Kekecial v Aus Made

1. Kekecial claims two amounts from Aus Made: $400,000 and $291,931.89.

1. In short, Kekecial says that it loaned $400,000 to Aus Made; that the loan was repayable on demand; that upon it demanding repayment of the loan, Aus Made refused to repay it; and that as a consequence, Aus Made owes it $400,000, together with interest.
2. This characterisation of the payment of $400,000 is hotly disputed by Aus Made, which asserts the payment was made by way of a deposit on an order made by Kekecial for BP rolls. Aus Made contends that, on 29 January 2020, Kekecial and Aus Made entered into a contract, pursuant to which Kekecial agreed to buy 320 BP rolls for $1,580,544 from Aus Made (the alleged BP Rolls Contract). It contends that the $400,000 was a deposit or part payment for the BP Rolls Contract.
3. As things transpired, Aus Made never in fact supplied the BP rolls to Kekecial.
4. Kekecial has two other, alternative, claims by which it seeks to recover the $400,000 (if it is not successful in establishing its loan claim):

(i) It claims that Aus Made and Haha made a representation to it prior to it advancing the $400,000, to the effect that, if that sum was advanced, it would be repaid on demand (the Advance Representation), and that it advanced the $400,000 to Aus Made in reliance upon this representation, and has suffered loss and damage to the value of $400,000 because the money has not been returned;

(ii) Alternatively it claims restitutionary relief from Aus Made, arising from the fact that, in all the circumstances, by retaining the $400,000 paid to it by Kekecial, Aus Made has been unjustly enriched to the detriment of Kekecial (the Unjust Enrichment claim).

(b) Aus Made denies each of these alternative claims. It denies that the Advance Representation was made. It denies that Kekecial has been unjustly enriched (and, in any event, contends that this unjust enrichment claim is inadequately pleaded, and so should not be allowed).

1. Aus Made counterclaims against Kekecial, pleading that the BP Rolls Contract was entered into and that Kekecial breached the BP Rolls Contract by not paying the balance of the purchase price. It claims that as a consequence of Kekecial breaching the BP Rolls Contract, Aus Made suffered loss and damage (the Aus Made Damages) of approximately $680,000. This claim is detailed in Aus Made's closing submissions at paragraphs 280 and 281. In short, it claims: loss of profit on the BP Rolls Contract; alternatively, loss of the deposit it paid the manufacturer (Novapharm, as defined below) on the contract Aus Made entered to buy BP Rolls from Novapharm (which Aus Made claims it entered only because Kekecial had entered the BP Rolls Contract with Aus Made); and also, a proportion of the legal costs it incurred in legal proceedings it commenced in the NSW Supreme Court against Novapharm in relation to the Novapharm BP Rolls contract, on the basis that it brought these proceedings to mitigate its losses.
2. Aus Made also alleges in its counterclaim (as an alternative plea) that on or about 28 and 29 January 2020, the Kekecial parties made representations to it (BP Rolls Order Representation), to the following effect:

(i) that Kekecial had then made (or was then making) a firm order for 10 containers of BP rolls; and

(ii) that no 'purchase order' was required to give effect to, or formalise, that firm order.

1. Aus Made alleges that, in reliance on the BP Rolls Order Representation, it placed its purchase order for BP rolls with Novapharm (its supplier), and that, as a consequence, it would suffer detriment if Kekecial were now permitted to resile from these representations, and that Kekecial is estopped from doing so.
2. Aus Made also contends that the BP Rolls Order Representation was misleading and deceptive, or likely to mislead and deceive, in breach of s18 of the Australian Consumer Law (ACL), and that Aus Made suffered the Aus Made Damages, as a consequence of Kekecial's misleading and deceptive conduct.
3. Kekecial denies that the BP Rolls Contract was ever made, denies making the BP Rolls Order Representation, and denies that Aus Made is entitled to the Aus Made Damages.

1. Kekecial's claim for $291,932.89 arises in the following circumstances:

(a) Kekecial paid Aus Made $291,931.89 too much on an order for disinfectant liquid, in circumstances where it paid the amount due on the original purchase order, and then the order was varied down by agreement (with a varied purchase order) so that less disinfectant liquid was ordered (and the cost dropped accordingly).

(b) Aus Made has kept the difference (that is, the $291,931.89), and seeks to apply it in reduction of the Aus Made Damages.

(c) Importantly, Aus Made agrees that the $291,931.89 needs to be paid to Kekecial if Aus Made does not succeed on its counterclaim in the proceeding.

1. The Regulatory Issues (the second set of issues in this case) involve claims by Kekecial in both breach of contract, and misleading and deceptive conduct.
2. First, Kekecial makes a breach of contract claim. In broad terms, it claims that:

(a) Under the Supply Agreement, Aus Made was responsible for ensuring that the product it supplied to Kekecial complied with Chinese laws and was fit to be sold in China (in circumstances where the mini paper rolls were to be cut down into smaller, labelled, rolls before being on-sold in China, and Aus Made was responsible for ensuring the labelling also complied with Chinese laws);

(b) The labels and product did not comply with Chinese laws;

(c) Kekecial suffered loss and damage (the Kekecial Damages) as a result. It claims that these arose from compensation agreements it says it reasonably entered, in November 2020, with the two companies to whom Kekecial on-sold the product after buying it from Aus Made. These companies processed the product into smaller, labelled, rolls. These two companies are collectively referred to as the Myron companies, as described below.

1. Aus Made denies that it breached the Supply Agreement, that the labels and goods did not comply with Chinese laws, and that Kekecial is entitled to the loss and damage it claims.
2. Second, Kekecial claims that the Aus Made parties made three sets of detailed representations to it, relating generally to labelling and compliance with Chinese laws. Kekecial claims that all of these were misleading and deceptive in breach of the ACL. It claims the same loss and damage for this claimed ACL breach, as it claims for the alleged breach of the Supply Agreement (that is, the Kekecial Damages).
3. The Aus Made parties deny making the representations, and the alleged ACL breaches. They deny that Kekecial is entitled to the Kekecial Damages.

1. This case took a long time.
2. The writ was filed on 1 December 2020. Initially the trial was listed to start on 22 September 2021. However, it was relisted, repeatedly, for various reasons. On 9 October 2023 I dismissed an application by the Aus Made parties to adjourn it still further.
3. The hearing commenced on 30 October 2023, and continued for four sitting days then. The parties opened their cases, and Kekecial's director, Andy, commenced his evidence in chief. The trial was then adjourned, to allow for further pleadings and evidence, and to enable a second application for security for costs to be heard.
4. On 22 February 2024, that security for costs application, and objections to further pleadings and proposed evidence, was due to be heard. Two days before that listed hearing - on 20 February - the Aus Made parties' solicitor emailed the Court, saying that senior counsel for the Aus Made parties was unavailable, being part-heard in another matter. Most of the interlocutory steps ordered to be done for that hearing had not yet been completed, and the parties agreed to adjourn to 8 March 2024. Those interlocutory matters were then heard on 8 March: evidence objections; objections to the latest versions of the statement of claim, and defence and counterclaim; and the security for costs application. I gave oral rulings on most of those matters that day, and a written ruling on the final aspects on 21 March 2024.
5. On 15 May 2024, I dealt with yet more issues relating to pleadings, expert evidence, and discovery issues raised by the parties.
6. Evidence then continued on trial days listed between 20 and 31 May, and on 27 June, 22 and 26 July, and 2 to 4 October 2024.
7. Mr Daryl Williams KC and Mr Liam Magowan appeared as counsel for the Kekecial parties throughout.
8. Mr Iain R Jones KC and Mr John Petras appeared as counsel for the Aus Made parties at the hearings from 30 October 2023 to 2 November 2023, and on 8 March 2024. Mr Cam H Truong KC and Mr Shaun Clement replaced them as counsel for the Aus Made parties at the hearings from 15 May 2024.
9. The final pleadings relied on were:
   • the third further amended statement of claim, dated 15 November 2023 (final Statement of Claim);
   • the fourth defence to the third further amended statement of claim, and further amended counterclaim, dated 29 October 2024 (final Defence);
   • the further amended reply and defence to further amended counterclaim, dated 12 February 2024.
10. There were also requests for further and better particulars of earlier versions of the statement of claim, and particulars given in answer to those requests.
11. As may be apparent from the many versions of the pleadings, the parties' cases changed a number of times and continued to evolve even as the trial continued. The parties provided an agreed chronology and lists of issues to be determined (which list was revised repeatedly as the case progressed). The final version of this list of issues was version 7, provided on 4 October 2024.
12. A court book was filed, and added to substantially, in the course of the trial. By the end of the trial, it had grown to 6108 pages. Of those, approximately 3320 pages were tendered.
13. Following the evidence, the case was adjourned for final written submissions.
14. Hundreds of pages of written closing submissions were filed.
15. At this stage, Aus Made made an application to amend its defence still further. Relevantly, it sought to rely on a clause in the Supply Agreement to allege that Kekecial was not entitled to make the Kekecial Damages claim. I rejected that application for reasons given orally at trial: in short, because it was made too late, without explanation as to why it was made so late, and because allowing the amendment would have had significant time and costs consequences: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.
16. Oral closing submissions took place on 25 and 28 October 2024.
17. In the end, the trial spanned almost a year: 363 days, starting on 30 October 2023, and ending on 28 October 2024. It was initially listed on a 4 day estimate. By the time the trial began, that had increased to a 10 day estimate. It in fact took 23 sitting days.

1. There is a large cast of people and companies involved in the events underlying this dispute. To make it easier to follow who's who, I have referred to people and companies by the following names in this judgment.
2. It may be helpful to tag or bookmark this section, so you can refer back, as you read on in this judgment.

• Andy is Mr Zhenhua Yang, the second defendant by counterclaim, and a director of Kekecial.
• Kekecial is Kekecial Pty Ltd., the plaintiff, and first defendant by counterclaim. Its directors are Andy and his son Haobo. It is an Australian company, incorporated in July 2017 when Andy moved to Australia. It operates an export business exporting various Australian products to China. Relevantly in this case, it purchased goods from Aus Made in Australia, and sold them to the Myron companies (as referred to below) in China.
• the Kekecial parties are Kekecial and Andy.
• Haobo is Mr Haobo Yang, Andy's son, and a director of Kekecial.

• Aus Made is Aus Made Express International Group Pty Ltd (the first defendant, and plaintiff by counterclaim). It is an Australian company which operates a business distributing and exporting healthcare and hygiene products, as well as dairy products and canola oil. Haha is its director and was CEO at the relevant times.
• Haha is Mr Huifeng Liu (the second defendant, and a director of the first defendant, Aus Made). He is also the director and shareholder of Shandong Ruhui.
• the Aus Made parties are Aus Made and Haha.
• Shandong Ruhui is Shandong Ruhui Import and Export Trade Co Ltd. It is a Chinese company, established in 2007 and it carries on an exporting and importing business in China. Haha is its director. Relevantly, it purchased goods from Myron Trading.

• Kenny is Mr Zhen Khan, who worked with (or for) Aus Made and Haha during the relevant period (and was titled 'CEO-Assistant in emails he sent to others on behalf of Aus Made and Haha), but who subsequently fell out with Haha. He gave evidence for the Kekecial parties.

• Myron Biotech is Hunan Myron Biotechnology Co Ltd (sometimes referred to in contemporaneous documents by the name Myron Shengwu Jishu Co Ltd). Aiping Liu is its major shareholder, and was its legal representative (a Chinese term) until 21 June 2022.
• Myron Trading is Hunan Myron Trading Co Ltd. (sometimes referred to in contemporaneous documents by the name Hunan Mailun Trading Co., Ltd). Aiping Liu was its legal representative, and 80% shareholder until 21 December 2020 when Andy took over those roles.
• the Myron companies are Myron Biotech and Myron Trading. These Chinese companies purchased goods from Kekecial. Myron Trading then on-sold at least some of those goods in China, mostly to Shandong Ruhui. A big issue in this case was the extent of Andy's financial or other involvement with the Myron companies
• Ms Aiping Liu was the legal representative (a Chinese term, as set out in formal documents filed with the Chinese government, and in company searches), and a shareholder, of Myron Trading from its inception, and of Myron Biotech until 10 December 2021 (when Andy took over as legal representative and major shareholder).
• Tmall is a website for Chinese consumers, which operates in a similar manner to Amazon. Aus Made signed a document which allowed Myron Trading to open a flagship store on Tmall to sell Evocide disinfectant and sanitising paper.

• Tea Co is Hunan Tiantianqing Tea Industry Co, a Chinese company which Andy and his brother Zhendong Yang have been running for about twenty years. Andy said it was his primary line of business. Andy held 85.93% of its shares; his brother the rest. It sold and manufactured health tea products. Andy gave evidence there were more than 10,000 pharmacies in China selling its products. Kekecial, Myron Trading and Tea Co are parties to the Myron Trading Compensation Agreement, a tripartite agreement dated 10 November 2020 - one of the two compensation agreements which Kekecial relies on for the Kekecial Damages claim.
• T Biotech is Hunan Tiantianqing Biotechnology Co Ltd, another Chinese company which Andy controlled, at least between 26 November 2018 and 20 November 2020. According to information filed with the Chinese government, and put in evidence, it was established on 7 September, 2005. From June 2016 to 26 November 2018, it had 10 or 11 shareholders including Andy, his brother Zhendong Yang, and Aiping Liu. From 26 November 2018, Andy and his brother were the only shareholders. Andy is named in the filed company information as being 'Senior Management' which encompasses 'Directors, Supervisors, Managers etc.', for the period up to 20 November 2020, when his brother Zhendong is then named in that role. It is one of three companies Shandong Ruhui authorised to use the Ruhui trademark, for 2 years from 27 February 2019 (the other two companies being Myron Trading and Myron Biotech). On 21 November 2022, it was renamed Hunan Shiren Biotechnology Co Ltd.

• Aeris is Aeris Environmental Ltd, a listed company and a parent in the Novapharm group.
• Peter is Mr Peter Bush, Aeris' director.
• Novatech is Novatech Research Pty Ltd.
• Bruce is Mr Bruce Davidson, who was the chief representative of Novatech in the relevant dealings.
• Novapharm is a group of companies, relevantly including Aeris and Novatech, which sold goods to Aus Made. I have mostly referred to dealings with Aeris or Novatech by saying 'Novapharm', as the distinction between those entities does not matter in this case and the parties often referred to it this way.
• Royal Touch is Royal Touch Pty Ltd. It is an Australian company which was involved in the manufacture of the parent rolls (discussed below) at its factory, which were then sold to Novapharm.

1. To put the disputes in this case into context, I will first outline the commercial relationships between the various companies involved in the supplies of disinfectant liquid, and disinfectant paper.
2. The parties' dealings began with disinfectant liquid (Evocide). It was sold by Novapharm to Aus Made, which on-sold to Kekecial, which on-sold to the Myron companies. The Myron companies then on-sold it to the Chinese market, including to Shandong Ruhui. There was no dispute in this case about these sales of disinfectant liquid.
3. The parties then also started selling disinfectant paper.
4. Royal Touch and Novapharm manufactured the disinfectant paper into mini parent rolls. I will refer to that product as the Raw End Product.
5. Novapharm sold Raw End Product to Aus Made, which sold it to Kekecial.
6. Kekecial sold the Raw End Product to the Myron companies. It delivered the mini paper rolls to a bonded area in Hunan, China. There, the Myron companies processed the mini parent rolls for retail sale: they cut the paper and put it in small, labelled, packs for retail sale in China. I will refer to this repackaged product as the End Product. By processing the goods in the bonded area of China, the goods could be advertised as 'made in Australia'. This set up also meant that Andy's company, Kekecial, was exporting to China (which was important for the business visa which Andy had applied to obtain from the Australian Government).
7. Having manufactured the mini parent rolls into the smaller packages - the End Product - the Myron companies on-sold the End Product within China, principally to Shandong Ruhui (Haha's Chinese company). Haha gave unchallenged evidence that Shandong Ruhui purchased approximately 70% of the Myron companies' repackaged goods, and the invoices between Shandong Ruhui and Myron Trading provide some support for this figure. Andy purported not to know anything much about the Myron companies' sales.
8. Myron Trading also made online sales.
9. The flow of goods is summarised in the following diagram which was handed up during the trial :

1. Aus Made sold the Raw End Product to Kekecial under the brand name 'Southern Cross'. In China, the End Product was sold under the brand name 'Ruhui'. On 27 February 2019 Shandong Ruhui, which owned the Ruhui trademark, sent a letter on Aus Made's letterhead, authorising Myron Trading 'and its affiliates', Myron Biotech and T Biotech, to use the Ruhui trademark for two years 'to engage in the business of manufacturing, distributing and selling products affixed with the abovementioned trademark'.
2. The End Product was sold as two different products: (Ruhui® Disinfectant Wipes (For Skin). and Ruhui® Disinfectant Paper Towels (for surface use). Broadly speaking, the wipes were designed to be dipped in water, then used to sanitise skin; and the paper towels were designed to have water sprayed on them and then used to sanitise surfaces.
3. Later, Royal Touch arranged for a specialist machine to make paper rolls which were much larger than the mini parent rolls. These were called big parent rolls (BP rolls). Aus Made placed an order for BP rolls with Novapharm, and much of the dispute in this case relates, in broad terms, to whether Kekecial placed an order for BP rolls with Aus Made. No BP rolls were ever supplied.
4. Haha and Andy were each involved in at least two different stages of the supply line. Haha was both a director of Aus Made and of Shandong Ruhui. Andy was both a director of Kekecial, and deeply involved with the Myron companies, as discussed further below. Andy also was a director of T Biotech, which was, according to Andy, involved in sales to drug stores in China. (Andy refers to T Biotech as Kekecial's 'distributor', in an email relating to compensation claims which he sent on 2 November 2020 to Haha.)

1. Andy was the main witness for the Kekecial parties in relation to the events leading to the disputes in this case. Kenny also gave evidence for the Kekecial parties.
2. Haha gave the main evidence on those events for the Aus Made parties.
3. A troubling aspect of this case is that I found the evidence of these key witnesses to be unreliable, so much so that, for the reasons explained below, I do not accept any of the oral evidence of Andy, Haha or Kenny on contentious matters, save where their evidence is supported by contemporaneous documents.
4. The fact that I have been unable to accept so much of the oral evidence of these key witnesses in this case, absent documentary corroboration, is quite extraordinary. It has made my task of ascertaining the facts a more difficult one and has had a significant bearing on my findings on the key issues. In the end I have relied heavily on the documentary evidence for the primary evidence in the proceeding. This task, too, was harder than usual, as there was some doubt as to when some of the documents relied on were actually created. I discuss all this below.

1. Andy was a Chinese citizen who sought, and eventually obtained, permanent residency in Australia, having applied for a business migration visa. He had considerable experience in operating businesses in the Hunan Province in China.
2. Andy speaks little English, and gave evidence via an interpreter. After most of Andy's evidence in chief was given, the trial was adjourned for some months. It then resumed and he completed his evidence. Much of the time that he gave evidence was taken up by his many long, rambling, evasive, and non-responsive answers to questions. He frequently made long speeches designed to highlight points he thought it important to make about the Kekecial parties' case - rather than answering the specific question put to him.
3. His oral evidence was frequently contradictory, and flew in the face of what was contained in contemporaneous written documents. Cross-examined about particular contemporaneous messages which were not consistent with the story he was giving in his evidence to the Court, he first argued that the translation was wrong, then gave unconvincing explanations.
4. He firmly denied the existence of any phone calls between himself and Haha in around January 2020 (the period leading up to the alleged BP Rolls Contract being entered into). Then, when telephone records were produced to show that there were phone calls, he accepted that there were such phone calls, but said that the discussions excluded any discussion of BP rolls - which both he and Haha were repeatedly referring to in WeChat and other messages at the time. In the face of the documentary evidence, his oral evidence on these points was not credible.
5. His evidence about his involvement with, and knowledge of, the operation of the Myron companies was particularly unimpressive, as I discuss in the section dealing with the Kekecial Damages claim below. He sought to convey the impression that Kekecial was an agent for the Myron companies in dealing with Aus Made, but that he had hardly any involvement with the Myron companies or knowledge about their financial and business affairs. This was despite him clearly having significant involvement, as I discuss in the section on the Regulatory Issues below, in relation to the Kekecial Damages claim.
6. He was often evasive, in giving evidence, in relation to what he claimed to know about the Myron companies. For example, on the one hand, he gave specific evidence about employees with particular experience being hired by Myron Trading, but on the other, when cross-examined for more information, said, 'How would I know? I was no employee of Hunan Myron'.
7. Andy claimed, in giving evidence, to not to know anything about Myron Trading on-selling goods to Shandong Ruhui. This was despite a contemporaneous email on 4 June 2019 where he forwarded a contract between Shandong Ruhui and Myron Trading to others, along with four related invoices; despite other contemporaneous messages he wrote to Haha about advance payments and sales made by Shandong Ruhui to Myron Trading. On 31 August 2019, Andy replied on behalf of Myron Trading (referring to it as 'we') in regard to a proposed order by Shandong Ruhui:

Ok, you ask him to formally place the order and pay the deposit, we can only stock up according to the order

1. A lot of communication occurred via WeChat, with groups of people included in different WeChat groups for different purposes. In the 'Disinfection Project - China Subcontracting Project Team' WeChat Group (the Disinfection Project WeChat group), members communicated about many aspects of the goods, as well as their supply and sales in China, but no one from the Myron companies (was part of that WeChat group (or included in any of the messages). Andy was included and spoke on behalf of the Myron companies, but purported in giving evidence, to only know a limited amount about them, or even about the sales he referred to in those messages. For example, on 26 September 2019, the Disinfection Project WeChat group (ncluding Andy) was told of a large payment ('1 million'), which Shandong Ruhui had made to Myron Trading for disinfectant towels. Andy conceded in evidence that he knew of the payment at the time, but went on to claim that he didn't know where Myron Trading had got the product from, saying Haha could have been providing them with products. I do not accept Andy did not know the source of that payment. There was no evidence - nor any other suggestion in the trial - that Myron Trading was obtaining disinfectant goods from anyone other than Kekecial at that time. (I note that I assume the '1 million' payment was in RMB. RMB, or renminbi, is the currency system in China. Its base unit is yuan, which can also be written 'CNY.' Various documents in evidence refer to currency in RMB or CNY.)
2. Importantly, the two Myron companies and the Tea Co and T Biotech all had the same telephone number (as shown in company documents). There was no dispute that Andy controlled two of these: Tea Co and T Biotech. Andy was cross-examined about this by Mr Truong KC, and, tellingly, compared the situation to Haha's three companies sharing a phone number:

Mr Yang, is it right to say that the two tea companies and the two Myron companies have the same phone number?

