be determined at a subsequent hearing is the payment or other benefit that would have flowed to Sunnya in consideration for the use of its New Zealand Neurio trade marks in the manufacture of the Neurio-branded products supplied to GABT under the eleven contracts if Mr He and Ms Lu had not contravened s 182(1) and breached their fiduciary duties by Ms Lu negotiating the eleven contracts for the benefit of GABT and on terms that provided no payment or other benefit to Sunnya, with the knowledge and encouragement or endorsement of Mr He. The Plaintiffs did not seek an order requiring Mr He and Ms Lu to account for profits in the alternative to equitable compensation.
I now turn to the Plaintiffs' claims that GABT was involved in Ms Lu's contravention of s 182 of the Corporations Act, that GABT knowingly received the benefit of the Neurio-branded products supplied to it under the eleven contracts, that GABT knowingly assisted Mr He and Ms Lu's breaches of fiduciary duty, and that GABT entered into those eleven contracts as the alter ego of Mr He and Ms Lu.
Contrary to the Plaintiffs' submissions, I do not consider that "involvement" of GABT in Mr He's and Ms Lu's contraventions of s 182 of the Corporations Act is established merely by pointing to Mr He's 95 per cent shareholding in GABT. The evidence does not provide a sufficient basis for inferring that GABT's decision to enter into any or all of the eleven contracts had been the subject of a shareholder vote. The Plaintiffs' submissions did not refer to any other evidence that would support an inference that Mr He was the directing mind and will of GABT in relation to the eleven contracts. I do not consider that the evidence rises higher than supporting on the balance of probabilities the inferences that I have drawn above that Mr He and Ms Lu encouraged GABT to terminate the cooperation relationship with Sunnya, to accept transfers of Sunnya's Australian and New Zealand Neurio trade marks, and to enter into the eleven contracts with Supermega for Neurio-branded products to be manufactured in New Zealand and exported to China for sale by GABT.
However, on the balance of probabilities, GABT had knowledge of the essential elements of Mr He's and Ms Lu's contravention of s 182 of the Corporations Act in respect of the eleven contracts. On the basis of the matters referred to at [693] above, I infer that GABT knew by 21 October 2022 (if it did not know earlier) that Mr He and Ms Lu were directors of Sunnya. GABT knew that it had terminated the cooperation relationship by issuing the GABT Termination Notice on 21 October 2022 signed by its executive director, Mr Lu. GABT knew of the demands set out in that notice for Sunnya to transfer the Australian and New Zealand Neurio trade marks to GABT. The only documents relied on in support of that demand have either not been admitted into evidence in these proceedings, or have been found to have been falsified. I therefore infer that GABT knew that it had no right to demand the transfer of the Australian and New Zealand Neurio trade marks. I infer that it was obvious to GABT that the transfer of those trade marks would involve Sunnya giving up valuable rights to GABT for no consideration, including the right to control the use of the Neurio trade mark for the manufacture in New Zealand of Neurio-branded products for export to China. I infer that it was obvious to GABT that, in circumstances where the cooperation relationship had been terminated, it was not in Sunnya's interests to permit GABT to procure the manufacture of Neurio-branded products in New Zealand for export to China where those products would then be sold by GABT for its own profit, without any consideration moving to Sunnya. GABT knew that such profits would ultimately be primarily for the benefit of Mr He as GABT's 95 per cent shareholder. I further infer that it was obvious to GABT that, by deploying or permitting Ms Lu to negotiate the eleven contracts with Supermega on its behalf, Supermega may be encouraged to enter into those contracts believing that Ms Lu's involvement signified Sunnya's consent to that particular use of Sunnya's registered New Zealand Neurio trade mark. In circumstances where Sunnya stood to gain nothing from consenting to this use of the trade mark by GABT, and GABT knew that Jatcorp was in the process of removing management control of Sunnya from Mr He and Ms Lu, I infer that it was obvious to GABT that Sunnya did not in fact consent. I draw each of those inferences more comfortably in the absence of any evidence adduced by GABT to the contrary, in circumstances where it chose not to actively participate in the proceedings after filing its defence. For those reasons, I have determined that, by entering into the eleven contracts with Supermega during the period from 31 October to 8 November 2022, GABT was knowingly concerned in Mr He's and Ms Lu's contraventions of s 182(1) of the Corporations Act in respect of those contracts and that GABT thereby contravened s 182(2). It follows that GABT is liable to pay compensation to Sunnya under s 1317H of the Corporations Act.
The inferences that I have drawn immediately above are inferences of actual knowledge on the part of GABT. Even if GABT had avoided actual knowledge of some of those matters by wilfully shutting its eyes to the obvious, GABT had knowledge in the requisite sense of each of the essential matters that made up the breaches of fiduciary duty by Mr He and Ms Lu referred to at [713] above, which constituted a dishonest and fraudulent scheme. GABT's entry into the eleven contracts with Supermega during the period from 31 October to 8 November 2022 served its own interest at the same time as facilitating Mr He and Ms Lu's dishonest and fraudulent breaches of their fiduciary duties. GABT received such Neurio-branded products as were delivered under the eleven contracts in the knowledge that those products had been manufactured by Supermega, exported to China and delivered by GABT's nominated importer as a consequence of Mr He's and Ms Lu's breaches of fiduciary duty. GABT is therefore liable to compensate Sunnya for any loss suffered as a result of GABT's knowing assistance in Mr He's and Ms Lu's breaches of fiduciary duty and knowing receipt of those products or, alternatively, to account to Sunnya for any gains thereby made by GABT. The Plaintiffs will be required to make an election between those two remedies. [245]
In circumstances where the Plaintiffs do not seek any order that would impose joint and several liability on Mr He, Ms Lu and GABT in respect of the breaches of fiduciary duty concerning the eleven contracts, my conclusions at [717]-[718] above mean that it is not strictly necessary to address the Plaintiffs' contention that GABT acted as the alter ego of Mr He, or of Mr He and Ms Lu, in entering into those contracts during the period between 31 October and 8 November 2022, and in receiving Neurio-branded products delivered to it under those contracts. If it had been necessary to do so, I would have rejected that contention. As I have said at [671] above, GABT had its own long-established business, including in the importation of milk food products. It was in GABT's interests to take over the business of selling Australian and New Zealand-manufactured Neurio products in China after it terminated its cooperation relationship with Sunnya. The interests of Mr He and Ms Lu were aligned with the interests of GABT by reason of Mr He's majority shareholding in GABT, and the imminent loss of effective management control over Sunnya by Mr He and Ms Lu. In my opinion, that alignment of interests does not provide a sufficient basis for concluding that Mr He directed GABT's actions, and that his mind was GABT's mind, in relation to the eleven contracts. The evidence does provide a sufficient basis for finding that Mr He, in conjunction with Ms Lu, encouraged GABT to terminate the cooperation relationship, and encouraged and endorsed GABT's entry into the eleven contracts with Supermega, as I have found above in determining that GABT knowingly assisted Mr He's and Ms Lu's breaches of fiduciary duty and knowingly received the Neurio-branded products delivered to it under the eleven contracts.
The Plaintiffs are entitled to the declarations sought that GABT knowingly assisted Mr He's and Ms Lu's breaches of fiduciary duty, and knowingly received the Neurio-branded products supplied under the eleven contracts, together with orders for GABT to either compensate Sunnya in an amount to be determined or account to Sunnya for its profits, at Sunnya's election. As explained at [714] above, if Sunnya elects equitable compensation, the loss to be quantified at a subsequent hearing is the payment or other benefit that would have flowed to Sunnya in consideration for the use of its New Zealand Neurio trade marks in the manufacture of the Neurio-branded products supplied to GABT under the eleven contracts. If Sunnya elects an account of profits, then it seems to me that the profits earned by GABT in selling the Neurio-branded products supplied to it under the eleven contracts represent the benefit that GABT obtained as a result of its knowing receipt of the Neurio-branded products, and its knowing participation in Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duties. [246]
The Plaintiffs also sought an order restraining GABT from taking any steps to market, manufacture, sell, distribute or export any Neurio-branded products, or other products that are to be sold to ultimate consumers in China in or with Neurio packaging, to or for any person other than Sunnya (or persons authorised by Sunnya). Alternatively, the Plaintiffs sought an order restraining GABT from taking any steps to market, manufacture, sell, distribute or export any Neurio-branded products to or for any person other than Sunnya (or persons authorised by Sunnya). The Plaintiffs' closing submissions did not articulate any basis for those proposed orders, which go much further than restraining any continuation of the conduct by which I have found that GABT knowingly assisted Mr He and Ms Lu's breaches of fiduciary duty in respect of the eleven contracts. I am not satisfied that the Plaintiffs are entitled to those orders, which would permanently deprive GABT of the ability to exercise any of its rights as the registered owner of the Chinese Neurio trade marks, by precluding GABT from manufacturing Neurio-branded products anywhere in the world, and by precluding GABT from marketing, selling and distributing Neurio-branded products anywhere in the world, including in China, irrespective of where, or pursuant to what arrangements, those products have been manufactured. However, it seems to me that the Plaintiffs are entitled to orders limited in their terms to restraining GABT from taking any steps to manufacture, or cause to be manufactured, Neurio products in Australia or New Zealand without the consent of Sunnya as the registered owner of the Neurio trade marks in those jurisdictions. An injunction in those terms will suffice to preclude GABT from placing any further orders for products under the eleven contracts if and to the extent that they have not yet been fully performed, and will preclude GABT from assisting any similar breaches of fiduciary duty by Mr He and Ms Lu in the future. For the reasons explained at [803]-[804] below, Mr He and Ms Lu continue to owe fiduciary duties to Sunnya notwithstanding their resignation as directors of the company on 25 November 2022.
I now turn to the Plaintiffs' claims that Supermega and Megadairy were involved in Ms Lu's and Mr He's contravention of s 182 of Corporations Act, and knowingly assisted in Mr Lu's and Mr He's dishonest and fraudulent breaches of fiduciary duty.
The NZ Parties accept that knowledge of Mr Wu is attributable to each of Supermega and Megadairy.
The Plaintiffs have failed to establish circumstances that would support an inference that Mr Wu had knowledge of one of the four kinds referred to at [491] above of the essential elements of the contravention of s 182 of the Corporations Act by Mr He and Ms Lu, and their breaches of fiduciary duty, in relation to the eleven contracts that Supermega entered into with GABT during the period from 31 October to 8 November 2022.
Mr Wu knew that Sunnya and GABT were separate companies, and that Mr He and Ms Lu were directors of Sunnya. Irrespective of whether Mr Wu believed that Mr He and Ms Lu also controlled GABT, Mr Wu knew that Neurio-branded products could not be manufactured in New Zealand without Sunnya's consent. However, Ms Lu's involvement in negotiating the eleven contracts on behalf of GABT was capable of conveying to Mr Wu that Sunnya consented to Supermega manufacturing Neurio-branded products in New Zealand to be supplied to GABT under those contracts. That is all the more so in circumstances where Mr Wu understood that the relationship between Sunnya and GABT involved some kind of cooperation between the two companies, as was the fact until 21 October 2022. [247]
For the reasons explained above, the role of Mr He and Ms Lu in encouraging GABT to terminate the cooperation relationship is an important matter underpinning my conclusion that Mr He and Ms Lu contravened s 182 of the Corporations Act and breached their fiduciary duties to Sunnya by Ms Lu (with the knowledge and encouragement or endorsement of Mr He) negotiating on behalf of GABT the eleven contracts that it entered into with Supermega during the period from 31 October to 8 November 2022. There is no evidence that Mr Wu knew, during the negotiation of those eleven contracts, that the cooperation relationship had been terminated. Nor does the evidence support a finding that this was obvious to him but he wilfully shut his eyes to it, that he wilfully and recklessly failed to make inquiries that an honest and reasonable person would make, or that he knew circumstances that would indicate the facts to an honest and reasonable man. There is no evidence that Mr Wu had any information about the internal dispute at Sunnya between Mr He and Ms Lu on the one hand, and Jatcorp and its nominated directors of Sunnya on the other hand, before 15 November 2022. [248]
The evidence does not indicate that the eleven contracts were distinguishable, from Mr Wu's point of view, from the earlier six contracts, which the Plaintiffs have not established involved any breach of Mr He's and Ms Lu's statutory or fiduciary duties. The frequency of GABT's orders that were placed with Supermega increased, and the volume of Neurio-branded products ordered by GABT increased significantly, during the period from 31 October 2022 to 8 November 2022 compared to the earlier period. In my opinion, the increased frequency and volume would put an honest and reasonable person in Mr Wu's position on inquiry. However, that does not render Mr Wu liable as having been knowingly concerned in the contraventions of s 182 or under the second limb of Barnes v Addy.
The Plaintiffs submitted that Mr Wu's false evidence in relation to the fabricated Production Sales and Confidentiality Agreement and Brand OEM Authorized Letter referred to at [559]-[566] above should be taken as an implied admission that Mr Wu knew that Mr He and Ms Lu had requested, directed, encouraged or endorsed the eleven contracts between Supermega and GABT in breach of their statutory and fiduciary duties to Sunnya, or as circumstantial evidence permitting an adverse inference to that effect.
In my opinion, Mr Wu's false evidence about those fabricated documents is capable of supporting an inference that he knew that Ms Lu had negotiated the eleven contracts on behalf of GABT, and that he perceived that this, without more, put Supermega and/or Megadairy at risk of accessorial liability for the breaches of statutory and fiduciary duties alleged against Mr He and Ms Lu in respect of those eleven contracts. I infer that Mr Wu sought to minimise that risk to his companies by fabricating those documents, and by giving false evidence about them. [249] As explained at [542]-[548] above, this has significant adverse consequences for the credibility of Mr Wu's evidence in these proceedings. However, in the absence of any evidence suggesting that Mr Wu knew that the cooperation relationship between Sunnya and GABT had come to an end before Ms Lu negotiated the eleven contracts on behalf of GABT, I do not consider that an admission by Mr Wu of knowledge of the breaches of statutory and fiduciary duties by Ms Lu and Mr He can properly be drawn from Mr Wu's fabrication of the documents and his false evidence about them.
For those reasons, the Plaintiffs have failed to establish their Improper Contracts claims against Supermega and Megadairy.

[72]

Conclusion

For the reasons explained above, the Plaintiffs are entitled to: 1. a declaration that Ms Lu contravened s 182 of the Corporations Act by encouraging or endorsing Supermega (as seller) and GABT (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by Supermega of Neurio-branded products to be exported to GABT's nominated importer in China, and by encouraging or endorsing Supermega's manufacture and supply of Neurio-branded products to GABT under those contracts; 2. a declaration that Mr He contravened s 182 of the Corporations Act by encouraging or endorsing Supermega (as seller) and GABT (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by Supermega of Neurio-branded products to be exported to GABT's nomainted importer in China, and by encouraging or endorsing Supermega's manufacture and supply of Neurio-branded products to GABT under those contracts; 3. a declaration that GABT was involved in Mr He and Ms Lu's contraventions of s 182 referred to above within the meaning of s 79 of the Corporations Act; 4. orders that each of Ms Lu, Mr He and GABT pay compensation to Sunnya pursuant to s 1317H of the Corporations Act in respect of the contraventions of s 182 referred to above, in an amount to be determined at a subsequent hearing; 5. a declaration that Ms Lu breached her fiduciary duties owed to Sunnya by encouraging or endorsing Supermega (as seller) and GABT (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by Supermega of Neurio-branded products to be exported to GABT's nominated importer in China, and by encouraging or endorsing Supermega's manufacture and supply of Neurio-branded products to GABT under those contracts; 6. a declaration that Mr He breached his fiduciary duties owed to Sunnya by encouraging or endorsing Supermega (as seller) and GABT (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by Supermega of Neurio-branded products to be exported to GABT's nominated importer in China, and by encouraging or endorsing Supermega's manufacture and supply of Neurio-branded products to GABT under those contracts; 7. orders that each of Ms Lu and Mr He pay equitable compensation to Sunnya in respect of the breaches of fiduciary duty referred to above, in an amount to be determined at a subsequent hearing; 8. a declaration that GABT knowingly assisted the breaches of fiduciary duty by Ms Lu and Mr He referred to above within the meaning of the second limb of Barnes v Addy by entering into eleven contracts with Supermega during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by Supermega of Neurio-branded products to be exported to GABT's nominated importer in China; 9. a declaration that GABT knowingly received Neurio-branded products under those contracts within the meaning of the first limb of Barnes v Addy; 10. an order that GABT: 1. pay equitable compensation to Sunnya in respect of that knowing assistance and knowing receipt in an amount to be determined at a subsequent hearing; or 2. alternatively, account to Sunnya for its profits derived from that knowing assistance and knowing receipt, at Sunnya's election; and 1. an order that GABT is restrained from taking any steps to manufacture, or cause to manufactured, in Australia and/or New Zealand, products bearing the Neurio trade mark (being the trade marks with registration numbers 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061 in Australia and registration numbers 1141429, 1141430 and 1158888 in New Zealand) without the express consent of Sunnya as the registered owner of those trade marks in Australia and New Zealand, or the express consent of any successor in title to whom Sunnya may transfer those trade marks after the date of these orders.
The Plaintiffs' improper Neurio contracts claims must otherwise be dismissed for the reasons explained above.

[74]

Consideration and determination

The evidence relating to the steps taken by Mr He, Ms Lu and GABT to cause Sunnya to transfer the Australian, New Zealand and Indonesian Neurio trade marks to GABT for no monetary consideration during the period from 23 October 2022 to is summarised at [284]-[288] and [297] above. As referred to at [287] above, their efforts succeeded only to the extent that GABT was registered as the owner of the Australian Neurio trade marks on 31 October 2022. GABT subsequently transferred the Australian Neurio trade marks back to Sunnya pursuant to the interim orders made by this Court in the Sunnya proceedings on 10 November 2022 referred to at [300] above. Those interim orders also required Mr He, Ms Lu and GABT to withdraw their application to transfer the New Zealand Neurio trade marks to GABT. Sunnya remains the registered owner of those trade marks. There is no evidence that GABT has been registered as the owner of the Indonesian Neurio trade mark.
The board of directors of Sunnya was not informed about Mr He and Ms Lu's execution of a deed of assignment of the Australian Neurio trade marks to GABT in their capacity as directors of Sunnya, Mr He's execution in his capacity as a director of Sunnya of a request to be lodged with IP Australia for the transfer of the Australian Neurio trade marks to GABT, and Ms Lu's execution in her capacity as a director and Chief Executive Officer of Sunnya of deeds of assignment of the Indonesian and New Zealand Neurio trade marks to GABT. Those actions of Mr He and Ms Lu were part of the series of co-ordinated actions described at [687]-[707] above. I have found at [708] above that those actions were undertaken by Mr He and Ms Lu - each with the knowledge and encouragement or endorsement of the other - with the intention and purpose of diverting to GABT Sunnya's business of selling Australian and New Zealand-manufactured Neurio-branded products in China, so as to ensure that the profits of that business would be earned by GABT and flow through to Mr He as the 95 per cent shareholder of GABT, rather than being earned by Sunnya. I have found that profits flowing to Mr He through GABT would also indirectly benefit Ms Lu. Mr He and Ms Lu had only a minority shareholding in Sunnya through All168, and they were about to lose effective management control of Sunnya.
Two of the four documents relied on by Mr He and Ms Lu in their defence of the trade mark transfer claims were not admitted into evidence. The other documents have been found to have been fabricated for the purpose of the He Parties' defence of the Sunnya proceedings and prosecution of the All168 proceedings. [250] For the reasons explained at [701]-[703] above, I have found that GABT had no right to demand the transfer of the Australian or New Zealand Neurio trade marks, and that Sunnya had no obligation to transfer those trade marks to GABT. I make the same finding in relation to the Indonesian Neurio trade mark. The He Parties and GABT were the only parties to these proceedings with the means to produce evidence of any right of GABT to require Sunnya to transfer the Indonesian Neurio trade mark to GABT. They failed to do so. Even the 2014 documents relied on by the He Parties, which I have found to be false, do not purport to relate to the Indonesian Neurio trade mark. In those circumstances, Sunnya's registered ownership of the Indonesian Neurio trade mark is a sufficient basis to find that GABT had no right to require that trade mark to be assigned to it.
As I have found at [694]-[698] above, Sunnya's rights as the registered owner of the Australian and New Zealand Neurio trade marks were valuable assets to Sunnya's business. The conflict between the interests of Sunnya in retaining those assets, and the interests of Mr He and Ms Lu in having those assets transferred to GABT, for GABT to deploy the trade marks for the ultimate benefit of Mr He as its majority shareholder, is plain. For the reasons explained at [708] above, I found that such benefits to Mr He would also flow directly or indirectly to Ms Lu.
On the basis of the matters referred to at [737]-[740] above, I have determined that each of Mr He and Ms Lu contravened s 181(1) and s 182(1) of the Corporations Act, and breached their fiduciary duties owed to Sunnya, by taking the steps described above to transfer the Australian, New Zealand and Indonesian Neurio trade marks to GABT. Their conduct transgressed ordinary standards of honest behaviour, and their breaches of fiduciary duty were therefore a dishonest and fraudulent scheme.
I reject the He Parties' submission that the Plaintiffs' claim under s 182(1) of the Corporations Act has not been properly pleaded. [251] The Plaintiffs have expressly pleaded that, by directing, requesting, endorsing or encouraging GABT to demand that Sunnya transfer its Neurio trade marks to GABT, and by executing the documents that provided for the transfer of those trade marks from Sunnya to GABT for no consideration, Mr He and Ms Lu gained an advantage for someone other than Sunnya, and caused detriment to Sunnya. [252] If it be necessary to plead that this was the subjective purpose of Mr He and Ms Lu, then I consider that to be implicit in what has been expressly pleaded. It is so obvious that the pleaded conduct would deliver an advantage for GABT and cause detriment to Sunnya that Mr He and Ms Lu cannot have engaged in the pleaded conduct without having held that subjective purpose.
I find that GABT had knowledge of all of the essential elements of Mr He and Ms Lu's contraventions of ss 181(1) and 182(1) of the Corporations Act and breaches of fiduciary duties. GABT knew that Mr He and Ms Lu had executed the deeds of assignment purporting to transfer the trade marks to GABT for no monetary consideration because GABT's Executive Director, Mr Lu, executed each deed of assignment on behalf of GABT, as referred to at [284]-[286] above. I repeat my findings at [717]-[718] above that GABT knew that: (1) Mr He and Ms Lu were directors of Sunnya; (2) GABT had no right to require Sunnya to transfer its registered Neurio trade marks to GABT; (3) Sunnya would be giving up valuable rights by doing so; (4) it was not in Sunnya's interests to give up those rights; (5) the trade mark transfers were in the interests of GABT, and in the interests of Mr He as its majority shareholder, and in the interests of Ms Lu, who would indirectly benefit from any profits of GABT that were distributed to Mr He as its majority shareholder; and (6) Jatcorp was in the process of removing management control of Sunnya from Mr He and Ms Lu. I infer that it was obvious to GABT that Sunnya had not authorised Mr He and Ms Lu to transfer its valuable trade marks to GABT for no monetary consideration, and that Sunnya did not consent to those transfers.
By taking steps to procure its registration as the owner of the Australian, New Zealand and Indonesian Neurio trade marks after Mr He and Ms Lu executed the relevant deeds of assignment, GABT was knowingly concerned in Mr He and Ms Lu's contraventions of ss 181(1) and 182(2) of the Corporations Act. GABT thereby contravened ss 181(2) and 182(2).
GABT's purported demand for the transfer of the trade marks, and its attempted registration of those transfers, served its own interests at the same time as facilitating Mr He and Ms Lu's dishonest and fraudulent breaches of their fiduciary duties. GABT received the transfer of Sunnya's Australian Neurio trade marks for a period of approximately 10 days until this Court made the interim orders on 10 November 2022 requiring GABT to transfer those trade marks back to Sunnya. The Plaintiffs do not allege that GABT benefitted from being the registered owner of the Australian Neurio trade marks during that brief period.
I reject the Plaintiffs' submissions that GABT acted as the alter ego of Mr He, or of Mr He and Ms Lu, in relation to the attempted transfers of the Australian, New Zealand and Indonesian Neurio trade marks to GABT. As I have said at [671] above, GABT had its own long-established business, including in the importation of milk food products. The interests of GABT and the interests of Mr He and Ms Lu in diverting Sunnya's business to GABT, including by transferring Sunnya's Neurio trade marks to GABT, were aligned once GABT terminated the cooperation relationship. However, the evidence does not provide a sufficient basis for concluding that Mr He directed (as opposed to encouraged) GABT's actions, or that his mind was GABT's mind. [253]
As the Plaintiffs do not contend that Mr He, Ms Lu or GABT ultimately derived any benefit from the attempted transfers of the Australian, New Zealand and Indonesian Neurio trade marks to GABT, the relief claimed by the Plaintiffs is limited to declaratory relief together with an order restraining Mr He and Ms Lu from taking any steps to transfer those trade marks away from Sunnya in the future. Notwithstanding that Mr He and Ms Lu have now resigned as directors of Sunnya, the restraining order is appropriate to ensure that no further steps are taken to give effect to the deeds of assignment that they executed prior to their resignation.
The declarations sought by the Plaintiffs include a declaration that GABT knowingly received the Australian Neurio trade marks within the meaning of the first limb of the rule in Barnes v Addy. Although GABT held those trade marks only for the brief period referred to above, I accept the Plaintiffs' submission that this proposed declaration has utility in that it confirms that the interim order made by the Court on 10 November 2022 requiring GABT to transfer those trade marks back to Sunnya was appropriately made.

[75]

Conclusion

For the reasons explained above, the Plaintiffs are entitled to the following relief claimed in respect of the trade mark transfer claims: 1. a declaration that Mr He contravened ss 181 and 182 of the Corporations Act by: 1. executing, in his capacity as a director of Sunnya, the Deed of Assignment dated 23 October 2022 between Sunnya (as assignor) and GABT (as assignee) in respect of Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061; and 2. executing, in his capacity as a director of Sunnya, a Request for a Full Assignment or Transmission of a Trade Mark dated 23 October 2022 in respect of an assignment of Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061 from Sunnya to GABT; 1. a declaration that Ms Lu contravened ss 181 and 182 of the Corporations Act by: 1. executing, in her capacity as a director of Sunnya, the Deed of Assignment dated 23 October 2022 between Sunnya (as assignor) and GABT (as assignee) in respect of Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061; and 2. executing, in the purported capacity of legal representative of Sunnya, the Deed of Assignment dated 28 October 2022 between Sunnya (as assignor) and GABT (as assignee) in respect of Indonesian registered trade mark IDM000872371; 3. executing, in her capacity as Chief Executive Officer of Sunnya, the Confirmative Deed of Assignment dated 1 November 2022 between Sunnya (as assignor) and GABT (as assignee) in respect of New Zealand registered trade mark 1141429; 4. executing, in her capacity as Chief Executive Officer of Sunnya, the Confirmative Deed of Assignment dated 1 November 2022 between Sunnya (as assignor) and GABT (as assignee) in respect of New Zealand registered trade mark 1141430; and 5. executing, in her capacity as Chief Executive Officer of Sunnya, the Confirmative Deed of Assignment dated 1 November 2022 between Sunnya (as assignor) and GABT (as assignee) in respect of New Zealand registered trade mark 1158888; 1. a declaration that GABT was involved in each of the contraventions referred to in (1) and (2) above within the meaning of s 79 of the Corporations Act; 2. a declaration that Mr He breached his fiduciary duties owed to Sunnya by his conduct referred to in (1) above; 3. a declaration that Ms Lu breached her fiduciary duties owed to Sunnya by her conduct referred to in (2) above; 4. a declaration that GABT knowingly received Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061 within the meaning of the first limb of the rule in Barnes v Addy on or about 31 October 2022 for the period until GABT transferred those trade marks to Sunnya in accordance with the interim orders made by this Court on 10 November 2022; and 5. an order restraining Mr He and Ms Lu from taking any future step to transfer away from Sunnya any of the following trade marks: 1. Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061; 2. Indonesian registered trade mark IDM000872371; and 3. New Zealand registered trade marks 1141429, 1141430 and 1158888.

