24 In their counterclaim, Mr and Mrs Chen have alleged that they entered into three agreements with Mr and Mrs Chan. The first agreement, called the Immigration Agreement (pleaded in paragraph 66), was alleged to have been made in late October 2000. As pleaded in the Amended counterclaim delivered just over two weeks prior to trial, there were at least 15 terms of the agreement. In a nutshell, it is alleged by Mr and Mrs Chen that the Chans would pay Mr Chen the sum of at least $300,000 as compensation and would permit the Chens to reside in the Toorak property, that all their living expenses would be paid by East World Australia, and that when the property was purchased the Chens and the Chans would own the property as tenants in common in equal shares. It is pleaded that these extraordinary acts of generosity were the result of, inter alia, Mr Chen giving up his employment, helping to start up and work in the East World business, helping the Chans with obtaining residency in Australia, giving up his Chinese medicine practice and locating and purchasing a property in Toorak. This is a brief and incomplete summary of the alleged agreement.
25 The second agreement, which is called the Registration Agreement (pleaded in paragraph 68), is said to have been made on or about 10 December 2001 between the Chans and the Chens, and this in effect varied the immigration agreement. It is alleged that because of reasons connected with the Chans' visa requirements and their entitlement as first home buyers to a grant, Mrs Chan would be registered as the sole proprietor of the property and that David Chen's name would be added later.
26 The third agreement, called the Reimbursement Agreement (pleaded in paragraph 69), is said to have been entered into in or about February 2001. It is alleged that Mr and Mrs Chan agreed with Mr and Mrs Chen that the former would transfer moneys to the Chens' account, and that this money and any moneys over from the purchase of the property were to be used to reimburse Mr and Mrs Chen for moneys advanced by them to East World Australia, to pay expenses incurred by them for and on behalf of the company, and to pay all of their living expenses and expenses associated with the Toorak property.
27 This agreement was alleged to be partly oral and partly in writing. The so-called written part referred to some documents which may provide some evidence consistent with an agreement. The documents are not contractual.
Credibility Issues
28 The Chens maintain that there were three agreements, and the Chans, for their part, deny these agreements. Mr Chen was of the view that since he had given up his job and his Chinese medicine practice, and provided assistance in a number of ways, he was entitled to substantial compensation. In evidence Mr Chen described the payment of $300,000 variously as compensation, a gift and security. The versions of the Chans of the one part and the Chens of the other part are inconsistent and meet head on. It is difficult to escape the conclusion that one side is lying.
29 It is difficult to accept that either side could be mistaken about their versions concerning these alleged agreements. On the other hand the fact finding exercise is just not a question of believing one side and not the other. Credibility looms large in the resolution of the disputed facts in this proceeding.
30 As I stated early in the trial, there are a number of features of this proceeding which places a heavy burden on the Chens.
31 Mr and Mrs Chen assert that the agreements were made between the parties. Accordingly, they carry the burden of establishing them on the balance of probabilities.
32 Their versions of the events strains credulity; they are saying that the wealthy Hong Kong brother and sister-in-law were prepared to give them assets and money in excess of M$1.1 for Mr Chen giving up his job and a medical practice, helping the Chans become residents of this country and conducting a business in Australia in which Mr Chen was given a 30% interest. On proper analysis I do not accept that Mr Chen was in any way disadvantaged by giving up his employment and his medical practice because thereafter, for a number of years, he was in receipt of much the same income as he had been receiving in his job as a Chubb security officer. His medical practice according to his Tax Returns returned him very little money. Further, Mr and Mrs Chen and their child were living in a luxurious house in Toorak, rent free. His employment with the company was hardly demanding. It did very little business. The fact is that he enjoyed trading in shares commodities and the like and on the currency market, and it appears that he occupied his time doing that. Mr and Mrs Chen maintain that in China it is not unusual for families to live together and apparently also to share their assets. I have little doubt that in mainland China many families do share their residence but I am far from convinced that Chinese culture and family relationships lead to a very generous gift of property by one member of a family to another. The versions put forward by Mr and Mrs Chen fly in the face of what experience of life tells us. The Court is bound to closely scrutinise their evidence.