Mr Yang, it was just a yes or no, please?---Yes, but it's for the use in China. According to the regulations of Chinese government, a company must have a fixed landline and that was 20 years ago ...

That's because you control all four businesses, Mr Yang?---Absolutely not, for example, Haha had three companies, they all use the same number. It is common in China. ...

1. Haha gave evidence that in early 2018, Andy told him that he owned both Myron Biotech and Myron Trading, but that he did not have himself recorded as the owner or trader of these companies because of Australian immigration and visa requirements. Haha said that Andy wanted it to look like the Myron companies were separate to his Australian company, Kekecial, so that he could present the agreements between the companies as being genuine arms-length transactions to support his visa application. Haha gave evidence that, at the end of 2018, Andy informed Haha that one of the Myron companies was registered in his employee's name (Aiping Liu).
2. On 27 February 2019, Shandong Ruhui authorised the use of the Ruhui trademark for two years, to Myron Trading, 'and its affiliates', Myron Biotech and T Biotech:

to engage in the business of manufacturing, distributing and selling products affixed with the abovementioned trademark...

1. Haha (Shandong Ruhui's director) gave evidence that he gave that authorisation for the Myron companies and T Biotech to use the Ruhui brand name:

... because Andy told me those three companies belonged to him. He asked me to send a letter of authorisation for those companies ah together use the brand name, and as well as a sales authorisation.

1. In an affidavit filed in the NSW proceedings between Novapharm and Aus Made, Kenny gave evidence of his belief that the Myron companies were controlled by Andy. In this current proceeding - having fallen out with Haha, and now giving evidence for the Kekecial parties - Kenny tried to explain away that earlier evidence, saying that what he had sworn to earlier was just what Haha had told him. In circumstances where he was communicating with Andy throughout the relevant period, I consider what he said in the NSW proceeding more likely to correctly reflect his own observations from that period.
2. No-one was called from the Myron companies to give evidence. In particular, Aiping Liu was not called. The Kekecial parties point to the fact that, as a Chinese national, she could not be subpoenaed to give evidence in an Australian court (which the Aus Made parties accepted), and they submit that she was not in the Kekecial parties 'camp' (in terms of ability to call her). However, Andy had clearly had a long connection with the Myron companies and with Aiping Liu. There was nothing to suggest that they had fallen out in any way: asked about why she was not called, Andy simply said that he was 'rarely in contact' with her. Kekecial arranged for another Chinese person to give evidence by flying him to Australia. There is no evidence Aiping Liu was even asked to come to give evidence.
3. I accept the submissions made by Aus Made:

47. Ms Aiping Liu was not called as a witness. There was no adequate explanation for her absence. She was uniquely positioned to put a true complexion on the facts. Andy said she was the owner and controller of Myron Trading and Myron Biotechnology. The relationship between Kekecial and Myron Trading, the process of manufacturing and on-selling paper towel products and the alleged compensation was an important aspect of this proceeding and Kekecial's loss and damage claims. Ms Liu's absence means that any inference favourable to the Aus Made parties should be more confidently drawn against the Kekecial parties.

1. I draw an inference that Aiping's evidence would not have helped the Kekecial parties: Jones v Dunkel (1959) HCA 8, 101 CLR 298. That strengthens my willingness to accept Haha's evidence about Andy's involvement with the Myron companies. Haha's evidence about that is also consistent with the matters outlined above, the timing of when the Myron companies were established, and the fact that there are no contemporaneous documents showing anyone else making decisions or negotiating on behalf of the Myron companies. The evidence establishes that Aiping Liu signed documents for the companies, and she is pictured in the odd photograph, but otherwise she is remarkably absent from the many, many documents in evidence.
2. On 18 January 2023 Myron Biotech was selling Novapharm's disinfectant paper online, as indicated in a screenshot from the JD.com website in evidence. Aeris is named as manufacturer. There were over 1,000 product reviews for the product. This was relevant to the Kekecial Damages claim, as part of the reason that Kekecial claimed the Myron companies needed to be compensated was that they had purchased machinery for processing parent rolls, and were not able to use it anymore after all the regulatory issues occurred. These 2023 sales suggest the machinery was still being used. Andy was cross-examined about them. And although he was Myron Biotech's director, major shareholder, and legal representative, at that time, he purported, in giving his evidence, not to know anything about these sales, saying he was only an investor in Myron Biotech and was not involved in the business side of things.
3. Andy claimed that he lost relevant documents or emails and messages involving the Myron companies, or didn't have them, for different reasons. At one stage, it was because he had lost mobile phones which had them on it. At another (asked about his later involvement with Myron Biotech), it was because he was no longer a shareholder. He gave evidence that he was only the 'boss' of Myron Biotech, and its controlling shareholder, for 'a few months', and that he stopped as it was losing money. (In fact he controlled it, and was its major shareholder, for nearly two years). Asked to produce documents to show it was losing money (as he claimed), he said that because he was no longer a shareholder he could not produce any documents to show this.
4. I do not accept that all these documents were lost or that he could not produce them. To state the obvious: in this wired and interconnected world, Andy could have requested them from the Myron companies even in the course of the trial and had them emailed and produced to the Court. The extent of his involvement with the Myron companies was clearly an important issue.
5. I am satisfied that, contrary to his evidence at trial, during the relevant period, Andy treated the Myron companies as his companies.
6. Also relevant to Andy's credit, the Kekecial parties' claims in relation to damages changed significantly as the case proceeded, and highly relevant documents were produced without adequate explanation as to why they had not been produced earlier. Andy backdated at least one document, on his own evidence (the Deed of Loan between himself and Kekecial, stated to be dated 6 December 2022 but in fact signed some months later, at least). He only admitted that back dating after the Aus Made parties' solicitors demanded a native electronic copy of the document. I am not satisfied that all the documents the Kekecial parties produced, at those later times, were all created on the dates they bear, as I discuss further in the Regulatory Issues, in relation to the Kekecial Damages claim, below
7. Endeavouring to explain some of the difficulties with Andy's evidence, Kekecial submitted that he is a new immigrant, not experienced in operating through an interpreter or giving evidence before a Court, and his 'flow' was interrupted by objections from Senior Counsel for Aus Made on occasion.
8. The need for translation can make it more difficult to elicit clear evidence. And most of the evidence in the trial did not emerge in a clear, chronological or narratively consistent way, which also made it more difficult to follow some of the cross-examination. However, I do not accept that these difficulties explain all the inconsistencies in Andy's evidence. Nor are they explained by the fact that on occasions, his 'flow' may have been interrupted by objections being made. I have considered his evidence carefully, to account for occasions where something which the Aus Made parties submitted was a lie, may have been in fact an ambiguous response, a misunderstanding, or an incomplete answer, for various reasons. There are many instances where none of those excuses can adequately explain his contradictory evidence.
9. As a consequence of these matters, I do not accept Andy's evidence except where it is uncontroversial, or corroborated by contemporaneous documents.

1. Kenny gave evidence for the Kekecial parties.
2. His memory of events was clearly affected by time's passing - he often said he could not remember things clearly.
3. In emails he sent throughout the relevant period, Kenny named himself 'CEO Assistant' to Haha. The Aus Made parties submitted (and Haha gave evidence) that Kenny was not in fact an employee of Aus Made, but rather was Haha's business partner who helped Haha with translation and interpretation. Kenny also gave evidence of his business relationship, and that of his (now) ex-wife, with projects that Shandong Ruhui was involved with. There were separate WeChat groups involving the different projects. Kenny was highly involved with what was occurring in relation to the goods being supplied from Aus Made to Kekecial, then to the Myron companies, and then to Shandong Ruhui, given his own family interests. Regardless of whether he was employed by Aus Made, he was sending emails at Haha's behest, which Haha asked him to do due to Haha's lack of knowledge of English.
4. He subsequently stopped working with Aus Made and Haha, fell out with the Aus Made parties (and was involved in litigation against them), and eventually was a witness for the Kekecial parties in this case. I consider that some of his evidence of what had occurred at relevant times was tailored to try to support the Kekecial parties' case, rather than being what he actually recalled occurring.
5. As the Aus Made parties submitted:

41 Kenny was formerly involved in the disinfection project as a partner in China and, through his ex-wife, was a financial investor in the project. He has since fallen out with Haha, and commenced legal proceedings against him, including in the Supreme Court of Victoria on 3 April 2023, China, in the Federal Court of Australia, and Kenny also gave affidavit evidence against Haha and Aus Made (in support of Novapharm) in proceedings in the New South Wales Supreme Court. After freezing orders were made in this proceeding, Kenny posted about the freezing orders widely on social media and called Haha a "deadbeat". He voluntarily gave evidence for Kekecial. The hostility between Kenny and Haha colours Kenny's evidence that is not otherwise corroborated by contemporaneous documents.

42 Kenny's evidence was also affected by the effluxion of time, as he said on many occasions that he could not remember events or details clearly. He said that he could remember things clearer in 2022, but now only has some "impression". His memory seemed to only fail in relation to matters unhelpful to Kekecial's case theory, however, and Kenny showed a willingness to give explicit evidence when he considered it harmful to Aus Made's case. See, for example, his remarkable evidence that he "clearly" remembers not preparing the March 2020 purchase order, despite the contemporaneous messages showing he was asked to prepare it and Kenny acknowledging his affirmation that he would do so, and Kenny's evidence under cross-examination that he did the calculations for the invoice.

43 Kenny's evidence was plainly infected by his falling out with Haha. His evidence under cross-examination was tailored to try to assist Kekecial and harm Aus Made. One example is when Kenny resiled from his own sworn evidence in another proceeding that Andy owned or controlled both Myron companies, and tried to say that he did not actually know such a thing, but instead only said it on oath because it was something that Haha had purportedly said.

1. Although Haha's evidence was that Kenny frequently commented, in messages, on aspects that Haha had not asked him to, in the end, nothing in particular turned on this. Senior Counsel for the Aus Made parties did not invite the Court to find, in relation to any particular contemporaneous messages or emails Kenny had written, that Haha did not know about them.
2. Kenny gave evidence to the effect that he drafted emails under Haha's instructions and that many things he wrote were not actually happening as described in those emails. For example, asked about an email he sent to Novapharm, on 7 January 2020, which referred to sales gradually increasing, he said:

I don't remember this because the contents of all emails were drafted by me under the instruction of Haha, including some of the previous emails were also directed by Haha. So I wasn't aware clearly of lots of the specifics in these contents, I was just drafting those contents under instruction. When you ask the question whether the sales were increasing, I wasn't aware of this clearly at that time. So a lot of the emails - I can say this, a lot of the emails were drafted because Novapharm was pushing for that information and Haha was trying hard to remain as the exclusive distributor. For a period of time a lot of the things were not actually happened but the content was drafted at his direction.

1. However, putting things at their highest for him, Kenny still chose to send some emails and messages knowing them to contain untruths at the time (such as relating to his own financial position).
2. As a consequence of my concerns about Kenny's evidence, I do not accept his evidence on controversial matters, save where it is supported by contemporaneous documents.

1. Like Andy, Haha gave lengthy evidence, through an interpreter. His evidence, like Andy's, took longer than it needed to. His answers were lengthy and verbose, often going well beyond the questions asked, apparently with the intention of telling the court things he considered relevant about the Aus Made parties' case, rather than simply answering the questions put to him.
2. He was an unsatisfactory witness, giving non-responsive answers at times, and contradictory answers on important points.
3. He gave evidence of specific conversations in detail. I am not satisfied that he actually remembered these conversations.
4. He presented as certain when stating things which were later proven to be incorrect, or in relation to matters about which he later gave contradictory evidence.
5. He had clearly reconstructed some of his evidence to make it fit with what were otherwise gaps in evidence in relation to the claims Aus Made made relating to the alleged BP Rolls Contract, in the contemporaneous messages, emails and other documents. An example of this is the way he confidently asserted in great detail what had been said in a lengthy phone call (as shown in the telephone records) he had with Andy on 28 January 2020, in circumstances where the telephone call was made over four years before he gave evidence, and no notes were taken.
6. He admitted to lying to Andy and others in various WeChat messages and emails he sent, or which were sent on his behalf by Kenny. For example, he conceded in giving evidence, that a voice message he left in a group WeChat, sent to 8 people on 28 January 2020, included a lie. The message stated that the manufacturer had said full payment needed to be made when an order was placed. But Haha gave evidence that the manufacturer had not said this. He then continued:

This was my own thinking of giving them pressure, asking them not to randomly put orders in because of COVID coming in. ... My worry was that if they put in an order and put some deposit but when the COVID was not there, they do not want it.

1. He then went on to assert that he had separately told Andy the truth (that full payment was not needed) in a telephone call with Andy, and that Andy was the only one of the eight people who knew that full payment was not needed. His evidence about this claimed conversation with Andy, was that it occurred on 29 January, 'if I remember correctly'.
2. This evidence was the opposite of earlier evidence Haha gave, which was that he said to Andy in a conversation on 29 January (at 4.18 pm):

You know, during the pandemic when you place an order, you need to pay the price in full.

1. Haha also conceded that he told Kenny to tell lies about what was happening with Novapharm, in the emails he asked Kenny to send. An example of this was the email Kenny sent Novapharm on 15 April 2020, claiming that customers had had payments for orders refunded to them due to delays in filling the orders (discussed further in the chronology section below). He conceded in cross-examination that there had been no refunds.
2. In a WeChat message he sent Andy on 24 March 2020, Haha said that all the payments Aus Made had made to Novapharm for BP rolls had come from withdrawals from his own mortgage and Kenny's mortgage.
3. This was a lie. No money was withdrawn from Kenny's home mortgage to pay Novapharm. Cross-examined about the message, Haha blamed Kenny, saying that he and Kenny 'came up with this idea' of mentioning that the money had come from Kenny's mortgage, to apply pressure on Andy so he would pay as soon as possible, adding, 'Kenny told me what to write'. Haha agreed under cross-examination that it was ultimately his decision to lie to Andy - but then insisted it was not him lying, it was Kenny.
4. Haha chose to send the message. Whether Kenny had been involved in suggesting it be made is irrelevant to the fact Haha lied.
5. Haha also claimed that although Aus Made did not have a lack of cash at the relevant time, he told Andy that it did, in order to 'give him pressure so that he would pay the money for the products'. He claimed he was lying to both Novapharm and Andy when he told them of Aus Made's shortage of cash.
6. I do not accept that such untruths are simply 'white lies', as the Aus Made parties submitted. These were not harmless or trivial lies. They were designed to alter the way others acted, by misrepresenting important matters. And the fact that Haha accepted, when giving evidence, that he had lied in the past, in the face of clear examples of those lies being before the Court, does not make him a forthright witness, as Aus Made submits. He simply accepted the obvious.

1. Mr Qian Lei (who came from China to give evidence) gave brief evidence for the Aus Made parties as to the circumstances in which case a document relevant to the allegations about breaches of Chinese laws, came into existence.
2. The Aus Made parties also called Mr Du Yang, a translator.
3. In relation to their counterclaim, they called Mr. John Michael Rose as an expert costs consultant.
4. Reports by Chinese lawyers were filed by each side, on the basis they were experts in Chinese law. Mr Linlin Zhang gave evidence about this for the Kekecial parties. Ms Yuan Zhou gave evidence about this for the Aus Made parties. Both came from China to give evidence in person.
5. I am not satisfied that either of these expert witnesses was completely independent. Both had clearly had repeated discussions with those instructing them before providing their reports. However, I found that each of them did endeavour to be honest in giving their evidence, and in the end, it was the laws and regulations that they identified that I mostly needed to have regard to.

1. Given the difficulties and unreliability of much of the oral evidence (as outlined above), I have needed to pay particular attention to the documentary evidence in this case. It includes hundreds of emails, WeChat messages, text messages and recorded voice messages - many of which were scattered across the Court Book in no particular order, sometimes repeatedly. I have put it in chronological order, as best I could, below.
2. The parties in this case communicated across a variety of platforms, switching back and forth from WeChat messages to emails to text messages to voice messages. Many of the documents in evidence are translations, either official via an interpreter, or done by way of artificial intelligence. Where I have included extracts, I have not changed mistakes in the documents; so, for example, spelling mistakes have been left as in the originals.
3. Kekecial discovered many documents relating to the Myron companies, late in this proceeding, including the Compensation Agreements it relies on for the Kekecial Damages claim, and various invoices and purchase orders relating to sales from Kekecial to the Myron companies. Aus Made disputes that they were all created around the dates they bear. It is understandable that this dispute has arisen given that the documents were provided in the way they were, and so late in the proceeding. I am not satisfied that all the documents were created on or around the dates they bear, but in the end, this was not determinative of the issues in the case. I discuss this in more detail when I come to the Regulatory Issues, and particularly, the Kekecial Damages claim.

1. The BP rolls Issues are summarised at paragraphs 10-18 above.
2. I will set out relevant facts relating to these issues, then turn to the issues themselves.

1. In August 2017, Andy, who had recently arrived in Australia from China, was introduced to Haha, by a friend. Andy was looking for a business opportunity to support his business-migration visa application. Haha is a Chinese Australian who had been successfully carrying on business in Australia for some time.
2. In late 2017, Andy's company, Kekecial, placed two purchase orders for canola oil with Haha's company, Aus Made. These orders were filled, and the canola oil was exported to China.
3. Later, Haha raised another potential business opportunity with Andy, in relation to the supply of Evocide disinfectant liquid (which Aus Made purchased from Novapharm).
4. On 8 February 2018, Novapharm entered a non-exclusive distribution agreement with Aus Made in relation to the sale of Novapharm's goods in China.
5. On 14 June 2018, Aus Made and Kekecial entered an overarching supply agreement for the sale of barrels of disinfectant liquid to Kekecial (Disinfectant Supply Agreement). This case does not involve any disputes arising from this agreement.
6. On 26 November 2018, Aus Made and Kekecial entered the Supply Agreement at the heart of this dispute. It was also an overarching agreement for the international sale of goods by Aus Made to Kekecial. Kekecial and Aus Made each allege the other breached this agreement, in this case.
7. The Supply Agreement related to proposed sales of sanitising paper products and in particular of mini parent rolls. It included a clause in relation to Kekecial processing the goods it was sold by Aus Made to a smaller size, in the bonded area of Hunan, China, as well as clauses relating to the process of purchasing particular goods by way of the placement of purchase orders. It also included a minimum purchase clause for each order placed (at least one container).
8. On 8 February 2019, Kekecial, in turn, entered an overarching sales agreement with Myron Trading (Myron Trading Supply Agreement), and a similar one with Myron Biotech (Myron Biotech Supply Agreement), relating to sales of sanitising paper. The agreements include clauses making Kekecial responsible for product packaging and labelling and meeting the requirements of Chinese laws regarding disinfecting products, broadly mirroring the responsibility Aus Made had to Kekecial under the Supply Agreement (which is discussed in the Regulatory Issues below), and include a liquidated damages clause. These agreements also require specific 'sales contracts' to be placed for particular orders of goods (effectively, these sales contracts are like the purchase orders required for particular orders of goods, pursuant to the Supply Agreement between Aus Made and Kekecial).
9. At around this time (that is, February 2019) Novapharm and Aus Made discussed designing a specialised machine for their purposes that would be used to manufacture much larger paper rolls (BP rolls). On 12 February 2019, Bruce wrote to Kenny about the proposed new machine.
10. On 27 March 2019, Aus Made signed an exclusive distribution agreement with Novapharm. By it, Aus Made was appointed as a distributor and official representative of Novapharm's products in the Greater China Region, including mainland China, Hong Kong, Macau and Taiwan. The agreement concerned Novapharm's disinfectant liquids (Evocide) and sanitising paper products (Hand and Skin Sanitising Mini Treated Parent Rolls, Hand & Skin Treated Parent Rolls, Hard Surface Disinfectant Mini Treated Parent Rolls and Hard Surface Treated Parent Rolls). Appendix 2 of the agreement made reference, among other things, to prices and measurements for both 'mini treated parent rolls**'**: 2.8m x 300m = 840m2, at A $235 per roll , 'to end Aug 2019 only', and for 'treated parent rolls' (that is, BP rolls): 1.4 x 1.2 = 12,600 m2 at USD $1,600 per roll. It also included minimum order quantities and agreed minimum sales commitments. Relevant minimums were 240 mini parent rolls per 40-foot container, and 32 BP rolls per 40-foot container.
11. That same day, 27 March 2019, Haha signed a personal guarantee with Novapharm to support Novapharm's acquisition of the specialised machine (estimated to cost USD $660,000) to be used to deliver, treated, the BP rolls to Aus Made. By this guarantee, Haha guaranteed Aus Made's minimum sales commitments made in the Novapharm distribution agreement. The guarantee provided that Aus Made would undertake the final conversion of the products into finished paper product packs 'in its China facility', that would then be marked and distributed under the Aus Made Southern Cross brand name.
12. A few days later, on 4 April 2019, Kekecial signed a purchase order with Aus Made for 960 parent rolls (mini parent rolls) at $315,840.
13. There is a purchase order, dated 7 April 2019, between Myron Trading and Kekecial for the same amount of 960 parent rolls at $364,800.
14. Haha gave evidence that in April 2019, in Changsha, he told Andy 'the price' for BP rolls, and gave him 'a quote' (this evidence is discussed further below).
15. On 15 April 2019, Myron Trading paid Kekecial $364,800 (as shown in a debit advice).
16. On 23 May 2019, Kekecial signed a purchase order with Aus Made for 736 mini parent rolls at $242,144.
17. There is a purchase order dated 27 May 2019 between Myron Biotech and Kekecial for 736 mini parent rolls at $279,680.
18. On 3 June 2019, Myron Trading and Shandong Ruhui entered an agreement (titled '2019 Annual Goods Purchase and Sale Contract') for Shandong Ruhui to purchase Ruhui disinfectant products from Myron Trading. The next day, on 4 June 2019, Andy forwarded, in WeChat, scanned copies of this contract, and four related invoices, to the members of the Disinfection Project WeChat group.
19. From June 2019 to October 2020, Myron Trading sold disinfectant liquid and sanitising paper (the End Product) to Shandong Ruhui. There are invoices in evidence showing this.
20. There is a purchase order dated 1 July 2019 between Myron Biotech and Kekecial for 368 parent rolls at $139,840.
21. On 2 July 2019, Kekecial signed a purchase order with Aus Made for 368 mini parent rolls at $121,072.
22. On 31 August 2019, at 8.41 am, Haha messaged a WeChat group which included Andy in relation to an order from JD.com. Shortly afterwards, at 9.02 am, Andy responded:

Ok, you ask him to formally place the order and pay the deposit, we can only stock up according to the order ...