[79]

Outline of the parties' contentions

I have found that the actions described at [693]-[708] were intended to divert Sunnya's business to GABT by terminating the cooperation relationship between GABT and Sunnya and transferring the registered ownership of the Australian and New Zealand Neurio trade marks to GABT, thereby arming GABT to be able to manufacture Neurio-branded products in Australia and New Zealand for export and sale in China without any involvement of Sunnya and without any benefit passing to Sunnya. The Plaintiffs refer to this as the He Parties' "Plan A".
The interim orders made in the Sunnya proceedings during the period from 3 November to 10 November 2022 required GABT to transfer the Australian Neurio trade marks back to Sunnya, and precluded Mr He, Ms Lu and GABT from taking any further steps to transfer the New Zealand and Indonesian Neurio trade marks to GABT. [255] Plan A therefore failed.
The Plaintiffs' Neurio/NRIO claims arise out of what the Plaintiffs refer to as "Plan B" - the resignation of Mr He and Ms Lu as directors of Sunnya at the same time as Sunlife applied to register the NRIO trade mark in Australia and New Zealand, and the manufacture of NRIO-branded formulated milk powder sachets by Megadairy in New Zealand which were exported to China, where they were packaged in tins bearing both the Neurio and NRIO brands and distributed for sale to retail consumers, with notices published on GABT's website informing consumers that the Neurio label had been "upgraded" to include the NRIO label. The Plaintiffs allege that Plan B was a diversion to GABT of Sunnya's business of exporting and selling Neurio-branded products, or alternatively the diversion to GABT of a business opportunity for Sunnya to continue exporting and selling those products also using the NRIO brand. Sunnya received no payment or other benefit from the distribution and sale of Neurio/NRIO-branded formulated milk power under Plan B.
The Plaintiffs allege that Mr He contravened s 181(1) and s 182(1) of the Corporations Act and breached his fiduciary duties as a director of Sunnya by his involvement in preparing Sunlife's applications for registration of the NRIO trade mark in Australia and New Zealand that were lodged on 25 November 2022, being the same date on which Mr He resigned as a director of Sunnya.
The Plaintiffs allege that each of Mr He and Ms Lu breached (and continue to breach) ongoing fiduciary duties that they owed to Sunnya after their resignation as directors on 25 November 2022 by their actions comprising Plan B, which the Plaintiffs allege was a dishonest and fraudulent scheme.
The Plaintiffs allege that each of Sunlife and Ms He knowingly assisted (and continue to assist) those allegedly dishonest and fraudulent breaches of fiduciary duties by Mr He and Ms Lu, and that Sunlife was (and continues to be) a knowing recipient within the meaning of the first limb of Barnes v Addy because it "received the benefit of the NRIO/Neurio tins being, in essence, the diversion of Sunnya's Neurio business in China".
The Plaintiffs allege that each of GABT and GNT knowingly assisted (and continue to assist) the breaches of fiduciary duties allegedly committed by Mr He and Ms Lu as part of the allegedly dishonest and fraudulent Plan B scheme, and were knowing recipients of (and continue to receive) the Neurio/NRIO-branded tins by which Sunnya's business in China has been diverted. The Plaintiffs contend that each of GABT and GNT had the requisite knowledge of the essential matters comprising the allegedly dishonest and fraudulent scheme because, inter alia, each of GABT and GNT was deployed as the corporate creature, vehicle or alter ego of Mr He and Ms Lu.
The Plaintiffs allege that each of Supermega and Megadairy knowingly assisted the Plan B breaches of fiduciary duty allegedly committed by Mr He and Ms Lu.
The Plaintiffs allege that, by receiving the transfer of the New Zealand registered NRIO trade mark from Sunlife on or about 31 March 2023, and by allowing that trade mark to be used in the manufacture and sale of NRIO-branded sachets, NZFDA knowingly assisted the breaches of fiduciary duties allegedly committed by Mr He and Ms Lu as part of the allegedly dishonest and fraudulent Plan B scheme.
The Plaintiffs also allege that NZFDA knowingly received the New Zealand NRIO trade mark within the meaning of the first limb of Barnes v Addy.
It was submitted on behalf of Mr He that the NRIO trade mark was developed by Mr Wu, and that Mr He's admitted involvement in the applications for registration of that trade mark made by Sunlife in Australia and New Zealand on 25 November 2022 did not constitute any breach of Mr He's statutory or fiduciary duties as a director of Sunnya.
Mr He and Ms Lu contend that they resigned as directors of Sunnya because Jatcorp had allegedly seized effective control of the company from them, stripped them of their ability to operate the company, accused them of breaching their duties as directors, commenced the Sunnya proceedings against them, and ceased paying them. Mr He and Ms Lu contend that they did not resign for the purpose of pursuing any business of Sunnya. Mr He and Ms Lu therefore deny that they continued to owe fiduciary duties to Sunnya after their resignation. It was submitted on behalf of Mr He and Ms Lu that their conduct in relation to the NRIO trade mark represented a fresh initiative in an industry in which they were experienced and competent operators.
It was further submitted on behalf of Mr He and Ms Lu that, even if they continued to owe fiduciary obligations to Sunnya after their resignation, the evidence adduced by the Plaintiffs did not establish that Mr He and Ms Lu had engaged in any conduct in breach of such duties in relation to the NRIO trade mark, and the sale of formulated milk powder in Neurio/NRIO-branded tins in China. In particular, it was submitted that the Plaintiffs had not adduced any evidence that Mr He or Ms Lu were involved in the manufacture and distribution of NRIO-branded products.
It was submitted on behalf of Ms He that the accessorial liability claim against her must fail on the basis that the claim against Mr He and Ms Lu must fail for the reasons summarised above. Alternatively, it was submitted that any breaches of fiduciary duty by Mr He and Ms Lu were not dishonest, and so Ms He could not be liable under the second limb of Barnes v Addy. It was further submitted that there was no evidence of Ms He assisting in the allegedly dishonest and fraudulent Plan B scheme in any event, and a dearth of evidence of knowledge in the requisite sense on the part of Ms He.
In its defence filed in the Sunnya proceedings, Sunlife denied the allegations of knowing receipt and knowing assistance in Mr He and Ms Lu's allegedly dishonest and fraudulent breaches of fiduciary duty. Sunlife did not appear at the hearing.
GABT denied liability in its defence filed in the Sunnya proceedings, but did not appear at the hearing. GNT has not filed any defence.
It was submitted on behalf of Supermega, Megadairy and NZFDA that the NRIO trade mark was designed by Mr Wu in about 2021 and that Mr Wu agreed to Sunlife registering the trade mark because he considered that he could not register it himself without creating a perception that he was competing with customers of Supermega and Megadairy. It was further submitted that the evidence does not establish that Supermega or Megadairy manufactured NRIO-branded sachets with the QR codes that linked to GABT's Neurio website and WeChat account, being the sachets that were found in Neurio/NRIO-branded tins sold in China in March and April 2023. It was further submitted that the evidence did not establish that Mr Wu knew about the notices published on GABT's website before they were annexed to an affidavit served on him in these proceedings in April 2023. It was submitted that, at that time, Mr Wu caused appropriate inquiries to be made, and Supermega and Megadairy ceased manufacturing and exporting NRIO-branded sachets other than in so far as they were contractually obliged to do so. It was further submitted that, even if Supermega or Megadairy are found to have manufactured the NRIO sachets with QR codes linking to GABT's Neurio website and WeChat account, the evidence did not establish that they did so as intentional or knowing participants in a dishonest and fraudulent scheme involving Mr He or Ms Lu breaching their fiduciary duties to Sunnya, because it had not been established that Mr He or Ms Lu had any role in causing the NRIO sachets to be sold in Neurio/NRIO-branded tins in China.

[80]

