Guo v Xu - [2021] NSWSC 460 - NSWSC 2021 case summary — Zoe

NSWNSWSC

Guo v Xu

[2021] NSWSC 460

Supreme Court of NSW|2021-04-07|Before: Rees J, Adam P

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2021-04-07

Before

Rees J, Adam P

Catchwords

[1992] FCA 567 Abraham v Abraham [2012] NSWSC 254 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
[1981] HCA 39 Agar v Hyde (2000) 201 CLR 552
[1999] HCA 18 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 Circaz Pty Ltd v Manolidis [2003] NSWSC 455
(2003) 45 ACSR 542 Commissioner of State Revenue (Vic) v Snowy Hydro Ltd (2012) 43 VR 109

Source

Original judgment source is linked above.

Catchwords

[1992] FCA 567 Abraham v Abraham [2012] NSWSC 254 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170[1981] HCA 39 Agar v Hyde (2000) 201 CLR 552[1999] HCA 18 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 Circaz Pty Ltd v Manolidis [2003] NSWSC 455(2003) 45 ACSR 542 Commissioner of State Revenue (Vic) v Snowy Hydro Ltd (2012) 43 VR 109[2012] VSCA 145 Commonwealth Bank of Australia v Saleh [2005] NSWSC 843 Davis v Turning Properties Pty Ltd [2005] NSWSC 742(2005) 222 ALR 676 Gothard v Fell (2012) 203 FCR 236[2012] FCA 495 Hall v Nominal Defendant (1966) 117 CLR 423[1988] FCA 142 Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141(2007) 63 ACSR 429 Category: Principal judgment Parties: Hui (Annie) Guo (Plaintiff)

Judgment (49 paragraphs)

[1]

[4]

Judgment

HER HONOUR: On 10 October 2018, Ball J made an ex parte freezing order in these proceedings (the Australian proceedings) in aid of proceedings that the plaintiff, Hui (Annie) Guo, proposed to commence in the High Court of the Hong Kong Special Administrative Region Hong Kong (the Hong Kong proceedings): Guo v Xu (Supreme Court (NSW), Ball J, 10 October 2018, unrep). Amongst the orders made, the fourth and fifth defendants, Keynes Capital Global Ltd and General Energy International Holdings Ltd, were restrained from dealing with some $17 million in dividends paid on shares which they held in Rand Mining Ltd and Tribune Resources Ltd.
The Hong Kong proceedings were duly commenced. The freezing order was extended by consent and varied to cover further dividends and capital gains (now totalling $22,671,178.47). On 20 February 2019, Ball J made orders by consent extending the freezing order until the conclusion of the Hong Kong proceedings (the freezing order). On 1 November 2019, Keynes and General Energy gave an undertaking to hold a further $1 million of dividends paid in October 2019 (the undertaking).
Two applications are now before the Court. The plaintiff seeks to extend the freezing order such that the dividends held pursuant to the undertaking are paid into Court or a joint controlled monies account. For their part, Keynes and General Energy seek to vacate the freezing order and be released from the undertaking. There are four issues: 1. Where Keynes and General Energy consented to the freezing order following negotiation, is it necessary to establish exceptional circumstances or merely a material change of circumstances? 2. On any re-exercise of the Court's discretion, is there a sufficient prospect of judgment in the plaintiff's favour in the Hong Kong proceedings to support the freezing order, the undertaking or the extension of the freezing order to the October 2019 dividends: rule 25.14(3)(a), Uniform Civil Procedure Rules 2005 (NSW) (UCPR). 3. Further, is there a sufficient prospect that any judgment obtained by the plaintiff in the Hong Kong proceedings will be registered and enforced by this Court: rule 25.14(3)(b), UCPR. 4. Finally, do other discretionary factors have the consequence that the freezing order should be lifted, the undertaking be discharged or the extension of the freezing order be refused, in particular, has the plaintiff unduly delayed the Hong Kong proceedings?
The applications were hard fought, as both the Australian proceedings and the Hong Kong proceedings appear to have been generally. In total, 46 affidavits were read and 6,300 pages of documents were tendered. I had the benefit of detailed written and oral submissions by learned senior counsel Ian Jackman SC and Noel Hutley SC.
Three of the plaintiff's witnesses were cross-examined being geologist Malcolm Carson, stockbroker Lance Rosenberg and the plaintiff. Cross-examination of Mr Carson and Mr Rosenberg was brief whilst cross-examination of the plaintiff was more extensive. Cross-examination was conducted over a videolink which proved unstable and I was not in a position to form any views as to the plaintiff's credit, nor did her evidence raise any issues of concern in this regard. The plaintiff answered questions simply and directly, was precise and had good recall of detail. She made reasonable concessions.
None of the defendants' substantive witnesses gave evidence, although Keynes and General Energy's solicitors gave some evidence of these witnesses' instructions on information and belief and attached witness statements filed in the Hong Kong proceedings. The witness statements give an indication as to what these witnesses may be expected to say. Put shortly, the first and third defendants can be expected to dispute the plaintiff's version of events. Indeed, the third defendant emailed Keynes and General Energy's solicitors after reading the plaintiff's affidavits saying, I almost got a heart attack. Such a shameless and vicious woman, I am really speechless … I told [the plaintiff] explicitly that this was blackmail and we would not bow our heads. … [C]an I sue her for slander.

[6]

Finding an opportunity

In 2013, the plaintiff worked on a bid for the purchase of Barrick Gold Corporation's assets, which included a 51% share in the East Kundana Joint Venture, a gold mining project in Western Australia. The remaining 49% share of the joint venture was largely held by Rand and Tribune, being gold exploration and mining companies of which Anthony Billis is a director and major shareholder. Whilst the plaintiff's bid was unsuccessful, she formed the view that Rand and Tribune shares were significantly undervalued. The plaintiff and Mr Carson have sworn detailed affidavits setting out the analysis that each undertook to arrive at that assessment.
In March 2014, the plaintiff began working with Mr Carson to investigate the possibility of acquiring shares in Rand and Tribune. Mr Carson observed, "Unlocking the inherent value [of] these companies has perplexed possible suitors for years". On 21 March 2014, a shareholder, Jeff Verheggen, provided an introduction for the plaintiff, sending an email to Mr Billis advising to expect a call and noting: My broker spoke highly of [the plaintiff] and he was aware of some sizeable mining investments her group have orchestrated between chinese multi national companies and Aussie mining companies.
In April 2014, the plaintiff met with Mr Billis, advising that she represented "a investment platform from China with specific investment portfolio of Australian mining assets". The meeting went well. Afterwards, Mr Billis advised the plaintiff by email: … when we are ready you will be the first person I will talk to. … we are keen to do a deal within the next a [sic] few months. Annie as you know I am very sceptical of all offers and people behind the offers, I am not interested in [tyre] kickers so Annie please make sure that your contacts are real and not Phantoms flying a kite there are lot of them around so don't waste you[r] time with scammers. This transaction is a sizeable one and the best quality gold asset in the market. I will be happy to work with you and your team on this transaction. Will talk to you again in May, we should be good for this transaction.

[7]

Finding investors

In May 2014, the plaintiff and Mr Carson continued their analysis in respect of the potential transaction. In June 2014, the plaintiff telephoned the third defendant, Jianguo (David) Zhang, whom the plaintiff knew from her time at PricewaterhouseCoopers when working on Chinese investments in the Australian mining sector. The plaintiff told the third defendant of the investment potential of Rand and Tribune and said she would like to put together some investors for those companies. The third defendant said he was happy to work with her and would look for investors.
In July 2014, Mr Billis provided the plaintiff with a list of the top 50 Rand and Tribune shareholders. Mr Billis and the plaintiff made notes on the list, identifying shareholders who may be willing to sell their shares. The plaintiff spoke to the third defendant again, who said he would introduce investors.
In October 2014, over a conference call, the third defendant introduced two potential investors to the plaintiff: being the first defendant, Yuedong (Peter) Xu, and the second defendant, Ji (Jim) Chen. Both lived in Shanghai and were part of an investment fund called Shanghai Yunneng Fund. On 18 October 2014, the third defendant met with the first and second defendants in Shanghai. The meeting notes record that the third defendant was "responsible for drafting the basic principles of long-term strategic cooperation [with Anton Billis]" and that "Anton must allow Annie or her company to represent this transaction that will happen between us the purchaser and Anton". Minutes of the meeting were forwarded to the plaintiff.
The plaintiff organised a mine visit and forwarded an itinerary to the second and third defendants. The plaintiff arranged meetings over several days in November 2014, the purpose of which was to consult prospective professional advisers, visit the mine and processing plant, meet with the vendor and consider the structure for the investment opportunity. On 6 November 2014, the first, second and third defendants arrived in Kalgoorlie and were met by the plaintiff and Mr Carson. The third defendant introduced the first and second defendants to Mr Carson as potential investors. The plaintiff attended the meetings along with the first, second and third defendants.
According to the plaintiff, at a meeting in Perth, the first defendant told the plaintiff, "We have two BVI companies ready that we can use for the investment. It would be good if our names did not appear in any formal document". The second defendant agreed. Consistently with this, Mr Rosenberg said he was informed by the plaintiff that two British Virgin Islands companies would be used to purchase shares in Rand and Tribune, being Keynes and General Energy. Mr Rosenberg understood from his conversations with the plaintiff and the first, second and third defendants that Keynes and General Energy were vehicles for a funding syndicate comprising some or all of the first, second and third defendants.

[8]

Strategic Cooperation Agreement

After visiting the mine, the plaintiff and first, second and third defendants met in Sydney and signed a Strategic Cooperation Agreement. The agreement was bi-lingual in that, for each recital or clause, the text was first stated in Mandarin and then in English. Several official translations of the Mandarin text are also in evidence, but it is sufficient for the purposes of these applications to use the English in the document signed by the parties.
The Strategic Cooperation Agreement described the first and second defendants as "Party A", said (in the preamble) to be partners of a large-scale resource investment management company but with extensive mergers and acquisition experience and strong capital funding capabilities: "Party A has deep understanding of Chinese capital market and rich experience in investing and capital raising". The plaintiff and third defendant were "Party B", described in the preamble as having access to many project resources in Australia and with a successful track record of merging and acquiring assets in Australia and overseas. The parties agreed to form a long-term strategic relationship, focussing on investing and developing high-quality assets in Australia and overseas. The agreement provided: The basic principle of the Agreement is voluntary equality, mutual benefit, mutual promotion and honesty, and common development.
The Strategic Cooperation Agreement identified the parties' current project as acquiring shares in Rand and Tribune, with the acquirer to be a listed company from mainland China with A shares. (It appears that the transaction envisaged a takeover of the two companies, with a view to eventually privatising and re-listing the companies on the Hong Kong or Shanghai stock exchange.) The agreement noted that Party B had reached an acquisition intention with controlling shareholders of the target companies. The parties agreed to jointly negotiate with the target companies, "with Party B taking the major role". The parties agreed to jointly raise capital for the acquisition, with Party A taking the major role.
In respect of profit allocation, the agreement provided: 1. Transaction commission: After deducting all relevant expenses on the transaction, Party A will take 51% of cash profit and Party B will take 49%. … 2. Share of performance bonus established by the fund: Performance bonus generated from the fund managed by Party A and will not be less than 50% of all performance bonus from the transaction fund, Party A will take 51% and Party B 49%. Party A guarantees that the actual performance bonus earned by Party B will not be less than 25% of all performance bonus earned by the fund.
As to expense allocation, the agreement provided: Apart from the cost of due diligence on the target company of legal documents which will be carried by Party A, all other cost will be assigned to Party A and Party B in the same proportion as profit allocation.
In cross-examination, the plaintiff did not accept that the cost of Rand and Tribune shares was a "cost" to be dealt with under the expense allocation provision; "that funding should not be considered a cost. That's their contribution." Rather, cost meant the project cost which included the cost of due diligence and related costs to the project.
Witnesses to be called by the defendants in the Hong Kong proceedings can be expected to say that Keynes and General Energy were unaware of the Strategic Cooperation Agreement. Although Shan Yi (for Keynes) attended meetings from time to time with the plaintiff, the plaintiff never suggested to him that she had an arrangement with the first and second defendants or considered she had any right or interest in the shares, or in respect of any profits on sale or dividends that may be paid. According to Mr Ning (also of Keynes), the plaintiff did not mention to him that she had any arrangements with the first and second defendant.

[9]

Retaining advisors

The plaintiff retained Steinepreis Paganin, Perth solicitors, in relation to initial due diligence. The plaintiff also communicated with, but did not engage, two other law firms. Mr Carson's work continued, developing a valuation model. Throughout the transaction, Mr Carson provided reports and information to the plaintiff and the first and second defendants in respect of the project and answered the first and second defendants' questions about Rand, Tribune and the underlying assets.
The plaintiff introduced the first and second defendants to a stockbroker, the sixth defendant, Gleneagle Securities Nominees Pty Ltd. WeChat messages were exchanged between the plaintiff and the first, second and third defendants confirming that Gleneagle would act as broker on the transaction. The plaintiff, in turn, introduced Mr Rosenberg of Gleneagle to the first, second and third defendants. Mr Rosenberg knew Mr Carson from previous dealings in relation to mining companies.
Mr Carson told Mr Rosenberg that the plaintiff had some investors who wanted to purchase 10% of shares in Rand and Tribune, with the goal of taking over both companies. From his discussions with the plaintiff and Mr Carson, Mr Rosenberg understood that the plaintiff and her investors had access to some funds to undertake the initial purchase of shares but needed willing sellers of the shares and finance to finalise the initial purchases. Mr Rosenberg proceeded to organise funding for the initial purchases from the Bank of New York Mellon and CIMB Bank, provided corporate advice to the plaintiff and her investors, sourced and purchased shares on behalf of the plaintiff's investors and introduced the plaintiff and her investors to other advisors to assist with the takeover transaction.
Mr Rosenberg's advice was that the investors avoid it becoming known, as long as legally possible, that purchasers with connections to mainland China were purchasing Rand and Tribune shares because he believed that potential sellers of shares would demand a higher price. An expectation then existed in the market that mainland Chinese investors were paying premiums for companies holding mining assets. Gleneagle required a Nominee Services Agreement to be completed, which allowed Gleneagle to purchase and hold Rand and Tribune shares on behalf of the investors; it would not become known who the ultimate purchaser was unless and until they became a "substantial shareholder" and were required to lodge a form disclosing this fact.