1. Clearly, here Haha was writing about an order that had come in from JD.com (presumably to his Chinese company Shandong Ruhui, which purchased End Products from Myron Trading). Andy's response was that a formal purchase order was required, and payment of the deposit, before 'we' could stock up. The 'we' he refers to is clearly a reference to Myron Trading.
2. There is a purchase order dated 3 September 2019 between Kekecial and Myron Biotech for 372 mini parent rolls at $180,420.
3. On 3 September 2019, Kekecial signed a purchase order with Aus Made for 368 mini parent rolls at $164,142.72.
4. There is a purchase order dated 30 September from Kekecial to Aus Made for 368 mini parent rolls at $164,142.72, which Aus Made says was actually entered into on 18 September. I accept it was in fact entered then: the relevant invoice and payment documents are all dated from 18 to 20 September.
5. On 19 September 2019, there is a purchase order between Kekecial and Myron Biotech for 368 mini parent rolls at $178,480.
6. There is a purchase order dated 26 September 2019 between Myron Biotech and Kekecial for 262 mini parent rolls at $127,070.
7. On 5 October 2019, Kekecial signed a purchase order with Aus Made for 262 mini parent rolls at $116,862.48.
8. On 1 November 2019, there is a purchase order between Myron Trading and Kekecial for 368 mini parent rolls at $178,480. There is another purchase order the same day between Myron Trading and Kekecial for 369 mini parent rolls at $178,900.
9. On 2 November 2019, Kekecial signed a purchase order with Aus Made for 368 mini parent rolls at $164,142.72.
10. On 11 November 2019, Bruce wrote to Kenny about the need to order additional mini parent rolls now, if required, and about the initial commissioning of a proposed machine for making BP rolls. Kenny replied to Bruce a little later that day:

According to the current situation, we should have enough mini treated rolls in hand for the next months. Also, we've informed everybody that there will be a 3 months lead time for their new orders, so even they close for Xmas, there will be no problem with it.

1. On 30 November 2019, there was a meeting between Haha, Novapharm representatives, and others. In an affidavit filed in NSW proceedings between Aus Made and Novapharm, Haha swore that, at this meeting, Novapharm agreed that Aus Made was no longer the exclusive distributor, and that the sales targets imposed by their 27 March 2019 distribution agreement had been lifted. Novapharm disputed that it had agreed to this, in the NSW proceedings.
2. On 9 December 2019, Bruce wrote to Kenny:

... I have spoken to Royal Touch & the parent roll to parent roll Taiwan commissioning trial went extremely well & it's now being dismantled & packed into a container for shipping to Aust. It will be here mid Jan.

Do you have any indication of when 1st parent rolls orders will be placed?

1. On 12 December 2019, at 12.42 pm, Bruce wrote to Kenny asking him to:

...please confirm how many mini treated parent rolls you have left in stock in China?.

I just confirmed with the factory. All the last five containers (1744 skin rolls) were in the stock. Also, some HSD left as well, but not too much. We've manufactured enough for customer orders and marketing activities (such as the samples put in the material bags and giving out on Disinfectant Conference). We need to have customer's order to convert the rolls to small packs.

1. Bruce wrote to Kenny (cc'ing Haha), at 1.45 pm on 12 December:

That's not very encouraging to note that there is so many treated mini parent rolls still in the factory and that these (1,744 rolls) have not been converted into finished pack products. As per earlier advise, the parent roll to parent roll machine that Aus Made insisted that we go ahead with buying at a cost of $1m arrives in Mid Jan and we are expecting that it would be needed immediately to meet your committed volumes.

Can you please push your producers re placement of orders and volume requirements. What can we expect to receive by way of orders in January ?????

I totally understand you want to see new orders. We are more desperately hope to see the orders than you. We invested 20 times more than 1M on this project (a list of some of the investments was sent before) but as we said we need more time for letting ppl know the unique functions of our products. This needs more time and money to invest in. The Disinfectant Conference is one of the things we do to achieve this aim. We talked about this with Mr Stang, Steve and Peter in China, and after they met many distributors and the hospitals, Mr Stang had new plans for China market. And all the related info. was recorded in the meeting minutes.

No matter whether we want or not, it is the truth that we can not have new orders very soon. However, we are doing our best to promote the products. Disinfectant Conference made hospital and healthcare channel knew the products a lot, and we have a new plan on advertisement through new media and online influencers, etc. Everybody knows the products believe we'll have a bright future, but as we said, it could not that quick.

1. On 7 January 2020, Covid was referred to for the first time in the parties' communications. Bruce sent an email to Kenny and Haha, with the subject line: 'A mysterious virus is making China (and the rest of Asia) nervous. It's not SARS, so what is it?' The email went on to ask of sales news, continuing:

Would appreciate to hear of any update on how everything is progressing, especially as the Parent roll machine has arrived in Aust & will be operational within 2-3 weeks. Orders would be great!

Thx for sending the link. It happened several days before and we've already organized an article that combined Evocide Extra and paper products together with this event and more than 100 media and online platforms will publish the article. It the article we mentioned this event which can make the readers focus on disinfectant and then we introduced the products which are the best choice for disinfection for both public and private areas. Later I can send you a list of the links which published the article.

Also, the sales were gradually increasing and we developed some new channels after the Disinfectant Conference. Also, we have a big plan for promoting the products by online influencers, which is the most popular and efficient way to promote products currently in China. From the report of CCTV news, the 2 top online influencers achieved more than 400 million AUD each during the online shopping festival in November (only one day). Currently, we cooperated with Tik Tok (biggest online influencer platform in China) and will do a 3-month promotion which will have 200 to 300 online influencers to promote the products on their channels every day. The investment for this project is around 3.2 million AUD. Hopefully, we'll achieve much better sales.

1. On 8 January 2020, Myron Trading paid Kekecial $181,093.20.
2. Bruce emailed Kenny at 10.07 am that day (cc'ing Haha):

Kenny, what are the chances that you will need to place orders for either the hand or hard surface paper parent rolls over the next 3-4 weeks?

For paper order, it based on the sales situation. There are more and more channels joined in and more products sold. But as we reported, we still have big stock of rolls in hand. We need to use this first. There might be explosive growth in sales of both products after our deep cultivation of the market, but we still can not see any significate change till now. Once we may place new orders, I'll let you know as early as possible.

... Can confirm that RT can fit 368x 400m mini treated parent rolls in a 40" container. ...

If you wish to place orders for either or both hand & hard surface mini treated parent rolls please confirm with issuing appropriate PO by COB tomorrow.

1. Kenny wrote back at 9.46 pm confirming that no new mini parent rolls were needed, saying, 'we still have about 5 containers'.
2. That same day (22 January 2020) Aus Made issued over $100,000 worth of purchase orders to Novapharm, for disinfectant liquid and related items. It issued others on 23, 24 and 29 January 2020 (as listed below, in Novapharm's letter of 4 February 2020).
3. On 27 January 2020, Kekecial advanced $100,000 to Aus Made, with the descriptor 'Kekecial' on the banking record. The next day, 28 January, it advanced a further $100,000, this time with the descriptor 'bill' on the banking record. These two sums were subsequently applied toward a disinfectant liquid purchase order dated 2 February 2020, which Kekecial placed with Aus Made, reducing the amount due on that purchase order by $200,000.
4. Haha gave evidence that he had telephone calls on 28 and 29 January with Andy, in which BP rolls were discussed.
5. Andy at first gave evidence that there were no telephone calls between himself and Haha on 28 January and no discussion about BP rolls, and 'everything was in email'. However, in cross-examination, Andy was taken to Haha's wife's telephone records (which included Haha's telephone records). They show many calls with Andy's Chinese telephone number in January and February, including three on 28 January 2020. Andy then gave evidence that there were phone calls, but there was 'no discussion of big parent roll' in those calls. I find it highly unlikely that there were no discussions of big parent rolls, given that they were being discussed in that period in WeChat and email messages. However, I am not satisfied about what was said, in those calls, about them, given that I do not accept Haha's evidence.
6. Haha gave evidence he remembered three calls with Andy on 28 January 2020. (Haha had of course seen the phone records showing three calls, and the length of those calls, before giving this evidence.) I set out the most relevant parts of his evidence about what he claimed to remember about those calls, below.
7. The telephone records show that the first phone call between Haha and Andy was at 11.54 am on 28 January (for 1 minute and 51 seconds). Haha said about this:

Andy was asking me that the stock of the Novapharm disinfection liquid and also the paper towel, on the quantity. I said, 'I will go and check for you.' When I referred to disinfection paper towel, it was the small parent roll.

1. The second call between Haha and Andy was at 4.37 pm (for just 31 seconds according to the phone record). Haha gave evidence that in this call he told Andy the stock situation, and Andy said 'I'm busy. I'm very busy at the moment, why don't you call me later.'
2. Then, at 4.54 pm, Andy emailed Haha**:**

Because China is having a very severe pandemic now, the supply of disinfectant liquids and sanitizing papers falls short of demand. We urgently need 10 containers, disinfectant liquids of 180 tons, of which 90 tons should be shipped by air freight and 90 tons should be shipped by sea freight. The quantity of sanitizing papers is still being calculated.

1. The third phone call between Haha and Andy was at 7.49 pm (for 10 minutes and 39 seconds, according to the phone records). Haha gave detailed evidence as to what he claimed was said in that call:

... in the afternoon, after 7 o'clock on the 28th, in our telephone conversation, I asked him to confirm the order, how much exactly the liquid product you would need and also how much the paper towel products you would need from the big parent roll. You need to send me email to confirm.

During the conversation I again reiterated to Andy and stated to him that the manufacturer does not have the small parent roll, there is no stock left. In relation to the liquid, with the raw material in existence, it can only produce around 100 barrels and when I say a barrel, the can contain 1,000 litres.

Then I said to him that, 'If you require paper towel further, there won't be any small parent roll, it will be produced out of big parent roll' and then he said, 'The price for the big parent roll will be about the same as what you described in April last year.' When he referred to April last year, it was the April in 2019 when I told him the price for big parent roll in Changsha Hunan Province. Because at that time it was in April 2019, my company and I have signed with Novapharm in relation to big parent roll. Because at that time the big parent roll in relation to the size, width, length and the total area in fact has been sent to me in detail by Novapharm, therefore in April 2019, at that time in Changsha I did give him a quote. That price was based on the accumulation of the proportion of square metre of small parent roll and then he was asking me whether the price will be changed because at that time we were in the midst of the COVID 19.

Then he asked me that, 'Today isn't any change to the price you quoted me in April 2019, is there', and also he again confirmed with me that each container can contain how many big parent rolls, and also he was asking me the specific size of the big parent roll, and then he reconfirm with me again the price.

I told him that, 'The size would be exactly the same as I quoted you in April 2019 because the manufacturer hasn't updated me with any changes. If the big parent roll had any alterations or any changes, Novapharm would have told me already' and then he said, 'I know now. Let me calculate how much big parent roll I will need.' He asked me, 'Haha, in relation to manufacturing the big parent roll, do you know how long it will take for them to produce that.' I said, 'Andy, you know, Novapharm now' - which is 28 January - 'that they would produce and manufacture next month' but I said, 'As you always know, Novapharm's delivery of goods always been postponed.' I estimated at least, based on the previous experience, it would be more than one and a half months and he said, 'I understand.'

1. He claimed that Andy said to him, in this conversation:

'I am still in calculation, I'm still unsure but at least I would need 10 containers.' He said, 'I can't tell you exactly now, however, I need to talk to my team to do a very specific and accurate calculation before I can tell you.' I said, 'That's okay.'

1. At 9.47 pm, Haha emailed Andy, replying to Andy's 4.54 pm email:

Well noted. Please calculate the quantity of sanitizing papers as soon as possible. There is no stock of mini parent rolls now.

1. At 10.32 pm, Haha sent a voice message to eight members of the 'Ruhui Operation (8)' WeChat group, including Andy:

Then, if you have paper rolls of five containers to ten containers, you could calculate how many boxes of sanitizing papers could be made? My estimation is that papers of forty to fifty containers could be made, right? There should be no problem for one container to make papers of four to five containers. So, let's think about it. There will be no problem if we want to promote hot-selling products then. As long as we could last for one and half a month, it's totally possible that we could make it a hot-selling product. But you need to tell me the amount, tell me what's the approximate sales amount after one month and a half. For example, I can't let the manufacturer... The current policy of our manufacturer is like this: As long as you place an order, you need to make full payment. Understood? It's not like what it was before. In the past, only 50% needed to be paid. Now they are also scared. They see the current situation and are worried that, for example, if the pandemic is over, you might no longer want the products. Really, if the pandemic is over, tell me, how many people will buy the product, right? I can't tell it for sure now. However, regarding disinfectant liquid, I think for disinfectant liquid, I can't tell it for sure how many people will purchase it if the pandemic is over. But, regarding sanitizing papers, they will definitely have a better and better status of sale.

1. As discussed above, Haha conceded, in cross-examination, that he had been lying in this message in asserting that the manufacturer had told Aus Made that full payment needed to be made when an order was placed.
2. However, he went on to say that in fact Andy knew the truth (that full payment was not due when an order was placed) as:

I told him on the phone. If I remember correctly, it was on 29 January...

1. At some point between 10.32 pm on 28 January and 12.45 am on 29 January 2020 - the exact time is unclear - Andy replied to Haha's 10.32 pm voice message, in the WeChat group:

I definitely need 10 containers of paper rolls. It's temporarily confirmed.

1. Haha gave evidence of what he understood from that message. He said:

Because he was still doing calculation and his calculation was not completed as yet

.... I understood that he hasn't confirmed and decided the order as yet.

... I also believe that he wasn't confirming he needs 10 containers in the WeChat, therefore I was waiting for his email.

1. At 12.45 am on 29 January, Andy then wrote in the same WeChat group:

If sanitizing papers need a production cycle of one and half a month, it's not a good timing to do promotion now, because sea freight will take more than 20 days, so it will be more than two months. Moreover, it does take time to do sub-packaging.

I believe that to build a brand, promotion is essential, and it's a long process of cultivation.

1. Commencing at 12.45 am, Andy texted Haha the following messages:

1. Haha gave evidence that, by these messages, he understood Andy to have:

...done his calculation and all the statistics of his stock in the warehouse and he has decided how much, and the quantity of the goods to be imported.

1. At some time between 1.04 am and 1.13 am, Haha sent a voice message to Andy, asking Andy to advise him:

You need to advise me an approximate amount of big paper rolls sometime tomorrow. The amount of big parent roll has been confirmed, by which it will be very good for our production.

1. At 2.35 pm, Kenny emailed Peter and Bruce, thanking them for flying to Melbourne for the meeting the day before, and continuing:

... Because you will have the board meeting on Thur, so haha had several meetings with some key distributors immediately after our meeting. For promoting the products in this special opportunity, we'll invest more money and energy on it. In the first stage, we'll place an order for 10 containers of big treated mother rolls (320). Could you please calculate the estimated delivery date, so that we can arrange a new round of advertising on the media. ...

1. With the email, Kenny attached two signed purchase orders from Aus Made to Novapharm, one for Evocide, and the other for 10 containers of BP rolls, with the delivery date stated as 'ASAP before 28/02/2020'.
2. At 2.36 pm on 29 January 2020, Andy emailed Haha a short email (the 2.36 pm email) which has taken on great significance in this dispute. Aus Made relies on this email as being the order giving rise to the alleged BP Rolls Contract, which it claims was entered into on 29 January. It said:

Greetings! Because the situation of pandemic in China is very serious now. The supply of disinfectant and sanitizing papers falls short of demand. Disinfectant of 10 more containers and sanitizing papers of big parent rolls of 10 containers are needed. All of them are to be used on skin.

Disinfectant of 20 containers and sanitizing papers of 10 containers in total are needed. Thank you!

1. Haha maintains that he regarded the 2.36 pm email as an order. Haha repeated this in different ways during the course of his evidence:

... and in the afternoon, after 7 o'clock on the 28th, in our telephone conversation, I asked him to confirm the order, how much exactly the liquid product you would need and also how much the paper towel products you would need from the big parent roll. You need to send me email to confirm. This was the email of confirmation after he specifically and accurately did the calculation.

To me, this was the order from him because we confirm in the telephone conversation and this was the email replied from him.

So I became very sure when I received the email on the 29th because his agreement and I were based on the email, because on 28th and before that date he was been trying to confirm how many containers of the paper towel and also big parent roll.

1. After the 2.36 pm email, there was another phone call between Haha and Andy, at 4.18 pm (according to the phone records). Haha gave evidence that in this call he had asked Andy to think about the order 'very carefully':

... because I said, 'We are in the pandemic period but if the pandemic is over and you can't sell those products, what are you going to do? Are you going to confirm this,'... Also, I said to him, 'You know, during the pandemic when you place an order, you need to pay the price in full.' He said, 'Rest assured, no problems.'

... in relation to the paper towel, I will need to pay you after a period of time because the goods cannot be delivered in one and a half months and then I will pay you when the goods are delivered. However, I can send you some advance payment in a few days, so put your mind at ease... the order for the paper towel will be ready when the goods are to be delivered. After all, it was mostly for the purpose to show the immigration department...

1. Haha's evidence that he asked Andy to think very carefully about the order after it had been placed (in the 2.36 pm email, according to him) simply does not make sense and is not believable. Nor do I accept that Andy mentioned in this call that he would send 'some advance payment in a few days'. The $400,000 payment Kekecial subsequently made on 6 March 2020 - whose characterisation is in dispute - was made over five weeks later, with no mention of a payment being sought in the intervening contemporaneous messages.
2. Haha also gave evidence that in one of the telephone calls on 29 January (after the 2.36 pm email) he had the following discussion with Andy:

... I told him that, 'You have already placed an order and since the order is a placed order, you should pay the deposit' and he said, 'Well, since I have already placed the order and also you also said the products won't be delivered in one and a half months', and he said, 'We are good buddies and in Australia, let alone I have placed an order, even oral agreement is accountable ...

1. I do not accept there were such references to a placed order, or that Andy suddenly had this knowledge of Australian law about oral agreements and shared it with Haha.
2. Haha also gave evidence that, in that call, Andy said it was unreasonable to pay now given the products were one and a half months away, and that he would pay the deposit at a later stage.
3. Mr Williams KC cross-examined Haha about the fact that in his previous evidence about the 29 January conversation, he had not mentioned anything about Andy referring to a deposit. Haha doubled down, saying that was the truth. He then appeared to backtrack from his claim that the deposit had been discussed in the 29 January telephone call, saying:

...I can't recall whether it's 28th or 29th but in those days we were discussing those issues all the time. I can only tell you to the best of my memory, we did discuss those issues in general terms, but I can say firmly that between 28 January and 3 February, we did discuss the deposit issue...