Consideration and determination

I reject Mr Wu's evidence that he created the NRIO trade mark in 2021 for the following reasons.
First, it is inherently improbable that Mr Wu went to the trouble of creating a trade mark which, on his own evidence, would have no commercial value, and would have no use other than on individual portions of products that were packaged together and sold under a brand name other than NRIO. [256]
Second, Mr Wu's evidence about the agreement that he claims to have made with Mr He in 2021 about the registration of the NRIO trade mark was riddled with inconsistencies. [257] The explanation proffered by Mr Wu for not registering the NRIO trade mark himself if it was his creation - namely, that this would cause his customers to perceive that he was competing with them - also lacks credibility in circumstances where Mr Wu's companies are already promoting their own competing brands or, at least, have done so in the recent past. When confronted with this fact during his cross-examination, Mr Wu lied about the extent to which those brands had been promoted in the past, before purporting to change his evidence about those promotional activities to try and obfuscate the lie. [258]
Third, it is inherently improbable that Mr Wu would have agreed with Mr He for Sunlife to register the NRIO trade mark and (on one version of Mr Wu's evidence) to hold it on behalf of Mr Wu, and yet taken no interest in when the trade mark would be registered, and asked no questions about why Shanghai Gainful subsequently placed orders with Supermega for the manufacture and supply of NRIO-branded sachets of formulated milk powder products to be exported to China. The manufacture of those sachets in New Zealand would involve the use of the exclusive rights of the registered owner of the NRIO trade mark. [259]
For those reasons, I find that Mr Wu's evidence that he created the NRIO trade mark, and then agreed for Mr He to cause Sunlife to register the trade mark, was untrue. Mr Wu gave that false evidence in an effort to assist his companies' defence of the Sunnya proceedings, by seeking to distance Mr He and Ms Lu from the NRIO trade mark, and thereby distance his companies' production of NRIO-branded sachets from any breach of fiduciary duties by Mr He and Ms Lu.
It is not in dispute that Ms He, acting at the request of Mr He, caused Sunlife to apply for the registration of the NRIO trade mark in Australia and in New Zealand on 25 November 2022. [260] For the reasons explained immediately above, and in the absence of any evidence given by Mr He in relation to his reasons for requesting that Sunlife register the NRIO trade marks, I find that Mr He did not make that request for the purpose of Sunlife registering the trade marks and holding them on behalf of Mr Wu or his companies. I further find that Sunlife did not hold the Australian and New Zealand NRIO trade marks as agent for, or on behalf of, Mr Wu or any of his companies.
Mr He procured Sunlife's application to register the NRIO trade marks in Australia and New Zealand approximately two weeks after Plan A had failed as a result of the interim orders made by this Court in the Sunnya proceedings on 10 November 2022, and approximately one week after this Court had made further interim orders on 17 November 2022 requiring Mr He and Ms Lu to provide to Sunnya the formulation details for the Neurio-branded products sold by Sunnya as part of its business. [261] I have found that GABT was an active and knowing participant in the conduct of Mr He and Ms Lu comprising Plan A. [262]
It is necessary to consider Sunlife's application to register the NRIO trade marks in Australia and New Zealand on 25 November 2022 in the context of the failed Plan A, and in the context of the events that occurred in the weeks and months that followed the filing of those applications on 25 November 2022. It is artificial to consider each event separately, devoid of its context, as the submissions made on behalf of the He Parties and the NZ Parties tended to do.
GABT applied to register the NRIO trade mark in China on 6 December 2022. [263]
On 7 December 2022, Supermega (as seller) entered into two contracts with Shanghai Gainful (as buyer) for the manufacture and supply of NRIO-branded sachets of formulated milk powder with lactoferrin, to be exported to Shanghai Gainful in China. [264] All contracts that Ms Lu had negotiated with Supermega on behalf of GABT in the period up to 8 November 2022, and the contracts that were subsequently negotiated between Supermega and GNT in the period from 7 December 2022 to 12 January 2023, were for the supply of sachets of formulated milk powder packaged in cans. [265] The WeChat message that Ms Lu sent to Mr Wu on 6 December 2022, complaining that "the price is a bit high … because it doesn't include the cans" was plainly part of a negotiation of the price for a product to be supplied by one of Mr Wu's companies to a buyer on whose behalf Ms Lu was negotiating that was not to be packaged in cans. There is no evidence of any such contract under negotiation as at 6 December 2022 for products that were to be supplied to GABT, GNT or Sunnya. On that basis, and having regard to the existing association between GABT and Shanghai Gainful, which had acted as import agent for GABT in respect of the Neurio-branded products that GABT purchased from Supermega under contracts entered into during the period from 2 March to 8 November 2022, I infer that Ms Lu's message related to the supply of the NRIO-branded sachets that were the subject of the two contracts that Supermega entered into with Shanghai Gainful the following day on 7 December 2022. I infer that Ms Lu negotiated those contracts in the name of Shanghai Gainful as buyer, rather than in the name of GABT as buyer with Shanghai Gainful as import agent, in order to conceal the involvement of GABT which was a defendant to the Sunnya proceedings and which was already subject to interim orders made in that proceeding. [266] I draw those inferences more comfortably in the absence of any evidence from Ms Lu, and after having considered and rejected Mr Wu's evidence denying that Ms Lu's 6 December 2022 message related to Supermega's contracts to manufacture and supply NRIO-branded sachets to Shanghai Gainful. Mr Wu's evidence was internally inconsistent, speculative and self-serving. [267] I have therefore rejected it for the reasons explained at [542]-[548].
My findings below provide further support for the inference that GABT was the true purchaser or ultimate purchaser of the NRIO-branded sachets that Supermega manufactured under the two contracts entered into with Shanghai Gainful on 7 December 2022.
The notices published on GABT's website in early April 2023 referred to at [359] above claim both the "old version" (Neurio-branded tins containing Neurio-branded sachets of formulated milk powder) and the "new version" (Neurio/NRIO-branded tins containing NRIO-branded sachets of formulated milk powder bearing QR codes and displaying the same graphic artwork as the "old version" Neurio-branded tins) as "genuine products of our company" (my emphasis). Those notices stated that the Neurio trade mark had been "upgraded" to include the NRIO trade mark. I find that GABT published those notices on its website, which it described as the "Official Website of the Australian Brand Neurio". On the basis of its conduct in publishing those notices, I find that GABT caused NRIO-branded QR-coded sachets of formulated milk powder printed with a graphic design that had an established association with the Neurio brand to be packaged in cans bearing both the Neurio and NRIO trade marks, that GABT actively marketed those cans in China as a new or upgraded version of the Neurio brand of formulated milk powder products, and that GABT marketed itself as the company behind the "Australian Brand Neurio".
I further find that the NRIO-branded sachets that GABT caused to be packaged, marketed and sold in Neurio/NRIO-branded cans in China were manufactured by Megadairy and supplied by Supermega. I make that finding for the following reasons.
First, Megadairy is expressly identified as the manufacturer in the notices published on GABT's website referred to immediately above. GABT published the notices on its website. It is inherently improbable that GABT falsely or erroneously identified the manufacturer of the NRIO-branded sachets to be sold in the Neurio/NRIO-branded tins in those notices. This would have been a either an egregious misrepresentation or a fundamental error by an experienced operator in the Chinese formulated milk powder market, with obvious and potentially serious reputational consequences for GABT in that market. Mr Wu's evidence suggesting that the notices published on GABT's website "can be written up by anyone, so it is not necessarily the truth", is utterly implausible, and I reject it. [268] It is inherently probable as a matter of commercial reality that GABT exercises close control over the content of notices that it chooses to publish on its website, and I find that GABT approved the contents of the three notices concerning the "new" or "upgraded" Neurio-branded products comprising NRIO-branded sachets packaged in the Neurio/NRIO-branded tins. Mr Wu's transparent attempt to generate uncertainty about whether Megadairy in fact manufactured the NRIO-branded sachets referred to in those published notices by speculating that the notices might have been "written up by anyone", and therefore might not necessarily be true, reflects very poorly on his credit.
Second, Mr Wu acknowledges that Megadairy manufactured NRIO-branded sachets of formulated milk powder products, yet the NZ Parties failed to adduce evidence of sachets retained from each batch of those products in accordance with the sample retention practice that Mr Wu described. The NZ Parties only adduced evidence of photographs of sample NRIO-branded sachets that were undated, and in respect of which Mr Wu said that he could not ascertain precisely when or in what batch they had been manufactured. As I have said earlier in these reasons, those samples cannot have been retained under Megadairy's sample retention practice, as they could not serve the objectives of that practice. It is inherently probable that Megadairy did hold samples of the NRIO-branded sachets, including records of the date on which, and the batch number in which, those sachets had been manufactured, in accordance with its sample retention practice. Mr Wu gave evidence that his companies followed that sample retention practice in order to be able to address any complaints about the quality of the products, and in order to comply with government requirements. Mr Wu could have inspected the samples of NRIO-branded sachets that were retained in accordance with that practice in order to ascertain whether those sachets bore QR codes that linked to GABT's Neurio website and WeChat account. I find that Mr Wu's evidence that it is impossible for him to ascertain "such trivial details" was untrue. I regard that as untruthful evidence, and Mr Wu's failure to adduce evidence of NRIO-branded sachet samples retained in accordance with his companies' sample retention practice, as an implied admission that Megadairy did manufacture NRIO-branded sachets with QR codes. [269]
Third, Mr Wu accepted that the notices published on GABT's website came to his attention by no later than April 2023. Mr Wu's evidence that the notices incorrectly named Megadairy as the manufacturer of the "new" or "upgraded" Neurio/NRIO-branded products is highly implausible for the reasons identified at [789] above, and for the further reason that Mr Wu did nothing to complain or to request a correction of the alleged error when he became aware of the notices. According to Mr Wu's evidence in cross-examination, he caused one of his employees to ask some (unspecified) questions of Shanghai Gainful. That employee reported back to Mr Wu: "I don't know". Other employees of Mr Wu's company also told him, "I don't know". It is inherently improbable that Mr Wu was concerned about whether Megadairy had been incorrectly named as the manufacturer, yet was content to let the matter rest with "I don't know", as Mr Wu claimed in cross-examination. Mr Wu made no inquiries directly with Shanghai Gainful, and made no inquiries of GABT, although he had the ability to do so. Mr Wu sought to explain this by saying that it was "the policy of his companies" not to investigate in the absence of a direct complaint, in order to "minimise the personally liabilities of myself", and that he "didn't want to get involved." The notion that Mr Wu believed that he was minimising his potential liabilities by failing to investigate or even communicate with GABT about the dissemination of information by GABT in the Chinese market that Mr Wu claims to have believed or suspected incorrectly named Megadairy as the manufacturer of formulated milk powder products, is fanciful. Ignoring the dissemination of the allegedly incorrect information only had the potential to expose Megadairy to liability in the event that the products the subject of the notices were defective. [270] For those reasons, and for the reasons at [542]-[548] above, I reject Mr Wu's evidence about the inquiries that he says he caused his employees to make, and that he made with his employees, when the GABT notices came to his attention. I find that he made no such inquiries. I infer that the reason why Mr Wu did not make any inquiries, and did not take the alleged error up with GABT as the publisher of the notices, was that Mr Wu did not believe that Megadairy was incorrectly named as the manufacturer of the products the subject of the notices. On the contrary, I infer that Mr Wu was unsurprised by Megadairy being named in those notices as the manufacturer of the NRIO-branded sachets that were being marketed and sold in the Neurio/NRIO-branded tins in China, because he knew, even before he saw the notices, that those sachets would be packaged, marketed and sold in that way in China.
The following circumstances give rise to an inference on the balance of probabilities that Mr Wu had actual knowledge of those matters by the time Supermega entered into the two contracts with Shangai Gainful on 7 December 2022, and I so find. Sunnya's solicitors had written to Supermega on 15 November 2022 stating that Mr He and Ms Lu were no longer authorised to deal with Sunnya's assets, make payments out of Sunnya's bank accounts, or enter into any binding agreements on behalf of Sunnya. [271] Prior to receiving that letter, Supermega had frequently dealt with Ms Lu in negotiating contracts with Sunnya for the manufacture and supply of Neurio products. [272] It is therefore inherently likely that, on receipt of the 15 November 2022 letter, Mr Wu made some inquiries with Mr He and Ms Lu in order to ascertain whether or how the instructions set out in the letter were likely to affect the business of Supermega and its related manufacturing entity Megadairy. By 18 November 2022, Mr Wu had made a decision not to accept any further orders from Sunnya. [273] Mr Wu's reasons for that decision communicated to Mr Wang at the time - namely, that Sunnya was too busy, and that Mr Wu feared accidentally disclosing to Sunnya or to GABT confidential information belonging to the other - are implausible given that Supermega entered into new contracts with GNT for the manufacture and supply of Neurio products from 7 December 2022. [274] These matters, together with the terms of the email that Mr Wu sent to Mr Wang on 18 November 2022 stating that he had a "rough knowledge of the bigger changes of people inside your company and such changes remain to be there" (my emphasis), give rise to an inference that Ms Lu had conveyed to Mr Wu on or about 18 November 2022 sufficient information for Mr Wu to have formed the view that his business interests would be better served going forward by manufacturing Neurio products for GABT, which owned the trade marks in China, rather than for Sunnya. Given that Mr Wu was aware that Neurio products could not be manufactured in New Zealand without the consent of Sunnya as the registered trade mark owner, [275] that, gives rise to a further inference that Mr Wu was aware on or about 18 November 2022 that Mr He and Ms Lu were working to circumvent the requirement for Sunnya's consent. That is because, as at 18 November 2022, Mr Wu and his companies did not have Sunnya's consent to manufacture Neurio-branded products in New Zealand for anyone other than Sunnya. I have rejected Mr Wu's evidence that he had Sunnya's consent in the form of the Production Sales and Confidentiality Agreement purportedly dated 9 June 2015 and the Brand OEM Authorized Letter purportedly dated 8 July 2019. I have found that those documents, and the emails by which Mr Wu claims to have received them, were fabricated by or at the direction of Mr Wu for the purpose of the NZ Parties' defence of the Sunnya proceedings, and that Mr Wu gave false evidence in relation to those documents and emails. [276] From 15 November 2022, Mr Wu knew that Sunnya claimed to have revoked the authority of Mr He and Ms Lu to deal with Sunnya's assets or funds, or to enter into any binding agreement on behalf of Sunnya. [277] From 1 December 2022, Mr Wu knew that Mr He and Ms Lu had resigned as directors of Sunnya and had no authority to deal with Sunnya's assets, including by consenting to the use of its trade marks. [278] The mere fact of Ms Lu's involvement in the negotiation of any sales contracts that would involve the use of the Neurio trade mark was no longer capable of conveying to Mr Wu that Sunnya consented to that use of its trade mark. Mr Wu knew that Mr He had arranged for Ms He to cause Sunlife to register the NRIO Trade mark in Australia and New Zealand. [279] It is inherently likely that, in the course of negotiating the contracts for the supply of NRIO-branded sachets with Ms Lu on or about 6 December 2022, Mr Wu was told that Sunlife had applied to register the NRIO trade mark in New Zealand with a view to ordering sachets to be manufactured by Supermega and Megadairy that would be exported to China without tins - a departure from previous practice which Ms Lu emphasised in negotiating the price with Mr Wu - and that those sachets would then be placed in Neurio-branded tins in China where GABT was the registered owner of the Neurio trade marks. That is inherently probable because, unless such information had been provided to Mr Wu at that time, there was an obvious risk for Mr He and Ms Lu that Mr Wu would not have seen any reason to cease supplying Neurio products to Sunnya. Continued supply of those products to Sunnya by Supermega and Megadairy would have interfered with Plan B.
I reject Mr Wu's denials that he knew that the NRIO sachets would ultimately be packaged and sold in Neurio/NRIO-branded tins in China because that evidence is: (1) contrary to the inherent probabilities referred to at [792] above; and (2) inconsistent with Mr Wu's failure to make any meaningful inquiries about whether this had occurred in April 2023 when he says that he first became aware of the upgrade notices, as referred to at [791] above. I repeat my observations at [542]-[548] above.
I infer that GABT knew that Ms Lu was negotiating on its behalf, and for its ultimate benefit, the two contracts that Supermega entered into with Shanghai Gainful on 7 December 2022 for the manufacture and supply of NRIO-branded sachets of formulated milk powder. It is inherently improbable that Ms Lu would have done so without the knowledge of GABT. I infer that GABT applied to register the NRIO trade mark in China on 6 December 2022 in order to place itself in the position of being able to market and sell those products using both the Chinese Neurio trade mark and the newly registered Chinese NRIO trade mark in the manner that it subsequently did, in the knowledge that Ms Lu was in the process of procuring a supply of NRIO-branded sachets through Supermega and Megadairy. I infer that the NRIO-branded sachets manufactured by Megadairy under the 7 December 2022 contracts were delivered to GABT at some time prior to April 2023, when GABT published the notices referred to above on its website. I infer that, during the period from at least 25 November 2022, GABT and Mr He and/or Ms Lu were in communication with one another about, and were aware of, and encouraged and endorsed, all of one another's activities, including their respective applications to register the NRIO trade mark in Australia and New Zealand and in China. I infer that they co-ordinated those activities to ensure that, between them, they would hold the rights to use the NRIO trade mark for the manufacture of formulated milk powder products in Australia and New Zealand, and for the sale of those products in China where GABT would have the rights to both the Neurio and the NRIO trade marks, and that those products would be packaged, marketed and sold by GABT in China using the Neurio brand in conjunction with the NRIO brand. I draw that inference because it is consistent with the earlier conduct of Mr He, Ms Lu and GABT in relation to Plan A referred to at [685]-[718] above. As the Plaintiffs submitted, it is improbable that, in the period since 10 November 2022, Mr He and Ms Lu had abandoned the objectives underlying that earlier conduct, or that GABT had lost interest in pursuing on its own account the business of selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China that Sunnya had previously carried on with the cooperation of GABT. I infer that, during the course of their communications during the period from at least 25 November 2022, Mr He and Ms Lu expressly or impliedly encouraged or endorsed the registration by GABT of the NRIO trade mark in China, and GABT's use of that trade mark in China for the marketing and sale of NRIO-branded formulated milk powder sachets manufactured by Megadairy as new or upgraded versions of Neurio products, by packaging them in the Neurio/NRIO tins, and by publishing the notices referred to at [359] and [375] above. I draw all of those inferences more comfortably in the absence of any evidence to the contrary adduced by Mr He, Ms Lu or GABT.
On the basis of all of those matters, considered as a whole, I find that Mr He procured Sunlife's application to register the NRIO trade mark in Australia and New Zealand to create an alternative trade mark to Neurio that could be used for the manufacture of formulated milk powder products in Australia and New Zealand without the knowledge or consent of Sunnya, with the intention that such products would be manufactured for GABT, and packaged, marketed and sold by GABT in China using both the established Neurio trade mark of which GABT was the registered owner in China, and the new NRIO trade mark in respect of which GABT was shortly to apply for registration in China. I further find that Ms Lu negotiated for the benefit of GABT the two contracts that Supermega entered into on 7 December 2022 to manufacture and supply NRIO-branded sachets for formulated milk powder products to the buyer named as Shanghai Gainful. I find that the intention and purpose of Mr He and Ms Lu was to divert to GABT Sunnya's business of selling Australian and New Zealand-manufactured Neurio-branded products in China [280] by creating a new trade mark to be used to manufacture the products in New Zealand, and to be used in conjunction with the Neurio trade mark for the marketing and sale of the products in China as "new" or "upgraded" versions of the established Neurio product lines. That intention and purpose was carried into effect by GABT's marketing of the "new" or "upgraded" products from about April 2023, as evidenced in the notices published on GABT's website referred to at [359] above and similar notices published on e-commerce platforms referred to at [357] above. That use of the NRIO trade mark registered by Sunlife in Australia and New Zealand had the obvious effect of removing any need for GABT to procure the consent or cooperation of Sunnya in manufacturing the products, in circumstances where Mr He and Ms Lu had failed in their previous efforts to achieve that outcome by transferring Sunnya's Neurio trade marks to GABT for no consideration. For the reasons explained above, I have found that Mr He and Ms Lu encouraged or endorsed GABT's marketing of the NRIO sachets as "new" or "upgraded" Neurio products, and I infer that Mr He and Ms Lu intended to achieve that obvious effect. Indeed, this Plan B was really a continuation of Plan A, adjusted in response to the failure of the attempts made by Mr He and Ms Lu to arrange for the transfer of Sunnya's registered Australian and New Zealand Neurio trade marks to GABT.
I infer from the co-ordinated nature of their actions, which were directed to facilitating the supply to GABT of formulated milk powder products bearing the new NRIO trade mark, that Mr He and Ms Lu were each aware of the conduct of the other, and that they encouraged or endorsed one another's conduct. The obvious effect of their conduct, was to ensure a supply of products to GABT that could be sold, and was sold, by GABT in China capitalising on the established Neurio brand, being profits that had previously been earned by Sunnya in selling Australian and New Zealand-manufactured Neurio-branded products in China with the cooperation of GABT. As I have observed earlier in these reasons, Mr He would benefit directly, and Ms Lu would benefit indirectly, from such profits earned by GABT to a greater extent than they would have benefitted if such profits had been earned by Sunnya. [281] I infer that Mr He and Ms Lu intended to achieve the obvious effect of their conduct, for their own benefit and to the detriment of Sunnya.
It is inherently probable that Mr He carried out some preparatory work for the applications to register the NRIO trade mark in Australia and New Zealand prior to 25 November 2022, including designing the NRIO logo. I infer that Mr He did carry out such work, or caused others to carry out such work.
As I have already mentioned, it was submitted on behalf of Mr He and Ms Lu that they resigned as directors because Sunnya was in fundamental and irreconcilable dispute with them, Jatcorp had "seized" effective control of Sunnya from them and had removed their ability to make payments and enter into agreements on behalf of Sunnya, and to do those things that a director would ordinarily do. In addition, Sunnya had stopped paying Mr He and Ms Lu, and Jatcorp had called an extraordinary general meeting to vote on a resolution to remove them as directors of Sunnya. It was further submitted that, if Mr He and Ms Lu had remained as directors, their involvement in litigation against Sunnya, and particularly their claims in the cross-claim filed in the Sunnya proceedings, would have been an irreconcilable conflict with their obligations as directors of Sunnya. It was submitted that, it was "unthinkable" that they should resign as directors in those circumstances, and that the Court should infer that they resigned for those reasons and not for the purpose of pursuing any business opportunity relating to the NRIO trade mark.
I reject that submission. With the exception of the cross-claim in the Sunnya proceedings, all of the circumstances on which the submission relies existed prior to 7 November 2022, when Mr He, Ms Lu and All168 commenced the All168 proceedings seeking, inter alia, an injunction restraining Jatcorp from taking any step to convene a general meeting of Sunnya pursuant to the notice of EGM to be held on 8 November 2022, which included a proposed resolution to remove Mr He and Ms Lu as directors of Sunnya. [282] It was only after it became apparent that Plan A had failed as a result of the interim orders made in the Sunnya proceedings on 10 November 2022, and after the necessary preparatory work for the registration of the NRIO trade mark had been undertaken, that Mr He and Ms Lu resigned as directors of Sunnya on the same day that Sunlife applied for registration of the NRIO trade mark in Australia and New Zealand.
I find that Mr He and Ms Lu resigned as directors of Sunnya on 25 November 2022 in order to distance themselves from the company immediately before embarking on their endeavour to register the NRIO trade mark through Sunlife and to procure the manufacture of NRIO-branded products in New Zealand for the benefit of GABT, with the intention and purpose that I have found at [795]-[796] above.
Viewed in that context, the design of the NRIO logo and other preparatory work that I have inferred Mr He undertook prior to Sunlife's filing of the applications to register the NRIO trade mark in Australia and New Zealand on 25 November 2022 did not involve the exercise of Mr He's powers or the discharge of his duties as a director of Sunnya, and did not involve the use of his position as a director of Sunnya. The Plaintiffs have therefore failed to established the alleged breaches of s 181(1) and s 182(1) of the Corporations Act by Mr He.
However, by Mr He undertaking that preparatory work and procuring Sunlife's application to register the NRIO trade mark on 25 November 2022 (with the knowledge and encouragement or endorsement of Ms Lu), by Ms Lu negotiating the NRIO contracts with Supermega for the benefit of GABT in the period up to 7 December 2022 (with the knowledge and encouragement or endorsement of Mr He), by Mr He and Ms Lu encouraging or endorsing GABT's registration of the identical NRIO trade mark in China with the intention that it would be used together with GABT's Chinese Neurio trade mark to market and sell in China the NRIO-branded formulated milk powder products to be manufactured in New Zealand under contracts being negotiated by Ms Lu, and by Mr He and Ms Lu encouraging or endorsing GABT's subsequent packaging, marketing, and sale of those sachets in China as "new" or "upgraded" Neurio products, Mr He and Ms Lu diverted to GABT and pursued for their own profit (through Mr He's 95 per cent shareholding of GABT) the business of selling Australian and New Zealand-manufactured Neurio-branded products in China. Sunnya had been carrying on that business with the cooperation of GABT until shortly before Mr He and Ms Lu resigned as directors. Sunnya continued to pursue that business after the resignation of Mr He and Ms Lu, without the cooperation of GABT, including by exporting to China the tins of Neurio-branded products bearing the JAT logo. [283] The reality of this position is not obscured by the introduction of the NRIO trade mark alongside the Neurio trade mark. On the contrary, that was a strategy to facilitate the manufacture of formulated milk powder products in New Zealand to be marketed and sold as Neurio products in China, without using Sunnya's registered New Zealand Neurio trade marks so that Sunnya would not be entitled to prevent the manufacture of the NRIO products in New Zealand, and would not be entitled to require any payment or benefit in respect of the manufacture of those NRIO products that were to be marketed and sold under the Neurio trade mark in China. Mr He and Ms Lu cannot rely on GABT's termination of its cooperation relationship with Sunnya - which they had encouraged or endorsed in the Plan A stage of the series of coordinated actions described above - as freeing them to divert Sunnya's Neurio business in China to GABT for their own profit. It is therefore not necessary to determine whether Sunnya would contravene any law of the People's Republic of China by exporting Neurio-branded products to China without the consent of GABT. Assuming that it was lawful, the evidence establishes that it was difficult as a matter of commercial reality for Sunnya to market and sell Neurio products in China without GABT's consent. [284]
On the basis of the evidence referred to at [85]-[172] and [220] above, I find that Mr He and Ms Lu were able to pursue the business described above for GABT, for the ultimate benefit of themselves, by reason of their knowledge gained as directors of Sunnya of the terms on which Supermega and Megadairy manufactured and supplied Neurio products to Sunnya, their knowledge of the distribution channels and through which those products were marketed and sold in China, and their dealings with Sunnya's distribution partners, or their oversight of the dealings with those distribution partners by Sunnya's staff, during the period since at least October 2018. As I have found at [800] above, Mr He and Ms Lu resigned as directors of Sunnya for the very purpose of pursuing that business for GABT, for their own personal benefit. Contrary to the He Parties' submissions, this was no fresh initiative in which Mr He and Ms Lu utilised their expertise to launch of an entirely new NRIO line of products. It is clear from the events that happened, and from the terms of GABT's notice published on 22 April 2023 that the NRIO trade mark was only ever intended to be used in order to co-brand products sold to retail consumers with the Neurio brand. GABT's notice, which is extracted at [375] above, stated that (emphasis added): "The owner of Niu Rui You Neurio brand will continue to grow the Niu Rui You brand with imported products in original packaging, and will never change its brand name."
For all of the reasons explained at [781]-[803], there was a real conflict between, on the one hand, the interests of Mr He and Ms Lu in GABT taking over and profiting from the business of selling Australian and New Zealand manufactured Neurio-branded products in China without having to deal with Sunnya as the registered owner of the Australian and New Zealand Neurio trade marks, and, on the other hand, the interests of Sunnya in exercising and extracting value from its exclusive rights as the registered owner of those trade marks. Mr He and Ms Lu resigned as directors in order to pursue their own interests in GABT taking over and profiting from that business, which they sought to achieve, and did achieve, by their conduct referred to at [802] above. Mr He thereby breached the fiduciary duties that he owed as a director of Sunnya up to and including 25 November 2022, and Mr He and Ms Lu breached fiduciary duties that they continued to owe to Sunnya after their resignation as directors in accordance with the principles in Canadian Aero, as applied by intermediate courts in Victoria and New South Wales. [285] Having regard to their intention and purpose referred to at [795]-[796] above, I find that the conduct of Mr He and Ms Lu transgressed ordinary standards of honest behaviour, and that those breaches of duty were therefore a dishonest and fraudulent scheme for the purpose of the second limb of Barnes v Addy.
For the reasons explained above, the Plaintiffs are entitled to declarations in substantially the terms sought in their closing submissions in relation to the breaches of fiduciary duty by Mr He and Ms Lu. In my opinion, the Plaintiffs are also entitled to the injunctive relief sought in terms that will restrain the continuation of the dishonest and fraudulent scheme, or equivalent schemes, by Mr He and Ms Lu. The Plaintiffs are also entitled, at their election, to an order requiring Mr He and Ms Lu to pay equitable compensation to Sunnya for its loss sustained by reason of their breaches of fiduciary duty in an amount to be determined at a subsequent hearing, or an order requiring Mr He and Ms Lu to account to Sunnya for their profits derived from those breaches. In the event that the Plaintiffs elect equitable compensation, the loss to be compensated for is Sunnya's loss of its business of selling Australian and New Zealand manufactured Neurio-branded products in China. Whilst GABT's termination of the cooperation relationship (at the encouragement of, or with the endorsement of, Mr He and Ms Lu) was a contributing cause of that loss, it was Mr He and Ms Lu's breaches of fiduciary duty which are the subject of the Neurio/NRIO claims that enabled GABT to cut Sunnya out of any involvement in or benefit from the business of selling Australian and New Zealand manufactured Neurio-branded products in China. The Plaintiffs' claims for relief against Mr He and Ms Lu in respect of the Neurio/NRIO claims must otherwise be dismissed.
I now turn to the Plaintiffs' claims that each of Sunlife and Ms He knowingly assisted (and continue to assist) the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu, and that Sunlife was (and continues to be) a knowing recipient within the meaning of the first limb of Barnes v Addy because it "received the benefit of the NRIO/Neurio tins being, in essence, the diversion of Sunnya's Neurio business in China".
Ms He was the sole director of Sunlife at all relevant times. [286] I accept that knowledge of Ms He is therefore attributable to Sunlife.
Sunlife plainly knew that it had applied for registration of the NRIO trade marks in Australia and New Zealand at Mr He's request on 25 November 2022.
Contrary to the Plaintiffs' submissions, the familial relationship of Ms He with Mr He and Ms Lu is not a sufficient basis for attributing to Ms He (and, through her, to Sunlife) knowledge of the remaining elements of the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu.
The evidence does not give rise to an inference on the balance of probabilities that that Ms He or Sunlife knew that GABT applied to register in China on 6 December 2022 an NRIO trade mark identical to that which Sunlife had applied to register in Australia and New Zealand.
There is no evidence that Ms He or Sunlife knew about the contracts dated 7 December 2022 that Ms Lu negotiated with Supermega for the manufacture and supply of NRIO-branded sachets of formulated milk powder to be exported to Shanghai Gainful in China.
There is no evidence that Ms He or Sunlife were involved in the distribution, marketing or sale of NRIO-branded sachets in Neurio/NRIO-branded tins in China prior to May 2023. Nor is there any evidence that Ms He or Sunlife knew at any time prior to May 2023 that Mr He and Ms Lu intended for the NRIO trade marks that Sunlife had applied to register in Australia and New Zealand to be used to manufacture products that would be sold in China as New Zealand-manufactured Neurio products, co-branded with the NRIO trade mark. Nor is there any evidence that Ms He or Sunlife knew that this was occurring from about April 2023.
However, I find that Sunlife did know that the NRIO trade mark was being used in that way from May 2023, when Sunlife exhibited Neurio/NRIO-branded tins together with NRIO-branded sachets of formulated milk powder products at the Canton Trade Fair. [287] Those tins and sachets exhibited by Sunlife are the same in appearance as the "new version" tins depicted in the notices published on GABT's website on or about 4 April 2023. [288] I therefore infer that the Neurio/NRIO branded tins exhibited by Sunlife at the Canton Trade Fair identified Megadairy as the New Zealand manufacturer of the formulated milk powder products contained in the tins. It would therefore have been obvious to Sunlife from May 2023 that the NRIO trade mark that it had applied to register in New Zealand on 25 November 2022 was being used to manufacture sachets of formulated milk powder in New Zealand that were being exported to China where they were packaged and sold in Neurio/NRIO-branded tins. As I have already mentioned, the place of manufacture was important in the marketing and sale of Neurio-branded formulated milk powder products in China. [289] I infer that, as a result of her employment in marketing and media roles at Sunnya during the period from about 15 May 2020 to 8 December 2022, Ms He was aware of Sunnya's business in the sale of Australian and New Zealand-manufactured Neurio-branded products in China, and of the importance of the place of manufacture in the marketing and sale of those products. I infer that Ms He had also become aware during her employment with Sunnya that those products were manufactured for Sunnya by Megadairy in New Zealand, where Sunnya was the registered owner of the Neurio trade mark with exclusive rights to manufacture products bearing that trade mark. [290] It is inherently likely that Ms He, as the daughter of Mr He and Ms Lu and as employee of Sunnya, knew from 25 November 2022 that Mr He and Ms Lu had resigned as directors of Sunnya, that they were in dispute with Sunnya, and that the scope of that dispute included attempts made by Mr He and Ms Lu to transfer the registered ownership of Sunnya's Australian and New Zealand Neurio trade marks to GABT. If not, then Ms He and Sunlife learned those facts by no later than 7 March 2023 when they were joined as defendants to the Sunnya proceedings. That rendered it extremely unlikely that the NRIO-branded sachets exhibited by Sunlife at the Canton Trade Fair alongside Neurio/NRIO-branded tins had been manufactured in New Zealand with the consent of Sunnya as the registered owner of the New Zealand Neurio trade marks.
In my opinion, all of those matters known to Ms He (and, through her, known to Sunlife), taken together, would indicate to an honest and reasonable person in May 2023 that, after resigning as directors of Sunnya, Mr He and Ms Lu had caused the NRIO trade mark that Sunlife had registered in New Zealand at Mr He's request to be used for the manufacture in New Zealand of formulated milk powder sachets that were then marketed and sold under the Neurio brand in China, thereby diverting Sunnya's business in the sale of Australian and New Zealand-manufactured Neurio-branded products in China. It would be obvious to the honest and reasonable person that this was to the detriment of Sunnya, and that it would benefit Mr He and Ms Lu, or an entity associated with one or both of them - most likely GABT, to whom they had earlier unsuccessfully attempted to transfer the Australian and New Zealand Neurio trade marks. Those matters make up the essential facts comprising the breaches of fiduciary duty by Mr He and Ms Lu, and the matters by reason of which those breaches transgressed ordinary standards of honest behaviour. Knowledge of those matters that would indicate the facts to an honest and reasonable person is sufficient for the purpose of the second limb of Barnes v Addy.
For those reasons, I find that Sunlife knowingly assisted Mr He and Ms Lu's breaches of fiduciary referred to at [802]-[804] above from May 2023 by participating in the marketing and sale in China of the Neurio/NRIO-branded products, the formulated milk powder component of which had been manufactured in New Zealand and branded with Sunlife's NRIO trade mark. The Plaintiffs have failed to adduce evidence that supports a finding that Sunlife knowingly assisted those breaches of fiduciary duty in any way other than by participating in the marketing and sale of Neurio/NRIO-branded products in China from May 2023.
The Plaintiffs' submissions did not articulate the basis of their contention that the knowing assistance was provided by Ms He, in addition to being provided by Sunlife. In my opinion, the assistance was provided by Sunlife, acting through Ms He as its sole director. There is no basis for piercing the corporate veil and characterising the assistance as having been provided by Ms He personally.
I reject the Plaintiffs' contention that Sunlife and/or Ms He were knowing recipients within the meaning of the first limb of Barnes v Addy on the basis that they "received the benefit of the NRIO/Neurio tins being, in essence, the diversion of Sunnya's Neurio business in China". That submission erroneously conflates the Neurio/NRIO-branded products with the business opportunities that were diverted from Sunnya to GABT as a result of the breaches of fiduciary duty by Mr He and Ms Lu, with the knowing assistance of Sunlife from May 2023. Those business opportunities are not property for the purpose of the first limb of Barnes v Addy. [291]
For the reasons explained above, the Plaintiffs are entitled to a declaration in more limited terms than that sought in their closing submissions that, by participating in the marketing and sale of Neurio/NRIO-branded products in China from May 2023, Sunlife knowingly assisted in the breaches of fiduciary duty by Mr He and Ms Lu. The Plaintiffs are also entitled to injunctions restraining Sunlife from taking further steps that would assist the dishonest and fraudulent scheme of Mr He and Ms Lu, or equivalent schemes. The Plaintiffs are also entitled, at their election, to an order that Sunlife pay equitable compensation to Sunnya for losses caused by Sunlife's knowing assistance of Mr He and Ms Lu's breaches of fiduciary duty from May 2023, in an amount to be determined at a subsequent hearing, or to an order requiring Sunlife to account to Sunnya for any profits that Sunlife earned by reason of that knowing assistance. The Plaintiffs' claims against Sunlife must otherwise be dismissed. The Plaintiffs' claims against Ms He must be dismissed.
I now turn to the Plaintiffs' claims that GABT knowingly assisted (and continues to assist) the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu, and that GABT was (and continues to be) a knowing recipient of the Neurio/NRIO-branded products being sold in China.
GABT assisted the breaches of fiduciary duty by Mr He and Ms Lu by applying to register the NRIO trade mark in China that was identical with the NRIO trade mark that Mr He procured Sunlife to register in New Zealand, by taking delivery of the NRIO-branded sachets that had been manufactured by Megadairy in New Zealand, and by packaging, marketing and selling those sachets in China packaged in Neurio/NRIO-branded tins. [292] GABT did so with actual knowledge of the essential facts comprising the dishonest and fraudulent scheme in which Mr He and Ms Lu engaged, as described at [802]-[804] above. I have already found that GABT knew that Mr He and Ms Lu were directors of Sunnya. [293] Mr He and Ms Lu relied on their resignation as directors on 25 November 2022 in their defence filed in the Sunnya proceedings, and I therefore infer that GABT was aware of that resignation which occurred at a time when GABT was actively defending the Sunnya proceedings. On the basis of the evidence of the cooperation relationship referred to at [784]-[788] and [794]-[796] above, I find that GABT knew that Sunnya had procured the manufacture of Neurio-branded products in Australia and New Zealand, and sold and distributed those products in China, under the directorship of Mr He and Ms Lu, and with the cooperation of GABT, for some time prior to October 2022. I therefore infer that GABT knew that Mr He and Ms Lu had developed relationships with Sunnya's manufacturer and distributors, an understanding of Sunnya's manufacturing arrangements and distribution channels, and knowledge of the terms of Sunnya's arrangements with its manufacturer and distribution partners, by reason of their positions as directors of Sunnya. It was in that context that GABT engaged in the conduct referred to at [784]-[788] and [794]-[796] above, with the knowledge there referred to. As I have found at [796] above, the obvious effect of GABT's conduct, together with the conduct of Mr He and Ms Lu of which GABT was aware, was to ensure a supply of Australian and New Zealand-manufactured formulated milk powder products to GABT that could be marketed and sold by GABT in China capitalising on the established Neurio brand, without GABT requiring Sunnya's consent for the manufacture of those products as the registered owner of the Australian and New Zealand Neurio trade marks, thereby diverting to GABT the whole of the profits that had previously been earned by Sunnya from the sale of Australian and New Zealand-manufactured Neurio-branded products in China with the cooperation of GABT, and even depriving Sunnya of the ability to negotiate a fee for use of the Neurio trade mark in the New Zealand manufacturing process. The adverse effects of this course of conduct on Sunnya's interests, and the corresponding benefits to GABT and to Mr He as the majority shareholder of GABT, were obvious. I therefore infer that this conflict of interests was known to GABT. For all of those reasons, GABT is liable for knowingly assisting within the meaning of the second limb of Barnes v Addy the dishonest and fraudulent breaches of fiduciary of Mr He and Ms Lu described at [802]-[804] above.
I reject the Plaintiffs' submission that GABT is liable under the first limb of Barnes v Addy as a knowing recipient of the Neurio/NRIO-branded products. Again, that submission erroneously conflates those products with the business opportunities that were diverted from Sunnya to GABT as a result of the breaches of fiduciary duty by Mr He and Ms Lu, with the knowing assistance of Sunlife from May 2023. Those business opportunities are not property for the purpose of the first limb of Barnes v Addy. [294]
I reject the Plaintiffs' submission that GABT acted as the alter ego of Mr He and/or Ms Lu in relation to their breaches of fiduciary described at [802]-[804] above. I do not consider that GABT acted as the alter ego of Mr He, or of Mr He and Ms Lu, in engaging the conduct referred to at [784]-[788], [794]-[796] and [820] above. As I have said at [671] and [746] above, GABT had its own long-established business, including in the importation of milk food products. At the time of the impugned conduct of Mr He, Ms Lu and GABT, each of them stood to benefit from diverting to GABT the whole of the business of selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, which Sunnya had carried on with GABT's cooperation and which Sunnya was endeavouring to continue without GABT's cooperation by adding the JAT logo to its Neurio products that were then distributed and marketed for sale in China. The interests of GABT and the interests of Mr He and Ms Lu, were separate, but aligned. The evidence does not provide a sufficient basis for concluding that Mr He directed (as opposed to encouraged and endorsed) GABT's conduct, or that his mind was GABT's mind in relation to that conduct. [295] However, the diversion of that business to GABT, which Mr He, Ms Lu and GABT worked to achieve by their co-ordinated actions described above, [296] was to the mutual benefit of GABT and of Mr He and Ms Lu by reason of Mr He's 95 per cent shareholding in GABT, until Mr He divested himself of those shares on 10 March 2023. [297] Having acted in concert with Mr He and Ms Lu to achieve that mutual benefit in the period up to 10 March 2023, GABT is jointly and severally liable with Mr He and Ms Lu in respect of their breaches of fiduciary duty, as the Plaintiffs submitted.
For the reasons explained above, the Plaintiffs are entitled to a declaration that GABT knowingly assisted in the breaches of fiduciary duty by Mr He and Ms Lu. The Plaintiffs are also entitled to injunctions restraining GABT from taking further steps that would assist the dishonest and fraudulent scheme of Mr He and Ms Lu, or equivalent schemes. The terms of the injunctions sought by the Plaintiffs extend too far. In particular, the Plaintiffs' proposed terms would restrain GABT from taking any steps to market, manufacture, sell, distribute or export any Neurio products to or for persons other than Sunnya. An injunction in those terms would prevent GABT from making any use of its registered Chinese Neurio trade mark, irrespective of where and pursuant to what arrangements the products had been manufactured. The Plaintiffs are not entitled to such relief. The Plaintiffs are entitled, at their election, to an order that GABT pay equitable compensation to Sunnya for its loss suffered by reason of GABT's knowing assistance of Mr He and Ms Lu's breaches of fiduciary duty in an amount to be determined at a subsequent hearing, or an order requiring GABT to account to Sunnya for the profits or other benefits it earned by reason of that knowing assistance. The Plaintiffs are also entitled to declarations that GABT acted in concert with Mr He and Ms Lu to secure a mutual benefit in the period up to 10 March 2023 and is jointly and severally liable with Mr He and Ms Lu in respect of their breaches of fiduciary duty during that period. The Plaintiffs' remaining claims against GABT must be dismissed.
I now turn to the Plaintiffs' claims that GNT knowingly assisted (and continues to assist) the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu, and that GNT was (and continues to be) a knowing recipient of the Neurio/NRIO-branded products being sold in China.
The Plaintiffs' claim against GNT as an alleged knowing recipient of the Neurio/NRIO-branded products is misconceived for the reasons that I have explained above in relation to the equivalent claims against Sunlife and GABT. [298]
The Plaintiffs submitted that GNT participated in the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu because GNT was the distributor of the Neurio/NRIO-branded products in China, and because those products were sold by GNT and GABT. The evidence referred to at [356] above establishes that GNT acted as the distributor for at least some of those Neurio/NRIO-branded products, and I so find. On the basis of the evidence concerning distribution arrangements generally in the Chinese market for formulated milk powder products referred to at [124]-[126], and in the absence of any evidence to the contrary, I infer that GNT's role as distributor of the Neurio/NRIO products included GNT selling those products to other distributors or to retail consumers.
The Plaintiffs' submissions erroneously refer to the upgrade notices as having been published by GABT and GNT. The evidence about those upgrade notices, which is summarised at [359], [371] and [375] above provides no basis for inferring that GNT published, or had any role in the publication of, those notices on GABT's website.
The Plaintiffs' claim against GNT as an alleged knowing assistant in the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu rests principally on the Plaintiffs' contention that GNT was the alter ego of Mr He and/or Ms Lu. That contention rests solely on the familial links between Ms Lu and the controllers and shareholders of GNT, and the marital relationship between Mr He and Ms Lu. Those familial links provide no basis for finding that the mind of Mr He or Ms Lu was the mind of GNT in relation to GNT's acceptance of the role of distributor of the Neurio/NRIO products - a role that was within the established scope of GNT's business activities prior to November 2022.
In the alternative to their alter ego contention, the Plaintiffs rely on the following matters in support of their knowing assistance claim against GNT: (1) the position of Ms Aiping Zhang - Ms Lu's sister-in-law - as the actual controlling person, major shareholder and ultimate beneficiary of GNT; (2) GNT's role as distributor of Neurio/NRIO-branded products to which I have referred above; (3) Ms Lu's involvement in the negotiation of the two contracts dated 7 December 2022 pursuant to which Supermega manufactured and supplied the NRIO-branded sachets; (4) GNT's placement of orders with Supermega for Neurio products during the period from 7 December 2022 to 12 January 2023, as referred to at [219] above; and (5) the absence of any evidence from GNT explaining any of these matters.
I do not consider that those matters, individually or taken together, support an inference that GNT had knowledge of the essential elements of the breaches of fiduciary duty by Mr He and Ms Lu, and of the dishonesty of those breaches. As to (1) above, the familial links between Ms Lu and Ms Aiping Zhang do not provide a sufficient basis to infer such knowledge on the part of Ms Zhang or GNT. As to (2) above, the Plaintiffs' submissions failed to articulate what knowledge should be inferred from GNT's role as a distributor of the Neurio/NRIO products. The Plaintiffs did not identify any evidence that would support an inference that, by reason of that role, GNT knew that Mr He had arranged for Sunlife to register the NRIO trade mark that had been used to manufacture the NRIO-branded sachets that GNT was distributing in the Neurio/NRIO branded tins. As to (3) above, Ms Lu's conduct does not, without more, support an inference that GNT had knowledge of that conduct. The Plaintiffs' submissions failed to articulate how (4) above supports an inference that GNT had knowledge of the essential elements of Mr He and Ms Lu's breaches of fiduciary duty in respect of Neurio/NRIO branded products. As to (5) above, the absence of evidence from GNT does not, by itself, provide a sufficient basis to make the findings of knowledge for which the Plaintiffs contend against GNT.
For those reasons, the Plaintiffs' claims for relief against GNT in respect of the Neurio/NRIO claims must be dismissed.
I now turn to the Plaintiffs' claims that each of Supermega and Megadairy knowingly assisted the Plan B breaches of fiduciary duty allegedly committed by Mr He and Ms Lu by manufacturing the NRIO-branded sachets - all or some of which are printed with QR codes that link to GABT's website www.neurio.com.cn - that were sold in China in Neurio/NRIO branded tins.
I have found that Megadairy manufactured, and Supermega supplied, those NRIO-branded sachets, at least some of which were printed with QR codes. [299]
The NZ Parties accept that Mr Wu's knowledge is attributable to each of Supermega, Megadairy and NZFDA.
When Mr Wu negotiated on behalf of Supermega the two contracts dated 7 December 2022 for the supply of NRIO-branded sachets to Shanghai Gainful, Mr Wu knew that: (1) Sunnya was the registered owner of the Neurio trade marks in Australia and New Zealand and that Neurio-branded products could not be manufactured in New Zealand without Sunnya's consent; [300] (2) Mr He and Ms Lu had resigned as directors of Sunnya and had no authority to deal with Sunnya's assets, including by consenting to the use of its trade marks; [301] (3) Mr He had arranged for Ms He to cause Sunlife to register the NRIO trade mark in Australia and New Zealand; [302] (4) Ms Lu was the person with whom Mr Wu was negotiating the contracts for Supermega to supply NRIO-branded sachets to Shanghai Gainful; [303] (5) Shanghai Gainful was associated with GABT, in that it had acted as the importer for GABT under previous contracts for the supply of Neurio products by Supermega to GABT; [304] (6) the NRIO-branded sachets to be supplied by Supermega to Shanghai Gainful would be packaged in Neurio/NRIO-branded tins in China, and would be marketed and sold in that way in China. [305] By no later than April 2023, Mr Wu knew that the NRIO-branded sachets were in fact being marketed and sold under the Neurio brand in China. [306]
I reject the submission made on behalf of the NZ Parties that the Plaintiffs do not allege that Mr Wu knew the Neurio/NRIO tins were being sold in China without any benefit or payment being made to Sunnya, and Mr Wu therefore cannot have had sufficient knowledge of the allegedly dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu to be liable under the second limb of Barnes v Addy. It would have been obvious to Mr Wu from the matters above, and so I infer that he also knew in December 2022, that: (7) the conduct and matters referred to in (3), (4) and (6) above would facilitate products manufactured by Megadairy and supplied by Supermega being marketed and sold as New Zealand-manufactured products in China under the Neurio brand, with the introduction of the additional NRIO trade mark removing any need for Sunnya's consent to the manufacture of the products in New Zealand; (8) this would, in turn, remove any opportunity for Sunnya to negotiate and receive any payment or other benefit in connection with the manufacture and sale of those products; (9) having resigned as directors of Sunnya, Mr He and Ms Lu had no interest in offering such a payment or benefit to Sunnya; and (10) it was not in Sunnya's best interests for its rights as the registered owner of the New Zealand Neurio trade mark to be circumvented this way.
Mr Wu's knowledge of the matters referred to above, considered as a whole, amounted to knowledge of the essential matters comprising Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty diverting to GABT Sunnya's business of selling Australian and New Zealand manufactured Neurio-branded products or, alternatively, knowledge of circumstances which would indicate those essential matters to an honest and reasonable person in Mr Wu's position.
For those reasons, I find that each of Supermega and Megadairy knowingly assisted Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty from December 2022 by contracting to supply (in the case of Supermega) and by manufacturing (in the case of Megadairy) the NRIO-branded sachets of formulated milk powder products with the knowledge that those products would be marketed and sold in Neurio/NRIO tins in China, as subsequently occurred.
The Plaintiffs are therefore entitled to the declarations sought to the effect that Supermega and Megadairy knowingly assisted those breaches of fiduciary duty. The Plaintiffs are also entitled to injunctions restraining Supermega and Megadairy from taking further steps that would assist Mr He and Ms Lu's dishonest and fraudulent scheme, or variations on that scheme - namely any steps to manufacture, market, sell, distribute or export any NRIO-branded product, or any other product that is to be sold to ultimate consumers in China in Neurio-branded packaging, to or for any person other than Sunnya. However, the Plaintiffs' claim for orders restraining Supermega and Megadairy from taking any steps to manufacture, market, sell, distribute or export any Neurio-branded product to persons other than Sunnya is outside the scope of the Neurio/NRIO claims, and must be dismissed.
As against each of Supermega and Megadairy, the Plaintiffs are entitled, at their election, to orders that it pay equitable compensation to Sunnya for loss suffered by reason of its knowing assistance of Mr He and Ms Lu's breaches of fiduciary duty in an amount to be determined at a subsequent hearing, or an order requiring it to account to Sunnya for the profits or other benefits it earned by reason of that knowing assistance.
I reject the Plaintiffs' submission that Supermega and Megadairy are jointly and severally liable with Mr He and Ms Lu for their breaches of fiduciary duty because Supermega and Megadairy acted in concert with Mr He and Ms Lu to secure a mutual benefit or advantage. The Plaintiffs characterise the alleged mutual benefit or advantage as being "the diversion of Sunnya's trade in Neurio products in China to entities associated with Mr He and Ms Lu that would continue to engage Supermega and Megadairy to manufacture the products supplying the diverted trade in those Neurio products". That is not a mutual benefit, but two separate benefits - the trade, and profits from trade, that will benefit GABT, and the manufacturing contracts that will benefit Supermega and/or Megadairy. Consistently with the principles summarised at [496]-[499] above, the liability of Supermega and Megadairy as knowing assistants is personal to those assistants, and is separate from the liability of Mr He and Ms Lu as the defaulting fiduciaries. The "acting in concert" exception discussed at [512]-[514] above is not engaged in the absence of a mutual benefit which the third parties acted in concert with the defaulting fiduciaries to secure.
I now turn to the Plaintiffs' claims that NZFDA knowingly received the New Zealand NRIO trade mark within the meaning of the first limb of Barnes v Addy on or about 31 March 2023, and that by receiving that trade mark and by allowing it to be used in the manufacture and sale of NRIO-branded sachets thereafter, NZFDA knowingly assisted the dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu.
I reject the Plaintiffs' claim under the first limb of Barnes v Addy. The New Zealand NRIO trade mark was not property of Sunnya. It was property of Sunlife that was used for the purpose of Mr He and Ms Lu's dishonest and fraudulent scheme.
However, by receiving the transfer of the New Zealand NRIO trade mark from Sunlife on 31 March 2023 - shortly after Sunlife had been made a party to the Sunnya proceedings - with all of the knowledge referred to at [834]-[837] above, NZFDA knowingly assisted Mr He and Ms Lu's dishonest and fraudulent scheme by facilitating the registered ownership of the trade mark being held by an entity that was not yet a defendant to the Sunnya proceedings while Sunlife continued to market the NRIO-branded milk powder sachets manufactured by Megadairy in New Zealand under the Neurio brand in China. [307] I have rejected Mr Wu's evidence that Sunlife registered the New Zealand NRIO trade mark for his benefit. [308] For the same reasons, I reject Mr Wu's evidence that NZFDA's acceptance of the transfer of the trade mark from Sunlife was simply Mr Wu "taking back" the trade mark.
The Plaintiffs' submissions did not identify any evidence that NZFDA has in fact allowed the New Zealand NRIO trade mark to be used in the manufacture and sale of NRIO-branded sachets after 31 March 2023. There was some evidence of batches of formulated milk powder manufactured by Megadairy after 31 March 2023 being offered for sale in Neurio-branded tins in China, but there was no evidence that those tins contained NRIO-branded sachets.
The NZ Parties denied that NZFDA had permitted the New Zealand NRIO trade mark to be used in the manufacture or sale of NRIO-branded sachets of formulated milk powder since 31 March 2023, denied that any of the NZ Parties had manufactured or sold NRIO products since being restrained from doing so on 26 May 2023. [309] However, in response to the Plaintiffs' pleading that, if not restrained from doing so, NZFDA will cause or permit the New Zealand NRIO trade mark to be used in the manufacture and/or sale of NRIO-branded products and/or Neurio/NRIO-branded products to be sold by GABT and/or GNT and/or Sunlife, the NZ Parties pleaded that Megadairy would manufacture NRIO-branded products if lawful to do so pursuant to customer requests. I infer that this would include pursuant to customer requests from NZFDA as the registered owner of the New Zealand NRIO trade mark or from third parties authorised by NZFDA. There is therefore a risk that NZFDA or such authorised parties would permit the New Zealand NRIO trade mark to be used in the manufacture of NRIO-branded products in New Zealand, or in the marketing, sale, distribution, or export of such products, if not restrained permanently from doing so, and that such products would be marketed and sold in China in conjunction with the Neurio brand. This would, in substance, provide further assistance to Mr He and Ms Lu's dishonest and fraudulent scheme. There is no evidence, and nor did the NZ Parties submit, that the NRIO brand has ever been used other than for the manufacture, export, marketing and sale in China of formulated milk powder sachets in tins bearing the Neurio brand.
For those reasons, the Plaintiffs are entitled to a declaration substantially in the terms sought to the effect that NZFDA knowingly assisted in Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty, an order restraining NZFDA from taking any steps to market, manufacture, sell, distribute, or export any NRIO branded product to or for any person (or permitting third parties to take such steps), and an order restraining NZFDA from taking steps to manufacture, market, sell, distribute or export any other product that is to be sold to ultimate consumers in China in Neurio-branded packaging to or for any person other than Sunnya.
The balance of the Plaintiffs' claims for relief against NZFDA must be dismissed, including the claims for a declaration that NZFDA knowingly received the New Zealand NRIO trade mark within the first limb of Barnes v Addy, a declaration that NZFDA holds that trade mark on constructive trust for Sunnya, and an order requiring NZFDA to transfer that trade mark to Sunnya.