33 There is no document which evidences any of the alleged agreements. In particular there is no document evidencing the Chens' alleged interest in the Toorak property.
34 I propose at the outset to state the basic facts which are not really in dispute. I will later deal with each of the alleged agreements which clearly are at the heart of this litigation. The determination of the issues in the counterclaim will decide most of the disputed questions in the proceeding and hence it is appropriate to deal with the counterclaim first.
35 Whilst the Chens' versions of the event strain credulity, they have three members of the brothers' family on their side. The witnesses gave evidence alleging that Mr Chan had made certain admissions about what he had done for Mr Chen. The brothers' father, aunt and a cousin all gave evidence to the effect that at various times Mr Chan made statements to the effect that he had bought a house for his brother and set up a company for him. It will be necessary to closely consider their evidence. Each gave evidence from Shanghai by audio-visual link through an interpreter.
36 I will at the outset summarise the evidence that is not in dispute.
Basic Facts
37 Mr Chan was born in 1951, in mainland China, where he was raised and educated. He married Mrs Chan on 17 August 1979. He studied broadcasting and media and was employed as a public servant. He is a graduate of the University of China. In 1990 he was permitted to go to Hong Kong where he was employed in a State owned business. His wife was also born in mainland China, raised and educated there and graduated from Nanjing University in 1985 in Philosophy. She was employed as a public servant. They have a daughter Sing Chan who studied in Hong Kong and the U.S. of A. Mrs Chan was permitted to join Mr Chan in Hong Kong in 1992. On 15 September 1992 the Chans established East World HK. Its business was and is trading in motor vehicle radio and cassette parts, car alarms and other car accessories. It sources much of its produce in mainland China. As a result, Mr Chan regularly travels in the course of his business.
38 Mr Chen was born in May 1953. He married Mrs Chen in 1981. They have one daughter who is the third defendant Lujia Chen. She is aged 23 years. Mr Chen studied traditional Chinese medicine and obtained accreditation as a practitioner of Chinese medicine. He also studied English. He came to Australia in December 1988 to advance his studies in English. In June 1989 he accepted an offer from the Australian Government to take up permanent residence in this country. In September 1991 Mrs Chen and the daughter came to Australia and they have lived here ever since. In March 1997 Mr and Mrs Chen and their daughter became Australian citizens. I accept Mr Chen's evidence that it is not unusual in mainland China for families to have shared living arrangements.
39 East World HK has been and is a successful business. The Chans have acquired a property in Hong Kong. Their daughter after completing studies in Hong Kong went to an American university to further her studies.
40 Mrs Chen after her marriage in 1981 worked with China Post and continued that employment until she joined her husband in Australia in 1991. Whilst the Chens were living in China, they moved into an apartment which was adjacent to Mr Chen's parents and there was an internal door. Whilst there were separate meals and living areas, usually the families ate together.
41 When Mr Chen came to Australia he initially worked as a printer and in 1991 took up employment as a security officer with Chubb Security. He held that position with Chubb Security until he resigned in February 2001. In 1989 he established a traditional Chinese medicine practice in this State and from July 1991 the practice was conducted from his residence at 9 Austin Street, Footscray. He had purchased this property. He operated the medicine practice during the day and at night worked as a security officer. Mrs Chen provided some assistance in the Chinese medicine practice. The tax returns of Mr Chen reveal that he made little money in the Chinese medicine practice although there is other evidence to suggest that he saw more clients than the figures in the tax return reveal. By October 2000 his salary with Chubb Securities was approximately $40,000 per year which included superannuation contributions. Mr Chen self taught himself in trading shares, commodities, futures and foreign currency and engaged in those activities from about 1992. Mr Chen has been successful in his endeavours and by 2000 his family assets were in the order of $710,000 comprising the residential property in Footscray worth approximately $200,000, family investments held in funds in a cash management account with JB Were of approximately $210,000, a further $100,000 in a bank account and shares and securities worth approximately $200,000. By the year 2000 the Chens were thinking of purchasing another residential property. They were looking at buying a home in Brighton.