[10]

General Energy

General Energy is incorporated in the British Virgin Islands. The company has issued share capital of USD$1.00. Its sole director and shareholder was Zhendong Liu from Fujian Province, China.
On 29 December 2014, the second defendant sent the certificate of incorporation, register of members and register of directors for General Energy to the plaintiff. The plaintiff understood that Party A intended to proceed with the transaction through General Energy as one of its BVI investment entities. The plaintiff emailed instructions to the second defendant as to how General Energy could transfer money into Gleneagle's trust account. The plaintiff was introduced to Pak Wang (Daniel) Li over a WeChat call. The plaintiff said Mr Li went to university with the first defendant and was his long-term friend. On 1 January 2015, the plaintiff had a telephone call with the first and second defendants to confirm Gleneagle's role as the broker for the transaction and that Party A would use Mr Li as the authorised representative for General Energy.
On 31 December 2014, General Energy signed a term sheet with Gleneagle, instructing the stockbroker to purchase 10% of Rand shares at $0.85 a share (totalling $5.1 million) and 10% of Tribune shares at $4.20 a share (totalling $21 million). According to the term sheet, if Gleneagle secured the shares for less than the specified price, it was entitled to keep the difference as a transaction fee. To pay for the shares, General Energy agreed to transfer $4 million on 8 January 2015, $2 million on 20 January 2015 and the balance on 28 February 2015.
The second defendant forwarded the execution page of the term sheet, signed for General Energy, to the plaintiff. The term sheet was apparently signed by Mr Liu. On 5 January 2015, the second defendant forwarded the Nominee Services Agreement, apparently signed by Mr Liu for General Energy, to the plaintiff. Mr Li was nominated as General Energy's authorised signatory. Mr Rosenberg did not have any communications with Mr Liu. Mr Rosenberg has never met Mr Li but was introduced to him by phone.

[11]

What Mr Liu and Ms Chen will say

It should be noted at this juncture that Mr Liu is expected to disclaim his involvement in the transaction. On 28 September 2020, the plaintiff's Hong Kong solicitor drafted a witness statement for Mr Liu. Mr Liu told the solicitor that the contents of the draft witness statement were true but declined to sign it because Mr Li had contacted him the day before and demanded he not sign anything. Mr Liu confirmed that if called to appear in court as a witness, he would tell the truth consistent with the draft witness statement, according to which Mr Liu says he has known Mr Li since 2012; they had a longstanding business relationship and Mr Liu trusted Mr Li. In mid 2014, Mr Liu said that Mr Li introduced him to the first defendant in relation to a potential business transaction. Mr Liu does not know the second or third defendants. The draft statement states: While I knew that Li was involved in an investment with [the first defendant] in the mining industry in Australia ("Australian Investment"), I never sought to enquire more about it as it was none of my business. To clarify, I never participated, invested in or received any profits or capital gains from such Australian Investment. Further. During my time as sole shareholder or director of [General Energy], I (whether personally or through [General Energy]) have never provided any funding to the Australian Investment. I have also never attended any meeting or discussions with [the first or second defendants] or Li in relation to the Australian Investment.
According to the draft witness statement, Mr Liu said that Mr Li regularly provided him with documents in English for him to sign but Mr Liu does not read or write English, was never given a Chinese translation but was usually told that the documents were purely administrative and urgently required in respect of their business dealings. Mr Liu has never, on behalf of General Energy, applied to Gleneagle to open a securities account, has no knowledge of the terms sheets apparently executed by him on 31 December 2014, and has no knowledge of the Nominee Services Agreement of January 2015.
Mr Liu ceased to be the sole director and shareholder of General Energy on 30 April 2019 and was replaced by Ping Chen. The fourth and fifth defendants have circulated a witness statement by Ms Chen in the Hong Kong proceedings. Ms Chen disputes Mr Liu's statement that he did not provide any capital for the purpose of investing in mining companies in Australia. Whether Ms Chen has any connection with the second defendant was not the subject of evidence.

[12]

A side deal with Westlink Partners

Also on 31 December 2014, Gleneagle signed a term sheet with Westlink Partners Ltd. The stated purpose of the term sheet was to apportion the fees earned by Gleneagle as "Westlink introduced [Gleneagle] to the transaction and has done preliminary work on the transaction and designated [Gleneagle] as trading broker". Under the term sheet, Gleneagle would charge a fee of 1% of transaction value for Rand and Tribune shares, with an additional 0.5% fee for each $0.10 per share discount below $4.00 per share for Tribune shares. After deducting this fee, Gleneagle would pay the balance to Westlink Partners.
According to the plaintiff's curriculum vitae, she founded Westlink Capital Ltd as a platform for facilitating and co-investing Australian research sector projects. As to Westlink Partners, the company was owned 50% by the plaintiff's brother and 50% by the third defendant's driver and personal assistant. The plaintiff had been a director of the company until January 2015. The plaintiff said she was associated with the company but did not control it.
The plaintiff agreed that Gleneagle's fee, being the gap between the price at which shares were acquired and the agreed price with General Energy, would be shared between Gleneagle and Westlink Partners. She did not disclose this arrangement to Party A, but said that the third defendant was working with the first and second defendants, "and I left that with Mr Zhang to communicate".
The fourth and fifth defendants submitted that the term sheet between Gleneagle and Westlink was not disclosed to them and was contrary to the Strategic Cooperation Agreement, a basic principle of which was "mutual benefit, mutual promotion and honesty". The plaintiff agreed that this basic principle required that she disclose the profit that Westlink Partners was making on the purchase and on sale of Rand and Tribune shares, "Yeah probably accepted now, but at the time I didn't think they was relevant transaction".

[13]

Funds transferred to buy shares

As mentioned, the first payment due under the term sheet between General Energy and Gleneagle was $4 million due on 8 January 2015. On 6 January 2015, the plaintiff sent an email to the first, second and third defendants attaching "General Energy Instructions to Gleneagle re Step 1 funds & settlement". The second defendant forwarded a remittance advice to the plaintiff (emailed by Mr Li to the second defendant) from a Hong Kong bank, transferring $4 million to Gleneagle. The monies were drawn from an account ending 2457. The name of the account holder is not noted on the remittance advice. The second defendant also forwarded a letter from General Energy, a draft of which had earlier been provided by the plaintiff, confirming that the funds had been remitted. The letter appears to have been signed by Mr Liu. The second defendant also forwarded, from Mr Li, copies of Mr Li and Mr Liu's passports, which the plaintiff forwarded to Mr Rosenberg.
On receipt of the first payment, the plaintiff forwarded share transfer forms (in respect of Tribune shares already acquired) to the first, second and third defendants. Mr Carson also provided Mr Rosenberg with the list of the top 50 shareholders of the target companies which Mr Billis and the plaintiff had already annotated (see [13]), noting "you might find these useful". The plaintiff also approached several shareholders about selling their shareholdings, including Mr Verheggen.
Further WeChat messages ensued between the plaintiff and second defendant regarding the transaction. On 18 January 2015, the plaintiff noted, "during last telephone conversation you proposed to list the existing issues of the [Rand/Tribune] project as well as different consideration of the transaction framework via email, and how is it progressing so far?" On 19 January 2015, the second defendant advised that he would provide a new set of solutions for everyone's consideration, and sent a "absorb merger plan and issues" document which did not refer to Keynes or General Energy, but simply to "the fund company".
The second payment of $2 million was due on 20 January 2015. This was effected by two payments of $1 million on each of 20 and 23 January 2015. The first payment was made by remittance from a Hong Kong bank account. The remittance advice was forwarded by Mr Li to the second defendant and onto the plaintiff. The second instalment was remitted from the same Hong Kong bank, and Mr Li forwarded a copy of the remittance to the second defendant, who forwarded it onto the plaintiff. The applicant for the transfer was Mr Li and the account ended 3813. Although the monies appear to have been transferred from Mr Li's personal account, he does not appear to have been the source of the funds. According to a WeChat message sent by the second defendant: Daniel Li just called, he said he received money yesterday transferred from XingYe Bank (Mainland) to his personal bank, because the bank isn't experienced in such transfer, also the bank was suspicious about the Money Laundering behaviour they didn't give the money to Daniel. Daniel is now negotiating with the bank.
On 27 January 2015, the third defendant advised, by WeChat, that a loan guarantee needed to be signed by General Energy and had been sent to "your mailbox". The guarantee was in respect of a Master Securities Lending Agreement between General Energy and Gleneagle, being a margin loan. The second defendant acknowledged receipt of the message. On 28 January 2015, Mr Li forwarded the plaintiff and second defendant a Deed of Guarantee and Indemnity in favour of Gleneagle. The document was only partially completed - the name of the guarantor was not completed - but appears to have been signed by Mr Li. The margin loan was also signed by Mr Li for General Energy.

[14]

Keynes

Keynes is a British Virgin Islands company. The company's director and sole shareholder is Xinqian Yi from Beijing. The company has issued share capital of USD$2,000.
On 19 January 2015, the second defendant advised the plaintiff by WeChat: …contact has been successfully made with Mr Yi, a loyal LP of ours who has vacated the day of 23rd to meet with you and he will get in touch with you after arriving in Sydney on 21st.
On 20 January 2015, the second defendant messaged the plaintiff again: … please prepare another set of the Accounting opening form with Gleneagle for Keynes and give it to Yi when you meet Yi on 23rd. The plaintiff said the second defendant asked her to prepare this form because Party A had decided to use Keynes as the second BVI investment entity.
On 27 January 2015, Shan Yi (Xinqian Yi's son) contacted the plaintiff by email, advising that he had completed an account opening form, which he intended to lodge with Gleneagle. The plaintiff understood that Shan Yi was a friend of the first and second defendants. According to the form, the authorised contacts for Keynes were Jian (James) Ning and Shan Yi. The plaintiff understood that Mr Ning was the first and second defendant's assistant and, for a time, also Shan Yi's assistant. (According to Mr Ning, he was not employed as an assistant to the first or second defendants but worked for the Yi Group in their Beijing office.) The main bank account for Keynes was with Hong Kong and Shanghai Banking Corporation, being an account ending 0838.
On 9 February 2015, Shan Yi emailed the plaintiff, asking her to contact the stockbroker and request a share purchase agreement and bank account details. On 10 February 2015, the plaintiff sent a WeChat message to the second defendant asking him to sign "the letter of guarantee that I just updated" as soon as possible so that the plaintiff could communicate with the securities company. The second defendant agreed to do so. On 11 February 2015, the plaintiff forwarded Shan Yi an account opening document which had been signed by both parties and provided Gleneagle's trust account bank details. Later that day, the first defendant sent a WeChat message to the plaintiff and third defendant, "please arrange as soon as possible the entrustment acquisition agreement between the securities company and Mr Yi". By 12 February 2015, Gleneagle had set up an account for Keynes. (Mr Rosenberg said he was introduced to Mr Ning but has never met Xinqian Yi.)

[15]

Intermediary Service Agreement

At about this time, General Energy and Keynes may have entered into their own agreement which did not involve Party B to the Strategic Cooperation Agreement. According to a document prepared by Mr Ning, entitled "Australian Gold Mine Investment Cooperation Project Meeting Memo", on 11 February 2015, the first defendant met with Mr Liu and Mr Li of General Energy and Shan Yi and Mr Ning of Keynes in Hangzhou, Zhejiang Province to discuss a Rand and Tribune "Equity Acquisition Project". It should be noted that, according to Mr Liu's draft witness statement, he did not attend this meeting whilst Ms Chen suggests Mr Liu did attend, whilst fairly acknowledging that she was not there either.
According to the meeting memo, the parties agreed to cooperate with respect to the project. The parties agreed that General Energy would invest $20 million to continue acquiring shares in the target companies whilst Keynes would complete preparatory work and invest additional funding by the end of March 2015 to continue acquiring shares in the target companies. The parties agreed to organise funding for a full-scale offer. General Energy and Keynes agreed to share the costs and returns on investment from the project.
Also in evidence is an Intermediary Service Agreement between Keynes and the first defendant, dated 5 January 2015, said to have been executed in Haidian District, Beijing. The Intermediary Service Agreement provided that, with the first defendant's referral, Keynes proposed to acquire Rand and Tribune, with the first defendant being willing to provide intermediary service for this purpose. Article 1 of the Intermediary Service Agreement provided: Article 1 the Cooperation [Keynes] and [the first defendant] unanimously agree that [the first defendant] shall make use of its rich information resources and professional judgment to provide [Keynes] with intermediary service for the Acquisition Project, introduce [Keynes] to [Tribune] and [Rand] shareholders and facilitate share transfer transactions among them until [Keynes] has acquired more than 90% of the shares in [Tribune] and [Rand] ("Underlying Shares" for short). Article 2 obliged Keynes to raise funds to acquire the shares and to assume the profit and loss arising from acquiring the shares.
Keynes and General Energy say this is the document which governed their acquisition of Rand and Tribune shares (although General Energy was not a party to the Intermediary Service Agreement, so it may not explain General Energy's acquisition of shares). According to Shan Yi, Keynes was not a nominee or agent of the first and second defendants but invited by the first defendant to invest in its own right in Rand and Tribune shares. According to Mr Ning, the shares were not purchased at the direction of, or on behalf of, the first and second defendants but because Keynes believed the shares were a good investment. The funds used by Keynes to purchase the shares were provided by the Yi Group or investors identified by Keynes. Keynes and General Energy's position is that, to the extent that the first defendant - by entering into the Intermediary Service Agreement - cheated the plaintiff, then that is regrettable but not their concern.