[81]

Conclusion

For all of the reasons explained above, the Plaintiffs are entitled to the following relief in respect of the Neurio/NRIO claims: 1. a declaration that Mr He breached fiduciary duties that he continued to owe to Sunnya following his resignation as a director on 25 November 2022 by: 1. requesting the registration of the NRIO trade mark in Australia and New Zealand by Sunlife; 2. encouraging or endorsing the registration of the NRIO trade mark in China by GABT; 3. encouraging or endorsing the manufacture and supply by Megadairy and Supermega of NRIO-branded sachets of formulated milk powder products to Shanghai Gainful for ultimate supply to GABT; 4. encouraging or endorsing GABT's packaging of those NRIO-branded sachets in tins bearing the Neurio and NRIO brands, and the marketing and sale of those tins in China as new or upgraded versions of the Neurio brand of Australian and New Zealand-manufactured formulated milk powder products; 5. encouraging or endorsing the resulting association of the NRIO brand with the established Neurio brand; 6. by the conduct in (a) to (e) above, diverting to GABT the whole of Sunnya's business of marketing and selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, by excluding Sunnya from any ongoing role in that business which it had carried on using its rights as the registered owner of the Australian and New Zealand Neurio trade marks (in cooperation with GABT until 21 October 2023); 1. an order restraining Mr He from taking any steps to manufacture any NRIO-branded products in Australia or New Zealand, or to market, sell, distribute or export any such products; 2. an order restraining Mr He from taking any steps to manufacture in Australia or New Zealand any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than Sunnya or persons authorised by Sunnya; 3. an order that Mr He: 1. pay equitable compensation to Sunnya for loss suffered by reason of Mr He's breaches of fiduciary duty referred to in (1) above, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by Mr He by reason of his breaches of fiduciary duty referred to in (1) above, at the election of the Plaintiffs; 1. a declaration that Ms Lu breached fiduciary duties that she continued to owe to Sunnya following her resignation as a director on 25 November 2022 by: 1. encouraging or endorsing the registration of the NRIO trade mark in Australia and New Zealand by Sunlife; 2. encouraging or endorsing the registration of the NRIO trade mark in China by GABT; 3. procuring or requesting the manufacture and supply by Megadairy and Supermega of NRIO-branded sachets of formulated milk powder products to Shanghai Gainful for ultimate supply to GABT; 4. encouraging or endorsing GABT's packaging of those NRIO-branded sachets in tins bearing the Neurio and NRIO brands, and GABT's marketing and sale of those tins in China as new or upgraded versions of the Neurio brand of Australian and New Zealand-manufactured formulated milk powder products; 5. encouraging or endorsing the resulting association of the NRIO brand with the established Neurio brand; 6. by the conduct in (a) to (e) above, diverting to GABT the whole of Sunnya's business of marketing and selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, by excluding Sunnya from any ongoing role in that business which it had carried on using its rights as the registered owner of the Australian and New Zealand Neurio trade marks (in cooperation with GABT until 21 October 2023); 1. an order restraining Ms Lu from taking any steps to manufacture any NRIO-branded products in Australia or New Zealand, or to market, sell, distribute or export any such products; 2. an order restraining Ms Lu from taking any steps to manufacture in Australia or New Zealand any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than Sunnya or persons authorised by Sunnya; 3. an order that Ms Lu: 1. pay equitable compensation to Sunnya for loss suffered by reason of Ms Lu's breaches of fiduciary duty referred to in (5) above, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by Ms Lu by reason of her breaches of fiduciary duty referred to in (5) above, at the election of the Plaintiffs; 1. a declaration that, from May 2023, Sunlife knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (1) and (5) within the meaning of the second limb of Barnes v Addy by participating in the marketing and sale of Neurio/NRIO branded formulated milk powder products in China; 2. an order restraining Sunlife from taking any steps to market or sell any Australian or New Zealand-manufactured NRIO-branded products; 3. an order restraining Sunlife from taking any steps to market or sell any other Australian or New Zealand-manufactured products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, to or for any person other than Sunnya or persons authorised by Sunnya; 4. an order that Sunlife: 1. pay equitable compensation to Sunnya for loss suffered by reason of Sunlife's knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (9) above, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by Sunlife by reason of its knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (9) above, at the election of the Plaintiffs; 1. a declaration that GABT knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (1) and (5) within the meaning of the second limb of Barnes v Addy by: 1. applying to register the NRIO trade mark in China; 2. purchasing or taking delivery of NRIO-branded sachets of formulated milk powder products manufactured in New Zealand by Megadairy; 3. packaging those NRIO-branded sachets in tins bearing the Neurio and NRIO brands, and marketing and selling those tins in China as new or upgraded versions of the Neurio brand of Australian and New Zealand-manufactured formulated milk powder products, and thereby causing the NRIO brand to become associated with the established Neurio brand; 4. by the conduct in (a) to (c) above, diverting to itself the whole of Sunnya's business of marketing and selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, by excluding Sunnya from any ongoing role in that business which Sunnya had carried on using its rights as the registered owner of the Australian and New Zealand Neurio trade marks (in cooperation with GABT until 21 October 2023); 1. an order restraining GABT from taking any steps to manufacture any NRIO-branded products in Australia or New Zealand, or to market, sell, distribute or export any such products; 2. an order restraining GABT from taking any steps to manufacture in Australia or New Zealand any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than Sunnya or persons authorised by Sunnya; 3. an order that GABT: 1. pay equitable compensation to Sunnya for loss suffered by reason of GABT's knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (13) above, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by GABT by reason of its knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (13) above, at the election of the Plaintiffs; 1. a declaration that, by its conduct referred to in (13) above during the period up to and including 10 March 2023 when Mr He ceased to be a shareholder of GABT, GABT acted in concert with Mr He and Ms Lu to secure the mutual benefit of the diversion to GABT of the business referred to in (13)(d) above; 2. a declaration that GABT is therefore jointly and severally liable with Mr He and Ms Lu to: 1. pay equitable compensation to Sunnya for loss suffered by reason of Mr He's and Ms Lu's breaches of fiduciary duty referred to in (1) and (5) above in the period up to 10 March 2023, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by reason of Mr He's and Ms Lu's breaches of fiduciary duty referred to in (1) and (5) above in the period up to 10 March 2023, at the election of the Plaintiffs; 1. a declaration that Supermega knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (1) and (5) within the meaning of the second limb of Barnes v Addy in the period from December 2022 by contracting to supply, and by supplying, New Zealand-manufactured NRIO-branded sachets of formulated milk powder with the knowledge that those sachets would be marketed and sold in China in tins bearing the Neurio and NRIO brands; 2. an order restraining Supermega from taking any steps to manufacture or supply any NRIO-branded products, or to market, sell, distribute or export any such products; 3. an order restraining Supermega from taking any steps to manufacture or supply any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than Sunnya or persons authorised by Sunnya; 4. an order that Supermega: 1. pay equitable compensation to Sunnya for loss suffered by reason of Supermega's knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (19) above, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by Supermega by reason of its knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (19) above, at the election of the Plaintiffs; 1. a declaration that Megadairy knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (1) and (5) within the meaning of the second limb of Barnes v Addy in the period from December 2022 by manufacturing NRIO-branded sachets of formulated milk powder with the knowledge that those sachets would be marketed and sold in China in tins bearing the Neurio and NRIO brands; 2. an order restraining Megadairy from taking any steps to manufacture or supply any NRIO-branded products, or to market, sell, distribute or export any such products; 3. an order restraining Megadairy from taking any steps to manufacture or supply any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than Sunnya or persons authorised by Sunnya; 4. an order that Megadairy: 1. pay equitable compensation to Sunnya for loss suffered by reason of Megadairy's knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (23) above, in an amount to be determined at a subsequent hearing; or 2. account to Sunnya for any benefit or gain obtained or received by Megadairy by reason of its knowing assistance in the breaches of fiduciary duty referred to in (1), (5) and (23) above, at the election of the Plaintiffs; 1. a declaration that NZFDA knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (1) and (5) within the meaning of the second limb of Barnes v Addy in the period from 31 March 2023 by holding the New Zealand registered NRIO trade mark from that date; 2. an order restraining NZFDA from taking any steps to manufacture, market, sell, distribute or export, or to permit the manufacturing, marketing, sale, distribution or export, of any NRIO-branded products; and 3. an order restraining NZFDA from taking any steps to manufacture, market, sell, distribute or export, or to permit the manufacturing, marketing, sale, distribution or export, of any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, to or for any person other than Sunnya or persons authorised by Sunnya.
The Plaintiffs Neurio/NRIO claims must otherwise be dismissed.

[82]

Outline of the parties' contentions

The Plaintiffs contend that it was inevitable that there would be "period of transition" between the registration of the NRIO trade marks in Australia and New Zealand and in China, and the NRIO-branded sachets ordered from Supermega becoming available to export to China and for distribution and sale in the Chinese market. The Plaintiffs contend that Mr He and Ms Lu devised and managed a scheme to procure the manufacture of Neurio-branded products to be sold in China by GABT, GNT and/or Sunlife during this transition period, without any payment or other benefit flowing to Sunnya in respect of the manufacture or sale of those Neurio products.
The Plaintiffs contend that Mr He and Ms Lu implemented that alleged scheme by: (1) directing, requesting, encouraging or endorsing Megadairy to manufacture, and Supermega to supply, the Neurio products that are the subject of the contracts entered into between Supermega (as seller) and GABT (as buyer) on 25 November 2022 [310] and the ten contracts entered into between Supermega (as seller) and GNT (as buyer) during the period between 7 December 2022 and 12 January 2023; [311] and (2) directing, requesting, encouraging or endorsing the distribution and sale in China of those products, and other Neurio-branded products that have been sold without any payment or benefit to Sunnya, [312] by GNT, GABT and/or Sunlife in the period since November or December 2022. The Plaintiffs contend that Mr He and Ms Lu thereby breached fiduciary duties that they continued to owe to Sunnya after their resignation as directors of Sunnya on 25 November 2022, and that those breaches were a dishonest and fraudulent scheme.
The Plaintiffs claim that each of Supermega, Megadairy, GABT, GNT, Ms He and Sunlife knowingly assisted the allegedly dishonest and fraudulent breaches of fiduciary duty by Mr He and Ms Lu. The Plaintiffs contend that the liability of each of GABT and GNT is joint and several with Mr He and Ms Lu because: (1) each of GABT and GNT was deployed as the corporate creature, vehicle or alter ego of Mr He and Ms Lu in relation to the relevant Neurio products; and (2) each of GABT and GNT acted in concert with Mr He and Ms Lu to secure a mutual benefit, being the diversion of Sunnya's trade in Neurio products in China.
The Plaintiffs also claim that each of GABT, GNT and Sunlife knowingly received the benefit of the Neurio products, "such benefit being the trade in Neurio products in China previously belonging to Sunnya", and that GABT, GNT and Sunlife hold the products on constructive trust for Sunnya.
It was submitted on behalf of Mr He and Ms Lu that, having resigned as directors of Sunnya on 25 November 2022, they owed no fiduciary duties to Sunnya at the time of the alleged conduct that is the subject of the improper Neurio products claims. It was further submitted that, in any event, the evidence does not establish that Mr He, Ms Lu or Ms He appropriated any business opportunity of Sunnya to themselves, or that they were involved in the alleged conduct of GABT or GNT. It was submitted that, in circumstances where GABT had terminated its cooperation relationship with Sunnya, it is to be expected that GABT would immediately begin taking steps to exploit its Neurio trade mark in China, and there is no basis for inferring that GABT did so at the direction or request, or with the encouragement or endorsement of Mr He and Ms Lu.
Mr He and Ms Lu deny that either of GABT or GNT was their alter ego.
GABT, GNT and Sunlife did not appear at the hearing.
It was submitted on behalf of Supermega and Megadairy that the improper Neurio products claims against them depend entirely on the circumstance that Neurio-branded cans have appeared on the market in China bearing Megadairy's details as the manufacturer of the products in those cans. It was submitted that the evidence does not establish that those cans were manufactured after 15 November 2022. It was submitted that, prior to 15 November 2022, Mr Wu was unaware of any dispute between Sunnya and Mr He and Ms Lu and had no reason to suspect that the cooperation relationship between GABT and Sunnya had been disturbed.

[83]

Consideration and determination

The Plaintiffs' claims against Mr He and Ms Lu rest on the submission that the Court should infer that they directed, requested, encouraged or endorsed Megadairy to manufacture, and Supermega to supply, the Neurio products that are the subject of the contracts entered into by Supermega (as seller) and each of GABT and GNT (as buyers) on 25 November 2022 (in the case of GABT) and during the period between 7 December 2022 and 12 January 2023 (in the case of GNT), and that they also directed, requested, encouraged or endorsed the distribution and sale of those products and other Neurio-branded products in China from November 2022.
The matters on which the Plaintiffs rely as giving rise to such an inference essentially comprise the whole of the conduct of Mr He and Ms Lu in relation to Plan A and Plan B, which I have described above. [313] I accept the submissions made on behalf of Mr He and Ms Lu that those matters do not give rise to the inference for which the Plaintiffs contend because, following GABT's termination of its cooperation relationship with Sunnya and the failure of the plan to transfer the Australian and New Zealand Neurio trade marks to GABT, it is inherently probable that GABT was independently motivated by its own commercial interests to immediately begin exploiting its registered Neurio trade mark in China by distributing and selling Neurio-branded products in that market until such time as the NRIO-branded products became available to be marketed and sold in conjunction with the Neurio trade mark in China. It is therefore inherently probable that GABT took steps to secure a supply of Neurio-branded products for that purpose, without any direction, request or encouragement from Mr He or Ms Lu. Mr Wu had determined on about 18 November 2022 to cease supplying Neurio products to Sunnya, but to supply Neurio products to GABT. [314] In those circumstances, it is improbable that GABT required the endorsement or involvement of Mr He or Ms Lu to negotiate the contract that it entered into with Supermega on 25 November 2022. It is equally improbable that GNT - which was GABT's general distributor of the Neurio products in China [315] - required the endorsement or involvement of Mr He or Ms Lu to negotiate the contracts that it entered into with Supermega during the period from 7 December 2022 to 12 January 2023. Whilst the evidence does not exclude the possibility of their involvement, it does not provide a sufficient basis for inferring on the balance of probabilities that they were in fact involved in the negotiation of those contracts, or that they acted in concert with GABT and GNT in relation to those contracts.
The Plaintiffs' submissions did not identify any evidence that would provide a sufficient basis to characterise GABT and/or GNT as the corporate alter ego of Mr He and/or Ms Lu in respect of the contract that GABT entered into with Supermega on 25 November 2022, the contracts that GNT entered into with Supermega during the period from 7 December 2022 to 12 January 2023, or the sale of Neurio-branded products in China in the period from November 2022. As I have said earlier in these reasons, each GABT and GNT operated businesses that were established before the incorporation of Sunnya. The distribution and sale of formulated milk powder products was within the scope of their respective business activities. Neither Mr He nor Ms Lu were directors or employees of the GABT or GNT. Mr He was the majority shareholder of GABT, but there is no evidence to suggest that its decisions in relation to the contract with Supermega on 25 November 2022 or sale of Neurio products in China from November 2022 were the subject of shareholder voting or control. Ms Lu's familial relationship with the executive director of GABT and with the executive director and controlling person of GNT does not signify that Ms Lu had any control over those companies. For those reasons, the evidence does not support a finding that one or both of Mr He and Ms Lu was the directing mind and will of GABT and GNT in relation to these particular contracts and products.
To the extent that the Neurio-branded products have been distributed and sold in China by GABT or GNT in the period after November 2022, without any payment or benefit to Sunnya, there is no evidence which provides a proper basis for inferring that GABT or GNT was directed, requested, or encouraged to do so by Mr and He and Ms Lu, or that GABT or GNT acted in concert with Mr He and Ms Lu in distributing and selling those products in China. For the same reasons explained above in relation to the contracts that GABT and GNT entered into with Supermega during the period from 25 November 2022 to 12 January 2023, it is probable each of GABT and GNT distributed and sold those products on its own initative.
The Plaintiffs' submissions did not identify any evidence associating Sunlife with the distribution and sale of Neurio-branded products in China after November 2022 at all, let alone at the direction or request, or with the encouragement or endorsement of Mr He and Ms Lu. The evidence relating to Sunlife was limited to its role in promoting Neurio/NRIO branded products and Guamis-branded products at the Canton Fair in May 2023, which is the subject of the Neurio/NRIO claims addressed above and the Guamis claims addressed below.
The improper Neurio products claims against Mr He and Ms Lu fail for those reasons. The claims against GABT, GNT, Ms He, Sunlife, Supermega, and Megadairy, being dependent on the establishment of breaches of fiduciary duty by Mr He and Ms Lu, also fail. It is not necessary to address the further grounds on which those defendants resisted the improper Neurio products claims against them.

[85]

Outline of the parties' contentions

It will be recalled that Ms Chen and Mr Wang of Sunnya exchanged correspondence with Mr Li and Mr Wu of Supermega during November 2022 about the numbers of empty Neurio-branded cans and finished Neurio-branded formulated milk powder products held by Supermega. Mr Li of Supermega initially confirmed to Ms Chen that Supermega held, relevantly, 153,412 empty cans. Mr Wu subsequently denied that this was correct, and informed Mr Wang on 28 November 2022 that Supermega did not hold any empty cans at all. This was followed by further communications between Mr Wang and Mr Wu, and between Sunnya's solicitors and Mr Wu, about what had become of the empty cans that Mr Wang said had been dispatched from China to Supermega's warehouse in two containers on 22 September 2022. According to the evidence of Sunnya's solicitor, Ms Rachel Zhang, Mr Wu told her that all of the empty cans had been destroyed. According to Mr Wu's evidence, he told Ms Zhang that he might have destroyed some of the cans. [316]
The Plaintiffs contend that Mr He and Ms Lu directed, requested, encouraged or endorsed Supermega and/or Megadairy to release some or all of the empty cans and/or finished products which the Plaintiffs allege were, or should have been, held by Supermega on behalf of Sunnya in November 2022, to entities other than Sunnya. The Plaintiffs contend that Mr He and Ms Lu then directed, requested, encouraged or endorsed GABT and/or GNT to distribute and sell those products in China. The Plaintiffs allege that this constituted a breach of the statutory and fiduciary duties that Mr He and Ms Lu owed as directors of Sunnya, and a breach of fiduciary duties that they continued to owe to Sunnya following their resignation as directors. The Plaintiffs contend that each of Supermega, Megadairy, GABT and GNT were involved in the alleged breaches of statutory duty, and knowingly assisted the alleged breaches of fiduciary duty which the Plaintiffs contend were dishonest and fraudulent. The Plaintiffs also contend that GABT and GNT knowingly received "the benefit of the purportedly destroyed Neurio products being, in essence, the diversion of Sunnya's Neurio business in China".
With the exception of GNT which has never entered an appearance in the Sunnya proceedings, each of the defendants denies these allegations.
It is not entirely clear from the Plaintiffs' pleadings and submissions whether these claims concern the empty cans or the finished products that were the subject of the November 2022 correspondence referred to above, or both. Neither the pleadings nor the submissions identify when the Plaintiffs allege that Mr He and Ms Lu directed, requested, encouraged or endorsed Supermega and/or Megadairy to release the empty cans and/or finished products to entities other than Sunnya. Nor do the pleadings and submissions identify when the Plaintiffs allege that Mr He and Ms Lu directed, requested, encouraged or endorsed GABT and/or GNT to distribute and sell those finished products, or products packaged in those cans, in China.
The evidence referred to in the Plaintiffs' closing submissions was confined to the evidence summarised at [385] and [388]-[395] above concerning the appearance on the Chinese market in February 2023 of Neurio Blue Tin products forming part of Megadairy's batch number NE06220011 manufactured on 3 June 2022 that were packaged in cans that Mr Wang says are similar in appearance to the kind of cans that Sunnya claimed were held by Supermega in November 2022 but that Mr Wu claimed had been destroyed. The Plaintiffs' submissions refer to Mr Wang's evidence that sticker labels affixed to those cans omitted any reference to Sunnya, and contained QR codes that linked to GABT's WeChat account rather than to Sunnya's website.
I therefore proceed on the basis that the Plaintiffs' claim is that Mr He and Ms Lu breached their statutory and/or fiduciary duties owed to Sunnya by directing, requesting, encouraging or endorsing Supermega and/or Megadairy to release some or all of the empty cans that the Plaintiffs allege were, or should have been, held by Supermega on behalf of Sunnya in November 2022, to GABT and/or GNT, and by directing, requesting, encouraging or endorsing GABT and/or GNT to use those empty cans to package, distribute and sell in China Neurio Blue Tin products forming part of Megadairy's batch number NE06220011.

[86]

Consideration and determination

The Plaintiffs have failed to prove their claim for the following reasons.
Mr Wang's evidence referred to at [394] above, in which he sought to demonstrate that the cans in which Neurio Blue Tin products forming part of Megadairy's batch number NE06220011 appeared for sale in China in February 2023 were part of the stock of empty cans that the Plaintiffs contend Supermega was holding for Sunnya in November 2022, is vague and also lacks credibility because it is inconsistent with his contemporaneous correspondence with Mr Wu. In November 2022, Mr Wang had claimed that the "missing" empty cans had been shipped to Supermega from China in September 2022 and would have arrived at its warehouse in New Zealand on October 2022. It was only after focussing on batch number NE06220011 in February 2023, and learning that the batch had been manufactured on 3 June 2022, that Mr Wang suggested that the "missing" empty cans had been delivered to Supermega in New Zealand in May and July 2022.
The CIPL referred to at [389] above establishes that Supermega shipped the Neurio products comprising batch number NE06220011 to GNT in cartons, not cans. There is no evidence that the cans in which that batch of Neurio products were subsequently offered for sale in China emanated from Supermega or Megadairy. The evidence does not establish that Supermega or Megadairy "released" those cans at all, let alone that they did so at the direction or request, or with the encouragement or endorsement, of Mr He and Ms Lu.
It is not necessary to determine whether the empty cans and finished products that were the subject of the November 2022 correspondence between Ms Zhang and Mr Wang on behalf of Sunnya, and Mr Wu on behalf of Supermega, were wholly or partly destroyed. Assuming (in the Plaintiffs' favour) that they were not wholly destroyed, the evidence does not establish any link between those cans and products and batch number NE06220011, for the reasons explained above. If and to the extent that it is relevant to the way in which the Plaintiffs put the sale of destroyed products claims, Mr Wang's evidence referred to at [393] and [395] above carries very little weight for the reasons there explained, and does not provide a sufficient basis to find that Sunnya did not authorise the manufacture and dispatch of batch number NE06220011.
For those reasons, the sale of destroyed products claims against Mr He and Ms Lu fail, and the ancillary claims against the other defendants must also be dismissed.

[91]

Outline of the parties' contentions

Section 37A of the Conveyancing Act provides: "(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors."
The Conveyancing Act defines "property" as including real and personal property, any thing in action, and any other right or interest. Section 37A applies to transfers of funds with the intent to defraud creditors. [318]
The Plaintiffs allege that the payments made by Mr He and Ms Lu to HLW totalling AUD$4,213,126.88 during the period from 15 February to 3 March 2023 were made with the intent to defraud creditors, and are therefore voidable under s 37A of the Conveyancing Act.
In their defence filed in the Sunnya proceedings, Mr He, Ms Lu and HLW deny those allegations. They did not plead any defence relying on s 37A(3) of the Conveyancing Act.
HLW did not appear at the hearing. However, counsel appearing for the He Parties submitted that the Plaintiffs' pleaded case was limited to transfers to HLW totalling AUD$1,900,000, referring to my judgment delivered on 30 October 2023 in which I refused leave to the Plaintiffs to amend their claims to include claims against HLW and Mega Aqua under s 37A of the Conveyancing Act in respect of payments made by HLW to Mega Aqua totalling approximately AUD$3,200,000 during the same period in which Mr He and Ms Lu made the impugned payments to HLW. [319] In those reasons for judgment, I mistakenly referred to the Plaintiffs' claims in respect of the payments made by Mr He and Ms Lu to HLW as relating to payments totalling AUD$1,900,000. My mistake occurred because I overlooked that the Plaintiffs plead payments totalling approximately AUD$1,900,000 during the period from 17 to 28 February 2023 and, in addition, payments totalling AUD$2,400,000 during the period between 1 to 3 March 2023. [320] That mistake was not material to my reasons for refusing leave in respect of that proposed amendment. [321] The Plaintiffs' allegation pressed in closing submissions that the payments made by Mr He and Ms Lu to HLW totalling AUD$4,213,126.88 are voidable under s 37A of the Conveyancing Act is within the scope of their pleaded case.

[92]

Consideration and determination

As the Plaintiffs submitted, the term "defraud" in s 37A of the Conveyancing Act is understood as meaning to hinder, delay or defeat creditors. [322] The term "creditors" includes future, contingent or prospective creditors. An intent to defraud such creditors may be established if the developer believed in "some impending indebtedness". [323]
The Plaintiffs must prove that Mr He and Ms Lu had an actual intention to hinder, delay, or defeat present, future, contingent or prospective creditors when they transferred funds totalling AUD$4,213,126.88 to HLW during the period from 15 February to 3 March 2023 and, in that sense, acted dishonestly. Such an intention may be inferred from the evidence concerning the transfers and the circumstances in which they were made. It is not necessary to show that Mr He and Ms Lu appreciated that they were acting dishonestly. The intention to hinder, delay or defeat creditors need not be the sole or predominant intention, but it must be of some significance and not merely incidental to other intentions. [324]
The evidence of transfers and the circumstances in which they were made is summarised at [406]-[434] above. As the Plaintiffs submitted, that evidence establishes that the transfers were made during the period between the Plaintiffs notifying Mr He and Ms Lu of their intention to apply for freezing orders against them, and the making of those freezing orders. Mr He claims to have made those transfers in order to put HLW in funds to make payments under five sales contracts between HLW and Mega Aqua, pursuant to which HLW had placed orders recorded in documents entitled "contracts of purchase". For the reasons explained at [575]-[584] above, I have found that the transfers of funds from Mr He and Ms Lu to HLW totalling AUD$4,213,126.88 were not made for that purpose. There is no connection between those payments and the five sales contracts referred to by Mr He. Nor is there any connection between those payments and the contracts of purchase referred to by Mr He, which I have found were created in or about March 2023 for the purpose of giving payments from HLW to Mega Aqua totalling AUD$2,989,584.33 the false appearance of having been made in the ordinary course of business between HLW and Mega Aqua and, in turn, giving the payments from Mr He and Ms Lu to HLW totalling AUD$4,213,126.88 the false appearance of having been made in order to put HLW to in funds to make payments that it was said to be obliged to make to Mega Aqua in the ordinary course of business. I have found that each of Mr He and Mr Wu gave false evidence seeking to explain those payments to Mega Aqua totalling AUD$2,989,584.33, which Mr He relied on to explain the AUD$4,213,126.88 payments to HLW. Mr He and Ms Lu have not advanced any other explanation for those payments to HLW.
Those matters, considered as a whole, give rise to an overwhelming inference that the payments totalling AUD$4,213,126.88 were made by Mr He (on behalf of himself and Ms Lu, from their joint accounts) to HLW with an actual intent to defraud future contingent creditors - namely Sunnya, who would be a creditor of Mr He and Ms Lu if it succeeded in its claims against them in the Sunnya proceedings. In particular, Mr He's false evidence attributing the payments to a need to put HLW in funds to make payments to Mega Aqua under the five disputed sales contracts is circumstantial evidence that permits an adverse inference that Mr He made the payments to HLW from his joint account with Ms Lu with the intent of defrauding his and Ms Lu's creditors. I find that Mr He made the payments to HLW with that intent. Sunnya is a person prejudiced by those payments, as they depleted the assets available to unsecured creditors of Mr He and Ms Lu.