42 It appears that Mrs Chen has not had gainful employment in Australia although she did provide some assistance to her husband in his medicine practice.
43 During the period from about 1991 to 1998, the Chens and the Chans had infrequent contact. They corresponded approximately once or twice a year and in 1994 the Chens visited the Chans in Hong Kong. Mrs Chan and Mrs Chen went to the same primary school in China.
44 The Chans were interested in migrating to Australia and in January 1998 they visited this country. They arrived in Cairns and travelled down the east coast. When in Melbourne they stayed with Mr and Mrs Chen at their home in Footscray. They were there for a few days. I accept the evidence of the Chans that during this visit Mrs Chen told them that her husband worked very hard to support the family that he was working nights and did not have enough sleep. I also accept that she expressed to the Chans a concern about Mr Chen trading on the stock exchange.
45 The Chans left Australia on 2 February 1998. The Chans discussed immigrating to this country and they retained an immigration agent, Oliver Lai who is an accountant, carrying on business in Sydney. A decision was made to migrate to Australia and an application for a visa was lodged on 10 December 1999. Mrs Chan was the principal applicant because she was living in Hong Kong whereas Mr Chan spent much time travelling. Their daughter was included in the application. The application was for a migrant business skills visa. It is necessary to establish a number of qualifications for the visa, in particular to conduct a business in Australia during a three year period. It was the initial intention of the Chans to establish a business as an extension of the Hong Kong business. On 19 September 2000 the Chans were informed that they had been approved for a permanent entry visa to Australia. They were required to enter Australia prior to 27 October 2000. They were permitted to work in Australia. It was necessary to establish a business and if this was not established by 2003, there was a risk that the resident visas would be cancelled. Arrangements were made to come to Australia. The Chans' daughter, who was then in Los Angeles, travelled to Australia to meet her parents. The family arrived on 12 October 2000 and resided with the Chens in Footscray.
46 I interpolate to observe that Mr and Mrs Chan gave their evidence through an interpreter. I am satisfied that they have some understanding of the English language but it is minimal. Mrs Chen also gave evidence through an interpreter and whilst I think she has a reasonably good understanding of English, and can speak some English, nevertheless she did require the assistance of an interpreter. It is not surprising that she has a better understanding of English than the Chans because she has been in Australia for the past 14 years. Mr Chen speaks very good English. He is obviously an intelligent man. There is no doubt that in the year 2000 he did have a good knowledge of English and Melbourne and its surrounds to provide substantial assistance to the Chans on their entry visit to this country as migrants.
47 The Chans initially thought of establishing a business in Sydney where their accountant and migration advisor, Oliver Lai, was, but Mr Chan thought it would be more appropriate to establish a business in Melbourne using the assistance of his brother. A conversation occurred as to how much Mr Chen earned per year and I am satisfied that the Chans informed Mr Chen that he could be employed by a business to be established and be paid a salary in the order of what he was receiving at Chubb Security. The Chans told Mr Chen that a company to be established would have a number of shares and he would be given a 30% shareholding in the company.
48 On 16 October 2000, Mr and Mrs Chan and Mr Chen went to Sydney to meet with Oliver Lai. On the following day, East World Australia was registered. During the discussions with Oliver Lai it was agreed that there would be three directors, namely Mr and Mrs Chan and Mr Chen, that Mr Chen would be employed by the company and that he would receive 3,000 shares in the company as a gift. Mrs Chan was issued with 4,000 shares and Mr Chan 3,000. It was put by the Chans that Mr Chen would be responsible for the daily operation of the company. There is some dispute as to whether Mr Chen agreed at that time to give up his employment and be employed by the company. The Chens say this occurred much later. It will be necessary to refer to this later. It is part of Mr Chen's case that he was to receive compensation for giving up his job and his Chinese medicine practice. This was also very much in dispute and I will discuss this later.