[16]

Getting organised

On 13 February 2015, the plaintiff sent confirmation to the first, second and third defendants that Shan Yi had opened a nominee account with Gleneagle. The plaintiff sent various WeChat messages asking the first and second defendants whether Mr Li and Mr Yi had transferred money, and the first defendant confirmed that they had. On 16 February 2015, Mr Li forwarded a remittance advice from a Hong Kong bank account ending 3833 for $1 million, which the second defendant forwarded to the plaintiff. According to an email from Shan Yi to Gleneagle, these funds came from his account.
On 26 February 2015, the plaintiff sent an email to the first, second and third defendants with a draft authorisation by Keynes for Gleneagle to use the $1 million to buy Tribune shares. On 27 February 2015, the second defendant circulated a revised authorisation, to be issued by the first defendant "& Associates". The proposed letter opened: Thank you very much for everything you have done for our investors in last two months. Regarding the issues we are facing and the solutions you have suggested to us, we had a serious discussion last night. The following is our responses to the matter …
The letter proposed transferring $3 million "from/for" General Energy's trust account with Gleneagle, with $1 million to be used to purchase Tribune shares, and a further $2 million to be transferred into General Energy's account with Gleneagle on 3 March 2015. "We are still interested in purchasing Rand shares. However, we need to have a meeting … We will let you know as soon as we make the decisions". The plaintiff forwarded this to Mr Rosenberg: Pls see the attached confirmation letter from Peter and Jim last night, confirming the $5m. Pls let me know if this is ok, the settlement of remaining shares will be discussed on Monday with the Chinese, which I'll call u to discuss this morning. Keynes also forwarded a letter signed by Xinqian Yi to Gleneagle, authorising Gleneagle to use $1 million for the purchase of Tribune shares.
Later that evening, Mr Carson forwarded Mr Rosenberg a letter from the first defendant, together with a confirmation certificate that $3 million was in his account. The letter from the first defendant - which the plaintiff wrote following a series of WeChat messages with the first defendant setting out his instructions - confirmed that $3 million was in the first defendant's personal bank account in Shanghai (account ending 5888), of which $1 million would be transferred that evening and the balance of the funds would be transferred in manageable tranches commencing on 2 March 2015. Apologies were made for the delay and inconvenience caused. The first defendant sent an image of his bank balance, ending 5888, confirming that it held a balance which accorded with his letter.
Later that evening, Mr Li sent an email to the first defendant summarising the recent funding transactions. The email refers to funds now payable or owed to Mr Liu and Mr Li, which the plaintiff submitted was consistent with the payments made by Mr Liu or Mr Li being loans, to be repaid by the first and second defendants. WeChat messages exchanged that day between the plaintiff and the first and second defendants also indicate that the first defendant was endeavouring to obtain authority from Keynes whilst Gleneagle was negotiating with shareholders extending the time for payment for their shares, with another party also interested in buying the shares.
Further payments followed. On 2 March 2015, a series of emails and WeChat messaged ensued between the plaintiff and the first and second defendants in the course of paying some $2 million to Gleneagle. The monies appear to have come from the first defendant's bank account.
On 3 March 2015, the second defendant sent the plaintiff and the first defendant a document entitled "Advice on future work" which included: Thank you all for your concerted effort, especially [the first defendant's] accountability and [the plaintiff's] mediation, we battle at the first stage has achieved some positive results. … Strategies were proposed to acquire further shares, and funds necessary to pay for the shares, noting "the total funds available to us only amount to AUS$22 million (13 million + 9 million)". A loan needed to be arranged by Gleneagle for some $12 million, "In terms of timing we should try our best to provide [the first defendant] with sufficient time, and the suggestion is that negotiations start by the end of March …"
On 10 March 2015, the second defendant emailed a Final Settlement Binding Term Sheet between Gleneagle and Keynes to the plaintiff and first defendant, stating, "On behalf of Keynes Capital Global Limited, we confirm we agree with the content of the attached Term Sheet …". The email was stated to be sent by the first defendant "and the team". The plaintiff forwarded the term sheet to Mr Rosenberg and Mr Carson, noting that, after rounds of discussion and legal review, "the Chinese team" agreed with the term sheet, although the term sheet also had to be agreed with Mr Yi, director of Keynes. The plaintiff stated: I'm glad we got this term sheet confirmed and we are now officially one team. The team is looking forward to working with you on the Takeover.
The Final Settlement Binding Term Sheet was signed by Keynes. The stated purpose of the term sheet was to replace the term sheet between Gleneagle and General Energy and to purchase 7% of Tribune shares at $4.20 a share and 5% of Rand shares at $2.00 a share. Again, in the event that Gleneagle secured the shares at less than these prices, Gleneagle was entitled to keep the difference as a transaction fee. Keynes was to transfer between $6 million and $9 million to Gleneagle by 25 March 2015 to pay for the shares, with any unpaid portion payable on 8 April 2015. Keynes also agreed to engage Gleneagle as "The Advisor" under a Mandate for a proposed takeover of Rand and Tribune.
The second defendant also forwarded to the plaintiff and first defendant an email "on behalf of Keynes" agreeing with the contents of the term sheet. The second defendant also signed a side letter, on behalf of Keynes and General Energy, confirming that the buyer included Keynes, General Energy "or any nominee of either of these entities, and / or any other parties instructed by the undersigned which initiates and successfully concludes a take-over or take-overs of Tribune … and Rand …" Mr Rosenberg said he required Keynes to provide the side letter because he was concerned that, while the Term Sheet concerned only Keynes, in practice, the first and second defendants were giving instructions on the takeover transaction.

[17]

Going forward

Thus it appears that, after an initial period of discussion and negotiation between the plaintiff and the defendants, arrangements were now in place for Gleneagle to acquire Rand and Tribune shares for both Keynes and General Energy. As to how instructions were generally obtained to acquire such shares, Mr Rosenberg said that, since late 2014, he has been involved in over 50 conference calls involving the plaintiff and the investors in relation to the transaction. Sometimes, these calls lasted for a number of hours, in part because it was necessary to translate information from English to Chinese and vice versa to ensure that all participants understood what was being said. During these calls, the first and second defendants attended and participated on most occasions, with the third defendant, Mr Li and Mr Ning attending and participating occasionally. The first and second defendants both told Mr Rosenberg that the plaintiff was authorised to give instructions on behalf of the investors in relation to the transaction. Throughout the takeover transaction, Mr Rosenberg relied on the plaintiff to liaise with the investors and to obtain instructions and payments. The plaintiff was based in Sydney. The investors were based in China and, other than the second defendant, did not speak English.
The plaintiff said that, when she needed instructions in relation to General Energy or Keyne's dealings with shares or Gleneagle, she sought instructions from the first and second defendants or Mr Li. Instructions were always provided by the first and second defendants or occasionally Mr Li or Mr Ning. As the plaintiff understood it, decisions as to whether Keynes and General Energy would proceed to buy shares at a particular price were made by the first and second defendants, who never indicated that they needed to seek or confirm instructions on behalf of Keynes or General Energy with anyone else. The plaintiff never discussed the dealings of the first or second defendants in relation to the shares with Mr Yi or Mr Liu and was not aware of Mr Yi or Mr Liu making any decisions or taking any action in relation to the affairs of Keynes or General Energy other than in accordance with the wishes of the first and second defendants. When the plaintiff needed instructions to be given to advisors in relation to the transaction, such as lawyers and accountants, she sought those instructions from the first and second defendants. The plaintiff attended meetings with Gleneagle and advisors, and sometimes the first and second defendants attended the meetings when they visited Australia. Xinqian Yi and Mr Liu did not attend any meetings.
The fourth and fifth defendants relied upon an affidavit by solicitor Zhuocun (Tracey) Ding, who had taken instructions from Shan Yi and Mr Ning. (To the extent that Shan Yi or Mr Ning told Ms Ding anything about General Energy, I have given it no weight as it is not clear to me what role, if any, they had with that company.) According to Mr Ning, the plaintiff's role was to provide translation services to communicate with Gleneagle and other Australian firms; she had the best English and said that she had a good connection with the major shareholder in Rand and Tribune. The plaintiff also recommended some local professionals including Gleneagle, geologists and lawyers. Mr Ning understood that the plaintiff was a member of the first defendant's team. The plaintiff was not authorised to make any statements on behalf of Keynes; her role was to translate and provide the connection to the brokers, lawyers and Mr Billis. The plaintiff acted as a go-between who assisted with translations and conveyed documents back and forth. Mr Ning liaised with the plaintiff and Gleneagle in relation to Keynes' purchase of shares in Rand and Tribune. He also attended meetings with the first and second defendant about the project.

[18]

Further funds transfers

On 17 and 18 March 2015, further WeChat messages passed between the second defendant and the plaintiff in respect of two transfers of $3 million from the first defendant's bank account to Gleneagle. On 21 March 2015, the second defendant sent the first defendant and Mr Ning various papers and presentations in respect of the proposed acquisition of Rand and Tribune. On 25 March 2015, Mr Ning joined the WeChat group. On 23 March 2015, WeChat messages passed between the plaintiff and the second defendant concerning the transfer of $3 million by Mr Yi.
On 31 March 2015, the second defendant forwarded details of recent funding transactions to the plaintiff and first defendant, together with share transfer forms, in which General Energy transferred its shares in Rand and Tribune to Keynes. Also in evidence is a Settlement Binding Term Sheet between Gleneagle and Keynes, executed by Keynes but not Gleneagle, for the purpose of purchasing Rand shares from General Energy at $2.00 per share, with $4 million to be transferred by 27 April 2015 for this purpose.
Mr Rosenberg said that, in early 2015, the plaintiff told him that she had received an email from the first and second defendants that purchases of Rand and Tribune shares should be divided between Keynes and General Energy, with 60% of shares to Keynes and 40% to General Energy. Gleneagle purchased the shares accordingly. The first and second defendants never raised any issue concerning the split with Mr Rosenberg.
On 1 to 7 April 2015, further WeChat messages ensued between the plaintiff, first and second defendants in relation to a transfer of $2 million from the first defendant's bank account to Gleneagle. The plaintiff sent a WeChat message to Mr Ning, "please send me a photo of the first page of Mr Yi's passport; the agent needs to change the name to Mr Yi for all transfer receipts". The first page of Xinqian Yi's passport was provided, together with the passport of Mr Liu. On 8 April 2015, Gleneagle sought confirmation from the plaintiff that the various monies received, totalling some $2 million, were paid by General Energy. The plaintiff advised that the monies were from Keynes.
On 21 April 2015, further WeChat messages ensured between the plaintiff and the WeChat group concerning the transfer of $2 million by Xinqian Yi. On 26 April 2015, WeChat messages ensued between the first defendant and plaintiff in respect of the transfer of $2 million from Xinqian Yi, although at least some of these monies appear have originated from the first defendant's personal bank account. The first defendant wrote, "Annie don't forget tomorrow I need to transfer more money". The third defendant asked, "Under what name this money was for?" The first defendant wrote, "Keynes". The third defendant wrote, "Still need to pay out from the personal account. … So we should use Yi's name as usual".