1. He then gave different figures he said he told Andy about the total price and said that the amount of the deposit was not discussed. The cross-examination proceeded as follows:

This deposit that you say you discussed on definitely the 29th, or then maybe the 28th or then maybe somewhere between 28 January and 3 February, how much was it?---I told him that the total amount is about AUD$1.8 million and I probably did not even say $1.58 million and I would say around $1.6 million.

What was the deposit?---We didn't discuss how much exactly to put in the deposit.

Who was to say whether it was $5 or $1 million or anywhere in between?---I indeed did not have a discussion on the specific figures, I only told him that the manufacturer was asking for 100 per cent money for the goods. However, he said, 'This is unreasonable' and he said, 'Your paper towel products won't be delivered in one and a half months later. Now, if you ask me to pay 100 per cent of the money for goods, that's unreasonable and I can pay in full for the liquid product. So for the paper towel products, it can only be paid at a later stage close to the date when it is to be delivered.'

1. Haha said that usually deposits on purchase orders had been 40 or 50%, but that it had to be agreed each time. It was put to Haha that the reason there was no discussion about the amount of the deposit, or even an agreement as to the date on which the deposit would be paid, was because there was no firm order. Haha denied this.
2. At 8.30 pm, Kenny wrote to Bruce and Peter, copying in Haha:

Paper orders for mini treated mother rolls are totally around 1.1m AUD (around 800000 USD). We placed 10 containers of large treated mother rolls today, which is 512000 USD. So currently we've placed 1300,0000 USD orders. As you approved when we signed the agreement, the commencement date of paper's sales target was started from the first pack of paper for commercial sale on the market. I checked the date, the commencement date was from around 15th of September 2019 (we mentioned several times in the email about this date.) So we still have 7.5 months to go to achieve the sales target of paper products. Our forecast is at least 10 containers of treated rolls from Feb. 512000x7.5=3840000 USD. 3840000+1300000=5140000 USD. So the annual sales target will be achieved.

Haha told me that Andy sent an intention for ordering 10 containers of big parent rolls. It seems like the day was 28 January so it should be before this date.

1. Kenny then gave evidence that Haha had told him that 'we need' to get Andy 'to place an order', 'one or two days after seeing' the 29 January 2.26 pm email sent by Andy. (Kenny said that it was always Aus Made which prepared any purchase orders for Kekecial, including relevant specifications and price, requiring calculation. The purchase orders were then sealed and returned by Kekecial to Aus Made.) He gave evidence that 'I suggest not to get Andy to place an order officially', because the machinery had not arrived in Australia, and so Novapharm could not yet produce BP rolls, and because on 30 November 2019 at the Disinfection Convention, Haha and the president of Novapharm had a meeting discussing the cancellation of Aus Made's general distributorship agreement. He said that the terms of that had not been settled. In the circumstances, he said it was impossible that Novapharm would supply goods to Aus Made 'by that time'.
2. On 2 February 2020, Kekecial placed a purchase order with Aus Made for Evocide disinfectant, for 360 units for $2,563,304.40.
3. On 3 February, Myron Trading paid Kekecial $127,070.
4. The following day, 3 February 2020, at 12.19 pm, Bruce wrote to Kenny and Haha, saying that urgent airfreight needed to be arranged and paid for by Aus Made in order for the disinfectant order to be accepted by Novapharm:

...to be in a position to accept the Evocide Extra orders that you have raised...we need to urgently arrange for the airfreight $385,000kgs of unplanned raw materials. The best airfreight availability is via priority A/F at a cost of $465 per 1,000kgs (A$179,025). Can you please confirm that Aus Made Express will accept the responsibility for the payment of this unforeseen freight cost.

1. At 3.22 pm, Kenny wrote to Bruce, confirming Aus Made would pay the extra fee for shipping by air, and saying he would 'send PO later'.
2. A few hours later, at 6.49 pm, Kenny emailed Novapharm the promised purchase order, in the sum of $179,025. It notes Aeris as seller and describes 'the goods' as 'Air Freight Fee'.
3. On 4 February 2020, Peter wrote a letter to Haha and Kenny. It detailed the recent purchase orders placed by Aus Made between 22 January and 29 January 2020- including for BP rolls on 29 January 2020 - and setting out payment terms including payment of 40% at the time of placing an order. The letter stated:

• 2020012204001 dated 22 Jan 2020 for AU$1,051.60 - Drums, TPR and Vented Caps
• 2020012201001 dated 22 Jan 2020 for AU$99,561.53 - Evocide Extra
• 2020012301001 dated 23 Jan 2020 for AU$199,123.06 - Evocide Extra
• 2020012401001 dated 24 Jan 2020 for AU$99,561.53 - Evocide Extra
• 2020012901001 dated 29 Jan 2020 for AU$1,094,108.40 - Evocide Extra
• 2020012901002 dated 29 Jan 2020 for AU$893,277.00 - Evocide Extra
• 2020012901003 dated 29 Jan 2020 for AU$178,655.40 - Evocide Extra
• 2020012902001 dated 29 Jan 2020 for US$563,200.00 - Paper Rolls (Hand)
• 2020020399001 dated 03 Feb 2020 for US$179,025.00 - Air-freight fee

We are in receipt of your purchase orders, at outlined above.

As you would be aware, until the above-mentioned orders, Aeris Environmental Ltd and Novatech Research Pty Limited have not received any monthly rolling demand forecasts, purchase orders or indeed, purchase orders commensurate with the rate of purchasing contemplated under the original agreement. There was a face to face meeting on 30 November 2019, when the parties agreed there would a non-exclusive dealership, relieving Aus Made ... of its minimum purchase requirements.

All parties have moved forward on this basis, with Aeris and Novatech investing significant resources to set up a direct presence in China - providing capacity for technical, commercial and business support for our dealers, such as Aus Made ...

The purchase orders are immediately binding on Aus Made. The purchase orders were not forecast to Aeris and Novatech and covers a large volume of Products. Therefore, while we will use reasonable endeavours to fill the purchase orders as quickly as practicable, Aus Made acknowledges that at least some Products may not be ready for delivery or pick-up until a date later than the usual minimum lead time of ten (10) weeks ex-factory.

(a) Aus Made shall ensure payment to Aeris for each respective order placed on the Aeris for its Products with 40% by ETF of the respective total order value at the time of placing the order and the remaining 60% payment of the order value will be payable by EFT before the date that the order is picked up by the Distributors nominated transport company or before the date that the Products are delivered to the Distributors nominated freight forwarder within the Sydney metro area;

Please sign below where indicated and return a copy of the signed letter to us. Upon receipt of which, and your deposits, your orders will be expedited and processed.

1. This letter was signed by Haha and returned, the appropriate deposits were paid, and on 5 February, Novapharm emailed the relevant tax invoices to Aus Made.
2. On 5 February 2020, Andy asked for a purchase order (he called it 'the contract') to be sent in relation to some disinfectant liquid Kekecial wanted to purchase, and Haha then asked Kenny to prepare one, and it was sent to Andy. The following WeChat messages were exchanged in the 'Sterilization project subcontracting team in China (11)' group, starting at 4.40 pm:

Andy: Finish the contract and send it to me. My money should be here tomorrow.

1. Haha then emailed Andy (cc'ing Kenny), attaching a purchase order between Kekecial and Aus Made for disinfectant liquid, and saying:

... based on our communication on telephone, you decided to purchase 20 containers of disinfectant liquid. This is the order contract, and please seal and return it. ...

1. The email time is noted as 15.54 (ie 3.54 pm), but clearly must have been sent after the WeChat messages above, as it attaches the requested 'small contract'. (This looks like an instance of time being recorded differently on different devices.)
2. Notably here, Andy requested a purchase order in relation to a proposed order. It was prepared, and in sending it, Haha referred to Andy's decision to purchase based on a telephone communication. He then sent the formal purchase order, requiring it be sealed and returned (which occurred).
3. The next day, on 6 February 2020, at 8.40 am Haha sent two voice messages to Andy via WeChat:

Yang, ask your son to go to the bank and check if he's received the money. I really don't have any money, they sent me a letter today to urge me again or the delivery will stop tomorrow, fuck.

Check on your internet banking and see if you have the money yet. Make haste if the money arrives and have your son go to the bank, then issue a cashier's check and send it directly to the NBA bank, and deposit it in my account.

1. On 6 February 2020, Changsha Market Supervision published an announcement on its official website (the Changsha Announcement). It is the first of the announcements from Chinese authorities that Kekecial relies on in relation to the Regulatory Issues claims in this case. Andy gave evidence that he was told about the announcement by 'Hunan Myron' (that is, one or both of the Myron companies), which, he said, 'come look for trouble with me'. Andy forwarded the Changsha Announcement to Haha and others, via WeChat.
2. That evening, at 7.06 pm, Andy wrote to Haha, saying that the Evocide purchase order Haha had sent the day before had now been signed. He wrote:

The order contract has been signed and sealed, of which the amount is USD 2,563,304.40. We have already made an advance payment of USD 200,000. Tomorrow I will assign someone to issue the bank promissory note for the payment of the remaining 2,363,304.40.

1. Aus Made paid $755,422.81 to Novapharm on 6 February.
2. On 7 February 2020, Kekecial paid $2,363,334.40 to Aus Made (the balance due on the 6 February Evocide purchase order, after the two $100,000 payments already made on 27 and 28 January were taken into account).
3. On 10 February 2020, a purchase order was executed between Kekecial and Aus Made for 180 units of Evocide Disinfectant for $1,281,652.20. (That order was later varied to being for 139 units, for $989,720.31.)
4. On 10 February 2020, Myron Trading invoiced Shandong Ruhui for disinfectant, Ruhui disinfectant tissues and Ruhui disinfecting wipes_._
5. On 12 February 2020, Andy emailed Haha, requesting a purchase order be prepared for 10 additional containers of disinfectant liquid.

... In addition, based on the customer demand, additional 10 containers (180 tons) of disinfectant liquid will be ordered. Please prepare the contract and send it to me by Email. ...

1. That purchase order was prepared and sent.
2. Six days later, on 18 February 2020, Andy sent the signed and sealed purchase order to Aus Made. That same day, Kekecial paid $1,181,652.20 to Aus Made, leaving only $100,000 due on that purchase order. Andy wrote that he would pay the remaining $100,000 due on that order in the next few days.
3. On 6 March 2020, some five weeks after the alleged BP Rolls Contract was said to have been entered into, Kekecial paid $500,000 to Aus Made. Of that $500,000, the parties agree that $100,000 was applied to the remaining money due on the purchase order of 18 February 2020. The characterisation of the remaining $400,000 is disputed: Aus Made saying it was a deposit on the alleged BP Rolls Contract, Kekecial saying it was a loan.
4. The payment was made after Andy emailed his on Haobo, at 3.51 pm that day, :

Hello. Please make an advance payment of AUD 500,000 for the disinfectant napkin to AUS MADE EXPRESS INTERNATIONAL GROUP.

1. Haobo arranged the payment and signed the payment authorisation, which recorded 'Business Prepayment' as the 'description/purpose' of the payment.
2. At 4.55 pm, Haobo wrote to Andy, saying:

I have already made an advance payment of AUD 500,000 ...

I have arranged the prepayment: A$500,000. Please check the attachments.

1. According to Haha, he had a conversation with Andy after the $500,000 payment was made (in which he says Andy gave him advice about oral contracts under Australian law):

So on 6 March, after he made the payment and I had a conversation on the telephone with him about the small contract and this was the February conversation and also we had another conversation after he make payment on 6 March. He said, 'There is no rush, the small contract, you can send it to me after the manufacturer has made the delivery and the small contract was really to show the immigration department. My emails and also telephone conversation have many times confirmed with you that the purchase order was firm' and he said, 'Don't you worry because even in Australia, oral agreement is recognised, let alone I have sent you emails to confirm.'

1. Two and a half weeks later, on 24 March, Haha and Andy had a long conversation, starting at 5.05 pm. Haha gave evidence that he told Andy the BP rolls were about to be delivered and Andy needed to make the remaining payment for them. He said that Andy had responded to the effect that he did not have the money to pay. Haha's evidence about this call included:

On 24 March Kenny received a telephone call from a person called Jai from Novapharm and Jai said to Kenny that our big parent roll is about to be produced and 'you need to be very quickly, get ready to pay the rest of the payment for the product.' Then Kenny came to my office and he reported to me the conversation he received from Jai. So at this moment I start to make some contacts with Andy and I said to Andy, 'Andy, look, you have paid $400,000 deposit and now the big parent roll product is about to be delivered, you need to pay the remaining payment.' So on 24 March, after 5 o'clock - I forget exactly how many minutes after 5 pm - I had a telephone conversation with Andy for 27 minutes. During the 27 minute conversation Andy told me what happened in his company and he told me that his accountant whose name is Tau Yuan Ting, he said the accountant, Tau Yuan Ting signed an agreement with a pharmaceutical company and the Hunan Myron company but the money was not collected on time and he said now his company did not have money at that moment and also this has caused tens of millions of RMB lost to the company, and he said it was because the Tau Yuan Ting who destroyed his life. In order to show it was the (indistinct) made by Tau Yuan Ting, he, through WeChat, sent me a fine notice on the letterhead of Tiantianqing. In the letter it had a decision of the fine and the penalty on Tau Yuan Ting and Yung Zhen Dong, who is his brother. Therefore he said, 'Look, this is something very major happened. Really, I have no money to pay for the product.'

...I telephoned Andy asking him to pay the balance and Andy was telling me that his accountant, Tau Yuan Ting had made mistakes and has not collected the money owed, has not collected the advance payments and cost him tens of millions of RMB loss. So at that time I worried that he was not going to take the 10 containers of goods, so after the telephone conversation with him of 27 minutes, and also after he sent me the penalty notice to Tau Yuan Ting, I was terrified at that time. I worried that I would find no way out if he did not want the 10 containers of the paper towels, so I telephoned Kenny about this. So after I talked to Kenny did this, we had the discussion how to deal with this matter. So at the very beginning I was talking to Kenny saying that, 'I've taken out my own mortgage' according to the factory and to tell him the difficulties and give him some pressure and Kenny was saying to me that, 'Haha, if you're only saying your difficulty on your own, the pressure is not big enough. Because we are your partners of your disinfectant project, if you only say that you take out your own mortgage and the other party may not feel the pressure was not great enough.' So he said, 'It's best that you add me in it.' So after that I wrote the information from him and sent to Kenny asking his confirmation.

1. At 9.58 pm that night (24 March 2020), Haha messaged Kenny, in a WeChat group which included Andy, and asked him to prepare a purchase order for Kekecial for BP rolls. This was nearly two months after the alleged BP Rolls Contract, and is the first time there is any mention of such a purchase order for BP rolls, in the contemporaneous documentation. The following exchange occurred:

Haha**:** Boss Yang, we are all brothers, but please be considerate of each other from the perspective of doing businesses. Besides, the remaining balance of sanitising papers need to be paid as soon as possible. I have less than 100000 Australian Dollars in the account. In preliminary stage, all the payments of goods made to the manufacturer were withdrawn from Zhen Kang's and my own home mortgage. Now the manufacturer is going to ship goods. Please help me make the payment. Thank you!...

Haha**:** @Kenny Zhen Kang - Draft a small contract regarding sanitizing papers of 10 containers to Boss Yang.

Haha: The price could be accumulated based on the unit area price of mini parent rolls.

1. There was an alternative version in evidence, which, relevantly, records Haha saying:

Haha: Please accumulate the price per unit area according to the small master roll.

1. There is a purchase order between Kekecial and Aus Made dated 24 March, for the BP rolls for $1,580,544 in evidence, together with a related tax invoice. But these documents were not sent to Kekecial until three and a half weeks later, on 17 April 2020. Kenny's evidence about his involvement with this purchase order was confusing and contradictory. He agreed that it records 320 rolls at $4,939.20 each and that this was how he calculated it. He also gave evidence that he did not know if he did the calculations, and said that from what he could remember, he did not prepare the purchase order. Kenny said that in the WeChat message above, Haha was asking him to work out the price. However, Kenny said the machinery was not in place and all the specifications for BP rolls were not final, 'therefore it was impossible to do the calculation'. However, he also said that he did one 'based on speculated calculation provided by Novapharm'.
2. I am satisfied that Kenny did prepare the purchase order, but I am not satisfied in the circumstances as to when it was prepared, other than that it was completed by 17 April, when it was sent.
3. Later that night, in the early hours of 25 March, Andy left voice messages in a WeChat message group which included Haha. Both Kekecial and the Aus Made parties say this message support their case. According to an automated translation, what Andy said included the following:

Right, I want sanitizing papers of 10 containers. I said what I said. I will definitely take them. But, if you want to me take all of them at a time and pay so much money, I just don't have money even if you kill me. I can show the accounts of companies of two sides to you so you could see whether I have money or not. I didn't take money from others and you took money from others, right? You have received money due to you and I have paid you money payable to you. My own money, plus the money you received and the money transferred to you, I have made all the payments to you. It's not that I didn't make payments. I don't have a cent left. I'm in such a dire situation now. I still need to survive. I still need to sell products and make investment. I can't just purchase the disinfectant liquids and store the stock of ten to twenty containers in the warehouse without selling them. What am I going to do if I can't sell them?

1. Andy gave evidence that he was driving from Changsha to Guangzhou, some 700 km, when this message was sent, and that he was drunk at the time. Regardless, of course, what he said is relevant to what I have to decide in this case.
2. Aus Made relied on this voice message in submitting that the BP Rolls Contract had been entered into. It was put to Andy in cross-examination that this message indicated that he w_a_s 'committing to buying 10 containers of sanitising papers'. I note that even if this voice message did amount to such a commitment, it would not establish Aus Made's case - which was that the BP Rolls Contract had already been made on 29 January, or that the alleged representations had previously been made. I consider that by this message Andy was stating his (then) intention for Kekecial to later buy 10 containers of BP rolls. But he specifically also said that he could not purchase them, pay for them, and store them now.
3. Twelve days later, on 6 April 2020, Kenny emailed Bruce (cc'ing Haha, and Peter):

Could you please formally confirm with Royal Touch about when they can manufacturing the big treated mother rolls. We placed the order for 10 containers (320 rolls) of big treated mother rolls at the end of January 2020 and the 40% deposit was paid to them already at that moment. We took a lot of orders from our customers in China, and everybody waiting for a long time. Now more and more customers required us to refund the money because of the long waiting period. Even Royal Touch manufacturing the big rolls from today, our customers still need to wait for 1.5 months because of the shipping and manufacturing in China.

Also, about the big mother roll machine: We used to be informed the machine can be ready to be used before Xmas of 2019, then they changed it to the middle of Jan 2020. Then the ready-to-use date was changed to 15th-23th of Feb. On the 15th of Feb, we had been informed that the date was delayed to 23th, then informed they needed to do the adjustment and setup, so they can not start till the 9th of March. At around 9th of March, we'd been informed that the machine needs further adjustment to conduct the manufacturing. Now, we still not get a confirmed date that the machine can start manufacturing.

Please do help to confirm: 1. if the machine is ready to use; 2. when RT can formally start the manufacturing of our 10 containers paper order. We do need it to be started ASAP or we will lose all the orders we took and even the future orders for the paper products from the customers...

1. Kenny said he drafted this email according to Haha's instructions. Haha agreed that he told Kenny to write this email but said he did not tell him word for word, or sentence by sentence. He said he sent it because Andy had requested updates about when the BP rolls could be manufactured, and that he and Andy had discussed the contents of it. It was put to Haha that the prompt to send this email was Haha's growing concern about Royal Touch's ongoing delays in manufacturing BP rolls, and was not anything Andy had said. Haha denied this.
2. Kenny gave evidence that, to his knowledge, Aus Made had not taken a lot of orders from customers in China, that there had been no requests for refunds, and that Andy (Kekecial) was Aus Made's only customer for parent rolls. Haha gave evidence that the reference to 'many customers' in this email was to Shandong Ruhui's customers.
3. On 14 April 2020, Bruce sent an email to Kenny, cc'ing Haha and others. In it he made clear that whilst the machine had now been installed at the Royal Touch Sydney plant, adjustments were still being made and another trial was due soon.
4. On 15 April 2020, Kenny emailed Bruce at Novapharm, cc'ing Haha and others, asking for a refund in relation to the BP rolls order Aus Made had placed with Novapharm. In it he asserted that refunds had been made to distributors and customers:

We are regret to see there is still no fixed schedule of delivery of the big treated mother rolls we've ordered. As we mentioned in the below email sent on 6/4/2020, the ready-to-manufacturing date of the new machine was delayed many times from Dec 2019 till today and Royal Touch still can not give a fixed delivery date. Because of this, all our distributors and customers who place the order of paper products were informed of the change of delivery date many times. Though we directly passed the reasons you gave to them and gave them our sincere explanation, they still require the refund they paid for their orders because they all thought our promise (the delivery date) was not reliable. For keeping the relationship with the distributors and customers, we had already refund their paper orders.

So, we have to require the refund of the 10 containers big mother roll order from Royal Touch as well. Once they can confirm the delivery date, we will talk with the distributors and customers and reorder the big treated mother rolls based on their new orders. Due to the many times' delay of the delivery, some of the distributors and customers had already turned to other similar products. They could accept the delay, but they could not accept the delay again and again...