49 On 17 October 2000, Mr and Mrs Chan opened personal bank accounts with the National Bank. On that day the Chans and Mr Chen made application to open a company bank account with HSBC. The account could not be opened on that day as the Bank had to be satisfied of proof of the company's registration. On that day there was some discussion about the Chans purchasing a property in Melbourne. Mr Chen recommended Brighton whereas the Chans liked the Toorak area. They looked at a property at 176 Kooyong Road, Toorak, but it was not suitable. Also on 17 October there was some discussion between the Chans and the Chens about funds being provided for the company and Mrs Chan informed Mr Chen that she would transfer funds in the amount of A$300,000. There is a dispute as to what was said in relation to this matter. It is contended by the Chans that some of the money was to be used for the shareholders' contributions, namely A$10,000, while the rest was for operational costs of the company and for a deposit on any house that may be purchased. Mr Chen denies this discussion. Mr Chen says that his brother stated that he would be receiving compensation for his assistance and because he was to give up a job and his Chinese medicine practice. These matters are very much in dispute and are relevant to the alleged immigration agreement. In the course of discussions, Mr Chen gave details of an account he had at JB Were Securities Limited in his name. I accept the evidence of Mrs Chan that she was given this information to enable her to send money for the company.
50 On 18 October 2000, the Chans left Australia and two days later Mrs Chan sent A$300,000 to what she believed was Mr Chen's personal account. It is said by Mr Chen that the money was for him as compensation. This is denied by the Chans. Again, it is a matter that has to be resolved and I will discuss it later. It appears that the monies were not paid into Mr Chen's account, but were paid into an account with J B Were Securities in the name of the three defendants.
51 It is said by the Chens that around about this time Mr Chen decided that he would give up his job and take employment with the company. This is contrary to the Chans' version which was that it had all been agreed before they left Australia. Again, this is relevant to the alleged immigration agreement. Mr Chen, in November 2000, on behalf of the company, leased premises for use as an office at 370 St Kilda Road.
52 In late October 2000, Mr Chen telephoned Mrs Chan and informed her that there was a property for sale at 178 Kooyong Road, Toorak, and it would be auctioned on 9 December 2000. Shortly prior to the auction, Mr Chen made contact with a solicitor and spoke with a clerk, Olivia Brosnahan, of Eales and McKenzie. The Chens attended the auction. The Chans had indicated that they were very interested in purchasing the property. There is some dispute as to whether or not Mr Chen made contact with Mrs Chan during the course of the auction, but in my view it is unnecessary to resolve the question. There was some discussion after the property was passed in and eventually the vendor agreed to sell the property for M$1.65 with a settlement date of 30 days. Mrs Chen in fact signed the contract with a right to nominate a substitute purchaser. Mr Chen paid a deposit of $165,000 from the Chen Family Were Account. Contact was then made with Mrs Chan and arrangements were made to send out money for the purchase price. On Monday 11 December 2000, Mr Chen saw the solicitors in relation to the purchase and there was some discussion about making an application for a First Home Buyer's Grant of $7,000. Instructions were given to register the title in the name of Mrs Chan. There is a dispute as to what the arrangements were. It is contended by Mrs Chan that because her husband was always travelling it was difficult to get him to sign a transfer and accordingly it was to be transferred in her name and his name was to be added later. On the other hand Mr Chen asserts that it was agreed that he would have his name added later because there was some concern about the First Home Buyer's Grant. This is another matter which is in dispute and I will refer to this later. Mr Chen reported to Mrs Chan about the progress of the purchase of the house. Correspondence was sent to Mrs Chan containing the necessary documents for the completion of the sale. One of the documents was a statutory declaration by Mrs Chen acknowledging that she never had any interest in the property. Mrs Chan forwarded moneys for the purchase price, being $300,000 on 12 December, $500,000 on 9 January 2001, and $1,000,000 on 11 January 2001.
53 On 23 January 2001 settlement occurred and the property was registered in the name of Mrs Chan only. Application was made for a First Home Buyer's Grant, which was granted. In January 2001, no stamp duty was payable where an interest in property was transferred from one spouse to another. On the other hand, the probabilities of the payment of stamp duty were high in relation to a transfer to a stranger, although if there was a trust for the transferee it may not have attracted stamp duty. It is contended by Mr Chen that there was an agreement that he was to get an interest in the property. This is in dispute. Again, it is a matter which will be dealt with later.