[20]

Meetings to progress the take over

On 23 May 2015, the plaintiff, Mr Rosenberg and Mr Carson met the first, second and third defendants and Mr Ning in Hong Kong. According to minutes of the meeting, Mr Rosenberg said this was one of the most difficult and challenging deals he had worked on in over $3.5 billion in transactions. Over the years, he had worked with various parties "in various attempts to do exactly what General Energy and Keynes have just done". Other parties "had accumulated a stake but were unable [to] complete or get cooperation from Anton". As to why Mr Rosenberg had been successful on this occasion, he explained: Dealing with Anton is a huge challenge and very very difficult - Annie has been the only person who has succeeded in working and negotiating with him on this matter which has given Lance / [Gleneagle] a lot of confidence we can be successful. …
Mr Rosenberg said that he could not have done this without the plaintiff and Mr Carson's "strong and sustained input and the regular strategizing meetings". Mr Rosenberg advised that the group could sell all of the shares now and make a good profit, and asked whether the group wanted to sell. The second defendant advised, "[N]o we don't want to. Later we will tell you what we want to do and you will make a lot more money". The first defendant noted that this was the first time they had invested in Australia and they did not have much experience in this market. Mr Rosenberg suggested that lawyers be appointed to assist with the proposed takeover and that they approach Mr Billis noting, "[O]nly Annie can do this. Among all the work we have to do for this transaction, this is the hardest job". Further, "With regard to dealing with Anton this is up to Annie and the financing of the bid [is up to] the China team".
On 2 June 2015, the plaintiff participated in a telephone conference with Mr Rosenberg, Mr Carson, the first and third defendants and Mr Ning to progress funding the acquisition of further shares and to consider legal advice obtained on the proposed takeover. On 9 June 2015, WeChat messages ensued between the plaintiff, first defendant and Mr Ning concerning the transfer of $2 million from Xinqian Yi's account to Gleneagle. A further telephone conference was had on 2 June 2015 between the plaintiff, Mr Rosenberg, Mr Carson, the first, second and third defendants and Mr Ning in respect of the proposed takeover. The plaintiff was tasked with preparing a table of shares transferred, to be transferred and those which could be acquired.
On 23 June 2015, a further telephone conference took place between the plaintiff, Mr Rosenberg, Mr Carson and the first, second and third defendants. Mr Rosenberg noted that, in the last three weeks, various parties had been trying to buy shares noting: The good news is that [General Energy] and Keynes will make a profit if they sell their shares. The bad news is its getting harder to get the shares.
Mr Rosenberg said, in cross-examination, that his comment reflected his understanding that Keynes and General Energy had bought the shares as principals: I didn't know who the shareholders of General Energy and Keynes or the beneficiaries behind, but I'm comfortable in saying General Energy and Keynes would make the profit and whether [the first defendant] was a beneficiary or a shareholder or a profit share, I have no idea. But, yes General Energy and Keynes were the principals in this transaction.
The plaintiff understood that the first and second defendants were the principals rather than Keynes and General Energy. The plaintiff understood that the first and second defendants "would make a profit at that time by selling shares through that carrying vehicle General Energy and Keynes". When it was suggested to the plaintiff in cross-examination that she never told Mr Rosenberg that Keynes and General Energy were only acting as vehicles for the first and second defendants, the plaintiff said: No, I had told Mr Rosenberg multiple times … [E]arly on transaction that was very clear through Mr Xu and Mr Chen they would like to use the General Energy and Keynes to be that vehicle to carry the shares and carrying the benefit through this investment. … At all times that was understood between myself and Mr Rosenberg and all the others in Australia that the profit will be eventually earned by Mr Xu and Mr Chen, and at all times it was understood Keynes and [General Energy] were the carrying vehicles used by Mr Xu and Mr Chen in this transaction.
Further meetings took place on 1 July 2015, 9 July 2015 and 8 August 2015. The plaintiff submitted it was significant that, according to the minutes, decisions as to substantive matters, such as the rollover of loans in the name of Keynes and General Energy, were made by the first and second defendants despite Mr Li being present at the meetings.
The second defendant provided the plaintiff with details of a trip to Australia by the first to third defendants in July 2015. The plaintiff said the purpose of the trip was for the first, second and third defendants to meet with the plaintiff, Mr Carson, legal advisers and the vendor in Perth. She attended all of the meetings with the first, second and third defendants.

[21]

Takeover fails

Mr Rosenberg said that, at various times since early 2015, the investors were unable to provide funds as quickly as required to settle the purchase of Rand and Tribune shares. It also appears that it became increasingly difficult to find willing sellers. At the hearing, Mr Carson described acquiring shares as a "complex and difficult exercise".
On 14 July 2015, further WeChat messages ensued between the plaintiff and the first defendant concerning a transfer of $1 million from Xinqian Yi. On 7 August 2015, Gleneagle issued a binding term sheet to Keynes, offering to lend up to $3 million to be secured over Rand and Tribune shares. The term sheet was executed by Xianqian Yi for Keynes. The plaintiff later liaised with the first defendant about repayment of this loan. On 28 September 2015, Keynes and General Energy signed an engagement letter with Gleneagle, retaining Gleneagle to act as their exclusive financial adviser in Australia in connection with the proposed takeover of Rand and Tribune. Further funds were transferred by the first defendant in December 2015 and May 2016, although the source of the funds is not clear. Keynes entered into a loan with a Chinese company to obtain further funds to buy shares.
Mr Rosenberg said that, in about July 2016, the first and second defendants requested that Rand and Tribune provide due diligence so that the takeover transaction could continue to progress. Mr Billis required that the investors provide evidence of funding capacity before due diligence would be provided. The investors were not able to provide this evidence to Mr Billis' satisfaction and, on that basis, Rand and Tribune did not provide due diligence.
In October 2016, PricewaterhouseCoopers was retained to give tax advice on the proposed transaction. A retainer was sent to the plaintiff and second defendant.
On 9 February 2017, a Strategic Cooperation Agreement - Supplementary Agreement was executed by the first and second defendants (Party A) and the plaintiff and third defendant (Party B). The Strategic Cooperation Agreement was extended to another project but, relevantly, clause 3.2 of the Strategic Cooperation Agreement was amended to the following: Any income or revenue generated by the fund during the course of cooperation is to be allocated proportionately as pursuant to the percentage-based performance reward as specified in the above paragraphs. That is, income or revenue would be allocated 51% to Party A and 49% to Party B. It may be noteworthy that the Supplementary Agreement did not further amend the Strategic Cooperation Agreement to take into account the subsequent introduction of General Energy and Keynes into the transaction, nor the Intermediary Services Agreement dated 5 January 2015.
On 19 May 2017, WeChat messages ensued between the plaintiff, Mr Ning and the first defendant regarding the transfer of $10 million to Gleneagle for acquisition of shares by Keynes. Keynes now owned 12.98% of Rand Mining shares and 12.31% of Tribune shares. Ultimately, the transaction did not proceed to the threshold to launch a takeover of Rand and Tribune as the sufficient funds were not forthcoming from the defendants. Keynes and General Energy were nonetheless left with a substantial shareholding in both companies.

[22]

Payments to Highland / Westlink

In April 2015, Mr Carson contacted Gleneagle in relation to payment of a fee to Westlink. On 9 April 2015, Gleneagle transferred $1,356,145 to Highland Capital Investment Ltd, described in the bank receipt as "Fee for the purchase and sale of fully paid ordinary shares in [Tribune]". The plaintiff forwarded the bank receipt to the third defendant, saying that "As soon as I receive it, I will transfer it out". The plaintiff agreed that this payment was for the profit made on the apportionment terms agreed between Gleneagle and Westlink Partners. As to Highland, the plaintiff's brother was the director and sole beneficial shareholder of the company, although the plaintiff had access to Highland's bank account and authority to operate the account. The plaintiff agreed that she did not disclose this fee to the first and second defendants, nor to Keynes or General Energy: The fee earned, the Highland fee or Westlink fee was organised by Mr Zhang, defendant three, and it was up to Mr Zhang to communicate with defendant one and defendant two. I did not disclose it.
The plaintiff agreed that she paid half of the fee received to the third defendant, while the rest was retained by Highland. The plaintiff did not agree that her brother did not engage in this transaction, rather, she was authorised by her brother to deal with the transfer. Whilst she did not have an agreement with her brother to divide up the money between them, "I received some credit between me and my brother".
On 27 July 2015, Mr Carson emailed the plaintiff a spreadsheet setting out a calculation of a "Highland fee" in respect of shares purchased in Rand and Tribune from March to July 2015 being, as I understand it, the difference between the price at which the shares had been acquired and the price nominated in the Term Sheet. A portion of the fee was to be shared 50:50 with "JV", a reference to Mr Verheggen, who the documents indicate was a shareholder who was reluctant to sell his shares. Gleneagle calculated the fees payable to Highland as some $570,000 and fees payable to Westlink of some $590,000. A total of some $1.16 million was apparently paid. On 17 August 2015, the plaintiff sent a WeChat message to the third defendant advising, "our fees have been settled" and would be "sent to our Westlink account and I will transfer it to your wife's account".

[23]

Plaintiff asks for payment

On 8 June 2017, Rand and Tribune announced dividends of 10 cents per share and 20 cents per share respectively. According to the plaintiff, on 16 June 2017, she called the first defendant and said that, based on the Strategic Cooperation Agreement, Party B should be entitled to 49% of the dividend. The first defendant responded, "I will consider". On 25 June 2017, the plaintiff called the first and second defendants and asked if they would honour the Strategic Cooperation Agreement. Both said that they needed the money to spend and they would consider after the dividend payment was distributed.
The dividends were paid on 31 July 2017. Gleneagle received some $2 million in dividends for Keynes and General Energy. On 10 August 2017, the plaintiff called the first and second defendants again and asked them to honour the Strategic Cooperation Agreement. The plaintiff sent various WeChat messages to the first defendant asking whether Mr Rosenberg could retain part of the dividend for future expenses. The plaintiff said the reference to future expenses was to monies owing under the Strategic Cooperation Agreement. The first defendant replied that that there were insufficient funds to do so, "The subsequent payment will be paid by the Hong Kong acquiring entities". The plaintiff understood this to mean that the first defendant would have his assistant transfer most of the money to the BVI companies which would then make the subsequent payments to the plaintiff. It appears that the dividends simply remained with Gleneagle.
On 5 September 2017, the first defendant circulated an agenda for an upcoming trip to Perth, noting that one of the main objectives of the trip was to reverse Mr Billis' "misunderstanding of us as an intermediary, and clearly establishing us as the real investor". According to the plaintiff, the document suggested that, instead of proceeding with a proper takeover process, Mr Billis could sell his shares in the target companies to the first and second defendants for a discounted price. The plaintiff told the first and second defendants that some of the content of the agenda appeared to be against Australian law, but her advice was ignored; they wished to proceed with the agenda as prepared.
On 8 September 2017, the plaintiff met with Mr Billis the first defendant and Mr Li at Mr Billis' office. The plaintiff translated the proposal set out in the agenda which had been circulated. Mr Billis refused to proceed with the transaction as proposed because he considered the transaction was against the law. During the meeting, the plaintiff recalls the first defendant repeatedly saying, "Jim and I are the true purchasers of the shares". According to the plaintiff, Mr Li did not respond or say anything about this statement during the meeting.
On 13 September 2017, the second defendant sent an email to UBS and the law firm retained to advise on the takeover, referring to himself and the plaintiff as the representatives of Keynes and General Energy.
On 22 August 2018, Rand and Tribune announced a further dividend. The plaintiff was then on a business trip in China, when she said that she telephoned the first and second defendants noting that there had been another declaration of dividends and requesting that they honour the Strategic Cooperation Agreement and share in both dividend payments. The first defendant said, "We need the money and we are not going to pay you at this stage" and the second defendant said, "Yes, we cannot pay you."
In September 2018, Mr Ning contacted the law firm, advising that the first and second defendants and himself, were planning to visit Australia later that month and requested a meeting. This trip was arranged without notifying the plaintiff. The plaintiff believes that the reason why they did not notify her of the trip was because she had made repeated requests of the first and second defendants to pay her 49% of the profits and proceeds of the transaction, including 49% of any dividends. The plaintiff believes that the first and second defendants and Mr Ning intended to cut her out of these visits and meetings and therefore out of any future benefit arising from the transaction.
On 20 September 2018, Rand and Tribune announced a special dividend, being $1.25 per Rand share and $3.50 per Tribune share. On 21 September 2018, Mr Li, on behalf of Keynes, requested that the Rand and Tribune dividends be transferred to a new bank account in Hong Kong. Mr Rosenberg said that Keynes sought to provide new names as authorised contacts from whom Gleneagle could receive instructions, and details for a new bank account to be used for transfers. The plaintiff believes that the email indicates that the first and second defendants intended to withdraw funds then held by Gleneagle.
Rand and Tribune made further announcements in respect of the payment date for the special dividend and, on 4 October 2018 and 8 October 2018, Mr Li sent various emails to Gleneagle requesting payment of the dividend to Keynes. According to Mr Ning, Keynes wanted to invest in a Hong Kong company at the time, although this proposed investment was not referred to in Mr Li's correspondence at the time, nor in subsequent correspondence between the solicitors once these proceedings commenced.
To date, the plaintiff has received no payment from the defendants, either under the Strategic Cooperation Agreement or at all. The plaintiff has incurred expenses in respect of travel and accommodation. Mr Carson has rendered invoices totalling some $270,000 in respect of services provided in relation to analysing the assets of Rand and Tribune, which have not been paid.

[24]

Freezing order

On 10 October 2018, the plaintiff instructed solicitors to commence proceedings in Hong Kong and also commenced the Australian proceedings by summons seeking an order that, until the final resolution of the Hong Kong proceedings, the defendants be restrained from dealing with 49% of the Rand and Tribune dividends received by Gleneagle, being some $17.2 million. The summons was initially heard ex parte by Ball J. In support of her application, the plaintiff relied on her affidavit in which she expressed a concern that, in light of the first and second defendant's failure to pay monies under the Strategic Cooperation Agreement in respect of the dividends declared in July 2017 and August 2018, the first and second defendants intended to transfer the funds offshore and to refuse to pay monies owing under the agreement.
After considering the Strategic Cooperation Agreement (at [3]), Ball J considered that the evidence "strongly suggests that investments were made pursuant to the Agreement" through Keynes and General Energy: at [4]. His Honour was satisfied that, unless an injunction was granted, there was a real risk that the monies held in Gleneagle's account would be paid away to a jurisdiction where the plaintiff would not be able to recover the amount paid even if she was ultimately successful in her claim in the Hong Kong proceedings: at [8]. His Honour considered that the plaintiff had a prima facie case that Party B was entitled to 49% of the dividends currently held in Gleneagle's account. Further, the balance of convenience favoured the granting of an injunction, at least for a limited time, to preserve the amount claimed: at [10]. His Honour made orders restraining the defendants from dealing with the monies held by Gleneagle up to $17,168,803.60.
On 12 October 2018, the plaintiff commenced the Hong Kong proceedings against the same defendants. The plaintiff's solicitor was then informed that it was likely to take two years until the Hong Kong proceedings were determined.
In the Australian proceedings, the defendants were served in accordance with orders for substituted service. The first, second and third defendants have never appeared in the Australian proceedings. Keynes and General Energy appeared, initially retaining HWL Ebsworth Lawyers. Gleneagle filed a submitting appearance.
On 21 October 2018, the plaintiff's solicitor proposed that the freezing order be varied to enable the frozen funds to be transferred to a high interest account. On 24 October 2018, HWL Ebsworth advised that the freezing order would be contested as Keynes had invested in shares in Rand and Tribune on its own behalf and not on behalf of the first and second defendants. A copy of the Intermediary Service Agreement was provided, said to be the relevant agreement between Keynes and the first defendant. Nor did Keynes agree to the funds being transferred to an interest-bearing account. Rather, the funds should be released as Keynes wished to purchase more Tribune shares. (The Takeovers Panel was expected to issue a sell down order to one or more large shareholders of Tribune, which Keynes wanted to be in a position to acquire.) The plaintiff did not agree to the release but noted that, if the Takeovers Panel did make a sell down order, the plaintiff may reconsider the request if Keynes could explain why it could not use other funds, including its 51% share of the dividends which had not been frozen, to acquire the shares.
On 24 October 2018, Gleneagle was contacted by a lawyer acting for Keynes and General Energy, who requested a "Pershing" broker application form. Such a form could be used to enable Keynes and General Energy to change their shareholding in Rand and Tribune from shares held through Gleneagle to a direct shareholding. If such a change was made, it would be possible for Keynes and General Energy to direct the transfer of shares from Gleneagle to another broker.