[95]

Consideration and determination

As the Plaintiffs submitted, the He Parties have not adduced any evidence of the oral loan agreement pleaded in their defence to this claim under s 37A of the Conveyancing Act. The only evidence adduced by the He Parties in support of their defence is the resolution of All168 and the loan agreement between Sunlife (as lender), Ms He (as borrower), and Mr He (as guarantor), referred to at [435]-[448] above. As stated at [572]-[574] above, I have found on the basis of Mr Whitbourn's unchallenged evidence that those documents were created in late March 2023 and backdated to 28 June 2022.
Contrary to the Plaintiffs' submissions, I do not accept that the backdating of those documents, together with the fact that the payments were made during the period in which the Plaintiffs' application for freezing orders against Mr He and Ms Lu was pending and Ms He was not yet a defendant to the Sunnya proceedings, gives rise to an inference that the payments to Ms He were made with the intent to defraud creditors of Mr He and Ms Lu. As counsel for the He Parties submitted, and as referred to at [436] above, Mr He and Ms Lu were aware at the time of the payments to Ms He, that the Plaintiffs intended to apply for leave to amend their statement of claim, including by joining Ms He as a defendant to the Sunnya proceedings. It is inherently improbable that Mr He would have caused those payments to be made to Ms He with the intent of defrauding his and Ms Lu's creditors, thereby exposing his own daughter to claims under s 37A of the Conveyancing Act and a claim for a freezing order, in addition to the claims that were already the subject of the Plaintiffs' foreshadowed application for leave to amend. That is all the more so in circumstances where, as I have found above, Mr He was in the process of making payments to HLW in excess of AUD$4,000,000 with the intent to defraud his and Ms Lu's creditors. Having selected HLW as the recipient of those payments, it defies logic that Mr He would divert a relatively modest sum of AUD$400,000 to his daughter who was about to become a defendant in the Sunnya proceedings.
Notwithstanding the failure of the He Parties to adduce evidence of the oral loan agreement pleaded in their defence, the Plainitffs have failed to discharge their onus of proving that the payments to Ms He were made with the requisite dishonest intent on the part of Mr He and Ms Lu, and on the part of HLW.

[97]

Outline of the parties' contentions

These claims are directed at Mr He and Ms Lu's conduct during their tenure as directors of Sunnya in allegedly causing or permitting Sunnya to market and develop the Guamis brand that was owned by Sunlife in Australia and New Zealand and by GABT in China by co-branding Sunnya's Neurio products with the Guamis brand, and to their conduct after resigning as directors of Sunnya in allegedly requesting, directing, encouraging or endorsing Sunlife, GABT and/or GNT to sell and distribute those products in the same or very similar packaging, but omitting the Neurio brand.
The Plaintiffs allege that, Mr He and Ms Lu contravened ss 181(1) and 182(2) of the Corporations Act, and breached their fiduciary duties as directors of Sunnya during the period from about September 2021 by: 1. devising and managing a dishonest and fraudulent scheme whereby they would cause or permit Sunnya to engage in the marketing and brand development of the Guamis brand, in circumstances where Sunlife was the registered owner of the Guamis trade mark in Australia and New Zealand and, from May 2022, GABT was the applicant for registration of the Guamis trade mark in China; 2. causing Sunnya to commence producing milk formula products under the Guamis brand in Australia and New Zealand, to engage in marketing and brand development of those milk formula products, and to commence selling those milk formula products in China; and 3. causing Sunnya to engage in marketing and brand development activities for the line of products that it was producing under the Guamis brand, in circumstances where Sunnya was not the registered owner of the Guamis trade mark in Australia, New Zealand, or China.
The Plaintiffs contend that it was not in Sunnya's interests to undertake the marketing and development of the Guamis brand, in circumstances where Sunlife and GABT stood to benefit from any increase in the value of the brand achieved by Sunnya's marketing and development activities.
It is convenient to refer to the claims described at [903]-[905] above as the Guamis brand development claims.
Further or alternatively, the Plaintiffs allege that, Mr He and Ms Lu breached fiduciary duties that they continued to owe to Sunnya following their resignation as directors of the company on 25 November 2022 by: 1. requesting, directing, encouraging or endorsing Sunlife to cause or permit the New Zealand Guamis trade mark to be used in the manufacture of Guamis products to be distributed and/or sold by GABT, GNT or Sunlife; and 2. requesting, directing, encouraging or endorsing GABT, GNT and/or Sunlife to distribute and/or sell in China Guamis-branded products with the same or similar packaging to Sunnya's range of co-branded Neurio/Guamis products, including through shops operated by GNT on the Tmall e-commerce platforms.
In the alternative to their contention that Mr He and Ms Lu requested, directed, encouraged or endorsed Sunlife, GABT and/or GNT to do those things, the Plaintiffs allege that Sunlife, GABT and/or GNT did those things as the alter ego of Mr He and Ms Lu.
It is convenient to refer to the claims described at [907]-[908] above as the Guamis China sales claims. The Plaintiffs allege that the conduct of Mr He and Ms Lu that is the subject of those claims facilitated GABT, GNT and/or Sunlife taking Sunnya's business of selling the New Zealand-manufactured Neurio/Guamis-branded products in China.
The Plaintiffs allege that Sunlife knowingly received the benefit of the Guamis trade marks in Australia and New Zealand, and that Sunlife and GABT knowingly received the benefit of the value created in the Guamis brand by Sunnya's promotion of it within the meaning of the first limb of Barnes v Addy. The Plaintiffs also allege that Sunlife, Ms He, GABT, GNT, Supermega, Megadairy and NZFDA were involved in Mr He and Ms Lu's alleged contraventions of ss 181 and 182 of the Corporations Act within the meaning of s 79 of that Act and/or that they knowingly assisted in Mr He and Ms Lu's breaches of fiduciary duty within the meaning of the second limb of Barnes v Addy.
The He Parties deny that Mr He or Ms Lu breached any statutory or fiduciary duties owed to Sunnya in respect of the Guamis brand.
The He Parties contend that Sunnya's marketing and development activities related to the Neurio brand, and that this extended to co-branding a small number of products with the Neurio and Guamis brands. It was submitted on behalf of the He Parties that the Plaintiffs have adduced evidence of only very modest marketing, brand development and promotional expenses incurred by Sunnya, and have not identified any such expenses that related specifically to the Guamis brand and that did not relate to the Neurio brand. It was further submitted that Sunnya's total revenue of AUD$369,497 derived from sales of Neurio/Guamis-branded products in the twelve months to October 2022 must be viewed in the context of Sunnya's total revenue of approximately AUD$9,650,000 for the 2022 financial year. [325] It was submitted that the evidence simply does not support the contentions underpinning the Plaintiffs' Guamis claims that the Guamis brand was valuable to Sunnya, and that Mr He and Ms Lu caused Sunnya to make a substantive contribution to the marketing, promotion and development of the Guamis brand. It was submitted that, in the absence of evidence of value in the Guamis brand, the alleged dishonest and fraudulent scheme is inherently improbable.
It was submitted on behalf of the He Parties that, if Plaintiffs succeed in establishing the alleged breaches of statutory and fiduciary duty that are the subject of the Guamis brand development claims, notwithstanding the thin evidentiary basis referred to immediately above, then the Guamis China sales claims must be dismissed because Mr He and Ms Lu did not owe the duties in ss 181(1) and 182(2) of the Corporations Act following their resignation as directors of Sunnya on 25 November 2022. Nor did they owe any ongoing fiduciary duties post-resignation in respect of the Guamis brand, because their resignation had no connection with any opportunity relating to the Guamis brand.
It was further submitted on behalf of the He Parties that there was no evidence that Mr He and Ms Lu were involved in the conduct of Sunlife, GABT and/or GNT that is the subject of the Guamis China sales claims.
There was no appearance at the hearing for Sunlife, GABT or GNT.
The NZ Parties deny that Supermega, Megdairy or NZFDA were involved in, or knowingly assisted, any breach of statutory or fiduciary duty by Mr He and Ms Lu.
It was submitted on behalf of the NZ Parties that Mr Wu had developed the Guamis brand, and had approached Sunnya with the opportunity to promote that brand. Sunnya stood to profit from that opportunity, irrespective of whether it held the registered Guamis trade marks. Those trade marks were always subject to the direction and control of Mr Wu, irrespective of the identity of the registered owner, and Mr Wu was entitled to require the trade marks to be transferred to NZFDA in March 2023 after the commencement of the Sunnya proceedings.
As I have mentioned earlier in these reasons, the NZ Parties accept that knowledge of Mr Wu is attributable to Supermega, Megadairy and NZFDA. However, the NZ Parties submitted that, insofar as Sunnya spent money on the marketing, promotion and development of the Guamis brand (including as a co-brand or sub-brand of the Neurio brand), there is no evidence that Mr Wu was aware of that fact. In any event, Sunnya stood to benefit from any such expenditure by profiting from the sale of Guamis or Neurio/Guamis-branded products. Mr Wu was aware from the orders placed with, and fulfilled by, his companies, that the Guamis brand was being used in conjunction with the Neurio brand. However, Mr Wu did not otherwise know, or have any reason to enquire about, how the Guamis brand was being marked. Mr Wu has never visited the Guamis website.

[98]

Claims against Mr He and Ms Lu

It is not in dispute that Mr He requested Ms He to cause Sunlife to apply for registration of the Guamis trade marks in Australia and New Zealand in March 2020. [326]
For the reasons explained at [567]-[571] above, I have found that Sunlife was the registered owner of those trade marks in its own right and for its own benefit, and not for the benefit of Mr Wu or any of his companies. I have found that the alleged 2019 Guamis agreement on which the NZ Parties rely was fabricated for the purpose of the He Parties' and/or the NZ Parties' defence of the Sunnya proceedings, and that Mr Wu gave false evidence about that alleged agreement.
On the basis of the evidence summarised at [194]-[205], [380]-[384] and [450]-[458] above, I find that Sunnya commenced marketing, exporting and selling in China an Australian-manufactured Neurio/Guamis branded formulated milk powder product in about September 2021. The NZ Parties did not manufacture or supply that product to Sunnya.
There is no evidence of any prior use of the Guamis trade mark by Sunlife or any other person. In the absence of any evidence of any benefit to Sunnya in co-branding that formulated milk powder product with the Neurio and Guamis trade marks, rather than simply branding that product with its established Neurio trade mark, I infer that the use of the Guamis trade mark did not benefit Sunnya.
I find that Sunnya paid trade mark fees to Sunlife for the use of the Australian Guamis trade mark in respect of Neurio/Guamis branded formulated milk powder product that Sunnya commenced marketing, exporting and selling in China in about September 2021.
I find that GABT applied to register the Guamis trade mark in China in May 2022. GABT charged the registration fee to Sunnya, and Sunnya paid that fee. I infer from these facts that GABT applied to register the Guamis trade mark in China at the request or direction of Mr He, purportedly acting on behalf of Sunnya. It is inherently improbable that GABT would otherwise have charged this fee to Sunnya.
I find that Sunnya then commenced marketing, exporting and selling in China Neurio/Guamis branded liquid products that were manufactured and supplied by the NZ Parties. In addition to paying the registration fee for the Chinese Guamis trade mark, Sunnya paid trade mark fees to Sunlife for the use of the New Zealand Guamis trade mark in respect of those liquid products.
I find that Sunnya earned modest revenue from sales of products in its Neurio/Guamis product range. The evidence does not provide a sufficient basis to make any finding about whether the sale of those products was profitable for Sunnya. Sunnya's marketing expenses incurred during this period from about September 2021 until November 2022 (including its costs of participating in trade shows and, its website design and maintenance expenses) included the costs of marketing and promoting the Neurio/Guamis product range. There is no evidence that the Guamis brand was being promoted, marketed and developed by any other means during this period. Thus, Sunnya was funding the whole of the cost of promoting the Guamis brand, in addition to paying fees for the use of the Australian and New Zealand Guamis trade marks and for the registration of the Chinese Guamis trade mark.
At the time of the events referred to above, Mr He and Ms Lu were the only executive directors of Sunnya and had day-to-day management control of the company. [327] There is no evidence suggesting that there was any disharmony between them in relation to the company's affairs. I therefore infer that the decisions for Sunnya to associate its established Neurio brand with the new Guamis brand by developing a Neurio/Guamis-branded product range, the decisions to procure the manufacture of those products in Australia and New Zealand and to export those products to China for marketing, distribution and sale, and the decisions to cause Sunnya to thereby bear the whole of the cost of promoting and developing the Guamis brand, were made by Mr He and Ms Lu jointly, or were made by one of them with the knowledge and encouragement or endorsement of the other.
I infer that the association of the Guamis trade mark with the established Neurio trade mark enhanced the prospects of the new Guamis trade mark being developed into a valuable brand. Thus, Sunlife and GABT stood to benefit from the value of their brand being improved by the marketing and promotional efforts of Sunnya, undertaken at Sunnya's cost. If and to the extent that Sunnya's profits were increased by reason of its sales of Neurio/Guamis products (and I make no such finding), that benefit would endure only for so long as Sunlife and GABT were content for Sunnya to continue using the Guamis trade marks in Australia, New Zealand and China in consideration for the fees that Sunlife and GABT were charging to Sunnya.
I reject the NZ Parties' submission that Mr He and Ms Lu simply caused Sunnya to take the opportunity to profit from the sale of Neurio/Guamis products, and that the identity of the registered Guamis trade mark owner was irrelevant because the Guamis trade marks were under the control, and subject to the direction, of Mr Wu. First, there is no evidence that it was profitable for Sunnya to use the new Guamis trade mark in conjunction with its established Neurio trade mark. Second, for the reasons explained at [567]-[571] above, I have found that Sunlife was the registered owner of the Guamis trade mark in Australia and New Zealand in its own right and for its own benefit, and not for the benefit of Mr Wu or any of his companies.
For all of those reasons, I accept the Plaintiffs' submission that it was not in the interests of Sunnya to undertake the marketing and development of Sunlife and GABT's new Guamis brand by associating it with the established Neurio brand, and, in doing so, to bear the whole of the costs of developing that brand, including the costs of registration of the trade mark in China. The decisions made by Mr He and Ms Lu (or by one of them, with the knowledge and encouragement or endorsement of the other) to associate the two brands by marketing and selling Neurio/Guamis-branded products, and to cause Sunnya to bear those costs, therefore involved a breach of the fiduciary duty that each of them owed to Sunnya to exercise their powers as directors of the company bona fide and in the interests of the company. [328] Contrary to the He Parties' submissions, it is not to the point that, in the events which happened, the total amount spent by Sunnya in promoting the Guamis brand was modest.
The evidence does not provide a sufficient basis for any finding in quantitative terms about the effect of Sunnya's efforts on the value of the Guamis brand. However, I infer from the actions of Mr He and Ms Lu in relation to the Guamis brand after their resignation as directors of Sunnya, discussed below, that Sunnya's efforts had developed the Guamis brand from being an unused trade mark to a brand that had sufficient value to warrant GABT, GNT and/or Sunlife taking Sunnya's Neurio/Guamis-branded product range and marketing and selling those same products under the Guamis brand in China.
For the same reasons, I also accept the Plaintiffs' submission that those breaches of fiduciary duty were a dishonest and fraudulent scheme. It must have been obvious to Mr He and Ms Lu that their conduct would devote Sunnya's resources to enhancing, at Sunnya's cost, the value of the Guamis brand that was owned by their daughter's company Sunlife in Australia and New Zealand, and by GABT in China in which Mr He owned 95 per cent of the shares. In my opinion, this transgressed ordinary standards of honest behaviour. [329]
For the same reasons, I also accept the Plaintiffs' submission that each of Mr He and Ms Lu contravened s 181(1)(a) of the Corporations Act by making those decisions (or by encouraging or endorsing those decisions made by the other). There is no evidence about the subjective beliefs of Mr He and Ms Lu about whether those decisions were in Sunnya's best interests at the time that the decision were made. In my view, the objective matters to which I have referred above not only support my conclusion stated above that the decisions were not objectively in Sunnya's best interests, but also support an inference that neither Mr He nor Ms Lu subjectively believed that the decisions were in Sunnya's best interests. That is because the obvious consequence of the decisions was to invest Sunnya's resources in the development of the Guamis brand for the benefit of the registered owners of the Guamis trade marks. I draw those inferences more comfortably in the absence of any evidence from Mr He or Ms Lu to the contrary. Thus, the Plaintiffs have established the contravention of s 181(1)(a) even assuming (in favour of Mr He and Ms Lu) that their conduct is to be assessed against that section subjectively rather than objectively. [330]
For the same reasons, I infer that Mr He and Ms Lu made those decisions (or encouraged or endorsed the decisions made by the other) to gain an advantage for Sunlife (and, from May 2022, for GABT), and that this was their subjective purpose at the time. Again, I draw those inferences more comfortably in the absence of any evidence from Mr He or Ms Lu to the contrary. Accordingly, the Plaintiffs have also established the alleged contraventions of s 182(1)(a) of the Corporations Act by Mr He and Ms Lu in relation to the Guamis brand development claims.
For the avoidance of doubt, I do not consider that Mr He's conduct in requesting Sunlife to register the Guamis trade mark in Australia and New Zealand in March 2020 constituted a breach of his statutory or fiduciary duties to Sunnya. The evidence does not provide a sufficient basis to infer that Mr He and/or Ms Lu intended in March 2020 that Sunnya would develop the Guamis brand in the manner that they subsequently caused Sunnya to do from September 2021.
I now turn to the Guamis China sales claims against Mr He and Ms Lu, which concern alleged conduct of Mr He and Ms Lu (or their alleged alter egos) after they resigned as directors of Sunnya on 25 November 2022. As the He Parties submitted, ss 181 and 182 of the Corporations Act do not apply to those claims. After their resignation as directors, the fiduciary duties that precluded Mr He and Ms Lu from obtaining for themselves any property or business advantage belonging to Sunnya, or for which it had been negotiating, continued to apply if their resignation was prompted or influenced by a desire to acquire the property or business advantage for themselves or their associates, or if their former position with Sunnya led them to the property or business advantage that they later acquired for themselves or their associates. [331]
On the basis of the evidence referred to at [380]-[384] and [450]-[458] above, I find that, within three weeks after Mr He and Ms Lu's resignation as directors of Sunnya, GNT began placing a series of orders with Supermega for a Guamis-branded formulated milk powder product and for Guamis-branded liquid products, The Guamis-branded liquid products ordered by GNT were the same as the Neurio/Guamis-branded liquid products that Supermega had previously supplied to Sunnya. The packaging of the Guamis-branded formulated milk powder and liquid products that GNT ordered from Supermega was the same as the packaging for Sunnya's Neurio/Guamis-branded products, except that the Neurio trade mark had been removed. Supermega supplied those Guamis-branded products to GNT, which were then exported to China where they were marketed and sold by GABT through its website www.guamis.cn and by Sunlife at the Canton Fair.
I further find that, within two weeks after the Court made interim orders in the Sunnya proceedings restraining Sunlife from taking any steps to manufacture, sell, or export any Guamis-branded products to or from any person other than Sunnya, Sunlife lodged an application with the New Zealand Intellectual Property Office to transfer the New Zealand Guamis trade mark to NZFDA. That transfer was registered on 31 March 2023. NZFDA provided no consideration to Sunlife for the transfer.
For the reasons explained at [567]-[571] above, I have found that Sunlife was under no obligation to transfer the New Zealand Guamis trade mark to NZFDA or to any other company nominated by Mr Wu. I have found that the alleged 2019 Guamis agreement on which the NZ Parties rely was fabricated for the purpose of the He Parties' and/or the NZ Parties' defence of the Sunnya proceedings. Specifically, I have found that the alleged 2019 Guamis agreement was fabricated after the Court made the interim orders on 9 March 2023 restraining Sunlife from taking any steps to manufacture, sell or export any Guamis-branded products to or for any person other than Sunnya, [332] and after Sunlife made the application to transfer the New Zealand Guamis trade mark to NZFDA, in an attempt to conceal that the transfer was made in order for NZFDA to hold the trade mark on behalf of Sunlife in an attempt to take it outside the scope of the 9 March 2023 orders which applied to Mr He, Ms Lu, GABT, GNT, Sunlife, Supermega, and Megadairy.
I find that, after the registration of the transfer of the New Zealand Guamis trade mark to NZFDA, GABT's website continued to describe Sunlife as the owner of the Guamis brand, and Sunlife marketed and sold Guamis-branded products at the Canton Fair in May 2023 as referred to above. On 26 May 2023, the Court made further interim orders in the Sunnya proceedings restraining NZFDA from dealing with or using the New Zealand Guamis trade mark, as referred to at [458] above.
In my opinion, the timing of GNT's orders for Guamis-branded products so soon after Mr He and Ms Lu resigned as directors of Sunnya, the placement of those orders with Supermega which had been supplying the same products to Sunnya with Neurio/Guamis co-branding, the identical packaging of the products save for the removal of the Neurio brand from the products supplied to GNT, gives rise to a strong inference that Mr He and Ms Lu had some involvement in the orders placed by GNT, including by providing information to GNT about the products and/or their packaging and/or about the terms on which Supermega had been supplying the products to Sunnya. I draw that inference more comfortably in the absence of any evidence to the contrary from Mr He or Ms Lu.
It is inherently improbable, in my opinion, that Sunlife would permit the New Zealand Guamis trade mark - which it had registered at Mr He's request, and of which it remained the registered owner until 31 March 2023 - to be used in the manufacture of products to be supplied to GNT, without the knowledge and endorsement of Mr He.
Further, it is inherently improbable that GABT would market through its www.guamis.cn website the same products in almost identical packaging that Sunnya was marketing and selling under Neurio/Guamis branding, without the endorsement of GABT's majority shareholder Mr He, who retained an interest in Sunnya through All168 even after his resignation as a director of Sunnya. It is equally improbable, in my opinion, that Sunlife would market and sell such products without the endorsement of Mr He, who was the father of Sunlife's sole director and shareholder and who had requested Sunlife to register the Guamis trade mark in the first place.
In the absence of any evidence of disharmony between Mr He and Ms Lu concerning the affairs of Sunnya while they were directors of that company, and concerning matters relating to the Neurio and Guamis brands after they resigned as directors of Sunnya, I infer each of them was aware of, and encouraged or endorsed, the conduct of the other in relation to matters concerning the Guamis brand after they resigned as directors of Sunnya.
For all of those reasons, I infer that Mr He and Ms Lu (or one of them, with the knowledge and encouragement or endorsement of the other), requested, directed, encouraged or endorsed Sunlife to permit the use of the New Zealand Guamis trade mark in the manufacture of Guamis-branded products to be supplied to GNT, and requested, directed, encouraged or endorsed GNT, GABT, and Sunlife to market, distribute, and sell those products in China in the same packaging as Sunnya's Neurio/Guamis products. As I have explained above, the Guamis-branded products were the products from Sunnya's Neurio/Guamis range through which Sunnya had marketed and developed the Guamis brand from an unused brand into a brand of some value.
I accept the Plaintiffs' submission that, by their conduct described immediately above, Mr He and Ms Lu sought to obtain for GABT, GNT and Sunlife the business opportunity of distributing and selling the Guamis-branded products in China, in circumstances where Sunnya had been actively pursuing that opportunity by distributing and selling in China the same products in the same packaging under Neurio/Guamis co-branding and, by that co-branding, Sunnya had promoted and developed the Guamis brand at its own cost. The opportunity that Mr He and Ms Lu sought to obtain for GABT, GNT and/or Sunlife came to them by reason of their former positions as directors of Sunnya. They stood to benefit personally from the diversion of that opportunity due to Mr He's 95 per cent shareholding in GABT. The fiduciary duties that Mr He and Ms Lu owed to Sunnya as directors of the company therefore continued to apply after their resignation to preclude them from seeking to obtain that business opportunity for GABT, GNT and/or Sunlife. [333] Mr He and Ms Lu breached those ongoing fiduciary duties.
I accept the Plaintiffs' submission that this breach was dishonest and fraudulent. It is not to the point that Sunlife and GABT might have taken action to preclude ongoing use of the Guamis trade marks by Sunnya after Mr He and Ms Lu resigned as directors of Sunnya. Mr He and Ms Lu's ongoing fiduciary duties precluded them from using knowledge about Sunnya's Neurio/Guamis business gained during their directorship to request, direct, encourage or endorse GABT, GNT and Sunlife to take that part of Sunnya's business.
For those reasons, the Plaintiffs are entitled to the declaratory relief sought in respect of each of Mr He and Ms Lu to the extent that the relief concerns: (1) their contraventions of ss 181(1)(a) and 182(1)(a) of the Corporations Act and breaches of fiduciary duty in causing Sunnya to market and develop the Guamis brand during period from September 2021 to November 2022 by marketing and developing a co-branded Neurio/Guamis product range; (2) their breaches of fiduciary duty in requesting, directing, encouraging or endorsing Sunlife in and from December 2022 to permit the use of the New Zealand Guamis trade mark in the manufacture the products from the Neurio/Guamis range, branded only as Guamis, to be supplied to GNT; and (3) their breaches of fiduciary duty in requesting, directing, encouraging or endorsing GNT, GABT, and Sunlife to market, distribute and sell those products in China in packaging that replicated Sunnya's Neurio/Guamis product range packaging, save for the removal of the Neurio trade mark. The Plaintiffs are not entitled to the balance of the declaratory relief sought, including a declaration that Mr He breached his statutory or fiduciary duties to Sunnya by requesting Sunlife to register the Australian and New Zealand trade marks.
The Plaintiffs are also entitled to the orders sought that Mr He and Ms Lu pay compensation under s 1317H of the Corporations Act or equitable compensation for Sunnya's loss suffered by reason of their contraventions of s 181(1)(a) and s 182(1)(a) of the Corporations Act and their breaches of fiduciary duty, with the amount of such compensation to be determined at a subsequent hearing. The Plaintiffs' submissions did not identify the loss. I find that the loss is the costs incurred by Sunnya in marketing and developing the Guamis brand through marketing and developing the Neurio/Guamis product range during the period from September 2021 to November 2022.
Mr He and Ms Lu's breaches of fiduciary duty in requesting, directing, encouraging or endorsing GNT, GABT, and Sunlife to market, distribute and sell the Guamis-branded products in China were restrained by the interim orders made by the Court on 9 March 2023. As referred to at [939] above, steps were taken promptly thereafter to attempt to take the New Zealand Guamis trade mark outside the scope of those interim orders. I infer that, if not restrained from doing so by orders of the Court, Mr He and Ms Lu would continue to take steps to cause or encourage the manufacture of Guamis-branded products for export to China, and the marketing, distribution and sale of those products in China, whether through GNT, GABT, and Sunlife or through other entities. It is therefore appropriate to make the orders sought by the Plaintiffs restraining Mr He and Ms Lu from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than Sunnya, or persons authorised by Sunnya in writing.