54 The Chans arrived back in Australia on 27 January 2001. Some furniture was purchased. At some point during the course of their stay, both the Chans and the Chens occupied the property on one evening. Again, there is some dispute about discussions had concerning occupation of the house. By this time, Mr Chen had given notice to Chubb. He evidently gave them notice some time in October - November the previous year and was enjoying accrued paid leave. His employment ceased with Chubb on 12 February 2001.
55 I am satisfied that when the Chans were in Australia in late January early February, a discussion took place concerning the Chens looking after the property. I accept the evidence of Mrs Chan that she told the Chens that the Chans would not stay in Australia until their daughter came to do her Master's Degree in Melbourne in mid to late 2003. They would then consider coming to Australia to reside.
56 Again, there is a dispute as to the basis upon which the Chens moved into the house. It is the contention of the Chans that the Chens were asked to move into the house and be house sitters looking after the interests of the Chans, and that this would also make it easier for Mr Chen to operate the business from the St Kilda Road property. Ultimately it was agreed that the business should be conducted from the house. It appears that the Chens moved into the property some time in March 2001. In May 2001, the Chens sold their home in Austin Street, Footscray.
57 The Chans returned to Hong Kong in early February 2001 and after their return Mrs Chan forwarded the sum of $150,000 to Mr Chen to ensure there were sufficient funds to purchase furniture for the house and for the operation of the company.
58 At some time around June/July 2001, Mr Chen requested Mr Lai to prepare the company accounts and tax return. Mr Chen gave the information to Mr Lai to enable him to perform these tasks. It will be necessary to refer to the accounts later.
59 The Chans returned to Australia on 1 August 2001 and stayed in the home at Toorak with the Chens and their daughter. On this visit Mr Chen suggested that the Chans give him a Power of Attorney and this was executed through a local solicitor. Mr Chen said it was necessary for him to run the company properly and it was quite inconvenient and expensive to send company documentation overseas for signatures. It was during this visit that the Chans ascertained that Mr Chen was trading in derivatives and shares using the company's money. Up to this time the company had very little business and there was some criticism made by the Chans of Mr Chen's efforts. He said that he could make more money by trading.
60 There is a dispute between the parties as to whether or not the Chens were entitled to use company funds for their personal expenses. The Chans deny any such agreement. Again, this is a matter that is to be considered later. Whilst the Chans were in Australia in August 2001, Mr Chen took his brother to lunch to meet a man from Tricom Securities, Paul Markus Helsing. Mr Chan was induced to enter into a very detailed agreement on behalf of East West Australia with Tricom Securities. It was not the type of agreement that any person should sign unless the person had a very good understanding of its contents. Mr Chan did not to understand the contents of the documents and relied upon his brother for assistance. On no view could it be said that he had an understanding of the agreement when he signed it. It does, to some extent, reflect upon both his brother and Mr Helsing that he was induced to sign this very detailed agreement. The documents were a client agreement and risk disclosure document for margin foreign exchange services. The client agreement comprises some 32 pages of closely written type and purports to be an agreement with East World Australia. Both Mr Chen and Mr Chan signed the document on 3 August 2001. The risk disclosure statement states that the client should not enter into the transaction unless "you are an experienced and sophisticated investor" and "you understand the nature of and risks associated with the transactions". Mr Chen suggests that his brother had a full understanding of what he was doing, but I do not accept that for one moment. It does reflect upon the credibility of Mr Chen that he induced his brother to enter into such an agreement. On any view, foreign exchange transactions and the like amount to educated gambling, and are very speculative. Mr Chen was self-taught and the evidence does suggest that he may have been successful as a trader over the years. However, the agreement was opening the company up to substantial losses if trading proved unsuccessful. There is no doubt that Mr Chan used company funds to trade in a variety of shares, derivatives, commodities and foreign exchange.