[25]

Application to vary freezing order

On 26 October 2018, Keynes and General Energy filed a motion to vary the freezing order to reduce the amount frozen by reason of a fall in share prices and Keynes' wish to acquire Tribune shares. In response to the motion, the plaintiff's solicitor advised that the plaintiff regarded any movement in share prices after 12 October 2018 as irrelevant to her entitlements under the Strategic Cooperation Agreement, noting: By way of confirmation and for the avoidance of doubt, our client's position is that: (a) The Strategic Cooperation Agreement was repudiated by [Keynes] by the conduct of the first and second defendants in refusing to pay to our client any portion of the dividends which have been paid by Rand and Tribune …; (b) Our client accepted this repudiation by commencing a proceeding in Hong Kong on 12 October 2018 to enforce her rights under the Strategic Cooperation Agreement; and (c) On that basis, our client's loss and damage ought to be assessed as at 12 October 2018 by reference to the profit generated on the Rand and Tribune investments as at the close of the market on 11 October 2018. This letter gained some prominence on these applications as Keynes and General Energy contend that, by reason of the plaintiff purporting to have terminated the Strategic Cooperation Agreement on 12 October 2018, she has no claim to profits post-termination and thus the freezing order should not be extended to subsequent dividends and capital gains.
The plaintiff issued a notice to produce to Keynes in the Australian proceedings, seeking documents from 11 November 2014 on recording communications between the parties concerning the acquisition of shares in Rand and Tribune, the distribution of dividends and the Strategic Cooperation Agreement. Keynes filed a motion to set the notice aside. On 30 October 2018, the plaintiff's solicitors proposed to vary the notice to produce, with documents to be produced by verified discovery. Keynes accepted this proposal.
On 31 October 2018, Ball J heard Keynes and General Energy's motion to vary the freezing order. After what appears to have been a lengthy hearing, his Honour made orders by consent that Keynes provide verified discovery in answer to the plaintiff's notice to produce. Further, the freezing order was varied by the addition of a new order, permitting Keynes and General Energy to require Gleneagle to acquire further Rand and Tribune shares using some $5.36 million which - as I understand it - was capital gain rather than dividends. Shares so acquired were to be held by Gleneagle. Directions were also made for the filing of further evidence in respect of the application to vary the freezing order, with the matter listed for further hearing on 26 November 2018.
On 31 October 2018, the plaintiff swore an affidavit setting out her assets. In respect of four properties which the plaintiff owned, either in her own right or with someone else, valuations were provided together with details of borrowings secured over the properties, rental income and development plans. Details of the plaintiff's salary were given, together with shareholdings and business interests. (Two of the properties were sold shortly before the hearing but not disclosed by affidavit. This was said to amount to a material change of circumstances warranting discharge of the freezing order, to which I will return.)
On 5 November 2018, Gleneagle was directed to transfer all money held on behalf of Keynes and General Energy that was not the subject of the freezing order, together with all Rand and Tribune shares. It appears that this direction was actioned.
On 9 November 2018, Ball J vacated the hearing of the application to vary the freezing order and re-listed the matter for hearing for three days commencing on 10 April 2019. The time for Keynes to provide verified discovery was extended to 14 December 2018. The time for Keynes and General Energy to serve evidence was extended to 21 December 2018.

[28]

Australian proceedings are resolved

In the Australian proceedings, on 14 February 2019, HWL Ebsworth finally responded to the plaintiff's proposed consent orders, noting that, on 23 January 2019, the Australian Securities and Investments Commission had announced that Morgan Stanley was appointed to sell some 12 million Tribune shares pursuant to the sell down order. Morgan Stanley had called for bids by 15 February 2019, that is, the next day, and Keynes and Global Energy were interested in acquiring shares. Accordingly, Keynes and Global Energy proposed to avail themselves of the variation of the freezing order made by Ball J on 31 October 2018 to purchase Tribune shares, which would be held on the terms prescribed by his Honour until resolution of the Hong Kong proceedings. Further, and more controversially, it was proposed that the whole of the frozen monies be released to purchase additional Tribune shares, to be held by Gleneagle and dealt with in a manner which preserved the amount of the presently frozen funds.
On 15 February 2019, the plaintiff rejected this proposal on the basis that the parties had already agreed to settle the Australian proceedings on the terms set out in the plaintiff's Calderbank letter of 4 December 2018. The fact that the offer had been accepted was said to be confirmed by the fact that the fourth and fifth defendants did not subsequently comply with the Court's orders relating to discovery and evidence, which would be inexplicable if they did not regard the matter as having been settled. The plaintiff's solicitor noted that the fourth and fifth defendants had provided no explanation for the delay of almost two months in responding to the proposed orders to implement the settlement, nor put forward their proposal until the day before the deadline for bids in circumstances where the sale process had been publicly announced on 23 January 2019. In the circumstances, the plaintiff's solicitors proposed to approach the Court to have the matter re-listed. "At that listing our client intends to seek orders implementing the settlement".
On 18 February 2019, HWL Ebsworth proposed amendments to the proposed short minutes of order, as well as amendments to a proposed email to be sent to the Associate to Ball J, including that his Honour be notified of "a resolution of these proceedings" (being words suggested by the fourth and fifth defendants' solicitors rather than those of the plaintiff's solicitor, which had referred to agreement in respect of "the freezing orders"). The plaintiff's solicitor agreed to the proposed amendments and, on 19 February 2019, signed the consent orders, which were duly sent to the associate to Ball J.
On 20 February 2019, Ball J made the following orders by consent: 1. Upon the plaintiff giving the usual undertaking as to damages, the freezing order … be extended until the final resolution (including the hearing, determination of any appeals and the payment of all monies awarded) of the [Hong Kong] proceedings …. 2. The hearing listed to commence on 10 April 2019 is vacated. 3. The following [procedural] orders are vacated … (c) Order 1 of 31 October 2018 in respect of … verified discovery [by Keynes]; … 4. Liberty to apply on 24 hours' notice. 5. Each party to pay their own costs of, and incidental to, these proceedings. It is this freezing order which Keynes and General Energy seek to have discharged.
On 4 March 2019, HWL Ebsworth approached the plaintiff's solicitor again to seek to use the frozen funds to acquire shares in Rand and Tribune. On 26 March 2019, the plaintiff again declined this proposal and suggested that the best way to minimise any prejudice associated with the freezing order was by expediting resolution of the dispute. The plaintiff suggested that the parties resolve the dispute by arbitration in Sydney, which could be conducted and finalised more quickly than the Hong Kong proceedings. The plaintiff offered to engage in without prejudice commercial discussion at any time either by correspondence, telephone, video or in person in either Sydney or Hong Kong. There was no reply.

[29]

Further progress of Hong Kong proceedings

On 11 April 2019, the plaintiff arranged for the issue of an amended writ in Hong Kong. In April 2019, the plaintiff also agreed to provide security for the fourth and fifth defendants' costs up to and including the hearing of the strikeout application. The plaintiff paid HK$600,000 into court.
On 5 June 2019, the plaintiff filed an amended statement of claim in advance of the strike out application on 11 June 2019, adding an entitlement to a Pallant v Morgan equity in the Rand and Tribune shares. (Where, pursuant to an arrangement between the parties to acquire property, one acquires property in its own name and does not honour the arrangement, that party may hold the property on trust for the parties: Pallant v Morgan [1953] Ch 43 per Harman J; Banner Homes Group Plc v Luff Developments Ltd [2000] Ch 372 at 397-8 per Chadwick LJ; Commissioner of State Revenue (Vic) v Snowy Hydro Ltd (2012) 43 VR 109; [2012] VSCA 145 at [105]-[106].) The fourth and fifth defendants' Hong Kong solicitor said the amended pleading was circulated "without any prior indication" and contained wholesale changes to the plaintiff's case.
On 11 June 2019, the strikeout application was not pursued in light of the amended pleading. Submissions were made, however, on two remaining issues: first, whether the plaintiff should be allowed to amend her pleading at all; second, whether the defendants' costs of the strikeout application - which the plaintiff accepted she must pay - should include the costs of two counsel. As to the first matter, Keynes and General Energy argued that the amended claim was inconsistent with the original claim as the plaintiff now claimed an entitlement to the shares in the target companies whilst, in her original claim, the plaintiff claimed to be entitled to a portion of the dividends and capital gains. After argument, Her Honour Chan J reserved judgment.
On 14 June 2019, the fourth and fifth defendants' solicitors requested additional security for costs in respect of the Hong Kong proceedings. On 17 June 2019, the plaintiff's solicitors suggested that the request await her Honour's judgment.
On 18 June 2019, the plaintiff's solicitors wrote to the Registrar of the High Court requesting assistance to serve the pleadings, orders and evidence on the first, second and third defendants in Mainland China. Keynes and General Energy strongly criticised the plaintiff for delaying this request for four months after leave was granted to serve the documents out of the jurisdiction. The plaintiff submitted that there was little point in serving the pleadings if the application to strike out the claim was successful. I agree. On 28 August 2019, the High Court informed the plaintiff's solicitor that service on the first and second defendants had not been effective. On 26 September 2019, the High Court informed the plaintiff's solicitor that the third defendant had not been served either.
On 3 September 2019, Chan J gave judgment, accepting the plaintiff's submission that there was no inconsistency between the facts relied upon by the plaintiff and the relief sought, either in the original statement of claim or the proposed amended statement of claim. The plaintiff's amendments were allowed, subject to the usual order to pay the defendants' costs thrown away. The defendants' costs were certified to include two counsel. The plaintiff was ordered to pay these costs forthwith. The plaintiff has not yet paid these costs, although the fourth and fifth defendants have not requested payment and, apparently, it is not common practice to do so where security for costs has been paid into court.
On 11 September 2019, the fourth and fifth defendants' solicitors renewed their request for additional security for costs. The plaintiff's solicitors offered security of some HK$300,000 until the close of pleadings and completion of discovery. On 12 September 2019, the plaintiff issued an amended summons and, on 13 September 2019, again requested the Registrar of the High Court to serve the first and second defendants at another address in Mainland China. Despite attempts to serve the first, second and third defendants at multiple address in Mainland China, this was not achieved.
On 12 October 2019, the writ of summons expired (a writ is valid for 12 months from the date of issue although the High Court has the power to extend the validity of the writ). The fact that the writ had expired for service on the first to third defendants did not prevent the plaintiff proceeding against the fourth and fifth defendants. On 29 October 2019, the fourth and fifth defendants filed a defence, stating that they purchased the Rand and Tribune shares on their own account, after they were introduced to the opportunity by the first defendant.
The plaintiff's efforts to serve the first and second defendants in the Hong Kong proceedings continued, but remained unsuccessful. The High Court sent letters to the plaintiff's solicitors on 8 November 2019 advising of their lack of success. On 19 December 2019, the plaintiff filed a reply to the fourth and fifth defendants' defence in the Hong Kong proceedings, bringing the pleadings to a close between them.

[30]

Plaintiff's motion and the undertaking

On 7 October 2019, Rand and Tribune announced further dividends. On 16 October 2019, the plaintiff's solicitors wrote to HWL Ebsworth noting that, in light of the plaintiff's amended claim in the Hong Kong proceedings, the plaintiff now claimed a proprietary interest in up to 49% of Keynes and General Energy's shares in Rand and Tribune. An undertaking was sought that no steps would be taken to dispose of the shares until the resolution of the Hong Kong proceedings. As it was understood that the shares were no longer held by Gleneagle, details were sought of the custodian holding the shares. Further, in light of the recent dividend announcement, the plaintiff claimed to have an interest of 49% in the some $2 million in dividends which would soon be received by Keynes and General Energy. An undertaking was sought that 49% of the dividends would be paid into Gleneagle's high interest bank account to be held pending resolution of the Hong Kong proceedings. Agreement was again sought to pay the funds already held by Gleneagle into a high interest account.
HWL Ebsworth advised that it was taking instructions but, in the interim, Keynes and General Energy agreed to provide seven days' notice before taking any steps to dispose of the shares or the dividends soon to be paid. On 21 October 2019 and 25 October 2019, the plaintiff's solicitor sent follow-up letters and, on 25 October 2019, Keynes and General Energy withdrew their undertaking and gave notice that, after seven days, they would be entitled to dispose of the shares and dividends.
On 29 October 2019, the plaintiff filed the motion presently before the Court, seeking an order that, on giving the usual undertaking as to damages, Keynes and General Energy pay 49% of the October 2019 dividends into Court or a controlled monies account in the name of the solicitors for the plaintiff, Keynes and General Energy, together with 49% of any future dividend payments, and to restrain Keynes and General Energy from dealing with such dividends until resolution of the Hong Kong proceedings.
On 1 November 2019, consent orders were made pursuant to which Keynes and General Energy undertook to hold 49% of the dividends in an Australian bank account and not to dispose of the dividends until determination of the plaintiff's motion. It is this undertaking from which Keynes and General Energy now seek to be released. The plaintiff's motion was listed for hearing on 29 November 2019, later adjourned by consent to 21 February 2020.