Also, most of the Evocide Extra we've ordered are still in stock and it may need a longer time to convert to cash. The current situation in China is totally different from 2 months ago. Many companies start manufacturing disinfectant products, so it's not sold as quickly as before. Thus we need some cash flow in hand to pay the last 60% of all Evocide Extra orders, run the company and do the promotions and marketing activities of the products in the greater China area.

So, please consider the real situation and allow the refund of the big treated roll order. The 40% we've paid for paper can be calculated directly in the 60% of Evocide Extra orders. Thx very much!

1. Haha gave evidence that he asked Kenny to send this email on his behalf. He claimed he discussed it with Kenny and told him what to say, after Andy asked him to talk to Novapharm to see if the order could be cancelled or delivered in batches.
2. The email asserts that paper orders had already been refunded to distributors and customers. Cross-examined about this, Haha gave evidence of having a legal dispute with one customer in Guangdong, saying that because a refund had not been paid to this customer, Shandong Ruhui had been sued, and Shandong Ruhui was then ordered to refund money to the customer. In fact, that legal dispute was much later (so could not have been what he was referring to in this email). Haha also referred to another customer in Chongqing. Haha conceded in evidence that there were no refunds which had been given at the time of the email, but said that customers were requesting them, and then said he did not tell Kenny every word of this email, nor authorise 'every single word or every sentence'; that he only told him the 'general gist'. He claimed that he only told Kenny some customers 'were demanding' refunds; to the extent it says some got refunds, he suggested that Kenny made it up.
3. I do not accept that Kenny made this up, or wrote it without Haha's authorisation. The email was written when Haha and Kenny were still on good terms. And in the NSW proceeding between Aus Made and Novapharm, Haha swore, expressly, that Kenny translated this email to him at the time it was sent. In his affidavit in that proceeding of 20 June 2021 (which was in evidence in this case), Haha said:

[88] On 15 April 2020, I asked Mr Kang to send a reply email to Mr Davison copying me and others, among other things, requesting for refund of the deposit for the 10-container big parent rolls. Exhibited at pages 280 to 281 of Exhibit HL-1 is a copy of this email. Mr Kang translated this email for me at about the time it was sent.

1. Cross-examined about that affidavit, Haha agreed that what he said in that paragraph about Kenny translating the email to him was not true, but said that this was because of his understanding at the time of a translation:

My understanding, if he told me the meaning of the contents in general, that was translation. Because I don't speak English, so it is out of my control what it says word for word or sentence by sentence or grammar and he is my disinfectant project partner and he has his own discretion.

1. Haha went on to admit that he did not, in paragraph 88 of the affidavit, say the email had included a lot of things he had not asked Kenny to say or authorised him to say. It was then put to Haha that he did authorise Kenny to say all of the things in the email and that it was only now, when lies were being identified, that he sought to distance himself from responsibility for it. Haha denied this was the case. However, I consider it was precisely what happened.
2. On 17 April 2020, Aus Made sent a purchase order (dated 24 March 2020), and a related tax invoice, to Kekecial for the 320 BP rolls, at a total cost of $1,580,544, dated 24 March 2020. In the accompanying email, Niki Yang (Aus Made's bookkeeper) wrote to Andy:

Attached is the order contract for 10 containers of big parent roll. Please review and sign if all good, and return the signed and sealed version to me.

1. Haha gave evidence that either before or after the purchase order had been sent, he could not recall which, he had called Andy and told him that Novapharm had not responded to a request made to cancel the order and that it would not be likely to be agreed because manufacture had already started.
2. That same day, 17 April 2020, Aus Made sent Kekecial a varied purchase order in relation to the 10 February order for disinfectant, reducing the number of units and therefore the price of the goods (to a new total price of $989,720.31). Kekecial's claim in relation to the overpayment of $291,931.89 arose from this.
3. Andy gave evidence that on 18 April he asked Haha, via WeChat, to repay him for the amount that Andy had paid for air freight costs. Andy said he asked accountants in China (Myron's accountants) to do a reconciliation exercise about it. He gave evidence that on 8 May Haha repaid these air freight costs.
4. On 21 April 2020 at 12.34 pm, Bruce emailed Haha and Kenny, with details of the production trials being undertaken on the BP Rolls machine:

In view of bringing Haha & yourself up to speed on what we have been working on over the past few weeks with respect to the parent roll machine and indeed the 90m roll converting machine, let start by saying that we are continuing to undertake numerous production trials on the new parent roll to parent roll machine and the next trial is to take place later this week.

As discussed many times, the parent roll to parent roll is a one of a kind 'unique' machine that has never been built before for such a purpose and the learning curve has been steep indeed but we are totally committed to producing the large parent rolls. We would simply like to ask for your continued support & that you bear with us whilst we resolve the product manufacture. We are very confident that we are now on top of the issues and we will have everything resolved.

As for the 90m roll converting machine, as advised due to the embossing rollers having worn down, it resulted in the ply's not being correctly bonded and this required re-working of the gears and bearings of the machine which resulted in only being able to supply approx. 300 of the 1,000 cartons on order. RT has advised that they believe that they have overcome this by replacing various aspects of the gears and roller bearings and will be undertaking a trial later this week as well (likely on Thursday) and after this trial and qualification of the paper we anticipate that RT will be back to full production on this machine and will be able to supply the remaining 700 cartons by the end of next week once they have confirmed the embossing is working correctly.

I will further update you on Friday with the progress made,

1. Later that day, on 21 April 2020, Kenny emailed Bruce and Peter, again seeking to cancel the order Aus Made had made for the BP rolls with Novapharm:

I talked with Haha about the 90m rolls. Please tell RT to cancel the rest of the 700 cartons of the order. Because Royal Touch delayed the delivery many times, many customers required refunds and cancelled their orders of this. Also, our planned donation activities will be all finished this week, so we don't need the rest of the 90m rolls.

As I described in the last email, Royal Touch delayed the ready-to-manufacturing date many times for different reasons. We directly passed the info we've got from you directly to the distributors and customers to explain the delay in the delivery of their orders. They can trust once, twice, but they couldn't trust us all the time. The distributors and customers thought we were not reliable because we didn't deliver their orders but excuses. Also, most of their sales channels were traditional retail channels. They were selling the paper products for a while. If we don't deliver their orders on time, they still need to pay for their costs, including rentals, labor costs, etc. So, they have to give up the position for selling our paper products to avoid the above-mentioned fees and costs. Business is continuous. If we can not keep supplying their products, they can not continue it, or they will focus on other similar products. So, they can accept the delay once or twice, but they can not accept the uncurtained delivery date. As we said in the last email, we had to give refunds to all of them because the delivery date was changed many times. Even we trust Royal Touch can solve the problem soon, the customers and distributors didn't trust anymore because the date was changed many times already.

After we gave the refund to them, we faced a big problem which was short of cash flow. If RT could deliver the big mother rolls on time, we could charge the rest of the money. After this, we would have enough cash flow in hand and then place our next 10-container order. But now, we refunded to all the distributors and customers, so we don't have enough cash flow to keep it running. Also, as I mentioned in the last email, the most of Evocide Extra we've ordered are still in hand and it's sold slower now. So, we do need to cancel the current 10-container paper order and use the 40% we've already paid to do the promotions and advertisements in China and keep the business running. If you can not refund the money, that can be put as credit and used for the later payments.

1. Haha agreed that this email was drafted by Kenny, on Haha's instructions; Haha gave evidence that, 'I told him approximate contents'. He said it was sent after Andy asked Haha to try to get a refund from Novapharm.
2. On 28 April 2020 Andy sent Haha a WeChat message:

Mr Liu, Hello! Sorry to bother you! As a friend, I really can't hold on now, I've only got such money in my company account in Australia and private account. I even have trouble in paying for shipping in business and living expenses at home. When you said you had tight budget, I paid you all the money I had and never thought much about it. But now I am really running out of money.

I paid AUD 101676.44 for the shipment of 41 barrels.

The payment of such 41 barrels stood at AUD 291931.89.

Then you said you still lacked money. I paid another AUD 400,000.00, So the total amount is: AUD 793608.33. The domestic freight I paid as the advance payment is what you wanted me to help. Now I have invoiced to pay back the tax to others. Mr. Hu from JD.Com only paid a few tens of thousands. There is still a shortage of more that AUD 400,000 freight cost. As for my China-based company, as you can imagine, there is no place for the inventory of disinfectant backlog. And due to the investigation by market supervision bureau, from the Spring Festival till now, other sellers have been afraid to sell disinfectant tissues. They asked to return goods and refund the disinfectant tissues worth of over 9 million yuan. I would also like to ask you to help me get through this difficult time for the sake of us as friends and also as partners with long-term cooperation.

1. In cross-examination, Andy said the message was about 'me lending AUD $400,000 to Haha because he was short of funds.' He went on to say:

...I have provided documents to show that at the time I was helping Haha to make payments for goods - no, for freight about more than 1 million to a client of his which were not known to me or Hunan Myron.

1. On 28 April 2020, at 12.32 pm, Haha replied in WeChat, relevantly:

1. The issue of the freight: On that day, I told you that I could pay your freight cost in Australian dollars and it was no problem. But...

... if you want me to pay the freight, I have to borrow temporarily from friends. When you receive this freight cost, you need to transfer to me in the form of order payment, so that I can return to my friend in time.

2. Domestically, I transferred RMB 9 million from the company's account to you. As my assistant said, the total amount of freight of your delivered goods from China now only reaches more than 5 million yuan. There is more than 3 million yuan of the freight payment in your account.

3. As you still remember, you told me that your own Hunan side with 20 containers of disinfectant are not enough, I had to give you 10 containers of orders placed by the customer to me, Kang Zhen and I were worried that the goods were not enough, and we paid at our own expense. In addition, we ordered two containers of disinfectant in the factory, when we both wanted to order more containers, but because there is no money to order more. ... Kang Zhen and I are now also suffering, but I never dare to mention this to you since nothing may happen if we told you.

4. Tissue paper is also the case, bro. You and I confirmed the order. We placed an order for the factory just according to your confirmation email without receiving your payment. You should not forget that during the epidemic, manufacturers are in need of the full amount of the payment ah, in order not give you increased financial pressure. Kang Zhen and I discussed. I let Kang Zhen bring out all his savings. I also let Kang Zhen tell the factory that I still have $2 million for the annual purchase contract as a guarantee. With such, they started producing the tissue paper...You only paid part of it later, but you kept telling me you had no more money so I didn't dare to rush you... Now the factory has already shipped the goods, they are now pressing for payment every day, otherwise the tissues ordered will not be shipped...

5. Now such problems occur. ... There is completely no way of returning those goods from the factory. And because of the purchase contract for the whole year, I still paid $2 million as guarantee deposit. Seeing such sales situation, Kang Zhen and I were also very y annoyed!

6. ... For Yang Yang, we lost nearly RMB 4 million ... Now the project has been withdrawn from the trial. ... This is a matter that Kang Zhen and I feel a shame ...

7. Today, after I saw your message, I sincerely hope you understand the current situation Kang Zhen and I are facing.

1. Haha was not telling the truth in much of this message, as he conceded in evidence. The manufacturer was not requiring full payment; Kenny did not bring out all his savings; the factory had not already shipped the goods.
2. On 30 April 2020, Bruce emailed Kenny and Haha to say that Novapharm was now in a position to switch to full production on the machine which had been built for BP rolls, and that they:

very much look forward to confirming the availability of the first commercial production run by tomorrow in view of fulfilling your orders in the system.

1. On 4 May 2020, Niki Yang (Aus Made's bookkeeper) wrote to Cao (the Myron companies' financial officer) asking Cao to please help her 'to invoice, I will pay today'. She sent a screenshot of a table showing some figures (which appear to relate to the prepaid freight that Andy referred to in his 28 April 2020 email, as it includes the same figure of $101,676.20), and asked for confirmation that the AUD amount and Kekecial account details she sent were correct. Cao responded, confirming both.
2. On 6 May 2020, Haha sent an email to Novapharm, seeking a refund of the deposit Aus Made had paid for BP rolls.
3. On 11 May 2020, Andy sent a WeChat to Haha:

My advice is that solicitor and you make an appointment with them for negotiation and continue the cooperation. Everyone should think about the future. Goods should be shipped in batches. This is not a one-shot deal. We are not able to cover our marketing costs within one or two years. Investment in equipment and renovation of factory also cost a lot. We are all for the long-term cooperation.

1. On 17 June 2020, Cao messaged Niki (of Aus Made):

Besides, regarding the 691931.89 Australian Dollars Kekecial paid to Aus made Express (41 barrels of liquids*7120.29 Yuan/barrel: 291931.89 + extra payment of 400000), it needs to be confirmed whether sanitising paper will continue being shipped or the payment will be refunded to Kekecial Company temporarily. Please send a reply email to the email box of Kekecial Company.

1. Another translation of this message was in evidence. It did not differ materially. It referred to 'overpayment' rather than 'extra payment', and said 'for now', rather than 'temporarily'.
2. On 22 June, at 10.58 am, Andy messaged the Disinfection Project WeChat group, which included Haha:

I just asked Boss Cao. Boss Cao has two options. One option is to refund. We will also refund the advance payment of Shandong Ruhui, then purchase goods again and make payments. Another option is to reply by email and confirm the extra payment for goods made by Kekecial Company will be transferred to payment for sanitizing paper to be shipped, because that payment is the extra payment for disinfectant liquids. 400000 of the payment is advance payment made by Shandong Ruhui. Back then, you said that you had financial strain and requested me to transfer money to you, so I transferred 400000 Australian Dollars to you. The total amount is around 690000 Australian Dollars. I'm still in the assessment and processing stage of migration application now and I need to present annual financial reports to Department of Home Affairs in June. Such a large amount of accounts receivable will also impact me greatly.

1. Together with that message, he sent a screenshot of the 17 June message Cao had earlier sent Niki.
2. At 11.03 am, Haha responded:

Boss Yang, we are both men. We must rely on facts to conduct ourselves and deal with things. It's all right whether we could do businesses or not. You can't just talk nonsense with your eyes wide open.

1. At 11.08 am, Kenny shared the screenshot of the same 17 June Cao message, with Niki and Haha, in a WeChat group called 'Payment for Disinfection Liquid Order', saying in a message which appears just below the screenshot:

This is very clear! [Look up] Even if you don't want it any more, I still have to chase you up. If I don't send it, Novapharm would not just let it be, either.

1. Haha and Andy continued messaging each other, from 11.12 am to 11.19 am:

Andy: Haha, we just want you to send an email confirmation. It will be easier for me to explain if Department of Home Affairs ask about these matters. How am I supposed to explain if my company only has a registered capital of 200000 while there are accounts receivable of around 690000 shown in financial reports? Why is it so difficult for you to just send an email reply?

Andy: You may ask your accountant about how the two payments were made to you. The first one is the payment for the shortfall of shipped disinfectant liquids. The 400000 was paid after you requested me to transferred money of Shandong Ruhui to you. How come it is me who is talking nonsense now?

Haha**:** Boss Yang, I never said I wouldn't reply to you. It's just that I have been busy with negotiating the matter of merger and acquisition in the past few days. But no matter how, we are both men. You can't just deny placing the order of sanitizing paper of 10 containers. The Australian Dollars you remitted is the deposit for sanitizing paper.

Haha: Because of the sanitizing paper of 10 containers which you ordered, I'm already burnt out now due to dealing with the manufacturer about this matter. Have you ever thought about the consequences if it ends up with going to court?

1. After 11.44 am on the same day, Haha sent two audio messages to the 'Payment for Disinfection Liquid Order' WeChat group. Haha said that he had just called Andy and:

... explained this situation. You can't say that you don't acknowledge these 10 containers of paper towels, right? Can you deny it? He acknowledged it, emm, acknowledged that there are 10 containers of paper towels.

Emm, then , another things is that he asks LIU Yang to reply to his email. He said its for the accounting purpose of the immigration company. Its because that he advanced such a large amount of funds without a single confirmation email, emm, which is very troublesome. He also said that he did not mean to ask you for a refund. It's just that, just explain this situation and show it to the immigration department.

1. Haha gave evidence about this claimed phone call with Andy:

I said, 'Even though the business may not be going ahead but you cannot deny the deposit of the 10 containers and you were very clear about the true purchase order at the time and we cannot talk nonsense', and he said, 'Okay, I know.' So I said, 'I will write you an email to confirm this.' He said, 'That's okay.' I said to him again, that in Australia to go to court is terribly expensive and to go to court with Aeris is unimaginable. So he said, 'Understood' ...

1. At 11.57 am, Niki circulated to Haha, Kenny and others, a draft email reply to Cao's 17 June WeChat message. The draft email was proposed to be sent to Andy. The draft referred to Cao as 'your company's financial officer'. It included reference to Shandong Ruhui's credit in 'your company accounts', and asked 'whether it will be refunded to Shandong Ruhui for now'. (This was clearly a reference to a credit Shandong Ruhui had with Myron Trading. Kekecial did not trade with Shandong Ruhui.)
2. At 12.43 pm, Kenny replied in that message chain, proposing a much shorter email to be sent. There was some discussion then as to whether the word 'order' or 'purchase order' should be used, and what those terms meant.
3. After 12.58 pm, Kenny sent two audio messages (transcribed within the WeChat program, and translated):

... About this order...after all, he ordered this stuff, right? and then he owes a lot of money while he has also paid a lot of money. It shouldn't be any issue as long as explaining them clearly.

1. At 1.04 pm, Niki sent another draft of the proposed email to be sent to Andy, in the WeChat group, which included Haha and Kenny. It did not mention Kekecial. It referred to receiving an email order for 10 containers of BP rolls:

From your company, Hunan Myron Trade Pty Ltd ... on 29 January 2020.

I think you might need to also include his Kekecial in it because he is using that company for his immigration purpose ...

If he is using this company, Hunan Myron, for it, then there is definitely no issue with this company name. but if he is using Kekecial for it, does it mean that Kekecial must be included, emm, how about putting it in brackets? I haven't quite figured it out either.

Right, right, I got it mixed up. It's Kekecial who paid us.

No need to attached the PO, right? Hasn't been stamped yet. Issue an invoice and attach it?

1. At 1.25 pm on 2 June 2020, Aus Made (Niki) sent an email to Kekecial (Andy) attaching an invoice for BP rolls for the first time:

Hello. On January 29, 2020, we received the order issued by your company (Kekecial Pty Ltd, ABN: 63620714383) for 10 40' containers of disinfectant napkin big master roll (for the skin) by Email, with a total amount of AUD 1,580,544 (as for the invoice, please see the attachment). In March 2020, our Company received the deposit of AUD 691,931.89 you paid for this order.

Please make a payment of the remaining AUD 888,612.11 for this order as soon as possible so that we can arrange the shipment as soon as possible.

1. Another translation in evidence of this email relevantly said, 'From March, our company has successively received deposits of 691,931.89 Australian dollars'.
2. On 19 August 2020, Aus Made's solicitors sent a letter to Novapharm's solicitors, requesting the refund of the deposit Aus Made had paid Novapharm.
3. This was refused by Novapharm's solicitors on 11 September 2020.
4. Relevantly to the Regulatory Issues (discussed below), Changsha Municipal Health Commission published an Administrative Penalty Decision dated 11 September 2020 (relating to a fine it had issued to a Chinese pharmaceutical chain, Sinopharm Holding Hunan Retail Chain Co. Ltd).
5. On 24 September 2020, Aus Made and Haha commenced a NSW Supreme Court proceeding against Novapharm (that is, Aeris and Novatech), relating to the manufacture and proposed supply of the BP rolls and the contract Aus Made had entered with Novapharm. (Those parties later counterclaimed, and the case was eventually settled.)
6. Andy gave evidence that around 20 October 2020, he first saw the Changsha Penalty Decision (dated 11 September) and informed Haha about it. His evidence continued:

I was told by Hunan Myron that the pharmacy came to look for trouble because this is the administrative penalty decision published on the official website of the Changsha Municipal Administration of Health - sorry, health committee and we download it from the official website.

1. On 22 October 2020, Kenny stopped working with Aus Made.
2. On 2 November 2020, Andy emailed Haha. The email was sent with the subject line, 'please repay the overdue payment and negotiate to dispose the loss to Chinese importers and distributors'. I set it out in full in the Regulatory Issues below, in relation to the Kekecial Damages claim. Relevantly to the BP Rolls Issues, it stated:

... Now our Kekecial Company and our importer-Hunan Mailun Commerce Trading Co., Ltd and distributor-Hunan Tiantianqing Biotechnology Co., claim that:

1. On April 28, 2020, I communicated with you on WeChat for your repayment of AUD 793,608.33 to Kekecial Company, including the product payment of AUD 691,931.89 and the prepaid freight of AUD 101,676.44. Later you only made a repayment of the air freight I have prepaid for you, and AUD 691,931.89 has not yet been repaid. In June, you sent me an Email, unilaterally specifying to change such overdue payment into the deposit of Ruhui disinfectant napkin. This is absolutely unacceptable. In our contract, written purchase order should be placed for the product purchased, specifying the product name, quantity, specification, price and the date of delivery. It is unacceptable to conclude the purchase contract on telephone or WeChat. Our Kekecial Company does not acknowledge your contract or conclude the 10 containers of Ruhui disinfectant napkin purchase contract with AUS MADE EXPRESS INTERNAITONAL GROUP. Hope that you can repay Kekecial Company the product payment of AUD 691,931.89 prior to November 10, 2020.