61 Going back in time, on 4 May 2001, Mr Chen opened an account with C A & L Bell Commodities. The firm was a broker, trading in commodities, currency and bonds. Mr Chen stated that he opened the account to have easier access to the market if his Tricom broker was unavailable. He opened the account with a cheque of $10,000 drawn on the company JB Were account, but did not inform the Chans about this until they visited him in August 2001.
62 The Chans returned to Hong Kong and on 10 October 2001 transferred $120,000 to the company. Mrs Chan forwarded the money in the belief that it was going into the company account.
63 In late 2001, Mrs Chen purchased some Coogee woollen jumpers and sold them to a purchaser in mainland China. There is some dispute about the true nature of this transaction. But I am satisfied on the evidence that the transaction was in fact a company transaction. The evidence is unclear as to who paid for what. Mrs Chen was extremely vague as to whether or not the Chinese purchaser ever paid for the goods.
64 In February 2002, the Chans returned to Australia and stayed in Toorak. This was the Chinese New Year. A question arose as to whether the title should be transferred into the name of Mr Chan, and Mr Chen took the Chans to the Title's Office to arrange for registration. This was done. There was no question of any stamp duty being paid. More importantly, there was no suggestion made by the Chens that either should have his or her name registered on the title. The Chans and the Chens, including Lujia Chen travelled for a nine day visit to New Zealand. After returning to Hong Kong, Mrs Chan transferred on 20 March 2002, $220,000, as she understood it, to the company. The money was forwarded to the company's JB Were account. On 19 April 2002, Mr Chen, without referring the matter to the Chans, opened an account with another broker, namely Man Financial Australia Limited. Mr Chen closed the Tricom account because he was unhappy with the service.
65 In August 2002, the Chans returned to Australia and stayed in the Toorak property. Their daughter also came to Australia and stayed with them. During this visit, it was necessary for the Chans to complete a survey for the Immigration Department. Mr Chen assisted Mrs Chan in filling in the document. The document was in English. The Chans and Mr Chen travelled to Sydney to meet with Mr Lai to enable the documents to be completed. Mr Chen had in the meantime provided to Mr Lai the information for the preparation of the accounts for the financial year ending 30 June 2002. Mr Lai completed the accounts quickly so that the information could be inserted in the survey. Mr Lai prepared the 2002 tax return and the documents were signed by Mrs Chan. The accounts revealed a loan to the company by Mrs Chan in the order of some $548,000 and this statement is evidence relied upon by Mr and Mrs Chen to support the alleged payment of compensation of $300,000. On 27 August 2002 the Chans returned to Hong Kong.
66 In January 2003, the Chens went to China to visit their families. During this visit they caught up with the Chans. Mrs Chan informed the Chens that Sing Chan was to return to Australia to study and that this was to take place some time in 2003. Evidently Mr Chen was unhappy with this proposal.
67 By letter dated 24 February 2003 from the Department of Immigration Mrs Chan was informed that the Australian company was not conducting sufficient trade activities and Mrs Chan became concerned about the lack of effort by Mr Chen. Efforts were made to purchase bullion gold for export through Mr Lai and from late February 2003 to the end of that year five transactions of bullion gold were exported to Hong Kong.
68 In early March 2003, a conversation occurred between Mrs Chan and Mr Chen. Mr Chen stated that he wanted his and his wife's name to be added to the title and if this was not done, he would not continue with the company. He stated to Mrs Chan that he had given up his job, sold his house and he had nothing. There was some discussion about what Mr Chen had done for the company. There is a dispute about this conversation. Mr Chen said that Mrs Chan and he discussed his name being added to the title. According to Mrs Chan she informed him the Chens had no interest in the property and the conversation ended by Mr Chen saying that he would not continue with the company and suggesting that the Chans come to Australia so that he could hand the company over to them. On the other hand, Mr Chen said that Mrs Chan agreed that she would not object to his name being added to the title of the property. He said that he then spoke to Mr Chan, who was in China, about the same thing. Mr Chen then sought to arrange the transfer of an interest in the property using the Power of Attorney but was told that he could not use this by an employee of the Land Titles Office. Mrs Chan made a decision to come to Australia but because of the SARS outbreak she decided not to.