[31]

Defendants' motion

On 20 December 2019, Keynes and General Energy's new solicitors, Maddocks, wrote to the plaintiff's solicitors in detail, challenging the suggestion that the plaintiff's undertaking as to damages was supported by significant assets. Maddocks suggested that investigation of the plaintiff's asset position may not be necessary if she lodged $20 million with the Court. Maddocks advised that its clients were considering withdrawing their consent to the continuation of the freezing order. In reply, the plaintiff's solicitors agreed to update the plaintiff's financial position by affidavit and again sought agreement to pay the frozen monies into an interest bearing account. The plaintiff proceeded to retain valuers to assess the value of the plaintiff's properties.
On 17 January 2020, Keynes and General Energy filed the motion presently before the Court, seeking to vacate the freezing order and be released from the undertaking. On a more positive note, Keynes and General Energy finally agreed - some 18 months after the initial request - for the frozen funds to be placed in an interest-bearing account (however, no agreement was ultimately reached on which interest-bearing account would hold the funds.)
On 21 January 2020, the plaintiff's solicitor rejoined noting that, prior to the parties reaching the consent position recorded in the orders made by Ball J on 20 February 2019 (see [121]), orders had been made for Keynes to provide verified discovery. This discovery would now be needed in advance of determination of the defendants' motion. On 31 January 2019, Keynes and General Energy's solicitors expressed consternation at the need for discovery, opposed providing evidence in chief in support of their motion and suggested that the matter be relisted. To this, the plaintiff's solicitors replied: We also note that your client agreed to consent to the existing freezing orders the night before your clients' discovery was due. As such, our client would be prejudiced if your clients were to now seek to withdraw their consent to the existing freezing orders, and yet object to providing the discovery previously ordered by the Court.
On 21 February 2020, the plaintiff filed a motion seeking verified discovery of the documents the subject of the plaintiff's earlier notice to produce as amended by agreement. On 1 April 2020, Ball J made orders for discovery by Keynes and General Energy: Guo v Xu [2020] NSWSC 337. Keynes and General Energy filed a summons seeking leave to appeal.

[32]

Defendants served in Hong Kong proceedings

In the Hong Kong proceedings, on 24 January 2020, the plaintiff applied for service of the summons on the first, second and third defendants out of the jurisdiction, supported by a further affirmation by the plaintiff's Hong Kong solicitor. An affirmation was also affirmed by a bailiff employed by Southport Magistrates Court, detailing efforts to serve the third defendant in Queensland. On 25 February 2020, Master Ho raised requisitions in respect of the application. The plaintiff's solicitors responded to the requisitions on 12 March 2020.
More significantly, on 29 January 2020, the High Court began to adjourn cases to reduce the need for parties to attend court premises, given the COVID-19 pandemic. This became referred to as the "General Adjourned Period", which was then expected to end on 23 March 2020 but has since been extended from time to time. On 9 March 2020, the High Court registries re-opened in Hong Kong following an extended shutdown on account of Chinese New Year and COVID-19. Litigants, however, were asked to only file urgent applications.
On 12 March 2020, the High Court ordered the plaintiff to provide HK$1 million as further security for costs (which was paid on 20 March 2020). On 16 March 2020, the plaintiff applied to extend the validity of the summons for a further 12 months. The plaintiff's solicitor set out the efforts that had been made to serve the writ on the first, second and third defendants, noting difficulties in tracing these defendants and steps taken by them to evade service.
On 19 March 2020, the plaintiff's solicitors wrote to Maddocks, repeating the offer to resolve the dispute by arbitration and, further, said the plaintiff would be open to having the substantive issues determined in the Australian proceedings should the parties agree to submit to the jurisdiction of this Court. The plaintiff also remained willing to engage in without prejudice commercial discussions at any time. Keynes and General Energy did not agree to arbitration, nor having the dispute determined in this Court, but suggested that the plaintiff had not prosecuted the Hong Kong proceedings with diligence.
On 27 March 2020, Chan J made orders renewing the writ of summons for 12 months from the date of its expiration, that is, until 12 October 2020. On 15 April 2020, Master Ho granted leave for the plaintiff to serve the writ on the first, second and third defendants by way of substituted service. On 20 April 2020, the plaintiff served the first defendant by email in accordance with the orders of substituted service. On 21 April 2020, the plaintiff served the second and third defendants by WeChat message in accordance with the orders for substituted service. On 8 May 2020, service of the Hong Kong writ was effected pursuant to the substituted service order. Notwithstanding service on the first, second and third defendants in accordance with the orders for substituted service, hard copy documents also served were returned to the plaintiff's solicitor under cover of a letter advising that delivery had failed for reasons unknown. The first defendant was due to file an acknowledgement of service on 5 June 2020.
On 8 May 2020, orders were made for discovery in the Hong Kong proceedings. On 15 May 2020, the fourth and fifth defendants served their list of documents containing 110 documents. On 18 June 2020, the plaintiff served an unsworn list of documents containing 2,169 documents (a verified list was provided on 10 July 2020). In July 2020, copies of the documents were provided. The plaintiff's solicitor provided hard copies, a matter about which the defendants' Hong Kong solicitor complained. Electronic copies were duly provided. In addition, it appears that the plaintiff continued to endeavour to send court documents to the first, second and third defendants, which continued to be returned "unclaimed". The plaintiff filed a mediation certificate and mediation notice, advising that the plaintiff wished to attempt mediation and proposed a venue and mediators in Hong Kong.

[34]

First defendant finally appears

On 23 October 2020, the plaintiff's solicitors received a letter from the first defendant's solicitor, advising that they were instructed to act for him in the Hong Kong proceedings: We confirm that we have authority to accept service of proceedings on behalf of Mr. Xu. Please arrange to have the writ in the Action served on us at your earliest convenience.
As the plaintiff's solicitor promptly responded "we consider it to be wholly disingenuous for a request now to be made that the writ be served on you for your client." In reply, the first defendant's solicitor advised, "Our client has been aware of the Action for some time … [and] now decides to take active steps to defend the Action (possibly with a counterclaim) …" The first defendant's solicitor sought additional time to file a defence and proposed not to attend a case management conference scheduled for 12 November 2020 as he needed time to consider the material.
On 12 November 2020, a case management conference was held before Chan J and orders made for the progress of the proceedings, at least between the plaintiff and the fourth and fifth defendants, with witness statements to be exchanged by 17 February 2021. It appears that the first defendant did not attend the conference. Following the conference, the plaintiff's solicitor urged the first defendant to proceed with expedition but agreed to allow the first defendant until 11 December 2020 to file his defence. However, the first defendant's solicitor sought further time and the plaintiff agreed that the defence could be filed by 4 January 2021. In the meantime, the fourth and fifth defendants filed a timetabling questionnaire and a mediation notice, also agreeing to mediate.
The first defendant requested further time to file his defence. On the plaintiff only agreeing to a further extension until 18 January 2021, the first defendant filed a summons seeking an extension of time to file a defence. On 22 January 2021, Chan J ordered that, unless the first defendant filed his defence by 29 January 2021, he would be debarred from doing so. The defence was duly filed.
As mentioned, witness statements were due to be exchanged in the Hong Kong proceedings on 17 February 2021. However, the plaintiff sought a 14 day extension. The plaintiff was also due to file a reply to the first defendant's defence on 26 February 2021 but sought an extension of 28 days. The scheduled date for exchange of witness statements between the plaintiff and the fourth and fifth defendants was then 12 April 2021.

[36]

When will the Hong Kong proceedings be heard?

The plaintiff's Hong Kong solicitor says a mediation will likely take place following the exchange of witness statements, as will a further case management conference. A trial is anticipated to take some 10 days. Provided pleadings can close by April 2021, a trial should take place in early 2022.
Whilst agreeing that the trial is likely to take 10 days, Keynes and General Energy's Hong Kong Solicitor, Yip Hon Kit, is of the view that the earliest possible date for a trial is the end of 2022: the first defendant's decision to participate in the proceedings has substantially changed the complexion of the case; discovery given by the first defendant will be vital. The plaintiff's discovery is said to be inadequate. Time needs to be allowed for mediation. The COVID-19 pandemic in Hong Kong remains serious and potential disruptions to court proceedings could arise if there are sustained outbreaks. Several key witnesses are based in Mainland China and travel restrictions may impede progress. Mr Kit says the High Court in Hong Kong has a congested diary. A trial will more likely take place in 2023 or beyond. It may then take the commercial judge anything from weeks to months to hand down judgment after completion of trial. Any judgment could be appealed to the Court of Appeal and then to the Court of Final Appeal, "it will be years before the right to appeal is exhausted".
Mr Kit was strongly critical of the plaintiff's suggested failure to progress the Hong Kong proceedings in a timely manner. The plaintiff's Hong Kong solicitor disputed Mr Kit's assessment, saying that the matter which has caused the most significant delay to the proceedings was the strikeout application filed on 7 January 2019, heard on 11 June 2019 and determined on 3 September 2019. Further, the first defendant attempted to evade service multiple times and his belated appearance and defence is the key cause of delay in the Hong Kong proceedings, which is believed to be an intentional tactic designed to cause delay. Nor did the plaintiff's initial estimates of how long the Hong Kong proceedings should take factor in the effects of COVID-19 in Hong Kong, which have caused extensive delays.

[37]

EXCEPTIONAL CIRCUMSTANCES OR MATERIAL CHANGE?