Looking forward to your reply to the aforesaid requirements by Email.

1. On 26 November 2020 Haha replied to Andy's 2 November email:

The lawsuit with the manufacturer is caused by the 10 containers of yours. The reason why I sued you in China is because you told me that Hunan Mailun Company will go bankrupt and be liquidated and is unable to repay the amount of more than 2 million owed to me (I haven't got time to verify the specific amount. Before falling out with me, Zhen Kang said you had overcounted more than half a million Chinese Yuan with us. But my attitude is, before checking of accounts is completed, I won't draw any conclusion to this figure of more than half a million. Two things shouldn't be mixed up).

If you want to address the issues between us now, then, my advice is as follows: Goods should be shipped for any orders from China and try to help you destock to the maximum. Payments of goods will be deducted from the money you owe to me. In Australia, we should make concerted efforts to win the lawsuit fought against the manufacturer and get back the advance payments of sanitizing papers. After deducting reasonable costs, the remaining balance will be refunded to you without being short of a single cent! I won't be as ruthless as Zhen Kang! Otherwise, if the lawsuit fought against the manufacturer is lost later, both of us will lose and suffer and the manufacturer will benefit from it. You should handle by yourself regarding which matter is more important.

1. On 1 December 2020, Kekecial commenced this County Court proceeding against Aus Made.
2. I turn now to my analysis of the issues.

1. The question as to how the $400,000 paid by Kekecial to Aus Made on 6 March 2020 is to be characterised is critical to claims made by both sides. Kekecial claims it was a loan to Aus Made and Haha, and seeks repayment. Aus Made asserts the $400,000 was paid as a deposit on the BP Rolls Contract (which it claims was entered into on 29 January 2020).
2. For the reasons given below, I am satisfied that the $400,000 was a loan by Kekecial to Aus Made (but not to Haha).
3. Kekecial's claim that the $400,000 was a loan is set out in the final Statement of Claim:

[12] On or around 6 March 2020, at the request of Ausmade and Mr Liu, Kekecial entered into an arrangement to advance a sum of $400,000 AUD to Aus Made and Mr Lui by way of loan alternatively advance ("the Advance Agreement").

The Advance Agreement was verbal and was constituted by a telephone conversation between Mr Liu of Ausmade and Mr Yang of Kekecial around March 2020, the substance of which was that:

(a) the Defendants were facing business difficulties and required urgent funds; and

(b) it was requested that Kekecial, in addition to paying the $100,000.00 AUD in arrears in relation to 10 February Purchase Order also further make an advance payment of $400,000.00 AUD to Ausmade to aid in its business operations.

The Advance Agreement is also to be implied because it is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case and by law.

[12A] There was a term of the Advance Agreement, amongst other things, that the monies advanced would be repayable on demand.

The term was express and oral and to be implied. Kekecial refers to and repeats the particulars sub-joined to paragraph 12 hereof

1. Aus Made's case in relation to the claimed BP Rolls Contract cobbles together various WeChat, text and voice messages, and emails, and supplements them with matters allegedly discussed in conversations which Haha claims he had with Andy.
2. Aus Made pleads in the final Defence:

[39] In or about late January 2020, Kekecial agreed to purchase from Aus Made 320 rolls of hand & skin sanitizing treated Big Parent Rolls (large rolls of sanitizing paper, each 9,000 meters long by 1.4 meters wide (Big Parent Rolls Order and Big Parent Rolls Agreement) for $4,939.20 per roll, a total of $1,580,544.

Insofar as in writing it is constituted by emails between Kekecial and AME on 28 January 2020 and 29 January 2020 (including with Ms Cao).

(a) the WeChat voice messages by Mr Yang on 25th March 2020;

(b) the WeChat conversations between Mr Yang and Haha on 28 January 2020, including Mr Yang's request that an e-mail order be sufficient.

(c) the direction by Mr Yang to Haha in the said WeChat conversations that the order had to be placed immediately as he only had Mini Paper Rolls Stock which would only last for 1 month.

Insofar as it is implied, it is to be implied by reason of facts matters and circumstances including:

(a) The history of dealings between Kekecial and AME in relation to the Mini Paper Rolls;

(b) The informality in the relationship and dealings between Kekecial and AME in relation to orders;

(c) the elements of the trading relationship between Kekecial and AME including that because Mr Yang could not listen, speak or read English. The purchase orders was prepared by AME for Kekecial;

(d) the fact that Kekecial made a deposit or prepayment or advance payment of AUD $400,000 towards the Big Paper Rolls on 6th March 2020;

(e) The fact that Mr Yang directed his son to go to the bank in making the payment on 6 March 2020 to have the transfer description of AUD 400,000 as "prepayment";

(f) the fact that as of 29 January 2020 the Pandemic of COVID was commencing that there was no supply of mini paper rolls available and that Kekecial was desperate, as it expressed in writing and orally, to have a supply of paper rolls to this market in Hunan province, China; and

(g) the fact that the payment of AUD $400,000 was made in the same transaction as the payment of AUD $100,000 arrears due and owning in respect of an Evocide order.

(h) Of an Evocide order. [sic]

[40] There were terms of the Big Parent Rolls Agreement:

(a) payment must be made by Kekecial prior to the shipment of the Big Parent Rolls due to the limited supply (oral); and

(b) the Big Parent Rolls would be supplied in 10 containers each containing 32 Big Parent Rolls (written).

1. Aus Made's claim that there was a BP Rolls Contract depends to a great extent on some of Haha's evidence as to what he remembered about various conversations between him and Andy, which he claims took place in April 2019 and at different times in 2020 (all of which Andy denies).
2. I say, 'some of' Haha's evidence, because his evidence is inconsistent on important points.
3. As I explained above, I found the oral evidence of each of Haha, Andy and Kenny to be unreliable, and I do not accept their respective uncorroborated versions of events. So, in making my findings, I have focussed on the extensive written record from the relevant periods - contained in SMS messages, WeChat, email and other documents. I have set out much of this evidence above, and I focus further on parts of the evidence given by each of Andy and Haha in the analysis below.
4. Aus Made claims that the BP Rolls Contract was made when Andy sent Haha the 2.36 pm email, on 29 January 2020. That email states:

Greetings! Because the situation of pandemic in China is very serious now. The supply of disinfectant and sanitizing papers falls short of demand. Disinfectant of 10 more containers and sanitizing papers of big parent rolls of 10 containers are needed. All of them are to be used on skin.

Disinfectant of 20 containers and sanitizing papers of 10 containers in total are needed. Thank you!

1. The critical question is, did this email amount to an order?
2. On its face, I do not consider that it does. Rather, it records what Andy said was 'needed'. Reading the email in context, I am satisfied that it was not an order, but a response to Haha's request for Andy's estimate of what would be required at some point in the future.
3. The contemporaneous evidence from 28 and 29 January shows that, in the lead-up to this email, Haha asked Andy to give an estimate 'of the approximate' amount of BP rolls Andy might want in a month and a half (see 28 January 10.32 pm voice message referred to above), and he asked Andy to 'advise' Haha of 'an approximate amount of big paper rolls', 'by some time tomorrow' (see 29 January, voice message between 1.04 am and 1.13 am referred to above).
4. I consider that the messages and emails Andy sent on 28 and 29 January were responsive to those requests from Haha and make sense in that context: for example, Andy said he needed 10 containers, and 'Its temporarily confirmed' (see the WeChat message sent between 10.32 pm on 28 January, and 12.45 am on 29 January, referred to above). Saying something is 'needed', in that context, does not amount to an order.
5. Further, the fact that Aus Made first sent a proposed purchase order to Kekecial on 17 April 2020, nearly 11 weeks after the 2.36 pm email (of 29 January), is consistent with that email being an estimate, and not an order.
6. The 2.36 pm email being an estimate and not an order is also consistent with the way in which orders were customarily placed between the parties. In all their other product purchases - both before and after 29 January - Aus Made and Kekecial used a formal purchase order mechanism for making product orders.
7. The Aus Made parties submit that there was such informality of dealings between Aus Made and Kekecial that a formal purchase order was unnecessary for the BP rolls. No such informality was established, however. As I have just pointed out, Kekecial and Aus Made both used a formal purchase mechanism in their dealings generally. And whilst of course the parties could have agreed to depart from their standard regime on this occasion, I am not satisfied that they did.
8. I agree with the following submission by Kekecial:

[202] Each of Andy and Haha are clearly experienced businessman of considerable business acumen and interacted with each other as such: their contractual relationships expressly demanded formality (including purchase orders), and they interacted with each other as such.

[203] The requirement for formality, including signed purchase orders is, it is submitted, not surprising given:

(a) the high level of business experience and business acumen of the relevant protagonist (Andy and Haha);

(b) the value of the purchase orders made under the relevant contracts. For example, the first purchase order made in relation to the Disinfectant Liquid was for $2,563,304.40 (noting that like all other purchase orders, it was signed and stamped); and

(c) the nature of the transactions, being transactions for the international sale of goods (which of their very nature require a high level of documentation).

1. There is another point to be made here. Kekecial and Aus Made had entered into two overarching agreements governing their commercial relationship (that is, the Disinfectant Supply Agreement in June 2018 in relation to disinfectant liquid, and the Supply Agreement in November 2018 in relation to paper). Both these agreements required formal purchase orders to be provided for orders of the types of goods they applied to, and each agreement set out a detailed process regarding these.
2. Whilst there was no overarching agreement specifically relating to BP rolls (these were a new product, albeit related to the mini parent rolls the subject of the Supply Agreement), Aus Made did not submit that this lack of a specific overarching agreement for BP rolls led to the parties adopting a different, informal, approach to placing orders for these than their usual regime. And, as noted above, Aus Made sent a proposed purchase order to Kekecial for BP rolls, in any event, on 17 April 2020, said to relate to the BP Rolls Contract.
3. The agreed regime was set out in Clause 2 of the Supply Agreement. Clause 2 is headed 'Purchase Orders', and relevantly provide:

(2) The Purchaser shall issue to the Seller written purchase orders for its requirements of the Goods on an as-needed basis (each a PO), which, unless otherwise agreed to in writing by the Seller and the Purchaser, shall be substantially in the form set forth in Appendix II. A PO shall contain a reference to this Contract, name and specifications of the Goods ordered, quantities, prices, delivery schedule, and the terms and place of delivery.

(3) The Seller may accept any PO by providing written confirmation to the Purchaser or by any other means agreed upon by the Parties. No PO shall be binding until accepted by the Seller.

1. Despite the reference to the 'form set forth in Appendix II' in each agreement, there was no agreed form of purchase order (and no Appendix II). However, the evidence was that Kekecial and Aus Made used purchase orders for all other orders (both before and after 29 January 2020), and that those purchase orders included name and specifications of the goods ordered, quantities, prices, delivery schedule, and the terms and place of delivery. In fact, it was always Aus Made (Kenny) who prepared the purchase orders and sent them to Kekecial, who then executed them and sent them back to Aus Made. The reason for this slight variation from the process set out in clause 2(2) was explained as being Andy's lack of English.
2. Significantly, at around the same time that Aus Made alleges the BP Rolls Contract was made by email, a purchase order was put in place, but for disinfectant liquid. That purchase order is dated 2 February, and was prepared by Aus Made. It was sent to Kekecial, and was signed and returned to Aus Made by Kekecial shortly thereafter.
3. Haha gave evidence that the reason no purchase order was prepared around 29 January for BP rolls was because Andy had asked him not to prepare one yet, because the BP rolls were not ready for delivery, and because Aus Made did not then have the money to pay for them.
4. I do not accept this evidence by Haha. It did not come across as truthful in part because it made no sense. Logically, neither of those matters was a reason for no purchase order being prepared for the BP rolls around 29 January 2020. Aus Made placed a purchase order for Novapharm for the very same BP rolls, on the basis of a delivery date that said, 'ASAP before 28/02/20'. If the timing of payment by Aus Made was an issue, that could have been addressed by adjustment of agreed dates, which could have been appropriately set out in a purchase order dealing with payment of both the deposit (or not requiring one at all) and final payment. Haha also referred to Andy wanting purchase orders for the requirements of the Department of Immigration (and his visa application). Logically again, that does not explain a failure to prepare one for 11 weeks after the order is claimed to have been made.
5. Haha also gave evidence that in a telephone call on 29 January, which he said happened after Andy 'placed the order in the email', the following conversations occurred between him and Andy:

I told him that, 'You have already placed an order and since the order is a placed order, you should pay the deposit' and he said, 'Well, since I have already placed the order and also you also said the products won't be delivered in one and a half months', and he said, 'We are good buddies and in Australia, let alone I have placed an order, even oral agreement is accountable ...

... It is not possible that I placed an order and then wanting the products, so I will wait for you when the goods are about to be delivered and then I will pay you the money.

1. At another point in his evidence, asked why he had not sent a purchase order to Andy earlier, Haha said:

Because on 6 March he did not allow me to produce such a purchase order

1. As Kekecial submits, the requirement for purchase orders in the overarching agreements was contained in Haha's precedent: he sought to do business in that way.
2. I do not accept that Andy somehow did not 'allow' Haha to produce a purchase order on 6 March or at any time. And I note that 6 March was long after the BP Rolls Contract was allegedly made.
3. Kenny gave evidence that Haha had told him on 28 or 29 January (it was unclear which) that Andy had an 'intent' to order 10 containers of BP rolls. He also gave evidence that Haha asked him to prepare a purchase order a day or two after 29 January. Kenny claimed that, at that time, he suggested to Haha that a purchase order not be prepared yet, because 'at the time Novapharm thought Aeris could not produce big parent roll', the machinery had not yet arrived, and, following discussions at the disinfection product convention in China on 30 November 2019, the terms of the distributorship agreement were uncertain. I am not satisfied that Haha and Kenny had those discussions reported by Kenny. As indicated above, I do not accept Kenny's evidence on these contentious matters, unsupported by contemporaneous evidence.
4. Importantly, the first time the contemporaneous documentation shows Haha mentioning a purchase order for the BP rolls was on 24 March 2020, when Haha sent a WeChat message asking Kenny to draft a 'small contract' for the BP rolls ('small contract' being the phrase Haha, Andy and Kenny sometimes used for purchase orders). I am not satisfied there was any request for a purchase order from Haha before then.
5. In messages sent both before and after 29 January 2020, in relation to other goods purchases, Andy referred to both 'purchase orders' and 'orders', and required formal placement of orders. For example, in a message on 31 August 2019, he said: 'ask him to formally place the order and pay the deposit; we can only stock up according to the order'. In a message on 5 February 2020, he wrote: 'Kenny, send me a small contract' (the phrase the parties used for purchase orders). On 6 February 2020, he referred to an 'order contract' having been signed and sealed. On 12 February 2020, he wrote that an 'additional 10 containers (180 tons) of disinfectant liquid will be ordered. Please prepare the contract ...'. These messages are telling, giving context to the communications on 28 and 29 January.
6. Aus Made submits that it is significant that Andy did not respond to Haha's message of 24 March where Haha had asked Kenny to make a 'small contract' or 'correct' Haha's statement regarding 'the remaining balance need to be paid as soon as possible'. However, the message goes on to ask, 'Please help me make the payment'. Read in context, I am satisfied that the reference Haha made to the remaining balance needing to be paid, was a reference to Aus Made needing to pay Novapharm (for the Aus Made/Novapharm BP rolls purchase order). It was not saying Kekecial needed to pay Aus Made, and I do not accept Haha's evidence to the contrary. Aus Made had signed a purchase order with Novapharm, and needed to pay. The tenor of that message was asking Kekecial to help with making that payment.
7. In that message exchange, Haha also asked - for the first time - for a purchase order to be drawn up. Andy was silent in response. I do not consider that it follows that he agreed that Kekecial owed money to Aus Made for the BP rolls, particularly given the context in which the exchange took place.
8. On 17 April 2020, when Aus Made finally sent a proposed purchase order for the BP rolls, its email described the proposed purchase order as the contract re the BP rolls, and asked for it to be reviewed and signed 'if all good' and for a signed version to be sent back. It was of course never signed or sent back. Notably, there was no suggestion by Aus Made at that stage, to the effect that it was unnecessary for a purchase order to be signed because a contract had already been made by email on 29 January.
9. On 17 April 2020, Aus Made also sent Kekecial a varied purchase order for its earlier disinfectant purchase, asking Kekecial to sign and return it. Kekecial did just that, on 27 April, and it was this that led to the credit of $291,931.89, leading to the $291,931.89 claim. These dealings between Aus Made and Kekecial are consistent with the parties' belief that a purchase order was required to cement in place relevant contractual obligations.
10. Further, Aus Made placed purchase orders for all its orders with Novapharm, as required under the overarching agreement those parties had entered. Various emails by Novapharm make clear its requirement to be sent purchase orders for any goods required (see 22 January 2020 email for example).
11. The contract Aus Made made with Novapharm for the BP rolls was itself made by purchase order: Aus Made sent it to Novapharm on 29 January, and it was accepted by Novapharm on 6 February.
12. In the end, it is plain enough from all the evidence, that at the relevant time, the parties' dealings reflected an understanding that purchase orders were required, between on the one hand, Novapharm and Aus Made, and on the other hand, Aus Made and Kekecial, to cement contractual commitments.
13. Indeed, there was no evidence of any other example of Aus Made or Kekecial treating something as an order where there was no Purchase Order.
14. In circumstances where it is evident that the parties always conducted their affairs using them, I consider that the fact there was no purchase order even put forward by Aus Made until 17 April, is strongly indicative of the fact that a contract for the supply of BP rolls had not been agreed in January as alleged by Aus Made.
15. I note too that the Evocide Purchase orders detailed in Novapharm's 4 February letter to Aus Made, were all placed by Aus Made with Novapharm between 22 and 29 January 2020; that is, before Kekecial placed its orders with Aus Made for the same product (on 2 and 10 February 2020). In other words, in placing these orders with its supplier, Aus Made took the commercial risk that Kekecial would not place orders with it (it wa_s 'trading naked', to_ using the broking analogy referred to in Kekecial's submissions). I consider Aus Made took that same commercial risk with the BP rolls order it placed with Novapharm, placing it without having an order for the same goods in place from Kekecial.
16. Further, I am not satisfied that a price had been agreed when Andy sent the 2.36 pm email referring to 10 containers of BP rolls being needed (on 29 January 2020). Nor am I satisfied that Aus Made is correct in contending, as it did at trial, that while the total price for the BP rolls had not been agreed per se at that time, there was nevertheless then an agreed mechanism for valuing the BP rolls.
17. The 2.36 pm email, and earlier contemporaneous messages between Haha and Andy, do not mention the number of BP rolls per container, or any price per roll.
18. Although the proposed number of BP rolls per container was set out in Novapharm's distribution agreement with Aus Made on 27 March 2019, there is no contemporaneous evidence to show that Andy was told about this. Haha agreed in evidence that he had never told Andy in WeChat or email that there were 32 BP rolls per container. (It was common ground that the relevant containers were 40 foot containers; and the Supply Agreement between Aus Made and Kekecial required the minimum purchase for any order to be one such 40 foot container.)
19. Haha gave evidence that, around 29 January, he had told Andy the total amount owing for BP rolls (his evidence about that was particularly unconvincing). He said he told Andy:

that the total amount is about AUD$1.8 million and I probably did not even say $1.58 million and I would say around $1.6 million.

1. He also gave evidence that 9 months before 29 January 2020, in April 2019, he gave Andy an oral quote for BP rolls, based on the price of small parent rolls:

...it was the April in 2019 when I told him the price for big parent roll in Changsha Hunan Province. Because at that time it was in April 2019, my company and I have signed with Novapharm in relation to big parent roll. Because at that time the big parent roll in relation to the size, width, length and the total area in fact has been sent to me in detail by Novapharm, therefore in April 2019, at that time in Changsha I did give him a quote. That price was based on the accumulation of the proportion of square metre of small parent roll and then he was asking me whether the price will be changed because at that time we were in the midst of the COVID 19.'

1. The contemporaneous evidence shows on 24 March 2020, Haha asked Kenny (in a group WeChat) to calculate a price for the BP rolls, asking him to calculate the price per unit area based on the mini parent rolls.
2. I am not satisfied on the balance of probabilities that the number of rolls in a container was discussed with, or known by, Andy, when he gave an estimate of needing 10 containers in the 2.36 pm email. It follows that there was no actual agreement as to price.
3. Certainly, Andy would likely have had a reasonable idea of about how much paper this might amount to, by a general comparison to how many mini parent rolls would fit in a container. But that is very different to knowing the price, and agreeing to it, as part of a contractual commitment.
4. Aus Made argues that Andy did not question the price when eventually a proposed purchase order was sent on 17 April 2020. However, this does not establish that Andy had agreed to a price on 29 January, or agreed then as to how the price was to be calculated.
5. Aus Made submits that the way the $400,000 was paid on 6 March 2020 assists its case. It was paid as part of a larger payment ($500,000). It was common ground that the remaining $100,000 of the larger payment was money Kekecial owed Aus Made on an earlier order. However, all of it was paid after Haha had said he needed some money. I do not consider the two sums being paid together makes any difference either way on the claims the parties make.
6. In the contemporaneous documentation for that payment, it was described as an 'advance payment', a 'business pre-payment' and a 'pre-payment'.
7. Andy called it an advance payment for the 'disinfectant napkin', when on 6 March 2020, at 3.51 pm, Andy emailed his son, Haobo, about the proposed payment:

Hello. Please make an advance payment of AUD 500,000 for the disinfectant napkin to AUS MADE ...