[100]

Claims against Sunlife and Ms He

The Australian and New Zealand Guamis trade marks were not property of Sunnya received by Sunlife as a result of a breach of fiduciary duty by Mr He and/or Ms Lu. I have found that those trade marks were registered by Sunlife in its own right and for its own benefit. I have held that the evidence does not establish that Mr He's breached any fiduciary duty owed to Sunnya by requesting Sunlife to register those trade marks in March 2020.
I have held that the value of Sunlife's Australian and New Zealand Guamis trade marks was enhanced by Mr He and Ms Lu's breaches of fiduciary duty in causing Sunnya to promote and develop the Guamis brand at its own cost. [334] However, that increase in value does not represent property of Sunnya received by Sunlife. Rather, it is a gain that accrued to Sunlife by reason of Mr He and Ms Lu's breaches of fiduciary duty, for which Sunlife will be liable to account to Sunnya if it knowingly assisted in those breaches of duty.
The Plaintiffs' knowing receipt claims against Sunlife fail for those reasons.
By permitting Sunnya to use the Australian and New Zealand Guamis trade marks in association with the Sunnya's Neurio trade mark for the Neurio/Guamis product range during the period from September 2021 until Mr He and Ms Lu resigned as directors of Sunnya, Sunlife was knowingly concerned in Mr He and Ms Lu's contraventions of s 181(1)(a) and s 182(1)(a) of the Corporations Act referred to at [933]-[934] above, and knowingly assisted Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty referred to at [930]-[932] above.
By participating in the marketing and sale of the equivalent Guamis-branded products through Sunlife's booth at the Canton Fair in May 2023 at the request or direction, or with the encouragement or endorsement of Mr He and Ms Lu, Sunlife knowingly participated in Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty referred to at [945]-[947] above.
I find that Sunlife, through its sole director Ms He, had knowledge of the essential elements of those contraventions and dishonest breaches for the following reasons.
I infer that Ms He, as the sole director of the registered owner of the Australian and New Zealand Guamis trade marks, had actual knowledge that those marks had not been promoted, developed, or used before Sunnya began to use them in association with the Neurio brand from September 2021. [335] I infer that Ms He had actual knowledge that Sunnya was using those trade marks in that manner because: (1) it is inherently likely that Ms He, who was employed by Sunnya in marketing and media relations roles during the relevant period from September 2021 until November 2022, knew that Sunnya was marketing and selling the co-branded Neurio/Guamis products, including in China; [336] and (2) Sunlife charged trade mark fees to Sunnya for the use of the Guamis trade marks in respect of those products. [337] I infer that Ms He had actual knowledge that the Guamis brand was not promoted or developed in any manner other than by Sunnya's marketing and promotion of the Neurio/Guamis product range during the period from September 2021 to November 2022. [338] That is inherenly likely, because any other use of the Guamis trade mark would have had to have been undertaken or authorised by Sunlife. Ms He therefore had actual knowledge, or had knowledge of matters that would indicate to a reasonable person in her position, that Sunnya was bearing the whole of the effort and cost involved in promoting and developing the Guamis brand of which Sunlife was the registered owner in Australia and New Zealand.
I infer that Ms He, as the daughter of Mr He and Ms Lu, and as an employee of Sunnya, had actual knowledge during the period from September 2021 to November 2022 that Mr He and Ms Lu were the two executive directors of Sunnya, and that the day-to-day management of Sunnya was under their control. Ms He therefore had actual knowledge, or had knowledge of matters that would indicate to a reasonable person in her position, that it was Mr He and Ms Lu who caused Sunnya to promote and develop the Guamis brand at its own expense during the period from during the period from September 2021 to November 2022.
I infer that Ms He, as the daughter of Mr He and Ms Lu, and as an employee of Sunnya, had actual knowledge on and from 25 November 2022 that Mr He and Ms Lu had resigned as directors of Sunnya.
It is inherently probable that Supermega required the consent of Sunlife, as the registered owner of the Guamis trade mark in New Zealand, to manufacture Guamis-branded products ordered by GNT to be exported to China. It is inherently probable that the request for consent as directed to Ms He as the sole director of Sunlife. There is no evidence that Sunlife had other employees. For the reasons explained at [942] above, it is also inherently probable that, in the course of responding to the request, Ms He had discussions with Mr He through which she became aware that GNT was ordering the Guamis-branded products for export and distribution and sale in China at the request or direction, or with the encouragement or endorsement of Mr He and Ms Lu. I therefore infer that, from no later than 13 December 2022, Ms He had actual knowledge that GNT was ordering Guamis products from Supermega at the request or direction, or with the encouragement or endorsement of Mr He and Ms Lu, and that those products were to be exported for marketing, distribution and sale in China. Ms He thereby knew the facts that would indicate to a reasonable person in her position that Mr He and Ms Lu were requesting, directing, encouraging or endorsing GNT to distribute and sell products branded with the Guamis trade mark, in circumstances where Sunnya had undertaken the work and incurred the cost of promoting and developing that trade mark.
It is inherently probable that, by reason of her employment with Sunnya in marketing and media roles during the period from September 2021 to November 2022, Ms He was familiar with the design of the packaging in which Sunnya marketed, distributed and sold its Neurio/Guamis-branded products in China. By no later than May 2023 when she attended the Canton Fair where Guamis products were promoted from Sunlife's booth, Ms He had actual knowledge that the packaging of the Guamis-branded products was the same as for the equivalent Neurio/Guamis products, save for the removal of the Neurio trade mark. I therefore infer that Ms He knew from no later than May 2023 that the Guamis-branded products ordered by GNT were being marketed, distributed and sold in China in substantially the same packaging in which Sunnya marketed, distributed and sold the equivalent Neurio/Guamis-branded products. Ms He thereby had knowledge of the matters that would indicate to a reasonable person In her position that the manufacture, export, marketing, distribution and sale of the Guamis-branded products in which Sunlife was participating at the Canton Fair involved the appropriation of Sunnya's business of procuring, exporting, marketing, distributing and selling in China the equivalent Neurio/Guamis-branded products.
Standing back from each of those inferences, and considering as a whole all of the circumstances referred to at [958]-[962] above, I am satisfied that those circumstances provide a reasonable basis to conclude on the balance of probabilities that Ms He had knowledge in the requisite sense of the essential elements of Mr He and Ms Lu's breaches of their statutory and fiduciary duties. [339]
The knowledge of Ms He is attributable to Sunlife, as I have said above. However, it is the conduct of Sunlife described above - not any conduct of Ms He - that assisted Mr He and Ms Lu's breaches of fiduciary duties. A company can only act through its directors, employees and agents. Ms He was the sole director of Sunlife, and there is no evidence that the company had any employees or agents.
I reject the Plaintiffs' submission that Ms He is personally liable as a knowing assistant on the basis that Sunlife was her corporate alter ego. The Plaintiffs also submitted that Sunlife was the alter ego of Mr He because he allegedly effectively controlled the company. Each of those submissions was a mere assertion. The inconsistency between the two submissions illustrates the absence of analysis that has marred each instance of the Plaintiffs' reliance on the alter ego doctrine in the Sunnya proceedings, and leads to me to reject both submissions.
For all of those reasons, the Plaintiffs are not entitled to the declarations sought to the effect that Sunlife knowingly received the Australian and New Zealand Guamis trade marks, and the benefit of the increase in the value of the Guamis brand that flowed from Sunnya's marketing and development of that brand, within the meaning of the first limb of the rule in Barnes v Addy. However, Sunlife is liable to account to the Plaintiffs for that increased value as a gain that Sunlife achieved by reason of its knowing assistance in Mr He and Ms Lu's breaches of fiduciary duty referred to at [955]-[962] above. As explained at [931] above, any value that the Guamis brand had as at 25 November 2022 was attributable to the marketing and development activities undertaken and funded by Sunnya. Any subsequent increase in the value of the Guamis brand is attributable to Sunlife (and, as explained below, GABT) knowingly assisting Mr He and Ms Lu's breaches of fiduciary duties owed to Sunnya after their resignation as directors of that company. In those circumstances, a declaration that the Australian and New Zealand Guamis trade marks are held on constructive trust for Sunnya, and orders requiring those trade marks to be transferred to Sunnya, are the appropriate means of giving effect to Sunlife's liability to account to Sunnya for its gains achieved by knowingly assisting Mr He and Ms Lu's breaches of fiduciary duties owed to Sunnya. That declaration and order in respect of the New Zealand Guamis trade mark will be directed to both Sunlife and to NZFDA, which I have held took the transfer of that trade mark for the purpose of holding it on behalf of Sunlife in an attempt to take the trade mark outside the scope of the interim orders made by the Court on 9 March 2023.
I infer from Sunlife's transfer the New Zealand Guamis trade mark to NZFDA for that purpose that Sunlife is willing to take any steps available to it to continue to facilitate the manufacture of Guamis-branded products to be exported to China for marketing, distribution and sale in China. I apprehend that this may extend to the provision of information or assistance to third parties directed to that end, even after the Australian and New Zealand Guamis trade marks are transferred to Sunnya in accordance with the orders to be made by the Court. In my opinion, it is therefore appropriate to make a further order in substantially the terms sought by the Plaintiffs restraining Sunlife from taking such steps, or permitting or purporting to permit any party other than Sunnya to use the Australian or New Zealand Guamis trade marks.
The Plaintiffs' claims against Ms He personally must be dismissed.

[101]

Claims against GABT

By applying to register the Guamis trade mark in China in May 2022, in circumstances where the Guamis brand was being marketed and developed solely through Sunnya's Neurio/Guamis product range, GABT was knowingly concerned in Mr He and Ms Lu's contraventions of s 181(1)(a) and s 182(1)(a) of the Corporations Act referred to at [933]-[934] above, and knowingly assisted Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty referred to at [930]-[932] above.
By marketing the equivalent Guamis-branded products on its www.guamis.cn website from about April 2023 at the request or direction, or with the encouragement or endorsement of Mr He and Ms Lu, GABT knowingly participated in Mr He and Ms Lu's dishonest and fraudulent breaches of fiduciary duty referred to at [945]-[947] above.
I accept the Plaintiffs' submission that GABT had the requisite knowledge because, in matters relating to the application to register the Guamis trade mark in China, and the use of that trade mark in China, GABT was the alter ego of Mr He in the sense that the mind of Mr He was the mind of GABT. I have come to that conclusion having regard to Mr He's majority shareholding in GABT at all relevant times until 10 March 2023 and the influence that this conferred on him over the business of GABT, [340] my finding that GABT acted at Mr He's request or direction in applying to register the Guamis trade mark in China in May 2022, [341] and my finding that GABT acted at Mr He's request or direction, or with his encouragement or endorsement, in marketing and selling Guamis-branded products through GABT's website from about April 2023. [342]
In circumstances where GABT's application to register the Guamis trade mark in China is still under examination, the Plaintiffs abandoned their claim for a declaration that GABT holds that trade mark on resulting trust or constructive trust for Sunnya.
However, the Plaintiffs do press for: 1. a declaration that GABT knowingly received the benefit of the Guamis brand and/or the increase in the value of that brand, and the benefit of the pending Chinese Guamis trade mark, and an order that GABT transfer that trade mark to Sunnya; 2. a declaration that GABT knowingly received the benefit of the Guamis-branded products, and a declaration it holds those products on constructive trust for Sunnya; 3. an order that GABT be restrained from taking any steps to have Guamis-branded products, or products that are to be sold under the Guamis brand, from being manufactured for the benefit of GABT in Australia or New Zealand; 4. an order restraining GABT from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than Sunnya, or persons authorised by Sunnya in writing; and 5. an order that GABT pay equitable compensation to Sunnya in an amount to be determined at a subsequent hearing.
As to (1) above, the Plaintiffs' submissions did not articulate the basis for their contention that GABT has received the Guamis brand, or an increase in the value of that brand, in circumstances where its application to be registered as the owner of the Guamis trade mark in China has not yet been granted. The Plaintiffs' claim for declarations of knowing receipt therefore fail. It would be inappropriate to make an order requiring GABT to transfer to Sunnya the trade mark that has not yet been registered. In my opinion, subject to one qualification, an order requiring GABT to take all necessary steps to substitute Sunnya as the applicant for registration of the Guamis trade mark in China would be an appropriate means of giving effect to GABT's liability to account to Sunnya for the gains that it received by reason of its knowing assistance in Mr He and Ms Lu's breaches of fiduciary duty (being the increased value of the brand in respect of which GABT has applied to be the registered trade mark owner in China). The qualification is that the Plaintiffs would not be entitled to such an order and the order sought in (5) above requiring GABT to pay equitable compensation to Sunnya for its loss sustained by reason of GABT's knowing assistance in Mr He and Ms Lu's breaches of fiduciary duty (being the costs incurred by Sunnya in marketing and developing the Guamis brand). The Plaintiffs would need to elect between those two remedies.
As to (2) above, the Plaintiffs did not articulate the basis on which the Guamis-branded products ordered and paid for by GNT should be regarded as property of Sunnya held on constructive trust for Sunnya.
The order proposed in (3) above is covered by the terms of the order proposed in (4) above. In my opinion, an order in the terms proposed in (4) above is appropriate for the same reasons that I have explained above in relation to similar orders sought against Mr He, Ms Lu and Sunlife, and for the further reason that GABT may yet become the registered proprietor of the Chinese Guamis trade mark in the event that the Plaintiffs elect for equitable compensation rather than an order requiring GABT to substitute Sunnya as the applicant for registration of that trade mark.
The Plaintiffs also sought a declaration that GABT was involved in Mr He and Ms Lu's contraventions of s 181(1)(a) and s 182(1)(a) of the Corporations Act by distributing Guamis-branded products for sale in circumstances where GABT knew that Sunnya was paying for the costs of promoting the Guamis brand, and an order that GABT pay compensation to Sunnya under s 1317H of the Corporations Act in an amount to be determined at a subsequent hearing. These claims for relief can only relate to the conduct of Mr He and Ms Lu during the period up to 25 November 2022 in which Sunnya's Neurio/Guamis product range was being manufactured in Australia and New Zealand, and exported to China. The Plaintiffs' submissions did not identify any evidence that GABT distributed those products for sale in China. Those claims therefore fail.

[104]

Conclusion

For all of the reasons above, the Plaintiffs are entitled to the following relief claimed in respect of the Guamis claims: 1. a declaration that Mr He contravened ss 181(1)(a) and 182(1)(a) of the Corporations Act, and breached his fiduciary duties owed to Sunnya as a director of Sunnya, by causing Sunnya to market and develop the Guamis brand during the period from approximately September 2021 to November 2022 by marketing and developing a co-branded Neurio/Guamis product range; 2. a declaration that Mr He breached fiduciary duties that he continued to owe to Sunnya after his resignation as a director of Sunnya on 25 November 2022 by: 1. requesting, directing, encouraging or endorsing Sunlife in and from December 2022 to permit the use of the New Zealand Guamis trade mark in the manufacture of the products from the Neurio/Guamis range, branded only as Guamis, to be supplied to GNT; and 2. requesting, directing, encouraging or endorsing GNT, GABT, and Sunlife to market, distribute and sell those products in China in packaging that replicated Sunnya's Neurio/Guamis product range packaging, save for the removal of the Neurio trade mark; 1. an order that Mr He pay: 1. compensation to Sunnya under s 1317H of the Corporations Act for the contraventions of ss 181(1)(a) and 182(1)(a) of that Act, or equitable compensation for loss suffered by Sunnya by reason of his breach of fiduciary duties, referred to in (1) above, in an amount to be determined at a subsequent hearing; and 2. equitable compensation for loss suffered by Sunnya by reason of his breaches of fiduciary duties, referred to in (2) above, in an amount to be determined at a subsequent hearing; 1. an order restraining Mr He from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than Sunnya, or persons authorised by Sunnya in writing; 2. a declaration that Ms Lu contravened ss 181(1)(a) and 182(1)(a) of the Corporations Act, and breached her fiduciary duties owed to Sunnya as a director of Sunnya, by causing Sunnya to market and develop the Guamis brand during the period from approximately September 2021 to November 2022 by marketing and developing a co-branded Neurio/Guamis product range; 3. a declaration that Ms Lu breached fiduciary duties that she continued to owe to Sunnya after her resignation as a director of Sunnya on 25 November 2022 by: 1. requesting, directing, encouraging or endorsing Sunlife in and from December 2022 to permit the use of the New Zealand Guamis trade mark in the manufacture of the products from the Neurio/Guamis range, branded only as Guamis, to be supplied to GNT; and 2. requesting, directing, encouraging or endorsing GNT, GABT, and Sunlife to market, distribute and sell those products in China in packaging that replicated Sunnya's Neurio/Guamis product range packaging, save for the removal of the Neurio trade mark; 1. an order that Ms Lu pay: 1. compensation to Sunnya under s 1317H of the Corporations Act for the contraventions of ss 181(1)(a) and 182(1)(a) of that Act, or equitable compensation for loss suffered by Sunnya by reason of her breach of fiduciary duties, referred to in (4) above, in an amount to be determined at a subsequent hearing; and 2. equitable compensation for loss suffered by Sunnya by reason of her breaches of fiduciary duties, referred to in (6) above, in an amount to be determined at a subsequent hearing; 1. an order restraining Ms Lu from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than Sunnya, or persons authorised by Sunnya in writing; 2. a declaration that Sunlife holds the Australian Guamis trade mark on constructive trust for Sunnya; 3. an order that Sunlife take all necessary steps to transfer the registration of the Australian Guamis trade mark to Sunnya; 4. a declaration that NZFDA holds the New Zealand Guamis trade mark, and Sunlife holds its interest in that trade mark, on constructive trust for Sunnya; 5. an order that NZFDA and Sunlife take all necessary steps to transfer the registration of the New Zealand Guamis trade mark to Sunnya; 6. an order restraining Sunlife from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than Sunnya, or persons authorised by Sunnya in writing; 7. an order restraining Sunlife from permitting, or purporting to permit, any party (other than Sunnya, or persons authorised by Sunnya in writing) to use the Australian or New Zealand Guamis trade marks for the purpose of manufacturing, exporting, marketing, distributing or selling any Guamis-branded product to or for any person; 8. at the election of the Plaintiffs: 1. an order that GABT take all necessary steps to substitute Sunnya as the applicant for registration of the Guamis trade mark in China; or 2. an order that GABT pay equitable compensation to Sunnya for loss suffered by Sunnya by reason of GABT's knowing assistance in Mr He and Ms Lu's breaches of fiduciary duties, referred to in (1) and (4) above, in an amount to be determined at a subsequent hearing; and 1. an order restraining GABT from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than Sunnya, or persons authorised by Sunnya in writing.
The Plaintiffs' claims for relief in respect of the Guamis claims must otherwise be dismissed.

[105]

Cross-claims

GABT's cross-claim has been dismissed pursuant to UCPR r 13.6, as referred to earlier in these reasons. [343]
By their cross-claim filed against Sunnya on 1 November 2023, Mr He and Ms Lu allege that Sunnya had breached their respective employment contracts by failing to pay their salaries for the month of November 2022, failing to pay their accrued but unpaid leave entitlements as at 25 November 2022, and failing to pay their superannuation guarantee for the month of November 2022. Mr He and Ms Lu also alleged that Sunnya had repudiated their employment contracts by, inter alia (1) passing the resolutions at the board meeting on 2 November 2022 removing Ms Lu as Chief Executive Officer of Sunnya, removing Mr He has company secretary of Sunnya, and removing Mr He's authority to approve payments by Sunnya; (2) commencing the Sunnya proceedings against Mr He and Ms Lu on 3 November 2022 and subsequently obtaining interim injunctive relief against them that restrained them from certain conduct in their employment with Sunnya; and (3) removing their access to their neurio.com.au email accounts on 25 November 2022. Mr He and Ms Lu seek judgment in the amount of their unpaid salary, accrued annual leave entitlements, and unpaid superannuation guarantee, and damages for repudiation of their employment contracts.
In closing submissions, counsel for the He Parties accepted that, if the Plaintiffs proved their allegations against Mr He and Ms Lu in the Sunnya proceedings - including the trade mark transfer claims, the improper Neurio contracts claims, and the Guamis brand development claims - then Sunnya will have succeeded in establishing that Mr He and Ms Lu repudiated their employment contracts, and they will not be entitled to the relief sought in their cross-claim.
For the reasons explained above, the Plaintiffs have proved sufficient of those allegations against Mr He and Ms Lu to establish that they repudiated their employment contracts. [344]
There will be an order dismissing the cross-claim filed on 1 November 2023.

[108]

Proper construction of the Share Purchase Agreement

As explained at [53] above, Jatcorp acquired its 51 per cent stake in Sunnya pursuant to a Share Purchase Agreement that it entered into with Mr He and Ms Lu on or about 13 June 2018.
It is common ground that Sunnya did not have a constitution. The All168 Plaintiffs accept that Sunnya is therefore governed by the replaceable rules under the Corporations Act. [345] Under the replaceable rules, Sunnya may appoint a director by resolution passed in general meeting, [346] and each shareholder at the general meeting is entitled to one vote on a show of hands or one vote for each share that they hold on a poll. [347] A poll may be demanded on any resolution by, relevantly, shareholders with at least 5 per cent of the votes that may be cast on the resolution on a poll. [348] Thus, as the owner of 51 per cent of the shares in Sunnya, Jatcorp would be entitled to demand a poll on any resolution concerning the appointment (or removal) of directors, and would cast 51 per cent of the votes on the poll taken on that resolution.
However, the All168 Parties submitted that, after completion of the Share Purchase Agreement, clause 5.3 continues to bind and constrain the parties - that is, Jatcorp, Mr He and Ms Lu - in relation to the nomination and appointment of directors of Sunnya, and the structure of the board of directors.
It is convenient to repeat the terms of clause 5.3 of the Share Purchase Agreement: "(a) On Completion, SUN must procure the appointments of: (i) Anthony Crimmins as a director of SUN and chairman with a casting vote; and (ii) Wilton Yao as an executive. (b) JAT agrees that Yanxia Lu will remain as CEO for three years and director of SUN. Her salary package will $100,000 per annum plus superannuation and reviewed annually, the first review to take place for the 12 months period commencing one year after Completion. (c) JAT agrees that Yinghan Le will remain as a Director of SUN. His salary package will $70,000 per annum plus superannuation and reviewed annually, the first review to take place for the 12 months period commencing one year after Completion. (d) The Vendors agrees that a representative of JAT will be employed on a salary package $70,000 per annum plus superannuation."
The All168 Plaintiffs submitted that, on the proper construction of clause 5.3, Mr Crimmins and Mr Yao are the only persons whom Jatcorp is entitled to cause to be appointed as directors of Sunnya, Mr He and Ms Lu will remain as directors of Sunnya at all times, and any alteration to that make up of Sunnya's board of directors would require the consent of all parties to the Share Purchase Agreement - Jatcorp, Mr He and Ms Lu. The All168 Plaintiffs submitted that clause 5.3 is "clearly not intended to provide only for the initial constitution of the board" and is "clearly intended to govern the ongoing make-up of the board of directors of Sunnya". The All168 Plaintiffs submitted that clause 5.3 "memoralises Mr He and Ms Lu's entitlement to 'remain' as directors", and that this confirms that the clause concerns the future, ongoing make-up of the board and not merely changes to be made to the board on completion of the Share Purchase Agreement.
The All168 Plaintiffs submitted that it should be inferred that Mr He and Ms Lu were satisfied that the Sunnya board would be capable of passing a resolution to which Mr He and Ms Lu did not concur only if the resolution had the concurrence of Mr Crimmins as chairman. The All168 Plaintiffs submitted that, if Mr Crimmins were to resign as a director and therefore ceased to be the chairman (as in fact occurred), any replacement chairman would need to be elected by the directors, and that, in those circumstances, Mr He and Ms Lu would effectively control the election of the chairman. [349] The All168 Plaintiffs submitted it was clearly intended that Mr He and Ms Lu, who had established Sunnya, would thereby continue to exercise a measure of influence or control.
In a purported alternative submission that is in truth a supplementary submission, the All168 Plaintiffs describe clause 5.3 (construed in the manner for which they contend, which excludes the replaceable rules) as giving rise to an "unworkable lacuna" in the event that a director resigns or is unable to carry out their functions, and the parties to the Share Purchase Agreement are unable to reach a unanimous agreement about the appointment of a new director to replace the resigning or incapacitated director. The All168 Plaintiffs submitted that terms should therefore be implied into the Share Purchase Agreement as a matter of business efficacy, and on the basis that they are so obvious as to go without saying, to the effect that Jatcorp may appoint up to and no more than two directors, Mr He and Ms Lu (jointly, I presume) may appoint up to an no more than two directors, and Jatcorp will not vote its majority shareholding in Sunnya so as to constitute the board in any other way.
The All168 Plaintiffs submitted that: "The prospect that Jatcorp would be entitled to appoint any 3 (or more) directors of its choice … cannot have been in contemplation. That would create the very real prospect of a triumvirate of directors being appointed who were at odds with Mr He and Ms Lu and could exercise complete control over the management of the company. It is submitted that there can only have been an intention or expectation that Jatcorp would appoint a total of 2 directors only, and that Jatcorp would need to ensure that at least one of those directors had the confidence of Mr He or Ms Lu such that Mr He or Ms Lu was prepared to elect them as chair."
I reject all of those submissions.
The terms of the Share Purchase Agreement are to be understood by what a reasonable businessperson in the position of the parties would have understood them to mean. That objective approach to construction requires consideration of the language used by the parties, the surrounding circumstances known to them, and the commercial purpose or objects to be secured by the contract. That is facilitated by an understanding of the genesis of the transaction, the background, the context, and the market in which the parties are operating. Unless a contrary intention is indicated, the Court is to approach the task of construing a commercial contract such as the Share Purchase Agreement on the assumption that the parties intended to produce a commercial result. The contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience. [350]
In my opinion, the language used by the parties in clause 5.3(a) is unambiguous and goes no further than obliging Jatcorp to procure the two appointments specified in clause 5.3(a) on completion of the Share Purchase Agreement. I accept the All168 Defendants' submission to that effect.
A reasonable businessperson in the position of the parties would not understand clause 5.3(a) as precluding any other person nominated by Jatcorp from being appointed as a director of Sunnya at any time after completion, except with the unanimous consent of the parties to the Share Purchase Agreement.
Nor would that reasonable businessperson understand clauses 5.3(b) and 5.3(c) as entitling (and obliging) Mr He and Ms Lu to remain as directors of Jatcorp, not only on completion of the Share Purchase Agreement, but in perpetuity thereafter. There are at least three reasons for this.
First, the reasonable businessperson would have not attributed to the parties an intention that directors of Sunnya would be powerless to take steps to remove a director in circumstances where they considered that their fiduciary and statutory duties to Sunnya required them to take such steps, such as where the director in question had been misappropriating company property.
Second, the reasonable businessperson would not have attributed to the parties an intention that the parties to the Share Purchase Agreement would control the composition of Sunnya's board in perpetuity in circumstances where any party was entitled to sell its shares subject to right of refusal process in clause 10 of the Share Purchase Agreement, [351] and the selling party had no obligation to procure the incoming shareholder to accede to the terms of the Share Purchase Agreement. I note that Mr He and Ms Lu did in fact transfer their shares in Sunnya to All168 at some time after completion of the Share Purchase Agreement. As the All168 Defendants submitted, the Share Purchase Agreement no longer binds all of the current shareholders of Sunnya.
Third, the reasonable businessperson would not have understood that the parties intended to create the "unworkable lacuna" that would arise on the All168 Plaintiffs' construction of clause 5.3 if a director resigns, is unable to continue carrying out their functions, or dies. That lacuna would work considerable commercial inconvenience, as the All168 Defendants submitted.
The implied terms proposed by the All168 Plaintiffs to overcome that lacuna would in truth merely create board deadlock in the event of a dispute over the election of a chairman of the board. I reject the All168 Plaintiffs' submission that those implied terms are necessary to give business efficacy to the Share Purchase Agreement, and are so obvious as to go without saying. They are neither necessary nor obvious because, as the All168 Defendants submitted, the replaceable rules cover the field. Those replaceable rules have effect as a contract between Sunnya and each shareholder, and between shareholders, pursuant to s 140 of the Corporations Act. [352]
The object of the Share Purchase Agreement was to facilitate the transfer of 51 one per cent of the shares in Sunnya to Jatcorp for consideration of at least AUD$6,500,000 payable to Mr He and Ms Lu, partly in cash and partly in the form of shares in Jatcorp. [353] There is simply no basis for the All168 Plaintiffs' submission that it "cannot have been in contemplation" that Jatcorp would be entitled to gain control over the management of the company in which it was acquiring the majority shareholding, by exercising the voting power conferred by that majority shareholding to pass resolutions of the company in general meeting appointing directors in accordance with the replaceable rules. [354]
For all of those reasons, I decline to make the declaration sought by the All168 Plaintiffs that Jatcorp is entitled to appoint two (and no more than two) directors, and Mr He and Ms Lu are entitled to appoint two (and no more than two) directors to the board of Sunnya.

[109]

EGM resolutions on 31 October 2022

As referred to at [282] above, there was no attendance on behalf of All168 at the EGM that was held at 11.00am on 31 October 2022. Mr Wang and Mr Shen attended on behalf of Jatcorp. Resolutions were passed removing Mr Qiang as a director of Sunnya, and appointing Mr Wang, Mr Zhang and Mr Shen as directors of Sunnya. It was also resolved that the current board members - Mr He and Ms Lu - be directed to provide the new members of the board full and unfettered access to Sunnya's books and records.
The All168 Plaintiffs' claim for a declaration that those resolutions are ineffective is founded on the failure to give at least 21 days' notice of the EGM as required by s 249H of the Corporations Act.
It is common ground that the period of notice given was less than the 21 days required by s 249H. As the All168 Defendants submitted, this is a "procedural irregularity" within the meaning of s 1322 of the Corporations Act. [355] That deficiency of notice does not invalidate the meeting or the resolutions passed at the meeting unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice, and declares the meeting to be invalid. [356]
In support their contention that substantial injustice was caused by the EGM having been held on 31 October 2022, only three days' after notice was given that the date of the EGM was brought forward to 31 October 2022, the All168 Plaintiffs submitted that the resolutions passed at the EGM contravened clause 5.3 of the Share Purchase Agreement, and that three days was an insufficient period of time for Mr He and Ms Lu to commence proceedings for injunctions precluding such contravening resolutions.
I reject that submission. The resolutions did not contravene clause 5.3 of the Share Purchase Agreement for the reasons explained at [996]-[1014] above.
I accept the All168 Defendants' submission that there is no evidence of any substantial injustice having been caused by the short notice of the EGM because there is no evidence that All168 was unable to arrange for Mr He or Ms Lu or some other representative to attend the EGM on the three days' notice. As I have said at [704] above, Mr He and Ms Lu's clandestine attempts to transfer Sunnya's Australian and New Zealand Neurio trade marks to GABT at the time that Mr He was objecting to short notice of the EGM gives rise to an inference that his reasons for objecting were that he wished to maximise the prospects that the transfer of the Australian and New Zealand Neurio trade marks to GABT would be completed before Jatcorp had an opportunity to appoint new directors to Sunnya, who would became aware of his and Ms Lu's actions in relation to the trade marks. Even if a representative of All168 had attended the EGM, the resolutions would have been carried on a poll, on which Jatcorp would have exercised 51 per cent of the votes.
For those reasons, I decline to make the declaration sought by the All168 Plaintiffs that the resolutions passed at the EGM were ineffective, or that the EGM was invalid.

[110]

Board resolutions on 2 November 2022

The evidence concerning the board meeting held on 2 November 2022 is summarised at [289]-[294] above.
It is common ground that Mr He and Ms Lu were given only approximately three hours' notice of the meeting. The All168 Plaintiffs' claim for a declaration that the resolutions passed at that meeting are ineffective is founded on the alleged failure to give reasonable notice of the meeting as required by the replaceable rule in s 248C of the Corporations Act.
I accept the All168 Defendants' submission that three hours was a reasonable period of notice in circumstances where the meeting was called for the purpose of taking urgent action in relation to the management of Sunnya's affairs after its newly appointed directors of Sunnya became aware of the steps taken by Mr He and Ms Lu to transfer Sunnya's Neurio trade marks to GABT.
Even if I had held that three hours was not reasonable notice, I would have held that no substantial injustice was caused by that procedural irregularity, and that the meeting, and the resolutions passed at it, were validated by s 1322(2) of the Corporations Act. I would have declined to make the declaration sought by the All168 Plaintiffs to the contrary in the absence of evidence that the period of notice was insufficient for them to be able participate in the meeting, and in circumstances were the sole complaint articulated in their closing submissions about the period of notice was that it was inadequate time for them to apply to the Court for an injunction restraining Mr Wang, Mr Zhang and Mr Shen from passing the resolutions that were passed at the meeting on 2 November 2022 on the grounds that they were contrary to clause 5.3 of the Shareholders Agreement. For the reasons explained at [996]-[1014] above, those resolutions were not contrary to clause 5.3.
For those reasons, I decline to make the declaration sought by the All168 Plaintiffs that the resolutions passed at the 2 November 2022 board meeting were ineffective, or that the meeting was invalid.