A freezing order is an interlocutory order made to prevent the frustration of a court's process: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [41]-[42] per Gaudron, McHugh, Gummow and Callinan JJ. In this case, the freezing order was made to prevent the frustration of a foreign court's process, being the High Court of the Hong Kong Special Administrative Region Hong Kong. Although the primary relief sought in the summons filed in the Australian proceedings was the freezing order, and the making of that order essentially disposed of the Australian proceedings, I consider that the freezing order remained essentially an interlocutory, rather than final, order. An order is final if "it finally determine[s] the rights of the parties in a principal cause pending between them": Hall v Nominal Defendant (1966) 117 CLR 423 at 443; [1966] HCA 36. The principal cause between these parties is the subject matter of the Hong Kong proceedings. The freezing order does not finally determine the parties' claims in those proceedings.
Even where a freezing order is made, or an undertaking given, by consent, the Court has inherent power to vary the freezing order or release a party from their undertaking inter alia where new facts come into existence or are discovered which render enforcement of the order or undertaking unjust: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 178; [1981] HCA 39; Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 at 447 per Isaacs J; RD Werner & Co Inc v Bailey Aluminium Products Pty Ltd (1988) 18 FCR 389 at 392-3; [1988] FCA 142 per Woodward and Foster JJ; Short v Crawley (No 42) [2009] NSWSC 1110 at [74]-[75] per White J. However, the nature and quality of the consent underpinning the order or undertaking will affect the Court's willingness to do so. In Paino v Hofbauer (1988) 13 NSWLR 193, McHugh JA (with whom Samuels and Clarke JJA agreed) observed at 198: (emphasis added) … when a party asks that a consent order based on a contract should be set aside or varied and the underlying contract could not be set aside or varied, the case would need to be exceptional before the Court would exercise its discretion in favour of an applicant. Clarke JA considered that "it would be a rare case in which it would be a judicial exercise of the discretion to grant an indulgence the effect of which is to vary an agreement between the parties": at 201. (In Gothard v Fell (2012) 203 FCR 236; [2012] FCA 495, Jacobson J referred to "special circumstances": at [69].)
In Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198; [2015] NSWCA 130, Bathurst CJ, Beazley P and McColl JA approved Paino v Hofbauer, noting at [27]: … his Honour's remarks were directed to a case where parties have bound themselves to a contract which underpins the court's orders. In such a case, the court's general discretion is to be exercised in the context of the respect the law gives to parties being held to their bargain. To relieve a party from the bargain they had freely entered, would, as McHugh J remarked, require an exceptional case. Such an approach does not fetter the discretion of a judicial officer. Rather, it is a statement of an appropriate exercise of discretion in a particular type of case.
The facts of Paino v Hofbauer are illustrative: consent orders were made following settlement of the plaintiff's claim providing judgment in favour of the plaintiff for $750,000, with execution stayed provided the defendants paid a lesser amount by instalments in accordance with an agreed timetable. The instalments were not paid. An application to extend time for payment was refused.
It is important, therefore, to ascertain whether the freezing order records a contract between the parties and, if so, whether the contract restricts the circumstances in which the orders made by varied: Abraham v Abraham [2012] NSWSC 254 at [12] per Ball J. In this context, Lord Denning MR's explanation in Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189 is frequently reproduced, being: It should be clearly understood by the profession that, when an order is expressed to be made "by consent," it is ambiguous. There are two meanings to the words "by consent." … One meaning is this: the words "by consent" may evidence a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is this: the words "by consent" may mean "the parties hereto not objecting." In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties.
Also illustrative, the consent orders in Siebe Gorman concerned orders for discovery. At the time that the orders were made, there had been no undue delay by the plaintiffs in a complex case. The defendants sought further discovery within 10 days, failing which the plaintiffs' claim would be struck out. The plaintiffs indicated that there were problems about producing the documents quickly. Shortly before the parties appeared before a master for the hearing of the defendants' application, the parties' solicitors verbally agreed that, in return for the plaintiffs consenting to the order for discovery, the defendants would ask the master to extend the time for complying with the order by ten days. The order was drawn up on that basis and expressed to be 'by consent'. It also included the provision that, in default of compliance, the plaintiffs' claim would be struck out. The consent order was held to fall into the second category described by Lord Denning - being consent orders in the sense that the parties did not object to the orders - such that the Court could readily vary the order.
As to whether consent orders give effect to a contract between the parties, some guidance was given in RD Werner, which concerned orders for security for costs. At 391-2: It is not possible to set out all the indicia of a binding contract having been entered into in a particular case. The subject matter and the circumstances will both be important. In the present case there was a history of negotiation about the claim for security for costs which extended over several weeks. A number of letters were exchanged, and there was a good deal of discussion as to the appropriate sum in which security might be ordered, before the parties reached agreement as to the order which ought to be made. … It is, we think, significant that the agreement in this case was entered into two days before Ryan J was asked to make the consent order. This was not a case where agreement was reached in discussions at the door of the court (cf Siebe Gorman, supra). Other factors which we think are significant are that a money sum for the security had to be negotiated, along with a method of providing security, that such negotiations occurred in writing and were spread over a period of time, and that a particular order for costs was also negotiated. In the circumstance of that case - where security was provided by the due date but not in the precise form contemplated by the orders - the Court nonetheless varied the orders.
More recently, in Mighty River International Ltd v Mineral Resources Ltd [2020] WASCA 44, orders were made by consent for Mighty River to provide security for costs by a particular date, failing which the proceedings would be dismissed with costs. Security was not provided by the specified date and the Court of Appeal of the Supreme Court of Western Australia (Quinlan CJ, Beech and Vaughan JJA) held that Mighty River was not entitled to a variation of the orders. At [63]: … the consent order was based on an underlying agreement between the parties. The exchanges were no mere conferral for the purposes of formulating an order which could be made without argument. The objective evidence leading to the February 2019 orders reveal substantial negotiations directed to the substance of the parties' interests, both as to the orders sought by Mineral Resources and the consequences of a failure to comply with those orders.
The fact that Mighty River had initially adopted a negotiating position that the defendant was not entitled to further security, then proposed two tranches of security totalling a lesser amount than that requested "objectively reveals substantive negotiations leading to agreement. It was in that context that Mighty River proposed the inclusion of the springing order. Objectively construed, the springing order was part of the bargain for the compromised position. Mighty River's consent could not properly be characterised as merely connoting that it was 'not objecting'": at [65].
Having regard to the history of the freezing order described at [101]-[121], from the ex parte order of 10 October 2018 until the consent order was made four months later on 20 February 2019, it is readily apparent that the freezing order was the product of protracted and difficult negotiations between parties ably represented by experienced commercial lawyers. Keynes and General Energy initially objected to the freezing order in toto and took steps to transfer the shares and any unfrozen funds away from Gleneagle. Keynes and General Energy filed a motion to vary the freezing order and a motion to set aside the plaintiff's notice to produce seeking documents to support the continuation of the freezing order. Keynes and General Energy then entered into without prejudice negotiations before seeking to resile from the deal and finally negotiating the form of orders and the email to Ball J in which his Honour was informed that the orders resolved the proceedings (being Keynes and General Energy's form of words). The consent orders not only resolved the freezing order but also finalised the remaining procedural matters in the Australian proceedings including vacating the remaining interlocutory orders (including that Keynes provide discovery and serve evidence) and determining the costs of the proceedings. This case is akin to RD Werner and Mighty River.
The fact that the consent orders also included liberty to apply on 24 hours' notice does not detract from this conclusion. The significance of 'liberty to apply' was explained in Commonwealth Bank of Australia v Saleh [2005] NSWSC 843 per Palmer J at [10]-[12]: (emphasis added) 10 A plaintiff seeking an interlocutory injunction always bears the burden of demonstrating that the circumstances of the case warrant the Court, in its discretion, granting what can often be an intrusive remedy before the case is fully heard on the merits. An order that is commonly made by consent in proceedings where an interlocutory injunction is sought is that the injunction be granted against the defendant and continued "until further order of the Court"; "leave to apply" is usually granted in addition, although it is implicit in any event. The formulation "until further order - liberty to apply" signifies that the defendant is at liberty to apply to the Court at any time prior to final determination of the proceedings in order to ask the Court to exercise its discretion afresh as to whether the interlocutory injunction should be continued. 11 As a general rule, if a defendant who has consented to an interlocutory injunction "until further order", brings the matter back before the Court for further consideration, it remains the burden of the plaintiff who obtained the injunction to satisfy the Court that the injunction should be continued; the mere fact that the defendant has previously consented to the injunction "until further order" does not reverse the burden so that the defendant must then satisfy Court that the injunction should be discharged. 12 This, of course, is the general rule: it will not apply where the terms of the consent orders show that the parties had a different intention. See likewise Abraham v Abraham at [12].
In this case, however, the terms of the consent orders, and the agreement underlying those orders, show that the parties had a different intention. The position was more akin to that described in Abigroup Ltd v Abignano (1992) 39 FCR 74; [1992] FCA 567, albeit largely in the context of final orders, "The reservation of liberty to all parties to apply to a court is a provision directed essentially to questions of machinery which may arise from the implementation of a court's orders. They include cases where a court may need to supervise the enforcement of orders after they have been made": at 88.
Here, the freezing order was intended to remain in place until the Hong Kong proceedings were finalised in all respects. On finalisation of the Hong Kong proceedings, including enforcement, it might be expected that the parties would return to this Court to make further orders in respect of the frozen funds, including to order payment of some or all of the monies to the plaintiff or to release the funds to Keynes and General Energy. Otherwise, the freezing order would remain in place unless and until exceptional circumstances arose which warranted the freezing order being varied or discharged. As Bell P observed of the orders made on 20 February 2019, in Keynes Capital Global Ltd v Guo at [16]: Unlike the orders that had previously been made extending the interim orders that had been obtained ex parte, the Consent Order was not stated to be until further order or until a date which would permit preparations to be made for a contested hearing of the orders originally made ex parte. Nor was it said to be made "without admission". True it is that the Consent Order had only a limited time span and, in that sense, could perhaps be described as "interlocutory". Its utility and purpose would, however, have been spent by the time it was set to cease effect, namely "the final resolution (including the hearing, determination of any appeals and the payment of all monies awarded) of the proceedings". Although the parties were given liberty to apply on 24 hours' notice, the quasi-finality of the Consent Order was reflected in the fact that order 5 made provision for the payment of the costs of, and incidental to, the proceedings.
Thus, I conclude that it is for Keynes and General Energy to establish exceptional or special circumstances before the freezing order is discharged. In this regard, the onus is on Keynes and General Energy rather than the plaintiff, the circumstances differing from those described in Commonwealth Bank of Australia v Saleh at [10]-[12] per Palmer J.
The same position does not pertain, however, in respect of the undertaking given by Keynes and General Energy on 1 November 2019 (see [135]), which was given two days after the plaintiff filed the motion presently before the Court and then only for a short period until the plaintiff's motion was heard. Soon after, on 17 January 2020, Keynes and General Energy filed their motion seeking to be released from the undertaking. The plaintiff's request, in June 2020, for a further undertaking to be given in respect of the sale proceeds of Rand and Tribune shares was declined: see [146]. Thus, in respect of the undertaking, the onus remains on the plaintiff to demonstrate that the circumstances of the case warrant the continuation of the undertaking or, as the plaintiff now also seeks, that the monies the subject of the undertaking be paid into Court or a joint controlled monies account.

[40]

Sale of two properties

Second, the plaintiff sold two properties shortly before the hearing and failed to disclose the matter to the Court. Aligned with this matter, the plaintiff's undertaking as to damages was said to be wholly inadequate in the circumstances of this case, including by reason of both the likely quantum of damages suffered as a consequence of the freezing order and the inherent difficulties in quantifying such damages: Cardile at [52]-[53].
It is apparent from the history of the Australian proceedings that, from time to time, Keynes and General Energy have challenged the adequacy of the plaintiff's assets to support her undertaking as to damages. The plaintiff has thereafter promptly assembled comprehensive evidence, including valuation reports, to disclose her asset position. The evidence before the Court - regrettably not contained in an affidavit but adduced during cross-examination - is that the plaintiff recently sold two of the four properties she owns in Sydney. The plaintiff was not, however, asked what she has done with the proceeds of sale. There is no evidence that the plaintiff has disbursed the funds. The onus, in this regard, is on Keynes and General Energy as they seek to have the freezing order lifted and must show the existence of exceptional circumstances. I am thus not satisfied that there has been a material diminution in the plaintiff's asset position since the freezing order was made by consent on 20 February 2019.
As to the adequacy of the undertaking as to damages, Keynes and General Energy have been unable to use the frozen funds for two and a half years and, if the freezing order remains in place, will likely not have the use of the funds for further year. There is no reliable evidence, however, that Keynes and General Energy would have successfully invested those monies in any particular venture if those monies had not been frozen, such that returns would have been generated beyond bank interest. I am not satisfied that exceptional circumstances arise in relation to the plaintiff's ability to honour the undertaking as to damages such as to warrant lifting the freezing order.

[42]

Other matters

Fourth, the plaintiff has amended her claim in the Hong Kong proceedings such that it is said that no relief is now sought which will give rise to a money judgment against Keynes and General Energy that may be registered under the Foreign Judgments Act 1991 (Cth). I have considered this at [203]-[210]. Suffice to say that I do not agree.
Fifth, the plaintiff filed the motion presently before the Court, contrary to the agreement underpinning the freezing order. That is true. The plaintiff's application to extend the freezing order appears to have come about, in part, due to the effluxion of time (with further dividends being paid a year after commencement of the Australian proceedings), and amendment of the plaintiff's claim in the Hong Kong proceedings such that the plaintiff now asserts a claim to the shares, including dividends or capital gains enjoyed since her equitable interest in the shares allegedly arose. The fact that further dividends were paid as time passed, or that the plaintiff's claim in the Hong Kong proceedings changed as those proceedings unfolded, are not particularly surprising events. Whilst I agree that the plaintiff's application to extend the freezing order to deal with these matters is, strictly speaking, contrary to the agreement which led to the consent orders being made on 20 February 2019, I do not consider it to be an exceptional circumstance that would warrant the discharge of the freezing order.
Finally, discovery has now been given in the Australian proceedings in circumstances where consent for the freezing order was conditional upon vacation of the order for discovery. However, the sequence of events already described at [137]-[139] indicates that the plaintiff's renewed request for discovery was prompted by Keynes and General Energy's motion to discharge the freezing order, accompanied with the contention that the onus fell on the plaintiff to establish a prima facie case to justify maintenance of the order. It was in this context that Ball J made orders for discovery, as his Honour considered that the documents were relevant to whether the plaintiff had a good arguable case against Keynes and General Energy, which involved factual questions about the relationship between Keynes and General Energy on the one hand and Party A and Party B on the other: Guo v Xu at [10]. Viewed in this context, I do not consider that this amounts to exceptional circumstances warranting a discharge of the freezing order.
In summary, I am not satisfied that Keynes and General Energy have established exceptional circumstances warranting the discharge of a freezing order made by consent following a period of protracted negotiation and resulting in resolution of the Australian proceedings.

[44]

Is there sufficient prospect of success that the other court will give judgment in favour of the plaintiff? (rule 25.14(3)(a))