1. Andy was in China and needed Haobo - who was himself a director of Kekecial, and was in Australia - to go to a bank branch and make the payment. Haobo did just that, signing the payment authorisation, recording it as 'Business Prepayment' in the 'description/purpose' section of the payment authorisation.
2. Haobo then emailed Andy at 4.55 pm:

I have already made an advance payment of AUD 500,000 ...

I have arranged the prepayment:A$500,000. Please check the attachments.

1. In its final Defence (at paragraphs 12, 13b and 13B), Aus Made pleaded that the $400,000 payment (made by Kekecial to Aus Made on 6 March 2020) was a 'deposit or advance payment or pre-payment' of the BP Rolls Contract. By its closing submissions, Aus Made focused on it being a deposit or part payment. There is nothing to support the suggestion the money was paid as a 'deposit', other than Haha's evidence at trial (which I do not accept). Deposits for other purchase orders were an agreed percentage of the claimed agreed price (including the deposit which Aus Made paid Novapharm in relation to the Aus Made BP Rolls Order), recorded in the relevant purchase orders. $400,000 was not an agreed percentage of an agreed purchase amount, and there is no earlier mention in the contemporaneous documentation of anything about a deposit.
2. Andy gave evidence that Haha had asked for a $400,000 loan in a telephone call on 26 February. He went on to say:

... in relation to the 500,000, 100,000 was the repayment of money owed to Haha for previous orders and 400,000 was money I lent to Haha. On the email that I sent on 18 February which I have already provided, the email says that I had - I owed Haha 100,000 which would be repaid in a few days and but after a few days I still couldn't repay the money because I didn't have money on my account. So after I received the payment for goods, I still didn't repay the money. On 26th I called Haha and I told him that I still hadn't received payment on my end. I may need to - I may need a few more days. And on that phone call he said he would like to borrow 400,000 from me and I agreed. And on 6 March I managed for the money to be transferred by my son. But my son would not be willing to - to transfer money if I told him that the 400,000 was money loaned to Haha, because my son didn't like him and there's more. So I had to think of a way. I sent an email to my son to instruct him to make payment of 500,000 to Haha for the purpose of a deposit for paying for ordering the tissue paper product. That's when my son agreed and went to make the payment. After the payment was made, my son sent an English email - an email in English to Haha.

1. As indicated above, I do not accept Andy's evidence generally, including the claimed conversation he says he had with Haobo on 26 February. I agree with Aus Made's submission that:

[210] The suggestion by Andy that he provided a false reason to his son to transfer funds to Haha should be rejected because it is illogical, is not supported by any contemporaneous document and is consistent with being a recent invention to try to explain away his correspondence with his son. His son had arranged other transactional payments to Haha. If son did not in truth like Haha, it is not apparent why a prepayment or a loan would make any difference to the son's attitude to making the payment.

1. However, whilst I do not accept Andy's oral evidence as to the circumstances, I am satisfied on the balance of probabilities that the money was provided to Aus Made by Kekecial because it had funds at the time, in order to assist Aus Made to pay Novapharm money it was due to pay for a freight delivery for the Evocide order.
2. I am satisfied on the balance of probabilities Andy gave an estimate at that time that Kekecial would need 10 containers of BP rolls in about 6 weeks.
3. Just a few weeks earlier, on 21 and 22 January, Kekecial had made two payments to Aus Made of $100,000 (which Aus Made agrees were advance payments, in that there was no purchase order for any goods at the time for them to be applied to). Those payments were subsequently applied, by agreement, to the 2 February purchase order entered into for disinfectant liquid: see Andy's 6 February email, at 7.06 pm.
4. I am satisfied that on the balance of probabilities, those two $100,000 payments were made because Aus Made needed money at the time, and that, on the balance of probabilities, the $400,000 payment was made for the same reason. (Aus Made submitted it did not need the money, relying on balance sheets from around that time. However, I am satisfied that it did need the money then from a cash-flow perspective.)
5. The making of the advance payment assisted Kekecial as well as Aus Made. It meant that Novapharm would send the Evocide order to Aus Made - who could then send it to Kekecial.
6. On 28 April 2020, Andy sent a WeChat message to Haha, saying amongst other things:

When you said you had tight budget, I paid you all the money I had and never thought much about it. But now I am really running out of money.

.... Then you said you still lacked money. I paid another AUD 400,000.00, So the total amount is: AUD 793608.33. The domestic freight I paid as the advance payment is what you wanted me to help. Now I have invoiced to pay back the tax to others. Mr. Hu from JD.Com only paid a few tens of thousands. There is still a shortage of more than AUD 400,000 freight cost. As for my China-based company, as you can imagine, there is no place for the inventory of disinfectant backlog. And due to the investigation by market supervision bureau, from the Spring Festival till now, other sellers have been afraid to sell disinfectant tissues. They asked to return goods and refund the disinfectant tissues worth of over 9 million yuan. . I would also like to ask you to help me get through this difficult time for the sake of us as friends and also as partners with long-term cooperation.

1. In support of its submission that Andy had entered the BP Rolls Contract, Aus Made relies on messages sent by Andy and Cao in June 2020.
2. In the message of 17 June 2020, Cao messaged Niki (of Aus Made) stating:

Besides, regarding the 691931.89 Australian Dollars Kekecial paid to Aus made Express (41 barrels of liquids*7120.29 Yuan/barrel: 291931.89 + extra payment of 400000), it needs to be confirmed whether sanitising paper will continue being shipped or the payment will be refunded to Kekecial Company temporarily. Please send a reply email to the email box of Kekecial Company.

1. There was another translation of this message in evidence. It referred to 'overpayment' rather than 'extra payment', and stated, 'for now', rather than 'temporarily'. I do not consider anything turns on these differences (and the parties did not submit otherwise).
2. On 22 June**,** Andy messaged the Disinfection Project WeChat group, including Haha, sending a screenshot of Cao's message to Andy of 17 June (extracted above), and saying:

I just asked Boss Cao. Boss Cao has two options. One option is to refund. We will also refund the advance payment of Shandong Ruhui, then purchase goods again and make payments. Another option is to reply by email and confirm the extra payment for goods made by Kekecial Company will be transferred to payment for sanitizing paper to be shipped, because that payment is the extra payment for disinfectant liquids. 400000 of the payment is advance payment made by Shandong Ruhui. Back then, you said that you had financial strain and requested me to transfer money to you, so I transferred 400000 Australian Dollars to you. The total amount is around 690000 Australian Dollars. I'm still in the assessment and processing stage of migration application now and I need to present annual financial reports to Department of Home Affairs in June. Such a large amount of accounts receivable will also impact me greatly.

1. Andy suggests that one option is to 'refund' in this message, and suggests the goods be purchased 'again' after that refund. Aus Made argues this shows he considered that the BP rolls order had already been made.
2. I am not satisfied that these WeChat messages indicate that an order for the BP rolls had been placed by Kekecial by email on 29 January 2020, when read in the context of the earlier messages and other matters discussed above, and in light of the fact that Andy knew by the time these messages were sent that Aus Made was treating the money as part payment for BP rolls. Andy had already made it clear in his earlier messages that he considered the $400,000 to be a loan. I consider he was here trying to find a commercial way to deal with the impasse between the parties.
3. In an earlier version of the statement of claim, Kekecial pleaded that the $400,000 was to be offset at a later date by a supply of disinfectant liquid. This was removed by amendment. Aus Made says this was consistent with the $400,000 being part payment for the BP Rolls Contract. I disagree. The pleading referred to the payment to be offset by a later supply of disinfectant liquid, not BP rolls.
4. I reject Kekecial's claim that the money was loaned to Haha personally (as well as to Aus Made). Kekecial paid it to Aus Made in the same transaction as it paid a $100,000 amount then due to Aus Made on a previous order. There is nothing other than Andy's oral evidence to suggest it was a loan to Haha, and as indicated, I do not accept his evidence.
5. For these reasons, I am not satisfied that the BP Rolls Contract was entered into. It follows that the $400,000 payment was not a deposit or part payment pursuant to that alleged contract (as Aus Made has claimed).
6. Nor do I do accept Andy's evidence that he told Haha (before lending it) that he would like the money repaid immediately. It makes no sense and is not supported by any contemporaneous evidence.
7. I am satisfied that the $400,000 was paid after Haha told Andy he needed money so Aus Made could pay Novapharm urgent freight costs relating to Evocide. Delivery of the Evocide was to the advantage of both Aus Made and Kekecial. I consider that Kekecial advanced the money as a result of that request. Andy intended that Kekecial would apply the advance against a future purchase order, and more likely than not for the BP rolls, which Andy had given an approximate indication Kekecial would want in six weeks. However, circumstances changed significantly - delivery was delayed by months because the BP rolls machine was not ready to produce the BP rolls, and regulatory issues arose with the disinfectant papers, and Kekecial did not place such an order.
8. I agree with Mr Williams KC's submission that an advance payment, which may be applied to a possible contract that has not yet been agreed, amounts to a loan until it is applied to a specific contract.
9. As a matter of law, a loan becomes a debt due when it is advanced (unless the parties agree to some later payment time): Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041. Nothing else was agreed here, so the loan was repayable on demand.

Kekecial's Restitution and Unjust Enrichment claims

1. Kekecial pleads, in the alternative, that it was entitled to repayment of $691,931.89 (comprising $400,000 and $291,931), on a restitutionary basis, claiming Aus Made was unjustly enriched by these amounts at the expense of Kekecial.
2. Its plea about this is brief, in the final Statement of Claim:

[20A] Further or in the alternative, Ausmade is liable to repay the full sum of $691,931.89 AUD to Kekecial by way of restitution as Ausmade has been unjustly enriched at the expense of Kekecial.

1. The Aus Made parties' defence, in the final Defence, is:

[20A] They deny the allegations in paragraph 20A and further say that there is nothing unjust or unconscionable according to the principles of restitution with the AUD $400,000 and AUD $291.931.89 being applied as payment towards the Big Parent Rolls Order on 22 June 2020.

1. Aus Made has agreed throughout the trial that it must repay the overpayment of $291,931.89 if it is unsuccessful in its claim under the alleged BP Rolls Contract. I will order that it pay Kekecial $291,931.89.
2. However, in its final submissions, Aus Made submitted that Kekecial's unjust enrichment claim in relation to the $400,000 could not succeed, because the claim was not properly pleaded. Its contention was that the pleading that Aus Made had been 'unjustly enriched' is a conclusionary statement. The specific basis on which it is claimed that restitution should be made (giving rise to the alleged unjust enrichment) must be pleaded in order for such a claim to succeed. Unjust enrichment itself it not a cause of action, and it is not enough just to plead a right to restitution. Aus Made referred to Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) CLR 560, 596-7 [78]: 'the concept of unjust enrichment is not the basis of restitutionary relief in Australian law'.
3. In Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, at 256-7, Davies J explained the following about the concept of unjust enrichment:

It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case ....

1. Under Australian law, absent a contract, but in circumstances where money was paid for an identifiable purpose, which purpose has failed or evaporated, so there is no longer a basis for the payment, it would be unjust for the recipient of that payment (here Aus Made) to retain the payment, and restitution would be available as a form of relief. This is so whether the plea is dressed as a 'total failure of consideration', or, described as a payment made by mistake, or even one made pursuant to an ineffective transaction.
2. Each of these ways of describing the making of a payment from A to B in circumstances where it would be unjust for B to retain the payment, are recognised by the common law, as species of claims for moneys had and received. The essence of the pleas, is the entitlement to restitution, arising from unjust enrichment of B at the expense of A (that is, payment to B occurring in circumstances which make it unjust for B to retain the money). In these circumstances, B would make 'restitution' to A to prevent that unjust enrichment occurring. In each case, these allegations would be subject to defences of 'change of position' and 'estoppel'.
3. The criticism of Kekecial's pleading by Aus Made is really that Kekecial has not pleaded any of these species of moneys had and received claims specifically, but has instead, and in the most general terms, pleaded a claim for restitution (that is, the relief, not the cause of action). Kekecial has pleaded that the relief is claimed by reason of Aus Made being unjustly enriched, but the basis of this plea is either absent or, at best, scant.
4. I consider that, whilst it is poorly pleaded, the context for the unjust enrichment plea is clear enough for Aus Made and the Court to evaluate it, as an alternative to the loan argument. In these circumstances, the conclusionary nature of the plea, whilst open to criticism, is not fatal.
5. I do not regard this approach as in some way having deprived Aus Made of an opportunity to establish a relevant defence, for example, change of position or estoppel, were one to have been available. The pleading of the claim as one in restitution for unjust enrichment put Aus Made on notice that an equitable defence, of the kind I have just mentioned, may apply. Its failure to plead such a defence, at the very least in the alternative, may be taken to mean it had none to plead. All it pleaded, in fact, was that it was not unjust for it to apply the $691,931.89 against money due under the BP Rolls Contract. A contract which I have found was never entered into.
6. I consider that - in the event it was correct to find the circumstances giving rise to the $400,000 payment did not give rise to a loan - there is still a clear basis for an order requiring Aus Made to make restitution to Kekecial for that sum. That is because there was either a total failure of consideration for, or a failure of the basis for, the making of the payment; and it would be unjust to allow Aus Made to retain it. That is the very nature of the injustice to which the remedy seeks to respond.

1. Kekecial further pleads that Aus Made and Haha represented and warranted that if Kekecial advanced $400,000 to Aus Made, those monies would be returnable on demand (the Advance Representation). The Advance Representation is pleaded as having been made by Haha, orally.
2. The Aus Made parties deny this representation was made.
3. I am not satisfied that the Advance Representation was made. As discussed above, the only evidence in support of the allegation that Haha made this representation orally, was given by Andy at trial. In the light of my findings about Andy's credibility, I do not accept Andy's evidence on this topic, which is unsupported by any contemporaneous documents. So this claim fails.

Aus Made's Estoppel and Misleading and Deceptive Conduct Claims

1. As set out in the Introduction above (paragraphs 16-17), Aus Made also counterclaims that, as a result of matters which allegedly occurred on 28 and 29 January 2020, Kekecial made the BP Rolls Order Representation**.** It claims that Kekecial represented that:

(a) it had made a definite order for 10 containers of BP rolls; and

(b) no signed purchase order for the BP rolls was required to confirm the order.

1. I am not satisfied that the BP Rolls Order Representation was made.
2. Aus Made relied on Haha's evidence to establish the truth of the pleaded '28 January' conversation it says occurred between him and Andy (paragraph 48 of the final counterclaim). However, as previously indicated, I do not accept Haha's evidence generally, save where corroborated by contemporaneous evidence. More particularly, I do not accept his evidence as to this 28 January conversation. I am not satisfied that on 28 January, Andy asked Haha in a conversation for the BP rolls purchase order preparation and signing to be 'postponed to a later date', nor that he asked Haha 'if they could just rely on an email order' for the BP rolls 'in the special [COVID] period', nor that they agreed that an email for the BP rolls order 'would be sufficient'.
3. As I am not satisfied that the BP Rolls Order Representation was made, Aus Made's estoppel, and misleading and deceptive conduct, allegations fall away.

1. The Regulatory Issues are the second set of issues in this case, as discussed at paragraphs [20] -[24] in the Introduction above. They involve two claims by Kekecial against Aus Made: the first for breach of contract, and the second, for misleading and deceptive conduct.
2. Kekecial's claim relating to the alleged breach of contract may be summarised as follows:

(a) The terms of the Supply Agreement were such that Aus Made was responsible for ensuring that the goods could legally be sold in China, and in particular that the labels to be affixed to the End Product (produced in China when the mini paper rolls were cut down into smaller, labelled rolls) accurately indicated the types of bacteria and viruses that could be killed by the product according to Chinese authorities' test reports and government approval ;

(b) In breach of these obligations, the goods could not legally be sold in China, and the labels did not comply with applicable Chinese laws, principally because scientific reports about the products which ought to have been obtained by Aus Made from an accredited scientific tester were not obtained.

(c) Kekecial suffered loss and damage as a result (arising from the two compensation agreements it says it reasonably entered into with the Myron companies, to whom it had on-sold the goods.

1. Aus Made denies that it had all these obligations under the Supply Agreement, that it breached the Supply Agreement as claimed, that the labels and goods did not comply with Chinese laws, and that Kekecial is entitled to the loss and damage it claims.
2. Further and alternatively to its breach of contract claims, Kekecial makes misleading and deceptive conduct claims. It pleads that three sets of detailed representations were made by Aus Made, relating to labelling and compliance with Chinese laws and related matters. I refer to these as the Claimed Representations. These are pleaded at length in the final Statement of Claim, at paragraph 6, paragraph 23A, and paragraph 23C.
3. Kekecial claims that the Claimed Representations were misleading and deceptive in breach of the ACL.
4. Importantly, for reasons that will become apparent, Kekecial claims the same loss and damage for these alleged breaches, as it claims for alleged breach of the Supply Agreement.
5. Aus Made denies making the Claimed Representations and the corresponding ACL breaches. It denies that Kekecial is entitled to the loss and damage claimed.
6. These regulatory issues took up significant time at trial. Amongst other difficulties, Kekecial's pleadings were confusing, so that precisely what was in issue as to breach, and what Chinese laws were claimed not to have been complied with by Aus Made only became clear in Kekecial's final written submissions; there were translation issues in relation to various regulatory notices issued by Chinese authorities which Kekecial relied on. One of these regulatory notices was the Changsha Penalty Decision published on September 11 2020, and Aus Made also sought to rely on a further notice from the Changsha Municipal Health Authority dated 23 October 2023 - that is, a week before the trial commenced - purportedly clarifying the Changsha Penalty Decision of 2020, and there were issues about its provenance, and effect; and the expert reports provided by experts in Chinese law for each side were extremely hard to follow.
7. In my analysis of these issues, I deal with the breach of contract claims first, then the misleading and deceptive conduct claims, and then the damages Kekecial claims.

1. Under the Supply Agreement, Aus Made was responsible for ensuring that the labels to be affixed to the End Product (produced in China when the mini paper rolls were cut down into smaller, labelled rolls) complied with Chinese laws and that the goods were fit to be sold in China.
2. Whilst there was some dispute about that, I am satisfied that this is the correct construction of the agreement.
3. The Supply Agreement was prepared based on a template which Haha had, and there is no evidence of any lawyers being involved in its drafting. It raises a number of difficult issues of construction. Clause 17 provides the agreement is to be governed by and construed in accordance with the laws of Australia.
4. It is written in both Chinese and English, with most clauses first set out in Chinese, then in an English version immediately below. Clause 22 has the effect that in case of any inconsistency between the Chinese and English clauses, the Chinese version prevails.
5. In the final Statement of Claim, Kekecial pleads clauses extracted from the English wording in the Supply Agreement. However, at trial, Kekecial put a NAATI-accredited translation of the Chinese parts of the Supply Agreement into evidence, and relies on this translation. Aus Made ultimately agreed with the NAATI translation, save in relation to one immaterial point. That point relates to the translation of 5 characters which appear in clauses 1 and 13. Kekecial claims the five characters mean 'OEMs' (cl 1) and 'OEMed' (cl 13), as shown in the NAATI translation, and that this is an abbreviation of the phrase 'Original Equipment Manufacturer'. Aus made says that the translation of those five characters, is in fact, 'manufacturing and processing on behalf'. The parties agreed the difference was not material to any issue in dispute, and gave the Court both alternatives.
6. I set out relevant terms of the Supply Agreement below, taken from the NAATI translation of the Chinese wording of the agreement.
7. References to Party A (the purchaser) are to Kekecial, and to Party B (the seller) are to Aus Made.
8. The recital includes this:

Through friendly negotiation, the Parties hereby enter into this International Sale and Purchase Contract for Goods (hereinafter referred to as "the Contract") with respect to the purchase of goods from Party B and the sale of goods by Party B to Party A, and the production and processing (as defined in Article 1 below) by Party A for Party B in China.

1. Other relevant clauses are:
   1. 1. Goods

As the owner of the goods purchased in the purchase order mentioned in Article 2 of the Contract (hereinafter referred to as "goods"), Party B has the right to legally provide such goods to Party A.

Party A OEMs the goods specified in the Contract for Party B in the Bonded Zone in Hunan, China, and serves as a packaging processor in China. Party B shall provide the parent paper roll to Party A, and Party A shall process it into small packages with different specifications according to Party B's requirements. The repackaged products must strictly meet the standards of China and Australia for this type of product.

The goods shall have proper packaging, labels, quality certificates, instructions and other necessary product information descriptions (hereinafter referred to as "product information") to ensure that the goods are suitable for Party A to onsell after the goods are delivered to Party A. All losses and responsibilities caused by errors in the product information, illegality regarding the labels provided by the manufacturer, or other problems shall be borne by the manufacturer. [For problems] handled and coordinated by Party B, and [for losses and responsibilities] borne by Party A in place of [the manufacturer], [the Parties] shall have the right to seek compensation from the manufacturer.

The product labels, instructions and production licenses must indicate the types of bacteria and viruses that can be killed by the product according to the inspection reports of Chinese authoritative institutions and Chinese government approval documents, otherwise Party B shall be taken as in breach of the Contract.