[111]

Alleged oppression

In support of their contention that the affairs of Sunnya have been conducted in a manner that has been oppressive to, unfairly prejudicial to, or unfairly discriminatory against, All168 within the meaning of s 232 of the Corporations Act, the All168 Plaintiffs allege that: 1. the All168 Defendants have excluded Mr He and Ms Lu from the management of Sunnya contrary to the terms of the Share Purchase Agreement or, alternatively, contrary to the legitimate expectations that they held by reason of their shareholding in All168, which in turn owns 49 per cent of the shares in Sunnya; 2. the All168 Defendants have denied Mr He and Ms Lu access to Sunnya's banking and financial records; 3. the All168 Defendants have approved remuneration for the Jatcorp-appointed directors of Sunnya only, which was unfairly discriminatory in favour of Jatcorp and against All168; 4. the All168 Defendants have caused the Neurio brand to be associated with the Jatcorp brand by adding the Jatcorp logo to Neurio-branded formulated milk powder products; 5. the All168 Defendants have sought and obtained injunctive orders that the All168 Plaintiffs contend "go beyond what the defendants could even arguably be entitled to", and the All168 Defendants have caused Sunnya to defend proceedings brought against it by GABT in relation to the Neurio trade marks in China; and 6. All168's shares are locked in Sunnya, and Jatcorp has not made any reasonable offer to buy out All168's shares at any reasonable price.
As to (1) above, the All168 Plaintiffs' complaint that Jatcorp acted contrary to the Share Purchase Agreement in "seizing control" of Sunnya by the resolutions passed at the EGM on 31 October 2022, is without substance. Jatcorp voted in favour of resolutions appointing directors to Sunnya, which resulted in Jatcorp having a majority of directors on the board. As the majority shareholder of Sunnya, Jatcorp was entitled to take that course under the replaceable rules that applied for the reasons explained above.
The resolutions passed at the 2 November 2022 board meeting removing Mr He and Ms Lu as the Company secretary and Chief Executive Officer of Sunnya (respectively), and requiring them not to authorise the disposal or transfer of any of Sunnya's assets or funds, and not to enter into any binding agreements on behalf of Sunnya, were not contrary to clause 5.3 or any other term of the Share Purchase Agreement. Mr He and Ms Lu had no legitimate expectation that their co-directors would permit them to continue to participate in the management of Sunnya in circumstances where Mr He and Ms Lu had embarked on a clandestine campaign to transfer Sunnya's valuable Neurio trade marks to GABT in breach of their statutory and fiduciary duties owed to Sunnya, and had failed to respond to the other concerns about Mr He's conduct in authorising transfers of funds out of Sunnya's account in the period after the EGM was called. Those concerns were raised with Mr He and Ms Lu in the letter that Mr Wang sent to them on 1 November 2022. As the All168 Defendants submitted, there is no evidence that Mr He and Ms Lu ever provided a substantive response to those concerns. They have not adduced evidence in these proceedings explaining the funds transfers that Mr He authorised. [357]
I reject the All168 Plaintiffs' submission that they were effectively compelled to resign as directors of Sunnya because they had been excluded from management. I have found that they resigned in order to distance themselves from Sunnya before embarking on their Plan B with the objective and intention of diverting to GABT Sunnya's business of selling Australian and New Zealand-manufactured Neurio-branded products in China. [358]
I also reject the All168 Plaintiffs' submission that Sunnya's affairs were conducted oppressively by the constructive dismissal of Mr He and Ms Lu and the failure to pay their salaries for the month of November 2022. Mr He and Ms Lu had repudiated their employment contracts by their conduct in pursuit of Plan B. [359]
As to (2) above, it is common ground that Mr He and Ms Lu were denied access to Sunnya's bank accounts during the period from between 1 and 3 November 2022 until 17 November 2022, when their access was restored on a "read only" basis. I accept the All168 Defendants' submission that, in the circumstances existing at that time, [360] the exclusion of Mr He and Ms Lu from access to Sunnya's banking records for a period of approximately two weeks did not constitute oppression. I also accept the All168 Defendants' submission that the complaints in the All168 Plaintiffs' submissions about alleged exclusion of Mr He and Ms Lu from access to other financial records of Sunnya are outside the scope of the pleaded case and were not the subject of any evidence in any event.
As to (3) above, I accept the All168 Defendants' submissions that the resolution passed at the 31 October 2022 meeting approving salaries of $60,000 per annum for each of Mr Wang, Mr Zhang and Mr Shen was not unfairly discriminatory against All168 in circumstances where there is no evidence that the salaries paid to Mr He and Ms Lu did not take into account their roles as directors of Sunnya in addition to their roles and responsibilities as employees, there is no evidence that Mr He, Ms Lu or All168 objected to the remuneration proposed for the Jatcorp-nominated directors as set out in the notice of EGM issued on 21 October 2022, and the All168 Plaintiffs do not contend that that remuneration was not a fair and reasonable remuneration for the role to be performed by those three directors.
As to (4) above, Jatcorp's logo was applied to the packaging of Sunnya's Neurio-branded products in about February or March 2023 in response to the appearance on the market of co-branded Neurio/NRIO products. [361] I reject the All168 Plaintiffs' submissions that this was "privileging or advancing the interests of Jatcorp", and that is "incongruous" with the complaints about the co-branding of Neurio products with the Guamis trade mark. As the All168 Defendants submitted, the addition of the Jatcorp logo to the packaging of Sunnya's Neurio products was an attempt to counteract Mr He and Ms Lu's diversion to GABT of Sunnya's business of selling Australian and New Zealand-manufactured Neurio-branded products in China by associating the Neurio trade mark with the NRIO trade mark, in breach of Mr He and Ms Lu's fiduciary duties owed to Sunnya. [362] I do not consider that it was unfairly discriminatory against All168 for the Jatcorp-appointed directors of Sunnya to cause the company to take this action in an attempt to ameliorate the impact on Sunnya of Mr He and Ms Lu's breaches of duty. In any event, the attempt was short-lived and apparently unsuccessful. Sunnya resolved to suspend its supply of Neurio-branded products to China on 20 April 2023. [363] There is no evidence that it has subsequently resumed exporting those products to China.
As to (5) above, I do not accept that interim relief sought and obtained by the Plaintiffs in the Sunnya proceedings goes beyond what they "could even arguably be entitled to" in respect of Mr He and Ms Lu's breaches of statutory and fiduciary duty, and the conduct of the other defendants to the Sunnya proceedings in being knowingly concerned in, and knowingly assisting, those breaches of duty. My reasons for this are explained in detail in the section of these reasons for judgment addressing the claims for relief in the Sunnya proceedings.
No evidence has been adduced in the Sunnya proceedings or the All168 proceedings that would provide a sufficient basis for this Court to make any findings about proceedings that are on foot in China, or about the conduct of the parties to those proceedings, even assuming that considerations of comity would not constrain this Court from making findings about those matters. All parties to the proceedings in this Court made various assertions about the Chinese proceedings. None of the parties adduced any evidence in support of those assertions, which were a time-wasting distraction in these proceedings.
The All168 Plaintiffs' contention referred to at (6) above has no substance in the absence of evidence that All168 wishes to sell its shares in Sunnya, and has offered to sell those shares to Jatcorp either in accordance with the right of refusal process in clause 10 of the Share Purchase Agreement or otherwise. Even if such evidence had been adduced, it is difficult to see how this could be characterised as oppressive rather than as the consequence of the conduct of Mr He and Ms Lu in breach of their statutory and fiduciary duties to Sunnya.
The test of oppression is an objective test of unfairness. In the present case, for the reasons outlined above, I have determined on the balance of probabilities that an objective commercial bystander considering the matters referred to above individually, and as a whole, would not be satisfied that the affairs of Sunnya were being conducted unfairly as at the date of commencement of the All168 proceedings. The claims made by the All168 Plaintiffs for declaratory and other relief in relation to the alleged oppression will be dismissed. [364]

[112]

Conclusion and orders

In the Sunnya proceedings (2022/329426), the Plaintiffs have failed in respect of their undervalue sales claims and their commercial invoices claims.
The Plaintiffs' improper Neurio contract claims have been partially successful only in relation to some of the impugned contracts, and only against Mr He, Ms Lu and GABT.
The Plaintiffs have succeeded in their trade mark transfer claims concerning the Australian, New Zealand and Indonesian Neurio trade marks, but failed in their European trade mark claim.
The Plaintiffs have succeeded in their Neurio/NRIO claims against Mr He and Ms Lu insofar as those claims related to breaches of fiduciary duties. The Plaintiffs have succeeded in their claims that Sunlife knowingly assisted those breaches of fiduciary (but only in the period from May 2023). The Plaintiffs have also succeeded in their claims that GABT knowingly assisted in those breaches of fiduciary duty, and that GABT acted in concert with Mr He and Ms Lu during part of the period in which those breaches occurred. The Plaintiffs have also succeeded in their claims that Supermega, Megadairy and NZFDA knowingly assisted Mr He and Ms Lu's breaches of fiduciary duty. The Plaintiffs' Neurio/NRIO claims have otherwise failed.
The Plaintiffs have failed in respect of their improper Neurio products claims, their sale of destroyed products claims, and their sale of written off products claims.
The Plaintiffs' claims under s 37A of the Conveyancing Act have succeeded only insofar as they concern payments made by Mr He and Ms Lu to HLW.
The Plaintiffs' Guamis claims have been partially successful against Mr He, Ms Lu, Sunlife and GABT. The Guamis claims have otherwise failed.
The declarations and orders of the Court are as follows: 1. DECLARE that the second defendant contravened s 182 of the Corporations Act 2001 (Cth) by encouraging or endorsing the eighth defendant (as seller) and the third defendant (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by the eighth defendant of Neurio-branded products to be exported to the third defendant's nominated importer in China, and by encouraging or endorsing the eighth defendant's manufacture and supply of Neurio-branded products to the third defendant under those contracts. 2. ORDER that the second defendant pay compensation to the first plaintiff pursuant to s 1317H of the Corporations Act 2001 (Cth) in respect of her contravention of that Act in (1) above, in an amount to be determined at a subsequent hearing. 3. DECLARE that the first defendant contravened s 182 of the Corporations Act 2001 (Cth) by encouraging or endorsing the eighth defendant (as seller) and the third defendant (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by the eighth defendant of Neurio-branded products to be exported to the third defendant's nominated importer in China, and by encouraging or endorsing the eighth defendant's manufacture and supply of Neurio-branded products to the third defendant under those contracts. 4. ORDER that the first defendant pay compensation to the first plaintiff pursuant to s 1317H of the Corporations Act 2001 (Cth) in respect of his contravention of that Act in (3) above, in an amount to be determined at a subsequent hearing. 5. DECLARE that GABT was involved in the first and second defendants' contraventions of s 182 of the Corporations Act 2001 (Cth) in (1) and (3) above within the meaning of s 79 of that Act. 6. ORDER that the third defendant pay compensation to the first plaintiff pursuant to s 1317H of the Corporations Act 2001 (Cth) in respect of its contravention of s 182 of that Act in (5) above, in an amount to be determined at a subsequent hearing. 7. DECLARE that the second defendant breached her fiduciary duties owed to the first plaintiff by encouraging or endorsing the eighth defendant (as seller) and the third defendant (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by the eighth defendant of Neurio-branded products to be exported to the third defendant's nominated importer in China, and by encouraging or endorsing the eighth defendant's manufacture and supply of Neurio-branded products to the third defendant under those contracts. 8. ORDER that each of the second defendant pay equitable compensation to the first plaintiff in respect of the breaches of fiduciary duty in order (7) above, in an amount to be determined at a subsequent hearing. 9. DECLARE that the first defendant breached his fiduciary duties owed to the first plaintiff by encouraging or endorsing the eighth defendant (as seller) and the third defendant (as buyer) to enter into eleven contracts during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by the eighth defendant of Neurio-branded products to be exported to the third defendant's nominated importer in China, and by encouraging or endorsing the eighth defendant's manufacture and supply of Neurio-branded products to the third defendant under those contracts. 10. ORDER that the first defendant pay equitable compensation to the first plaintiff in respect of the breaches of fiduciary duty referred to in (9) above, in an amount to be determined at a subsequent hearing. 11. DECLARE that the third defendant knowingly assisted the breaches of fiduciary duty by the first and second defendants in (7) and (9) above within the meaning of the second limb of Barnes v Addy by entering into eleven contracts with the eighth defendant during the period from 31 October 2022 to 8 November 2022 for the manufacture and supply by the eighth defendant of Neurio-branded products to be exported to the third defendant's nominated importer in China. 12. DECLARE that the third defendant knowingly received Neurio-branded products under the contracts referred to in (11) above within the meaning of the first limb of Barnes v Addy. 13. ORDER that the third defendant: 1. pay equitable compensation to the first plaintiff in respect of that knowing assistance and knowing receipt in an amount to be determined at a subsequent hearing; or 2. alternatively, account to the first plaintiff for its profits derived from that knowing assistance and knowing receipt, at the plaintiffs' election. 1. ORDER that the third defendant is restrained from taking any steps to manufacture, or cause to manufactured, in Australia and/or New Zealand, products bearing the Neurio trade mark (being the trade marks with registration numbers 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061 in Australia and registration numbers 1141429, 1141430 and 1158888 in New Zealand) without the express consent of first plaintiff as the registered owner of those trade marks in Australia and New Zealand, or the express consent of any successor in title to whom the first plaintiff may transfer those trade marks after the date of these orders. 2. DECLARE that the first defendant contravened ss 181 and 182 of the Corporations Act 2001 (Cth) by: 1. executing, in his capacity as a director of the first plaintiff, the Deed of Assignment dated 23 October 2022 between the first plaintiff (as assignor) and the third defendant (as assignee) in respect of Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061; and 2. executing, in his capacity as a director of the first plaintiff, a Request for a Full Assignment or Transmission of a Trade Mark dated 23 October 2022 in respect of an assignment of Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061 from the first plaintiff to the third defendant. 1. DECLARE that the second defendant contravened ss 181 and 182 of the Corporations Act 2001 (Cth) by: 1. executing, in her capacity as a director of the first plaintiff, the Deed of Assignment dated 23 October 2022 between the first plaintiff (as assignor) and the third defendant (as assignee) in respect of Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061; and 2. executing, in the purported capacity of legal representative of the first plaintiff, the Deed of Assignment dated 28 October 2022 between the first plaintiff (as assignor) and the third defendant (as assignee) in respect of Indonesian registered trade mark IDM000872371; 3. executing, in her capacity as Chief Executive Officer of the first plaintiff, the Confirmative Deed of Assignment dated 1 November 2022 between the first plaintiff (as assignor) and the third defendant (as assignee) in respect of New Zealand registered trade mark 1141429; 4. executing, in her capacity as Chief Executive Officer of the first plaintiff, the Confirmative Deed of Assignment dated 1 November 2022 between the first plaintiff (as assignor) and the third defendant (as assignee) in respect of New Zealand registered trade mark 1141430; and 5. executing, in her capacity as Chief Executive Officer of the first plaintiff, the Confirmative Deed of Assignment dated 1 November 2022 between the first plaintiff (as assignor) and the third defendant (as assignee) in respect of New Zealand registered trade mark 1158888. 1. DECLARE that the third defendant was involved in each of the contraventions referred to in (15) and (16) above within the meaning of s 79 of the Corporations Act 2001 (Cth). 2. DECLARE that the first defendant breached his fiduciary duties owed to first plaintiff by his conduct referred to in (15) above. 3. DECLARE that the second defendant breached her fiduciary duties owed to the first plaintiff by her conduct referred to in (16) above. 4. DECLARE that the third defendant knowingly received Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061 within the meaning of the first limb of the rule in Barnes v Addy on or about 31 October 2022 for the period until GABT transferred those trade marks to the first plaintiff in accordance with the interim orders made by this Court on 10 November 2022. 5. ORDER that the first and second defendants are restrained from taking any future step to transfer away from the first plaintiff any of the following trade marks: 1. Australian registered trade marks 2003876, 2003877, 2003878, 2183059, 2183060 and 2183061; 2. Indonesian registered trade mark IDM000872371; and 3. New Zealand registered trade marks 1141429, 1141430 and 1158888. 1. DECLARE that the first defendant breached fiduciary duties that he continued to owe to the first plaintiff following his resignation as a director on 25 November 2022 by: 1. requesting the registration of the NRIO trade mark in Australia and New Zealand by the fifth defendant; 2. encouraging or endorsing the registration of the NRIO trade mark in China by the third defendant; 3. encouraging or endorsing the manufacture and supply by the eighth and ninth defendants of NRIO-branded sachets of formulated milk powder products to Shanghai Gainful for ultimate supply to the third defendant; 4. encouraging or endorsing the third defendant's packaging of those NRIO-branded sachets in tins bearing the Neurio and NRIO brands, and the marketing and sale of those tins in China as new or upgraded versions of the Neurio brand of Australian and New Zealand-manufactured formulated milk powder products; 5. encouraging or endorsing the resulting association of the NRIO brand with the established Neurio brand; 6. by the conduct in (a) to 849(1)(e) above, diverting to the third defendant the first plaintiff's business of marketing and selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, by excluding the first plaintiff from any ongoing role in that business which it had carried on using its rights as the registered owner of the Australian and New Zealand Neurio trade marks (in cooperation with the third defendant until 21 October 2023). 1. ORDER that the first defendant is restrained from taking any steps to manufacture any NRIO-branded products in Australia or New Zealand, or to market, sell, distribute or export any such products. 2. ORDER that the first defendant is restrained from taking any steps to manufacture in Australia or New Zealand any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 3. ORDER that the first defendant: 1. pay equitable compensation to the first plaintiff for loss suffered by reason of the first defendant's breaches of fiduciary duty referred to in (22) above, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by the first defendant by reason of his breaches of fiduciary duty referred to in (22) above, at the plaintiffs' election. 1. DECLARE that the second defendant breached fiduciary duties that she continued to owe to the first plaintiff following her resignation as a director on 25 November 2022 by: 1. encouraging or endorsing the registration of the NRIO trade mark in Australia and New Zealand by the fifth defendant; 2. encouraging or endorsing the registration of the NRIO trade mark in China by the third defendant; 3. procuring or requesting the manufacture and supply by the eighth and ninth defendants of NRIO-branded sachets of formulated milk powder products to Shanghai Gainful for ultimate supply to the third defendant; 4. encouraging or endorsing the third defendant's packaging of those NRIO-branded sachets in tins bearing the Neurio and NRIO brands, and the marketing and sale of those tins in China as new or upgraded versions of the Neurio brand of Australian and New Zealand-manufactured formulated milk powder products; 5. encouraging or endorsing the resulting association of the NRIO brand with the established Neurio brand; 6. by the conduct in (a) to 849(5)(e) above, diverting to the third defendant the first plaintiff's business of marketing and selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, by excluding the first plaintiff from any ongoing role in that business which it had carried on using its rights as the registered owner of the Australian and New Zealand Neurio trade marks (in cooperation with the third defendant until 21 October 2023). 1. ORDER that the second defendant is restrained from taking any steps to manufacture any NRIO-branded products in Australia or New Zealand, or to market, sell, distribute or export any such products. 2. ORDER that the second defendant is restrained from taking any steps to manufacture in Australia or New Zealand any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 3. ORDER that the second defendant: 1. pay equitable compensation to the first plaintiff for loss suffered by reason of the second defendant's breaches of fiduciary duty referred to in (26) above, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by the second defendant by reason of her breaches of fiduciary duty referred to in (26) above, at the plaintiffs' election. 1. DECLARE that, from May 2023, the fifth defendant knowingly assisted the breaches of fiduciary duty by the first and second defendants in (22) and (26) within the meaning of the second limb of Barnes v Addy by participating in the marketing and sale of Neurio/NRIO branded formulated milk powder products in China. 2. ORDER that the fifth defendant is restrained from taking any steps to market or sell any Australian or New Zealand-manufactured NRIO-branded products. 3. ORDER that the fifth defendant is restrained from taking any steps to market or sell any other Australian or New Zealand-manufactured products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 4. ORDER that the fifth defendant: 1. pay equitable compensation to the first plaintiff for loss suffered by reason of the fifth defendant's knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (30) above, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by the fifth defendant by reason of its knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (30) above, at the plaintiffs' election. 1. DECLARE that the third defendant knowingly assisted the breaches of fiduciary duty by the first and second defendants referred to in (22) and (26) above within the meaning of the second limb of Barnes v Addy by: 1. applying to register the NRIO trade mark in China; 2. purchasing or taking delivery of NRIO-branded sachets of formulated milk powder products manufactured in New Zealand by the ninth defendant; 3. packaging those NRIO-branded sachets in tins bearing the Neurio and NRIO brands, and marketing and selling those tins in China as new or upgraded versions of the Neurio brand of Australian and New Zealand-manufactured formulated milk powder products, and thereby causing the NRIO brand to become associated with the established Neurio brand; 4. by the conduct in (a) to (c) above, diverting to itself the first plaintiff's business of marketing and selling Australian and New Zealand-manufactured Neurio-branded formulated milk powder products in China, by excluding the first plaintiff from any ongoing role in that business which the first plaintiff had carried on using its rights as the registered owner of the Australian and New Zealand Neurio trade marks (in cooperation with the third defendant until 21 October 2023). 1. ORDER that the third defendant is restrained from taking any steps to manufacture any NRIO-branded products in Australia or New Zealand, or to market, sell, distribute or export any such products. 2. ORDER that the third defendant is restrained from taking any steps to manufacture in Australia or New Zealand any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 3. ORDER that the third defendant: 1. pay equitable compensation to the first plaintiff for loss suffered by reason of the third defendant's knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (34) above, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by the third defendant by reason of its knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (34) above, at the plaintiffs' election. 1. DECLARE that, by its conduct referred to in (34) above during the period up to and including 10 March 2023 when the first defendant ceased to be a shareholder of the third defendant, the third defendant acted in concert with the first and second defendants to secure the mutual benefit of the diversion to the third defendant of the business referred to in (34)(d) above. 2. DECLARE that the third defendant is therefore jointly and severally liable with the first and second defendants to: 1. pay equitable compensation to the first plaintiff for loss suffered by reason of the first and second defendants' breaches of fiduciary duty referred to in (22) and (26) above in the period up to 10 March 2023, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by reason of the first and second defendants' breaches of fiduciary duty referred to in (22) and (26) above in the period up to 10 March 2023, at the plaintiffs' election. 1. DECLARE that the eighth defendant knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to in (22) and (26) above within the meaning of the second limb of Barnes v Addy in the period from December 2022 by contracting to supply, and by supplying, New Zealand-manufactured NRIO-branded sachets of formulated milk powder with the knowledge that those sachets would be marketed and sold in China in tins bearing the Neurio and NRIO brands. 2. ORDER that the eighth defendant is restrained from taking any steps to manufacture or supply any NRIO-branded products, or to market, sell, distribute or export any such products. 3. ORDER that the eighth defendant is restrained from taking any steps to manufacture or supply any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 4. ORDER that the eighth defendant: 1. pay equitable compensation to the first plaintiff for loss suffered by reason of the eighth defendant's knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (40) above, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by the eighth defendant by reason of its knowing assistance in the breaches of fiduciary duty referred to in in (22), (26) and (40) above, at the plaintiffs' election. 1. DECLARE that the ninth defendant knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (22) and (26) above within the meaning of the second limb of Barnes v Addy in the period from December 2022 by manufacturing NRIO-branded sachets of formulated milk powder with the knowledge that those sachets would be marketed and sold in China in tins bearing the Neurio and NRIO brands. 2. ORDER that the ninth defendant is restrained from taking any steps to manufacture or supply any NRIO-branded products, or to market, sell, distribute or export any such products. 3. ORDER that the ninth defendant is restrained from taking any steps to manufacture or supply any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, or to market, sell, distribute or export any such products, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 4. ORDER that the ninth defendant: 1. pay equitable compensation to the plaintiff for loss suffered by reason of the ninth defendant's knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (44) above, in an amount to be determined at a subsequent hearing; or 2. account to the first plaintiff for any benefit or gain obtained or received by the ninth defendant by reason of its knowing assistance in the breaches of fiduciary duty referred to in (22), (26) and (44) above, at the plaintiffs' election. 1. DECLARE that the tenth defendant knowingly assisted the breaches of fiduciary duty by Mr He and Ms Lu referred to at (22) and (26) above within the meaning of the second limb of Barnes v Addy in the period from 31 March 2023 by holding the New Zealand registered NRIO trade mark from that date. 2. ORDER that the tenth defendant is restrained from taking any steps to manufacture, market, sell, distribute or export, or to permit the manufacturing, marketing, sale, distribution or export, of any NRIO-branded products. 3. ORDER that the tenth defendant is restrained from taking any steps to manufacture, market, sell, distribute or export, or to permit the manufacturing, marketing, sale, distribution or export, of any other products that are to be sold to ultimate consumers in China in packaging bearing the Neurio brand, to or for any person other than the first plaintiff or persons authorised by the first plaintiff. 4. DECLARE that the payments made from the joint accounts of the first and second defendant to the account of the seventh defendant during the period from 15 February 2023 to 3 March 2023 totalling AUD$4,213,126.88 are voidable pursuant to s 37A of the Conveyancing Act 1919 (NSW). 5. ORDER pursuant to s 37A of the Conveyancing Act 1919 (NSW) that the payments referred to in (51) above be set aside. 6. ORDER that the seventh defendant repay to the first and second defendants the sum of AUD$4,213,126.88 that was paid to the seventh defendant under the transfers referred to in (51) above. 7. DECLARE that the first defendant contravened ss 181(1)(a) and 182(1)(a) of the Corporations Act 2001 (Cth), and breached his fiduciary duties owed to the first plaintiff as a director of the first plaintiff, by causing the first plaintiff to market and develop the Guamis brand during the period from approximately September 2021 to November 2022 by marketing and developing a co-branded Neurio/Guamis product range. 8. DECLARE that the first defendant breached fiduciary duties that he continued to owe to the first plaintiff after his resignation as a director of the first plaintiff on 25 November 2022 by: 1. requesting, directing, encouraging or endorsing the fifth defendant in and from December 2022 to permit the use of the New Zealand Guamis trade mark in the manufacture of the products from the Neurio/Guamis range, branded only as Guamis, to be supplied to the fourth defendant; and 2. requesting, directing, encouraging or endorsing the third defendant, the fourth defendant, and the fifth defendant to market, distribute and sell those products in China in packaging that replicated the first plaintiff's Neurio/Guamis product range packaging, save for the removal of the Neurio trade mark. 1. ORDER that the first defendant pay: 1. compensation to the first plaintiff under s 1317H of the Corporations Act 2001 (Cth) for the contraventions of ss 181(1)(a) and 182(1)(a) of that Act, or equitable compensation for loss suffered by the first plaintiff by reason of his breach of fiduciary duties, referred to in (54) above, in an amount to be determined at a subsequent hearing; and 2. equitable compensation for loss suffered by the first plaintiff by reason of his breaches of fiduciary duties, referred to in (55) above, in an amount to be determined at a subsequent hearing. 1. ORDER that the first defendant be restrained from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than the first plaintiff, or persons authorised by the first plaintiff in writing. 2. DECLARE that the second defendant contravened ss 181(1)(a) and 182(1)(a) of the Corporations Act 2001 (Cth), and breached her fiduciary duties owed to the first plaintiff as a director of the first plaintiff, by causing the first plaintiff to market and develop the Guamis brand during the period from approximately September 2021 to November 2022 by marketing and developing a co-branded Neurio/Guamis product range. 3. DECLARE that the second defendant breached fiduciary duties that she continued to owe to the first plaintiff after her resignation as a director of the first plaintiff on 25 November 2022 by: 1. requesting, directing, encouraging or endorsing the fifth defendant in and from December 2022 to permit the use of the New Zealand Guamis trade mark in the manufacture of the products from the Neurio/Guamis range, branded only as Guamis, to be supplied to the fourth defendant; and 2. requesting, directing, encouraging or endorsing the third defendant, the fourth defendant and the fifth defendant to market, distribute and sell those products in China in packaging that replicated the first plaintiff's Neurio/Guamis product range packaging, save for the removal of the Neurio trade mark. 1. ORDER the second defendant to pay: 1. compensation to the first plaintiff under s 1317H of the Corporations Act 2001 (Cth) for the contraventions of ss 181(1)(a) and 182(1)(a) of that Act, or equitable compensation for loss suffered by the first plaintiff by reason of her breach of fiduciary duties, referred to in (58) above, in an amount to be determined at a subsequent hearing; and 2. equitable compensation for loss suffered by the first plaintiff by reason of her breaches of fiduciary duties, referred to in (59) above, in an amount to be determined at a subsequent hearing. 1. ORDER that the second defendant is restrained from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than the first plaintiff, or persons authorised by the first plaintiff in writing. 2. DECLARE that the fifth defendant holds the Australian Guamis trade mark on constructive trust for the first plaintiff. 3. ORDER that the fifth defendant take all necessary steps to transfer the registration of the Australian Guamis trade mark to the first plaintiff. 4. DECLARE that the tenth defendant holds the New Zealand Guamis trade mark, and the fifth defendant holds its interest in that trade mark, on constructive trust for the first plaintiff. 5. ORDER that the tenth defendant and the fifth defendant take all necessary steps to transfer the registration of the New Zealand Guamis trade mark to the first plaintiff. 6. ORDER that the fifth defendant be restrained from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than the first plaintiff, or persons authorised by the first plaintiff in writing. 7. ORDER that the fifth defendant is restrained from permitting, or purporting to permit, any party (other than the first plaintiff, or persons authorised by the first plaintiff in writing) to use the Australian or New Zealand Guamis trade marks for the purpose of manufacturing, exporting, marketing, distributing or selling any Guamis-branded product to or for any person. 8. At the election of the plaintiffs: 1. ORDER that the third defendant take all necessary steps to substitute the first plaintiff as the applicant for registration of the Guamis trade mark in China; or 2. an order that the third defendant pay equitable compensation to the first plaintiff for loss suffered by the first plaintiff by reason of the third defendant's knowing assistance in the first defendant and second defendant's breaches of fiduciary duties, referred to in (54) and (58) above, in an amount to be determined at a subsequent hearing. 1. ORDER that the third defendant is restrained from taking any steps to manufacture, export, market, distribute, or sell any Guamis-branded product to or for any person other than the first plaintiff, or persons authorised by the first plaintiff in writing. 2. Order that the plaintiffs' claims for final relief are otherwise dismissed. 3. Order that the second cross-claim filed on 1 November 2023 is dismissed. 4. Reserve the question of costs. 5. Direct the parties to file and serve written submissions in relation to the costs of these proceedings and proceedings 2022/333557 within 14 days. 6. List the proceedings before Williams J at 9.15am on 15 May 2024 for directions in relation to any future separate hearing in relation to quantum.
In the All168 proceedings (2022/333557), the All168 Plaintiffs have failed in respect of each of their claims for relief. The orders of the Court are as follows: 1. Proceedings dismissed. 2. Reserve the question of costs. 3. Direct the parties to file and serve written submissions in relation to the costs of these proceedings and proceedings 2022/329426 within 14 days.