The plaintiff must demonstrate that she has a good arguable case on legal and factual matters: Cardile at 408. In Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 (affirmed on appeal in Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102), Sackar J (at [110]) adopted Mustill J's discussion of the notion of "good arguable case" as applicable in the context of a freezing order in Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG (the Niedersachsen) [1984] 1 All ER 398 at 404: In these circumstances, I consider that the right course is to adopt the test of a good arguable case, in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the Judge believes to have a better than 50% chance of success.
As Sackar J explained in Bhushan, "The analysis in relation to UCPR 25.14(3)(a) does not require me to decide that [the plaintiff] will succeed and obtain a judgment but only that there are sufficient prospects that [she] will": at [134]; a court should not embark upon a premature trial but a preliminary appraisal only: Bhushan at [144] citing Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [58]-[60].
Here, the plaintiff effectively seeks to extend the freezing order to the October 2019 dividends, being dividends paid after the plaintiff's purported termination of the Strategic Cooperation Agreement on 12 October 2018, as asserted in the letter set out at [107]. It seems to me that the prima facie case which the plaintiff needs to establish is not in respect of her claim generally but in respect of her claim to an entitlement to post-termination dividends.
Turning to the plaintiff's claims in the Hong Kong proceedings which may give rise to an entitlement to these funds, the plaintiff sues the first and second defendants for breach of contract in respect of the Strategic Cooperation Agreement. In addition, a joint venture is said to have existed such the first and second defendants owed fiduciary duties to the plaintiff, which have been breached. Further, the parties' arrangement contemplated the acquisition of the shares by Keynes and General Energy for the benefit of the parties to the Strategic Cooperation Agreement. By resiling from that arrangement, the plaintiff claims to be entitled to a "Pallant v Morgan equity" in the shares.
As against Keynes and General Energy, the plaintiff claims that: 1. Keynes and General Energy were the nominees or agents of the first and second defendants such that their acquisition of Rand and Tribune shares was carried out in pursuit of the first and second defendants' obligations under the Strategic Cooperation Agreement. 2. Keynes and General Energy had actual or constructive knowledge that the first and second defendants had breached fiduciary duties owed to the plaintiff and were liable pursuant to a Pallant v Morgan equity. Keynes and General Energy had the knowledge required to be accessories to the first and second defendants' breach of trust or fiduciary duty in accordance with the principles in Barnes v Addy (1874) LR 9 Ch App 244. 3. By reason of Keynes and General Energy's acquisition of Rand and Tribune shares as nominees of the first and second defendants, or their knowing involvement in or receipt of the shares in breach of trust or fiduciary duty, they are liable as constructive trustees of the shares, dividends paid on the shares and capital gains enjoyed or, alternatively, are liable to account to the plaintiff for those benefits.
Keynes and General Energy submitted that the plaintiff has only a weak prima facie case that they were the nominees or agents of the first and second defendants. There was said to be no suggestion in the evidence that Keynes and General Energy ever received the Strategic Cooperation Agreement or knew of its existence. Rather, the clear picture which was said to emerge from the contemporaneous documents was that the first and second defendants acted within the scope of their appointment under the Intermediary Services Agreement as the agents for Keynes and General Energy to arrange the purchase of the Rand and Tribune shares.
I have set out at length the communications between the plaintiff, the defendants and third parties such as Mr Rosenberg, Mr Carson, Mr Li and Mr Ning. I do not think the plaintiff's case can fairly be described as weak. The general impression gained from contemporaneous WeChat messages, emails and bank records is that General Energy was the corporate vehicle by which the first and, perhaps, the second defendant invested monies in this transaction whilst Keynes was another investor sourced by the first and second defendants, being a corporate vehicle by which Xinqian Yi invested monies into the transaction. Of the $44 million transferred from China to Australia to buy Rand and Tribune shares, the bulk of the monies appear to have come from either the first defendant's bank account or Xinqian Yi's bank account, whilst none of the monies appears to have come from a bank account in the name of either Keynes or General Energy. It also appears that the plaintiff's description of her role in the transaction - in terms of liaising with the Chinese investors, the target companies and Australian advisors - appears generally correct. Of course, evidence in the Hong Kong proceedings may lead to a different conclusion.
As for the Intermediary Service Agreement, the plaintiff squarely suggested that this agreement was a false document, and certainly not executed on 5 January 2015. This suggestion was flatly rejected by the defendants. Presumably to interrogate the authenticity of the document, on 2 April 2020, the plaintiff issued a notice to produce to Keynes and General Energy, seeking an electronic version of the Intermediary Services Agreement and associated metadata. On 17 April 2020, Keynes and General Energy produced documents in answer to the notice to produce, but as PDFs rather than in the electronic form sought. On this being brought to their attention, Maddocks simply replied that their clients had complied with the notice to produce in accordance with its terms, "We do not intend to respond to your assertions as to what you would have expected to be produced." With respect, this was somewhat disingenuous.
The Intermediary Service Agreement does have some interesting features, including its date. Whether Keynes and General Energy purchased Rand and Tribune shares pursuant to the Intermediary Services Agreement alone will be a live issue in the Hong Kong proceedings. On this application, the document does not materially reduce the plaintiff's prospects of success in those proceedings.
A finding that the first and second defendants were constructive trustees who failed to discharge their fiduciary obligations to the plaintiff may give rise to accessorial liability: Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; (2007) 63 ACSR 429. In the result, I am satisfied that the plaintiff has a good arguable case in the Hong Kong proceedings sufficient to justify freezing orders in respect of the October 2019 dividends, should other discretionary considerations also favour such an order.
Whilst it is not strictly necessary to consider this, Keynes and General Energy submitted that the plaintiff's contractual claim did not have sufficient prospects of success either. It was said that a reasonable businessperson would construe the Strategic Cooperation Agreement as providing for the allocation of the profits to those parties that made a contribution to the purchase price of the shares, after allowance was made for the cost of acquisition of the shares. As construed, the plaintiff would only be entitled to share in the dividends and capital gain if she made a contribution to the purchase cost of the shares. The reasonable businessperson reading the expense allocation provision (at [21]) would construe that, if the profits on the shares in the form of dividends and capital gain were part of the profits of the project, then the cost of the shares was a "cost" or an "expense" of the project which was to be borne equally by the plaintiff. Only after contributing to the costs/expenses could a party receive a share of the profits. The provision in respect of the performance bonus (at [20]) was said to be inconsistent with a construction that the first and second defendants would be applying their own funds to the purchase of the shares in Rand and Tribune, or that the parties to the agreement would share in any profits made by the parties that invested their capital in Rand and Tribune shares. Rather, at its highest, the agreement contemplated a division of cash profits and was silent on the ownership of Rand and Tribune shares acquired during the period of cooperation, or as to the parties' interest in any dividend or capital appreciation of those shares during the period of cooperation.
Helpfully, Mr Kit set out the principles for the construction of contracts in Hong Kong, which do not appear relevantly different from Australian law. Certainly, the legal documentation of the rights and obligations owed by the parties to one another is not entirely clear. On one reading of the Strategic Cooperation Agreement, the first and second defendants were to provide the investment capital, either directly or by bringing in other investors, to acquire the shares in Rand and Tribune; the plaintiff and third defendant were to facilitate the investment opportunity, including by conducting negotiations with the target companies. Self-evidently, the money would largely be provided by Party A, whilst Party B would outlay significantly smaller sums to perform their obligations under the agreement. Before distributing any profit in accordance with the agreed percentage allocation, it would be necessary for Party A and Party B to be reimbursed for their respective outlays before any remaining profit would be distributed. But, assuming there was a profit, then Party B would receive 49% of the profit, which would represent a far higher rate of return on Party B's outlay than Party A would enjoy. That said, Party A would not have the opportunity to enjoy any profit without the opportunity provided by Party B.
However the agreement is ultimately construed in the Hong Kong proceedings, it is tolerably clear that the first and second defendants agreed to distribute 49% of the profit of the transaction to the plaintiff and third defendant, either calculated after Party A and Party B had been reimbursed their respective expenses, or calculated by the method contended for by General Energy and Keynes. I do not accept, however, that the plaintiff's suggested construction of the Strategic Cooperation Agreement can be regarded as weak or implausible. As Ball J observed in his Honour's ex tempore judgment at [3]: (emphasis added) Under the terms of the Agreement, the parties agreed to invest or cooperate in the investment in certain ASX listed companies. It is not entirely clear from the terms of the Agreement, but it is at least strongly arguable, that Party A and Party B agreed to share all of the financial rewards arising from the investments on the basis that Party B would receive 49 per cent and Party A would receive 51 per cent, or at least that some of those benefits would be divided between them on a basis that was fair and reasonable.
Further, Keynes and General Energy submitted that what had transpired was such a radical departure from the Strategic Cooperation Agreement that it must have been pursuant to some other arrangement. First, the plaintiff did not, in fact, pay for the shares. (This would only be a radical departure from the agreement if it is construed in the manner contended for by Keynes and General Energy, which, as I have already noted, cannot be assumed). Second, the plaintiff received secret profits via Westlink and Highland. I repeat what I have said at [183].

[45]

Is there sufficient prospect of success that the judgment will be registered or enforced? (rule 25.14(3)(b))

Section 6(1) of the Foreign Judgments Act provides that a party in whose favour a judgment to which Part 2 applies may apply to the appropriate court to have the judgment registered in the Court. By section 6(2), the appropriate court in the present case is this Court. By regulation 3 of the Foreign Judgments Regulations 1992 (Cth) (made under section 5(1) of the Foreign Judgments Act), Part 2 of the Foreign Judgments Act applies to money judgments of the High Court of the Hong Kong Special Administrative Region. A "money judgment" is defined as "a judgment under which money is payable": section 3. No regulations have been made under section 5(6) of the Foreign Judgments Act to apply Part 2 to non-money judgments of that Court.
Keynes and General Energy submitted that the plaintiff seeks relief against them in the form of the imposition of a constructive trust over the shares and dividends. Although the pleading contains a prayer, in the alternative, for "damages and/or equitable compensation", it was submitted that this prayer related to the breach of contract and breach of fiduciary duties pleaded against the first and second defendants. It followed that the plaintiff sought relief which would not give rise to a money judgment against Keynes and General Energy that may be registered under the Foreign Judgments Act.
The claim for equitable compensation, on my reading of the pleading, may have application to the plaintiff's claim against Keynes and General Energy. More relevantly, an account of profits is clearly sought against these defendants together with "all necessary accounts and inquiries, interest [and] costs". An account of profits will give rise to a judgment under which money is payable.
It will be recalled, of course, that Cardile concerned a claim for an account of profits. LED Builders brought a claim for copyright infringement against Eagle Homes in respect of building plans. After commencement of proceedings, Eagle Homes declared substantial dividends to its shareholders (Mr and Mrs Cardile), the bulk of which were paid. Mr and Mrs Cardile formed a new company, which began to build houses using the controversial plans and the business name "Eagle Homes". LED sought an account of profits from Eagles Homes and third party freezing orders against the shareholders and the new company pending the taking of accounts. The majority (comprising Gaudron, McHugh, Gummow and Callinan JJ) considered that a freezing order may be made against a third party where, at 405 [57]: … some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor. This observation is, of course, not limited to freezing orders made against third parties.
Their Honours noted Lord Mustill's observation in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 362, that the right to an interlocutory injunction which is incidental to, and dependent on, the enforcement of a substantive right usually, although not invariably, takes the shape of a cause of action. At 402 [48]: However, we do not think that his Lordship was suggesting that an order might be made against a non-party not amenable in some way ultimately to some coercive process requiring it to disgorge, or in some other way to participate in the satisfaction of, a judgment against a party.
The Court concluded that a freezing order should be made against Mr and Mrs Cardile, although the rights and obligations of Mr and Mrs Cardile with respect to their property could only be finally determined in proceedings under section 37A of the Conveyancing Act 1919 (NSW). At 409 [71]-[72]: [71] … It should be remembered that this relief is incidental to the presently incomplete exercise by the Federal Court of its jurisdiction to determine the balance of the remedies sought by LED against Eagle Homes, namely that for payment of a money sum. Difficult questions often arise in the determination of an account of profits … [72] On any view, $1.2 million or any similar sum seems an excessive amount for Mr and Mrs Cardile to be bound to hold under a Mareva order. However, this Court has no means of knowing precisely what sum should be substituted. Judgment on the taking of the accounts is likely to be given soon, at which time perhaps the sum could be adjusted. Alternatively, on proper evidence, the personal appellants may apply to the Federal Court for a dissolution of the injunction to the extent that the amount which it secures is excessive. …
Thus, there was a difficulty in applying the measure of relief principles to the shareholders as judgment on the taking of the accounts had not yet been given. But it is tolerably clear that the Court proceeded on the basis that, once an account of profits had been taken, orders would follow for payment of a money sum.
Likewise, on the completion of a taking of accounts in the Hong Kong proceedings, being a remedy sought against Keynes and General Energy, an order will be made for the payment of a money sum by these companies which clearly falls within the definition of "money judgment", being a judgment under which money is payable. In addition, the plaintiff may well be entitled to a "money judgment" against the first and second defendants in respect of which Keynes and General Energy may be regarded as third parties against whom a freezing order may be made, being parties obliged to contribute funds or property to help satisfy the judgment debt.

[46]

Other discretionary factors

Keynes and General Energy point to the six matters referred to at [176]-[186] as evidencing a material change in circumstances such that the Court should release them from their undertaking. My conclusions in respect of these matters remain apposite. Insofar as the plaintiff's sale of two properties is concerned, the onus on this part of the case rests on the plaintiff but I remain in the position that there is insufficient evidence for me to conclude that the plaintiff has disbursed the proceeds of sale or in some way sought to divest herself of assets, particularly having regard to the fact that, historically, the plaintiff has responded promptly and in a fulsome manner to challenges to the adequacy of her assets.
In any event, the adequacy of the plaintiff's undertaking as to damages is but one factor to be taken into account when considering whether to make a freezing order. Other considerations include whether there is a serious issue to be tried and whether the applicant has done the best they can to provide appropriate undertakings even if the undertaking may ultimately prove inadequate: Varley v Varley [2006] NSWSC 1025 at [63]-[65] per Campbell J citing Allen v Jambo Holdings Ltd [1980] WLR 1252 at 1258 per Templeman J; Circaz Pty Ltd v Manolidis [2003] NSWSC 455; (2003) 45 ACSR 542 at 546-7 per Davies AJ. It appears that the plaintiff has assets of considerable value, albeit potentially insufficient to compensate Keynes and General Energy for damage suffered as a consequence of the freezing order; the plaintiff appears to have put everything she has 'on the line'.
In addition, Keynes and General Energy note that the plaintiff now seeks to freeze dividends paid after 12 October 2018, being the date which the plaintiff claims to have terminated the Strategic Cooperation Agreement. However, as I understand it, the defendants do not accept that the plaintiff validly terminated the Strategic Cooperation Agreement, nor that the agreement necessarily governed relations between the parties or was the genesis of the acquisition of Rand and Tribune shares. It will remain an issue to be determined in the Hong Kong proceedings whether there was a repudiatory breach of the Strategic Cooperation Agreement which the plaintiff could have, and did, accept or whether the plaintiff herself repudiated the agreement by asserting that she had accepted a purported repudiation and, if so, whether the other parties accepted the plaintiff's repudiation. I am not in a position on this application to determine who will likely prevail on this issue.
Either way, even if Keynes and General Energy are correct in respect of the plaintiff's contractual rights to post-termination profits, that may not be the end of the matter. The plaintiff also advances equitable claims against Keynes and General Energy as accessories to the first and second defendants' alleged breach of trust and fiduciary duties. The plaintiff thereby claims an equitable interest in the underlying shares, together with any dividends and capital gains associated with those shares, under the principles in Pallant v Morgan. I do not accept this is a material change of circumstances warranting discharge of the freezing order.

Guo v Xu

At a glance

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Judgment (49 paragraphs)

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Legislation Cited (5)

Cases Cited (37)

Cited By (4)