69 In the meantime, on 1 April 2003, unbeknown to the Chans, Mr Chen withdrew $50,000 from the East World Australia account with JB Were. The amount was paid into a Chen family JB Were account. Later it was suggested that the money was taken to cover the payment of expenses incurred and in lieu of wages. Later in the course of the interlocutory steps it was suggested that the money was made up of wages totalling $60,924 for the Chens for the years ending 30 June 2002 and 2003 and for reimbursement of sums paid. There is dispute in relation to this money.
70 On 16 June 2003, the Chans' daughter, Sing, arrived in Melbourne to take up residence at Toorak preparatory to commencing her eduction at the University of Melbourne. Mr Chen met her at the airport and made it very clear that she was not welcome. She stayed at the Toorak property for 24 hours and then went to a hotel which Mr Chen had arranged for her. She was made most unwelcome in the home and was particularly upset. Evidently Mr Chen told her to leave or he would get the police. Mr and Mrs Chan made a decision to return to Australia. They were concerned about obtaining the company documents.
71 The Chans arrived in Australia on 14 August 2003. On 16 August 2003 they flew to Sydney to see Mr Lai. He referred them to a Melbourne solicitor to seek legal advice. Whilst with Mr Lai, the Chans resolved to remove Mr Chen as a director of East World Australia and his employment was terminated. On 20 August 2003 Mr and Mrs Chan tried to make contact with Mr Chen and twice tried to send facsimiles to him. Eventually a facsimile was sent in Chinese which informed him that he had been removed as a director and that the company bank account was frozen. A demand was made that he hand over all documents concerning the company. Mr Chen refused. Mr Chen informed the Chans that he was contacting a solicitor. An attempt was made by the Chans to meet Mr Chen over the next few days but he refused to meet. Eventually he informed the Chans on Friday, 22 August 2003, to ring his solicitor, Mr Noel McNichol-Smith. In the meantime the Chans had discussions with their solicitor. Discussions took place between the solicitors. Later that day the Chans went to the Toorak property. There was an argument. The police were called and the matter was then left to the solicitors.
72 On 22 August 2003 Mr McNichol-Smith sent a letter to the Chans' solicitors, Lai and Hamilton. The Chans' solicitors responded to the letter.
73 On 2 September 2003, the Chans issued a writ seeking inter alia possession of the property and the return of company documents. A summons was filed seeking interlocutory relief and the summons came on for hearing before Habersberger J on 16 October. The parties filed affidavits. It will be necessary to refer to some of the affidavits later. On 5 December 2003, Habersberger J delivered his reasons and he granted a mandatory interlocutory injunction giving possession of the house to the Chans on 4 February 2004. The Chans went to the property on 2 February 2004 and found that a lot of furniture had been removed from the home.
74 On 4 February 2004 the Chans obtained possession. The handing over of the company documents was very much in dispute and eventually the parties agreed that they would be delivered to an independent firm of solicitors, which was done. They were produced to the Court on the trial. Evidently there was concern expressed by Mr Chen that if the documents were handed over something might happen to them such as destruction or alteration.
75 On 19 December 2003 the defendants filed a defence and counter-claim. It was amended and again amended on 9 September 2005. The plaintiffs filed an amended statement of claim on 15 March 2005. It will be necessary to refer to the pleadings later. There is some variation between the matters pleaded in the defence and counter-claim in December 2003 and the recent version. This raises questions concerning the credibility of Mr and Mrs Chen.
The Counter-Claim and Credibility
76 Mr and Mrs Chan deny they entered into the three agreements pleaded in the counter-claim. As stated, the resolution of the issues concerning the three alleged agreements go a long way to deciding many of the issues in the proceeding including the plaintiffs' claims. Accordingly, it is appropriate to deal with the counter-claim first. The credibility of each of the Chans and Mr and Mrs Chen is at the heart of the counter-claim. Mr and Mrs Chen allege there were three agreements and the Chans deny them. The agreements are pleaded in paragraphs 66, 68 and 69 of the counter-claim. I will briefly summarise the main obligations alleged. They are -