[113]

Endnotes

Then known as Jatenergy Ltd.
Re Sunnya Pty Limited [2023] NSWSC 225.
In the matter of Sunnya Pty Ltd [2023] NSWSC 1104, with the exception of Sunnya's claims against GABT for a declaration that GABT authorised Sunnya to have exclusive and permanent use of Neurio trade marks registered in China, and for an order that GABT transfer those trade marks to Sunnya.
In the matter of Sunnya Pty Ltd [2023] NSWSC 1286.
Registered trade mark numbers 1454093 and 1454096.
See [75]-[78] below.
See [80]-[81] below.
In all quotations in these reasons, any spelling or grammatical errors are reproduced from the original. Where the original document is in Mandarin, the quotation in these reasons is from the certified English translation of the relevant document admitted into evidence in these proceedings.
See [32] above.
Certified English translation.
See [55] above.
Registration numbers 2183059, 2183060 and 2183061.
Certified English translation.
Certified English translation.
See [93] above.
See [93] above.
See [99] above.
See [103]-[104] above.
As pleaded by the Plaintiffs, but not admitted by the He Parties, at paragraph 74F of the Third Further Amended Statement of Claim and paragraph 74F of the He Parties' Defence filed in the Sunnya proceeding.
See [135] above.
The experts agreed those costs amounted to only $80,126 during the period from April 2021 to October 2022.
Certified English translation.
Certified English translation.
Certified English translation.
Certified English translation.
Certified English translation.
Certified English translation.
See [90] above.
Certified English translation.
The Share Purchase Agreement is written in both Mandarin and English.
Certified English Transaction.
Certified English translation.
See [451]-[454] below.
See [122] above.
See [91]-[96] above.
See [93]-[96] above.
T212.38-212.46.
See [99] above.
See [153]-[154] above.
Certified English translation.
See [54] and [56] above.
See [177]-[181] above.
See [19] above.
See [242] above.
Certified English translation.
See [2]-[6] above.
Certified English translation.
Certified English translation.
See [56] above.
See [302]-[303] above.
See [173]-[174] above.
See [304] above.
See [75]-[77] above.
Despite having the services of an interpreter, in whose skill and ability in discharging his role the NZ Parties' Mandarin-speaking solicitors expressed confidence throughout the hearing.
See [14] above.
See [210]-[230] above.
Certified English translation.
Certified English translations.
Certified English translation.
Certified English translation.
Certified English translation.
See [197] above.
See [210], [282]-[283], [286]-[287], and [295]-[300] above.
See [302]-[308] and [315]-[326] above.
See [302] above.
See [317] above.
See [141] above.
See [93]-[96], [102] and [222]-[225] above.
See [286]-[287], [297]-[298] and [300] above.
[sic] - contracts of purchase.
See [330]-[379] above.
See [302]-[308], [315]-[326] and [388]-[395] above.
See [218]-[219] and [385]-[395] above.
See [396]-[400] above.
See [380]-[384] and [450]-[458] above.
Howard v Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 (Howard) at [31]-[34] (French CJ and Keane J); Xiao v BCEG International (Australia) Pty Ltd (2023) 111 NSWLR 132; [2023] NSWCA 48 (Xiao) at [111]-[114] (Gleeson JA, Michelmore JA and Griffiths AJA agreeing)
(2018) 265 CLR 1; [2018] HCA 43 (Foresters) at [67] (Gageler J).
Ibid at [67]-[69] (citations omitted).
(2018) 129 ACSR 265; [2018] NSWCA 179 at [144]-[154] (Gleeson JA).
Ibid at [61]-[62] (Meagher JA).
Howard at [63]-[64] (footnotes omitted) (Hayne and Crennan JJ).
Warman International Ltd v Dwyer (1995) 182 CLR 544 at 558 and 562-563; [1995] HCA 18 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
(2022) 398 ALR 658; [2022] NSWCA 12 at [112], [115] (referring to R v Byrnes (1995) 183 CLR 501 at 516-517; [1995] HCA 1 (Brennan, Deane, Toohey and Gaudron JJ) and [222]. Macfarlan and Gleeson JJA agreed with Leeming JA.
(2018) 362 ALR 597; [2018] FCAFC 189.
(1996) 186 CLR 71; [1996] HCA 57 at CLR 93-94 (Dawson and Toohey JJ), CLR 113 (Gaudron and McHugh JJ).
(2001) 207 CLR 165; [2001] HCA 31 at [74] (McHugh, Gummow, Hayne and Callinan JJ).
(2009) 239 CLR 129; [2009] HCA 21 at [84] (French CJ, Gummow, Hayne and Bell JJ).
At [31]-[32] (French CJ and Keane J), at [56] (Hayne and Crennan JJ).
Xiao at [111]-[114] (Gleeson JA, Mitchelmore JA and Griffiths AJA agreeing).
BCI Finances at [596]-[598] (Allsop CJ, Moshinski and Colvin JJ).
Hill v Zuda Pty Ltd (2022) 275 CLR 24; [2022] HCA 21 at [25]-[26] (Kiefel CJ, Gageler, Keane, Gordon, Edelman, Steward and Gleeson JJ).
Foresters at [67]; see [464] above.
Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150 at [40 (Leeming JA, Mitchelmore JA and Simpson AJA agreeing).
BCI Finances at [597].
[1974] SCR 592 at [24]-[25] (emphasis added) (Laskin J).
[2020] VSCA 193.
[2007] EWCA Civ 200.
(2005) 12 VR 513; [2005] VSCA 27 at [57] (citations omitted) (Phillips JA).
Foster Bryant at [8] (Rix LJ), quoting from Hunter Kane Ltd v Watkins [2002] EWHC 186 (Ch).
Schmidt at [100] (Kyrou, Hargrave and Emerton JJA).
Ibid at [142] and [145] (Kyrou, Hargrave and Emerton JJA).
[2012] NSWCA 383.
Ibid at [178] (Sackville AJA).
Howard at [62]-[65] (Hayne and Crennan JJ).
[2002] 2 Qd R 222; [2001] QSC 372 at [15] (Holmes J), referring to Island Export Finance v Umunna [1986] BCLC 460 at 481.
(1874) LR Ch App 244.
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah Constructions) at [111]-[113] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
Farah Constructions at [116]-[121] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); see also Murdoch v MDL at [26] (Leeming JA, Macfarlan and Gleeson JJA agreeing).
Farah Constructions at [172], [179] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 (Hasler) at [57], [106] (Leeming JA, Gleeson and Barrett JJA agreeing).
Hasler at [105]-[125] (Leeming JA, Gleeson and Barrett JJA agreeing).
Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576, 582 (Peter Gibson J); Farah Constructions at [174]-[178] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); Grimaldi v Chameleon Mining NL (2012) 200 FCR 296; [2012] FCAFC 6 (Grimaldi) at [259] (Finn, Stone and Perram JJ); Pittmore Pty Ltd v Chan (2020) 104 NSWLR 62; [2020] NSWCA 344 (Pittmore) at [191] (Leeming JA, with Bell P and Brereton JA agreeing).
Farah Constructions at [174]-[178] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); Pittmore at [191] (Leeming JA, with Bell P and Brereton JA agreeing).
Grimaldi at [261] (Finn, Stone and Perram JJ).
Pittmore at [191] (Leeming JA, with Bell P and Brereton JA agreeing).
Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84 at [116]-[123] (Santamaria, McLeish and Niall JJA).
Xiao at [39]-[60] (Gleeson JA, Mitchelmore JA and Griffiths AJA agreeing).
Xiao at [68]-[83] (Gleeson JA, Mitchelmore JA and Griffiths AJA agreeing).
Foresters at [88] (Gageler J); Xiao at [120]-[122] (Gleeson JA, Mitchelmore JA and Griffiths AJA agreeing).
Foresters at [88] (Gageler J); Xiao at [39]-[60], [120]-[122] (Gleeson JA, Mitchelmore JA and Griffiths AJA agreeing).
Grimaldi at [242] (Finn, Stone and Perram JJ), referring to Farah Constructions at [161] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
Grimaldi at [243] (Finn, Stone and Perram JJ).
Grimaldi at [248] (Finn, Stone and Perram JJ).
Xiao at [67] (Gleeson JA, Mitchelmore JA and Griffiths AJA agreeing). It was not necessary for the Court of Appeal to decide between the alter ego view and the contrary view in that case.
Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) 340 ALR 580; [2016] NSWCA 347 (a case that had been pleaded and run relying on the second limb of Barnes v Addy, in which the Court of Appeal held that it was not open to the respondent to seek to rely on alter ego liability for the first time on appeal); Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84 (a case that was run at trial and on appeal relying on the second limb of Barnes v Addy); Re Sirrah Pty Ltd (in prov liq) (2021) 152 ACSR 212; [2021] NSWSC 413 (the company was liable under the first and second limbs of Barnes v Addy, with Black J adding that it would also be liable as the defaulting fiduciary's alter ego, noting that the senior counsel for the company had not submitted to the contrary); Zibara v Ultra Management (Sports) Pty Ltd (2021) 283 FCR 18; [2021] FCAFC 4 (McKerracher and Anderson JJ dismissed an appeal against a finding at first instance that the company was liable under the second limb of Barnes v Addy, Derrington J dissenting); OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (2022) 164 ACSR 171; [2022] NSWSC 1199 (the company was held liable for involvement within the meaning of s 79 of the Corporations Act 2001 (Cth) of the director's breaches of ss 180-182 of that Act, and on the knowing receipt basis under the first limb of Barnes v Addy).
(2021) 283 FCR 18; [2021] FCAFC 4.
Ibid at [260]-[261] (Derrington J).
Ibid at [261]-[262] (Derrington J).
Ibid at [264] (Derrington J).
Ibid at [265] (Derrington J).
Hasler at [74] (Leeming JA, Gleeson and Barrett JJA agreeing).
Zibara at [155] (McKerracher and Anderson JJ).
Ibid at [268] (Derrington J).
Murdoch v MDL at [26]-[28] (Leeming JA, Macfarlan and Gleeson JJA agreeing).
(2022) 402 ALR 119; [2022] NSWCA 68.
Ibid at [204]-[205] (Brereton JA, with Bell CJ and Payne JA agreeing), referring to Farah Constructions at [110] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
Ibid at [226] (Brereton JA, with Bell CJ and Payne JA agreeing).
Ibid at [5] (Brereton JA, with Bell CJ and Payne JA agreeing).
Xiao [61]-[63] (Gleeson JA), and the authorities there referred to.
Grimaldi at [558] (Finn, Stone and Perram JJ).
DSHE Holdings Ltd (receivers and managers apptd) (in liq) v Potts (2022) 405 ALR 70; [2022] NSWCA 165 (DSHE Holdings) at [111]-[115] (Leeming and Kirk JJA, and Basten AJA) and the authorities there referred to.
(2006) 59 ACSR 373; [2006] NSWSC 1052 at [104] and [110] (Brereton J).
DSHE Holdings at [113] (Leeming and Kirk JJA, and Basten AJA); Cassimatis v Australian Securities and Investments Commission (2020) 275 FCR 533; [2020] FCAFC 52 at [180] (Greenwood J), and [466] (Thawley J) (Cassimatis).
DSHE Holdings at [113] (Leeming and Kirk JJA, and Basten AJA).
DSHE Holdings at [118]-[120] (Leeming and Kirk JJA, and Basten AJA).
Cassimatis at [449] (Thawley J).
Hart Security Australia Pty Ltd v Boucousis (2016) 339 ALR 659; [2016] NSWCA 307 (Hart Security) at [75] (Meagher JA, with Bathurst CJ and Beazley P agreeing); Re IW4U Pty Ltd (in liq) (2021) 150 ACSR 146; [2021] NSWSC 40 (Re IW4U) at [30] (Gleeson J); Ford, Austin & Ramsay's Principles of Corporations Law (16th ed, 2015, Lexis Nexis Butterworths) at [8.065].
Cases discussing the different views include Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (Re Colorado Products) at [420] (Black J); Hart Security at [73]-[75] (Meagher JA, with Bathurst CJ and Beazley P agreeing); Duncan v Independent Commission Against Corruption [2016] NSWCA 143 at [424]-[429] (Bathurst CJ); Australian Securities and Investments Commission v Flugge (2016) 342 ALR 1; [2016] VSC 779 (Flugge) at [1976]-[1991] (Robson J) (and, on appeal, Australian Securities and Investments Commission v Geary (2018) 332 FLR 201; [2018] VSCA 103 (Geary) at [409] (Ferguson CJ, Weinberg JA and Sifris AJA); Re IW4U at [32] (Gleeson J); VicBeef Holdings Pty Ltd v Chen [2021] VSC 546 at [149]-[204] (M Osborne J); Termite Resources NL (in liq) v Meadows (2019) 370 ALR 191; [2019] FCA 354 at [193]-[194] (White J). Ford, Austin & Ramsay's Principles of Corporations Law (16th ed, 2015, Lexis Nexis Butterworths) at [8.065] and [8.70.03].
Maxwell at [109] (Brereton J).
Flugge at [1974]-[1975] (Robson J) and the authorities there referred to. The primary judge's statement of the principles applicable to s 181(1)(b) was not disturbed on appeal: see Geary. See also Ford, Austin & Ramsay's Principles of Corporations Law (16th ed, 2015, Lexis Nexis Butterworths) at [8.230].
Re Colorado Products at [421] (Black J).
Blue Visions at [77]-[79] (Meagher JA), [158]-[159] (Gleeson JA).
Re Colorado Products at [433] (Black J).
IW4U at [38]-[40] (Gleeson J).
Yorke v Lucas (1985) 158 CLR 661 at 667-8; [1985] HCA 65 (Mason ACJ, Wilson, Deane and Dawson JJ), citing Giorgianni v R (1985) 156 CLR 473; [1985] HCA 29.
(2015) 235 FCR 181; [2015] FCA 342 at [402]-[405] (White J). See also Kim v Wang (2023) 298 FCR 337; [2023] FCAFC 115 (Kim v Wang)at [188] (Jackman J).
See [39] above.
See, for example, [272]-[273] above
See [203] (Mr Wang's characterisation all of Sunnya's costs of participating in trade shows as costs of promoting and developing the Guamis brand without any evidentiary basis supporting that characterisation), [238]-[239] (Mr Wang's selective presentation of Jatcorp's analysis of Sunnya's financial performance), [243] (Mr Wang's commentary about what occurred at the October 2022 meeting with Mr He, in which Mr Wang asserts that Mr He provided "no meaningful response" to a question of asked of him, rather than simply setting out Mr Wang's best recollection of the response that Mr He did provide) and [392]-[393] (Mr Wang's theory that cans of Neurio products offered for sale in China in early 2023 were empty cans that Mr Wu had told Sunnya had been destroyed, for reasons that were inconsistent with contemporaneous correspondence from Mr Wang to Mr Wu).
(1959) 101 CLR 298; [1959] HCA 8.
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 (Kuhl) at [63]-[64] (Heydon, Crennan and Bell JJ); Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 at [165]-[167] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ), [232] (Heydon J).
Kuhl at [63] (Heydon, Crennan and Bell JJ).
Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5 (Dixon, Williams, Webb, Fullagar and Kitto JJ).
Evidence Act 1995 (NSW) s 140; Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362; [1938] HCA 34 (Dixon J).
[2021] NSWCA 61 at [49], citing Hellicar at [165]-[167] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ), [232] (Heydon J).
See, for example, [583] below.
See [100], [103]-[104], [222]-[225] and [399] above, and [569] below.
See [200], [214]-[215], [336]-[341], [352] and [417]-[421] above.
See [336]-[341] above.
See [417]-[421] above.
See [213], [363]-[364] and [428]-[434] above.
See [363]-[364] above.
See [428]-[434] above.
See [559]-[566] below.
See [567]-[571] below.
See [575]-[584] below.
Kuhl at [64] (Heydon, Crennan and Bell JJ).
Kim v Wang at [260]-[261] (Jackman J) and the authorities there referred to. Similar observations were made by Lee J at [151], referring to Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555 at [197]-[205] (Besanko J).
J. D. Heydon, Cross on Evidence (14th ed, 2024, LexisNexis) at [33435].
See [266] above.
See [268] above.
See [270] above.
See [259]-[261] and [274] above.
Hyland v Hyland (1971) 18 FLR 461 at 467 (Asprey JA).
See [48], [88]-[89], [131]-[132] and [141] above.
See [158] above.
See [156] above.
See [159]-[164] above.
See [128]-[132] above.
The relevant evidence and admissions are summarised at [123]-[142] above.
See [165]-[167] above.
See [171] above.
See [173] above.
See [143] above.
Watson v Foxman (1995) 49 NSWLR 315 at 319 (McClelland CJ).
See [524]-[527] above.
See [530]-[531] above.
See [594] above.
See [592]-[593] above.
See [595] above.
See [595] above
See [603] above.
See [596]-[602] above.
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83; [1991] HCA 54 (Mason CJ and Dawson J); Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10 at [38] (Hayne J, with Gleeson CJ, McHugh and Kirby JJ agreeing); Troulis v Vamvoukakis [1998] NSWCA 237; Strategic Communications Management Pty Ltd v Techfront Australia Pty Ltd [2020] NSWSC 847 at [95] (Hammerschlag J); J. D. Heydon, Heydon on Contract: The General Part (2019, Lawbook Co) at [26-100].
See [68] and [71]-[72] above.
See [85]-[90] above.
See [64] above.
See [633] above.
Maxwell at [110] (Brereton J), extracted at [518] above; DSHE Holdings at [113] (Leeming and Kirk JJA, and Basten AJA), extracted at [519] above.
See [634] above.
See [635]-[640] above.
See [304] above.
See [226]-[229] above.
See [176] above.
Hancock v Rinehart (2015) 106 ACSR 207; [2015] NSWSC 646 at [152]-[153] (Brereton J) and the authorities there referred to.
Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421; [2016] FCAFC 186 at [62]-[67] (Allsop CJ) and [95]-[100] (Edelman J).
See [500]-[511] above.
See [9]-[10] above.
See [206]-[207] above.
See [65], [80]-[82], and [177]-[182] above.
See [6] and [175] above.
See [661]-[663] above.
See [659] above.
See [238]-[249] above.
See [241]-[249] above.
See [242] above.
See [252]-[275] and [554]-[558] above.
See [250]-[251] above.
See [252]-[253] above.
See [252] above.
See [250] above.
See [275] above.
See [284]-[287] above.
See [252]-[275] and [554]-[558] above.
See [53]-[56] and [70] above.
See [276]-[281] above.
See [210], [282]-[283], [287] and [683]-[685] above.
See [295]-[298] above.
See [289]-[294] above.
See [210] and [683]-[685] above.
See [206]-[207] above.
See [531] above.
3FASOC paragraphs 167A-167E, 318(h2), 318(o), 318(p), 330(i2), 330(p), 330(q).
See [226]-[229] above.
As Sunnya did until April 202 - see [371]-[372] above.
Xiao v BCEG at [39]-[65] (Gleeson JA, Michelmore JA and Griffiths AJA agreeing) and the authorities there referred to.
Foresters at [4]-[13] (Kiefel CJ, Keane and Edelman JJ).
See [208] and [214]-[217] above.
See [304]-[305] above.
I note that Mr Wu also appears to have deployed the fabricated document purportedly dated 2015 in the April 2023 publicity war against Sunnya referred to at [373]-[375] above.
See [255]-[264], [554]-[558] and [735] above.
See [531] above.
3FASOC paragraphs 122A-132, 134-138, 318(e)-(g), 318(h1), 318(o), 318(p), 330(f)-(h), 330(i1), 330(p), 330(q).
Xiao v BCEG at [61]-[65] (Gleeson JA).
See [660]-[663] above.
See [295]-[306] above.
See [334] above.
See [336]-[339] above.
See [340] above.
See [342] and [354] above.
See [330] above.
See [300], [309], [694]-[714] and [737]-[741] above.
See [717]-[718] and [743]-[747] above.
See [345] above.
See [346] above.
See [210] and [219] above.
See [295]-[300] above.
See [349]-[353] above.
See [363]-[364] above.
See [360]-[363] and [369] above.
See [365]-[366] above.
See [304]-[305] above.
See [220] above.
See [308] above.
See [219] above.
See [725] above.
See [92]-[121], [231]-[233] and [559]-[566] above.
See [304]-[305] above.
See [319] above.
See [344] above.
The business that Mr He and Ms Lu had already seriously undermined by encouraging the GABT to terminate the cooperation relationship as part of Plan A,
See [708] above.
See [297] and [327] above.
See [371] above.
See [371]-[375] above.
See [473]-[486] above.
See [14] above.
See [377] above.
See [359] above.
See [695] above.
See [85] and [329] above.
Farah Constructions at [116]-[121] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); see also Murdoch v MDL at [26] (Leeming JA, Macfarlan and Gleeson JJA agreeing).
See my findings at [784]-[788] and [794]-[796] above.
See [717] above.
Farah Constructions at [116]-[121] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); see also Murdoch v MDL at [26] (Leeming JA, Macfarlan and Gleeson JJA agreeing).
Xiao at [61]-[65] (Gleeson JA).
See [794] above.
See [449] above.
See [817] and [821] above.
See [785] and [788]-[793] above.
See [725] and [792] above.
See [319] above.
See [344] above.
See [785] above.
See [210] and [218] above.
See [785] and [788]-[793] above.
See [791] above.
See [377] above.
See [776]-[780] above.
See [379] above.
See [218] above.
See [219] above.
See [358] and [385]-[391] above.
See, in particular, [693]-[708], [711], [713], [737]-[740], [759]-[761] and [795]-[804] above.
See [308], [315]-[316] and [792] above.
See [386] and [388] above.
See [302]-[308] and [315]-[326] above.
See [138] above,
See, for example, Rheem Australia Pty Ltd v McInnes [2020] NSWSC 1313 at [259]-[264].
In the matter of Sunnya Pty Ltd [2023] NSWSC 1286 at [25]-[47].
3FASOC, paragraphs 215 and 225.
In the matter of Sunnya Pty Ltd [2023] NSWSC 1286 at [33]-[47].
Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 (Marcolongo) at [19], [32] (French CJ, Gummow, Crennan and Bell JJ); Super Vision Resources Ltd BVI Registered No 1810534 v AC Holdings Co Pty Ltd [2020] NSWCA 319 (Super Vision) at [4] (Meagher JA, Basten JA agreeing).
Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 (Barton) at 374; [1974] HCA 43 (Stephen J, Menzies and Gibbs JJ agreeing); Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1992] HCA 26 at [10]; Saba v Plumb (2018) 97 NSWLR 278; [2018] NSWCA 60 (Saba) at [69] (Macfarlan JA, Sackville AJA and Emmett AJA agreeing).
Marcolongo at [32]-[34], [56]-[57] (French CJ, Gummow, Crennan and Bell JJ); Saba at [64]-[69] (Macfarlan JA, Sackville AJA and Emmett AJA agreeing).
See [153] and [202] above.
See [183] above.
See [85]-[90] above.
See [469]-[472] above.
See [489]-[490] above.
See [525]-[527] above.
See [473]-[486] above.
See [450] above.
See [473]-[486] above.
See [931] above.
See [922] above.
See [13] above.
See [923] and [925] above.
See [926] above.
See [491]-[494] above.
See [176] above.
See [951] above.
See [941]-[943] above.
See [41] above.
See [733]-[749] above in relation to the trade mark transfer claims, [649]-[732] above in relation to the improper Neurio contracts claims, and [919]-[950] above in relation to the Guamis brand development claims.
Corporations Act, ss 135, 140.
Corporations Act, s 201G.
Corporations Act, s 250E.
Corporations Act, ss 250J-250M.
Corporations Act, s 248E.
Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (atf Parras Family Trust) (2023) 407 ALR 613; [2023] HCA 6 at [27] (Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16] (Kiefel, Bell and Gordon JJ); Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).
See [67] above.
Realestate.com.au v Hardingham (2022) 406 ALR 678; [2022] HCA 39 at [18]-[20] (Kiefel CJ and Gageler J) and [113]-[115] (Edelman and Steward JJ).
See [59] above.
See [1003] above.
Corporations Act, s 1322(1)(b).
Corporations Act, s 1322(2).
See [250]-[294] and [555] above.
See [795]-[800] above.
See [990]-[991] above.
See [1029] above.
See [355]-[379] above.
See [776]-[805] above.
See [372] above.
Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 at [74] (Gleeson and Adamson JJA, Griffiths AJA), citing Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133 at [22] (Stevenson J). 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: 22 April 2024

Parties

Applicant/Plaintiff:

EQUITY - Fiduciaries - Conflict rule - Profit rule - Liability of fiduciaries and third parties under the rule in Barnes

Respondent/Defendant:

Addy - Alter ego doctrine

Legislation Cited (3)

Corporations Act 2001(Cth)ss 79, 135, 140, 180, 181, 182, 201G, 232I, 233, 237, 248C, 249H, 250E, 248E, 250J-250M, 1317H, 1317S, 1318, 1322

Conveyancing Act 1919(NSW)s 37A

Evidence Act 1995(NSW)ss 136, 140, 166, 169, s 140

Cases Cited (147)

61 CLR 544; [2017] HCA 12 Edmonds v Donovan (2005) 12 VR 513; [2005] VSCA 27 Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200 Friend v Booker (2009) 239 CLR 129; [2009] HCA 21 Giorgianni v R (1985) 156 CLR 473; [1985] HCA 29 Grimaldi v Chameleon Mining NL (2012) 200 FCR 296; [2012] FCAFC 6 Gunasegaram v Blue Visions Management Pty Ltd (2018) 129 ACSR 265; [2018] NSWCA 179 Hancock v Rinehart (2015) 106 ACSR 207; [2015] NSWSC 646 Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84 Hart Security Australia Pty Ltd v Boucousis (2016) 339 ALR 659; [2016] NSWCA 307 Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Hill v Zuda Pty Ltd (2022) 275 CLR 24; [2022] HCA 21 Howard v Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 Hunter Kane Ltd v Watkins [2002] EWHC 186 (Ch) Hyland v Hyland (1971) 18 FLR 461 In the matter of Sunnya Pty Ltd [2023] NSWSC 1104 In the matter of Sunnya Pty Ltd [2023] NSWSC 1286 Island Export Finance v Umunna [1986] BCLC 460 Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kim v Wang (2023) 298 FCR 337; [2023] FCAFC 115 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (atf Parras Family Trust) (2023) 407 ALR 613; [2023] HCA 6 Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150 Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133 Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) (2022) 398 ALR 658; [2022] NSWCA 12 Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383 OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (2022) 164 ACSR 171; [2022] NSWSC 1199 Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165; [2001] HCA 31 Pittmore Pty Ltd v Chan (2020) 104 NSWLR 62; [2020] NSWCA 344 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10 R v Byrnes (1995) 183 CLR 501; [1995] HCA 1 Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 Re IW4U Pty Ltd (in liq) (2021) 150 ACSR 146; [2021] NSWSC 40 Re Sirrah Pty Ltd (in prov liq) (2021) 152 ACSR 212; [2021] NSWSC 413 Re Sunnya Pty Limited [2023] NSWSC 225 Realestate.com.au v Hardingham (2022) 406 ALR 678; [2022] HCA 39 Rheem Australia Pty Ltd v McInnes [2020] NSWSC 1313 Rishmont Pty Ltd v Tweed City Medical Centre Pty Ltd [2002] 2 Qd R 222; [2001] QSC 372 Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555 Saba v Plumb (2018) 97 NSWLR 278; [2018] NSWCA 60 Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193 Strategic Communications Management Pty Ltd v Techfront Australia Pty Ltd [2020] NSWSC 847 Super Vision Resources Ltd BVI Registered No 1810534 v AC Holdings Co Pty Ltd [2020] NSWCA 319 Termite Resources NL (in liq) v Meadows (2019) 370 ALR 191; [2019] FCA 354 Troulis v Vamvoukakis [1998] NSWCA 237 Twigg v Twigg (2022) 402 ALR 119; [2022] NSWCA 68 Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 VicBeef Holdings Pty Ltd v Chen [2021] VSC 546 Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 Watson v Foxman (1995) 49 NSWLR 315 Xiao v BCEG International (Australia) Pty Ltd (2023) 111 NSWLR 132; [2023] NSWCA 48 Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 Zibara v Ultra Management (Sports) Pty Ltd (2021) 283 FCR 18; [2021] FCAFC 4 Texts Cited: Ford, Austin & Ramsay's Principles of Corporations Law (16th ed, 2015, Lexis Nexis Butterworths) J. D. Heydon, Heydon on Contract: The General Part (2019, Lawbook Co) J. D. Heydon, Cross on Evidence (14th ed, 2024, LexisNexis) Category: Principal judgment Parties: 2022/329426 Sunnya Pty Ltd (First Plaintiff/Cross-Defendant on First Cross Claim/Cross-Defendant on Second Cross Claim) Jatcorp Limited (Second Plaintiff) Yinghan He (First Defendant/First Cross-Claimant on Second Cross Claim) Yanxia Lu (Second Defendant/Second Cross-Claimant on Second Cross Claim) Guangzhou Aotea Biological Technology Pte Ltd (Third Defendant/Cross-Claimant on First Cross Claim) Guangzhou Niurui Trading Co., Ltd (Fourth Defendant) Sunlife Healthfood Pty Ltd (Fifth Defendant) Yaqing He (Sixth Defendant) HLW Investments Pty Ltd (Seventh Defendant) Supermega Market Ltd (Eighth Defendant) Megadairy Ltd (Ninth Defendant) NZFDA Limited (NZ) (Tenth Defendant)

[2016] VSC 779

[2018] VSCA 103

[1996] HCA 57

[1992] HCA 26

[2005] VSCA 27

[2018] VSCA 84

[2001] QSC 372

[2020] VSCA 193

[2021] VSC 546

[2006] VSC 192

(2018) 265 CLR 1

(2016) 340 ALR 580