All the risks and losses incurred due to unsatisfactory transportation shall be borne by the transportation company. Party A shall have the right to co-ordinate with Party B to require the transportation company to make corresponding compensation for the losses suffered thereby.

The procurement and design of packaging materials for all products under the Contract repackaged by Party A shall conform to China's national standards and be approved by Party B before use.

1. 13. Party B's representations, promises and undertakings

Party B undertakes and promises that it has continuous operation ability and effective existence during the performance of this contract, and has obtained administrative license, reply, license, and all other relevant qualifications (if any) required by all government authorities, institutions and organs for the purpose performing this contract. And the sterilisation targets, label and identification of the product shall be provided.

Party B undertakes and promises that it is the owner of the goods subject to the agreement of this contract and it has the legal qualification to supply goods to Party A.

Party B promises that the goods provided are products that are qualified in terms of quality (in compliance with all relevant laws that may be applicable to the products, including but not limited to the laws of the place where Party B is located, the place where Party A is located and the place where the products are sold), and will not infringe the intellectual property rights of any third party. If Party B violates the provisions of this article, it shall refund Party A for the paid amount corresponding to the goods that fails to meet the above requirements, and bear the losses caused to Party A for the same reason.

Party B's violation of any of the above requirements will constitute a material breach of contract, and Party A may immediately terminate the contract and demand Party B to compensate for the losses suffered therefrom. ...

Party A will be responsible for advertising the products, which are the subject of this contract, and any related expenses in Hunan, China. Before the product goes on the market, Party A shall hold at least one new product launch event; and if necessary, [Party A] can ask Party B to arrange for an expert to provide explanation of the product.

1. I note that, in the extract above, I have italicised the final part of clause 4. I have italicised it to make clear that part of the clause is only in Chinese in the original agreement, and not in English. The evidence was that Andy asked for these words to be included in the agreement, to put an obligation on Aus Made in relation to labelling.
2. Under the Supply Agreement, Aus Made was to provide parent rolls to Kekecial, which Kekecial was to cut up, package, label and sell in China. (As set out above, in fact, Kekecial used the Myron companies to carry out that work.)
3. The focus of the relevant clauses of the Supply Agreement is on the saleability of what the parties called the End Product; that is, the smaller, labelled packages sold in China. I agree with Kekecial's submission that:

[332] The first point to be made here is that, as matter of construction of the Second [Supply] Agreement, the correct focus is on the saleability of the End Product, not the Raw End Product. There was never any suggestion that Raw End Product would be offered for retail sale in China. The entire premise of the Second Agreement was that the Raw End Product would be cut up, packaged, labelled and sold as End Product in China. Both parties knew this, so that the principles in such cases as Toll v Alphapharm (2004) 219 CLR 165 are engaged.

1. The second part of clause 4 (italicised above), makes clear that Aus Made had the responsibility for ensuring that the product labels to be affixed to the End Product indicate the types of bacteria and viruses that can be killed by the product in accordance with inspection reports of Chinese authoritative institutions.
2. I am satisfied that, under the Supply Agreement, Aus Made was responsible for the labelling which was eventually used on the End Products produced by the Myron companies.
3. I reject Aus Made's contention that, under the Supply Agreement, labelling was the responsibility of either Kekecial or Novapharm, not Aus Made. It advances this argument by reference to the first part of clause 4. That first part is somewhat confusing. It probably does no more than note the parties' agreement that Aus Made would have the right to seek compensation from Novapharm (who I consider is here referred to by the term 'the manufacturer') if Novapharm provided incorrect labelling information to Aus Made, which Aus Made then used in order to provide labelling to Kekecial. This interpretation is bolstered by the fact that clause 2 of the distribution agreement between Novapharm and Aus Made imposes obligations on Novapharm to approve 'all labelling, packaging and promotional and marketing material' Aus Made is to use. Whilst Kekecial had not seen that Novapharm agreement, Aus Made was of course well aware of it. It is also relevant that in Clause 5 of the Supply Agreement, the parties agree compensation could be sought from the transportation company in some circumstances. In other words, in the Supply Agreement, Kekecial and Aus Made at times set out their agreement as to when other entities - not party to the agreement - can be pursued for some compensation.
4. The second part of clause 4 of the Supply Agreement is clear: Aus Made is named as the party in breach if the product labels do not comply.
5. I reject Aus Made's submission (made in its opening) that the requirement that the goods have necessary product information, relevantly labels, was included for the protection of Aus Made's reputation as the goods were being sold in China, and it had licenced Kekecial to on-sell there, and hence that it was Kekecial's obligation to ensure these matters were correct.
6. The evidence established that Aus Made in fact supplied details for the proposed labelling to Kekecial and others, and that Haha required any proposed modification to be confirmed with him. For example, Haha sent an email on 21 May 2019, which stated:

Chinese version of final packaging design drawings ai document for Ruhui disinfectant napkin's sales in Mainland China. This Email is the final draft design drawing. In case of any modification, please confirm with me.

1. The fact that others were involved in considering different drafts of the labels (a matter Aus Made referred to) does not alter Aus Made's obligations under the Supply Agreement relating to the labelling.
2. In paragraph 28 of the final Statement of Claim, Kekecial pleads:

[28] In breach of the terms of the Second Agreement, the Goods it supplied to Kekecial pursuant to the orders alleged at paragraph 27 hereof:

(a) were not qualified products (which shall comply with all relevant laws that may be applicable to the products, including without limitation laws of the Purchaser's location, the Seller's location and the countries or areas the products sold to being China); and/or

(b) the products did not strictly comply with the standards of China and Australia for this type of product,

(c) the products did not have the necessary product information of appropriate packing and labels to ensure the fitness for Kekecial's resale of the sanitising paper products in China;

(d) the product label, instruction manual and product manufacturing license did not indicate the types of bacteria and viruses that can be killed by the product according to the test report of Chinese authorities and [with] government approval,

(e) the product was not reasonably fit for purpose, namely the sale in the Peoples' Republic of China;

(a) it is illegal to sell the products in China; and

(f) the sanitizing paper products under Mr Liu's and/or Ausmade's own brands and or labels do not comply with all relevant laws in China; and

(g) the product label, instruction manual and product manufacturing license did not indicate the types of bacteria and viruses that can be killed by the product according to the test report of Chinese authorities and [with] government approval.

On 5 February 2020, an announcement from Changsha Market Supervision in the title of "Strict investigation! Changsha Market Supervision Bureau exposed the sixth bath of typical illegal cases" was published on its official website ("Announcement").

On 22 April 2022, the Wancheng District Market Administration Hunan Province, issued an investigation in to exaggerated advertisements of the Southern Cross Disinfectant Paper on the label packaging box (CB 2357).

On 8 July 2020, the Health Supervisory Opinion was issued by the Changsha Municipal Health Commission (CB 2327- 2328).

On September 11, 2020, the Changsha Municipal Health Commission filed an investigation of "Ruhui disinfecting tissues". The Ruhui disinfection tissues were found to have misleading information on their packaging labels.

It was declared by Changsha Municipal Health Commission that it is illegal to sell Ruhui disinfecting tissues in China, substantial fines will be imposed by Chinese law enforcement agencies.

The packaging labels under the labels and brands of Ruhui disinfecting tissues were solely provided by Ausmade and/or Mr Liu to Kekecial, and supplied pursuant to the Second Agreement.

Ruhui disinfecting tissues do not comply with the standards and regulation in China.

Kekecial refers to the affidavit of Linlin Zhang dated 6 May 2022 by way of expert report ("Linlin Report") and further the particulars sub-joined to paragraph 28K hereof.

1. It is impossible from reading these particulars to paragraph 28 of the final Statement of Claim, without more, to tell what Chinese laws Aus Made is said to have breached.
2. The particulars incorporate by reference, first, the 'LinLin Report', and second, the particulars at paragraph 28K of the final Statement of Claim. However, a review of these still does not make clear what laws Aus Made is said to have breached.
3. The LinLin Report sets out a number of Chinese laws. However, it was extremely hard to follow - and much of it was the subject of a challenge in this trial. Much of it was struck out, either by Kekecial's agreement, or by my rulings. The version of the LinLin Report finally relied on was significantly truncated, and adopted by Mr LinLin Zhang at trial. He also gave further evidence at trial.
4. The particulars to paragraph 28K of the final Statement of Claim shed light on at least part of Kekecial's claims in paragraph 28. Paragraph 28K was part of Kekecial's claim that 'the Second Further Representation' was misleading and deceptive (which I deal with below).
5. I reproduce all of paragraph 28K here, to put its particulars in context:

[28K] Further, the Plaintiff says that the Second Further Representation was misleading and deceptive or likely to mislead or deceive within the meaning of s18 of the ACL in that:

(a) they did no [sic] obtain reports from an accredited scientific tester which proved that the product to be supplied pursuant to the Second Agreement was effective and complied with Chinese Law; and

(b) they did not have valid scientific evidence from accredited scientific testers which showed the paper to be supplied was compliant with Chinese law in that neither Zhebo and/or Feifan had obtained the relevant metrological accreditation of the Metrological Administrative Department of the People's Government to conduct the virus testing and was able to attach a "CMA" marking to their reports to demonstrate that they were accredited scientific testers such that the Reports were invalid for demonstrating that the paper to be supplied was compliant with Chinese law; and

(c) the paper supplied was not compliant with Chinese law.

Without limitation, Kekecial refers to and repeats the matters alleged at paragraph 28and the particulars joined to paragraph 28.

Neither Zhebo or Feifan had obtained the necessary metrological accreditation necessary for their reports to show that the paper to be supplied was compliant with Chinese law (that is, they were not accredited testers).

In order for the Zhebo reports to be valid, they needed to contain the CMA accreditation mark referred to at paragraph 23 of the Linlin report.

Further, in relation to the Zhebo reports, they specifically state ("the test results are only used for scientific research, teaching or internal quality control of the intrusting unit, I do not have the role of proof to the Society.")

In relation to the Feifan reports, they too do not contain the requisite CMA accreditation. Feifan did not in fact conduct any of the testing, but simply relied upon the testing conduct [sic] Zhebo.

1. I asked counsel for Kekecial for clarification of what Chinese laws were said to have been breached. This list was ultimately provided, and incorporated in the agreed list of issues:
   1. a. Measures for the Administration of Disinfection, Articles 18, 31 and 32
   2. b. Management Specifications for Labels and Instructions of Disinfection Products, Article 18(3) and (6)
   3. c.. Notification of Technical Requirements for Hygiene and Safety Evaluation of Disinfection Products, Article 4.4
   4. d. Regulations on Hygiene and Safety Evaluation of Disinfection Products, Article 11
   5. e. Measures for the Administration of Qualification Accreditation of Inspection and Testing Institutions, Article 15
   6. f. Rules for the Implementation of the Metrology Law of the People's Republic of China, Articles 29 and 31
   7. g. Advertisement Law of the People's Republic of China, Article 28
   8. h. Law of the People's Republic of China on the Protection of Consumer Rights and Interests, Article 45.
2. In its final written submissions, Aus Made pointed out that some of these laws do not put any obligation on a supplier of goods (that is, Aus Made itself cannot have breached them).
3. Kekecial then clarified, in its final written submissions, that where that is the case, the laws were included in order to show that scientific reports that had been provided in relation to the products by Aus Made were not valid, as the organisations which had provided them (Feifan and Zhebo) did not have appropriate CMA accreditation required by those laws.
4. Ultimately, Kekecial's claims on breach came down to this:

(a) First, Kekecial claimed that the paper products could not lawfully be sold in China, principally because they were disinfectant products of a particular category which required testing by relevantly accredited organisations (which were entitled to put the CMA approval stamp on their reports), and this did not occur. Although testing had occurred, it was not done was by relevantly accredited organisations. (Aus Made denied that the products fell within a category which required testing by relevantly accredited organisations for the products to be lawfully sold.)

(b) Second, Kekecial claimed that because the labels on the products (which were Aus Made's responsibility) made claims as to their efficacy, those claims needed to be supported by scientific testing from a relevantly accredited organisation (entitled to put the CMA approval stamp on their reports).

1. Various Chinese laws and regulations relating to disinfectant products were in evidence. The Notice of the National Health and Family Planning Commission on the Issuance of the Provisions on the Health and Safety Evaluation of Disinfection Products (issued 27 June 2014) was particularly relevant. After an introduction, it sets out Regulations on the health and safety evaluation of disinfectant products.
2. Article 1 of those Regulations makes clear that the purpose of relevant provisions include ensuring the effectiveness and safety of disinfection products used for the prevention and treatment of infectious diseases.
3. Article 2 includes three categories of disinfection products: category 1 (high risk); category 2 (moderate risk) and category 3 (low risk). These are based upon the risks of the use of the goods, as the Article makes clear:

Classified management shall be implemented according to the use of disinfection products and the risk degree of the object of use.

the first category is high risk and requires strict management to ensure safe and effective disinfection products, including high-level disinfectants and disinfection devices, sterilizers and sterilization devices, skin and mucosal disinfectants, biological indicators, and chemical indicators of sterilization effect. The second category is a moderate risk, which needs to strengthen management to ensure safe and effective disinfection products, including disinfectants, disinfection instruments, chemical indicators, as well as sterilization article packages with sterilization labels, and anti- (antibacterial) preparations. The third category is the low risk degree is low, the implementation of routine management can ensure safe and effective sanitary products in addition to anti- (antibacterial) preparations.

When the same disinfection product involves different categories, it shall be managed in a higher risk category.

1. Article 3 of the Regulations make clear (and there was no dispute) that only category 1 and 2 disinfectant products needed to be registered.
2. There was (ultimately) no dispute that the End Product disinfectant papers did not fall within category 1.
3. The critical issue came down to whether the goods were 'disinfection products' within category 2, and so required appropriate scientific testing by relevantly accredited organisations, or whether they did not require that testing (in that they were category 3 products, or not disinfectant products at all).
4. I am satisfied that the goods were disinfection products which fell within category 2.
5. Relevantly, the End Product was branded as a disinfectant product (Ruhui® Disinfectant Wipes (For Skin) and Ruhui® Disinfectant Paper Towels (for surface use). The labels on the packaging made detailed claims as to its efficacy, once the disinfection function was activated. For example, on the label of the wipes (which wrapped around them, like a small tissue pack), the following is stated (as translated):

Tested by a third-party testing organisation in an experimental environment: this product kills more than 99.999% of Staphylococcus aureus, Escherichia coli, Candida albicans, Neisseria gonorrhoeae, Treponema pallidum and Pseudomonas aeruginosa in a 5-minute period of time. It has a killing rate of 99.99% for rabies virus, measles virus, and HIV. The killing rate of MRSA is more than 99.999% in a period of 10 minutes. For hand, foot and mouth virus(enterovirus 71), and influenza virus H1N1, its killing rate is more than 99.9%. (For details, please refer to the test report). This product has undergone acute eye irritation test, multiple intact skin irritation tests, vaginal mucous membrane irritation test, oral mucous membrane irritation test, and the test results are all non-irritating. Patent number US 7888404, and Australia AU2006209795.

Once in contact with water, the disinfection function is activated.

Product Effectiveness: The killing rate of influenza virus H1N1 and hand, foot and mouth virus (enterovirus 71) is over 99.9%; It can effectively kill rabies virus, measles virus, HIV, Methicillin-resistant Staphylococcus aureus (superbug MRSR), Treponema pallidum, Neisseria gonorrhoeae, Staphylococcus aureus, Escherichia coli, Candida albicans, Pseudomonas aeruginosa. It can effectively inhibit the growth of Escherichia coli, Staphylococcus aureus, Candida albicans and Aspergillus niger (inhibition rate >99%).

Range of use: Suitable for wiping the skin, skin mucous membranes, broken and abraded parts.

How to use: Rinse the skin and then dry it thoroughly with this product, or wet the product with a small amount of clean water and then wipe the skin thoroughly. Treatment of broken skin and abrasions - Wet the product with a small amount of clean water and wipe around the wound, then follow up or see a doctor as appropriate.

Precautions. 1. Disposable. 2. Not to be used inside the ear. 3. Not to be used on infants under two months. 4. Avoid using on deep incisions or open wounds. 5. Avoid prolonged contact with eyes.

Product component: PEFC certified 100% primary pulp paper, biocides

Bactericidal active ingredient and content: Chlorhexidine digulconate (CHG) 0.0767% W/W ~ 0.0842% W/W (activated in content with water).

Storage conditions: dry place at room temperature

1. Further, the disinfectant liquid was registered as a disinfectant. It delivered the disinfectant in a bottle, rather than impregnating it in paper,
2. I agree with Kekecial's submission that:

[338(f)] one might ask rhetorically, if the End Product was not a disinfectant product, then what was it? Its only function was to disinfect either skin or hard surfaces, as the case required, killing viruses and germs on those surfaces. It was, quite literally, a product which disinfects.

1. Aus Made's expert, Ms Zhou, said that the End Product should be treated, for categorisation purposes as like a 'paper towel', and so in category 3. Aus Made submitted that the End Product, being paper, was very different to the liquid product, and that the Court should find that it was a benign, non-active product until water was added, and so was low risk and belonged in category 3, rather than being higher risk (like liquid) and belonging in categories 1 or 2.
2. However, I agree with Kekecial's submissions that:

[339] Her evidence that "a paper towel is a paper towel" utterly ignores the nature, content and intended use of the End Product. Likewise her evidence that a tissue could perform the same use if her saliva was added to it, because of the alleged bacteria killing effect of saliva, overlooks that the bacteria and virus killing component in the End Product is already there as an intrinsic part of the End Product, and is the entire basis for its sale (at a price, incidentally, many times the price of an ordinary paper tissue or towel). ...

[340] No doubt it usually the case that disinfectants are in liquid form, but that is not part of the definition of the word "disinfectant", which means "an agent used to disinfect something" (per Mirriam-Webster Online Dictionary: Disinfectant Definition & Meaning - Merriam-Webster). There is no reason why a paper towel impregnated with a disinfecting compound cannot be such an agent. Indeed, that is the precise and only intended use of the End Product.

[341] The End Product is entirely different in its manufacture, labelling and use from a mere paper tissue or similar product. It is paper impregnated with a disinfectant compound; dry at the time of sale, but activated merely upon being wetted with plain water so as to activate the disinfectant compound suspended within it.

[342] The relevant part of the Standard is reproduced at CB 5962. Article 2 is by its opening sentence expressly premised by reference to the disinfectant product use and the use of the risk level of the object to implement the classification and management

(emphasis added). This introduction must logically inform the interpretation of what follows.

[343] The standard sets out a hierarchy, with the rider "the same disinfection products involving different categories should be managed in the high risk category." The product, logically, is at least category 2 because the product claims to have "antibacterial preparations". Without extending the metaphor too far, it literally says so on the box: "this product kills more than 99.999% of Staphylococcus aureus, Escherichia coli, Candida albicans, Neisseria gonorrhoeae, Treponema pallidum and Pseudomonas aeruginosa in a 5-minute period of time. It has a killing rate of 99.99% for rabies virus, measles virus, and HIV. The killing rate of MRSA is more than 99.999% in a period of 10 minutes. For hand, foot and mouth virus (enterovirus 71), and influenza virus H1N1, its killing rate is more than 99.9%. (For details, please refer to the test report)." [emphasis added]. The packaging of the product would not need to refer to a test report if it was a category 3.

1. Aus Made's submission makes much of the fact that the End Product was a tangible product (dry paper). It submits that they are akin to a tissue or sanitary wipe, and required water to be added to have any further functionality. It submits that the product 'is not some potentially dangerous chemical (or amalgam of chemicals) which might be ingested, or be flammable, or which could fall into the wrong hands' (unlike products that need to be registered).
2. However, I consider that this analysis misses the point. Yes, water needed to be added to the End Product to activate it. But it was not being sold as tissues, nor designed to be used dry. And once water was added to the product, it was not just paper: the impregnated chemicals which allowed disinfecting were activated, and there were potentially risks in being applied to the skin or surfaces. Aus Made's submission that the product was not some potentially dangerous chemical begs that question. The risks associated with chemicals is why there is a testing and registration regime to be complied with.
3. This means that scientific testing was required by the appropriately accredited testing laboratory. And the evidence was that the appropriate CMA qualification had not been obtained by the organisations doing the testing on the End Product, and providing the reports.
4. In support of its claims that the goods fell within category 3, so that registration was unnecessary, Aus Made argues that substantial efforts were made to register the products online and that it was unable to. It says that Kekecial has not established that it was possible to register the products. I am not satisfied that the products could not have been registered. The evidence of attempts made was not comprehensive, and at no time was anyone who really knew what they were doing asked to register the products.
5. Aus Made also argues that some of the End Product (or something very similar) was later sold by Myron Biotech (in 2023) without registration occurring. However, there was no evidence of the context of any such sales, and in any event that is irrelevant to the issue of whether registration was legally required.
6. I note that Kekecial claims other instances of alleged breaches of the BP Rolls contract relating to regulatory issues, raising complex issues of fact and law. However, Kekecial's contractual claim goes nowhere, even though it has established breach, because it has not established its claim for loss and damage. So I do not need to deal with the other instances of claimed breach.

1. Further to its breach of contract claims, Kekecial claims that three sets of detailed representations were made by Aus Made, relating to labelling and compliance with Chinese laws and related matters. These sets of representations are pleaded at length at paragraphs 6, 23A, and 23C of the final Statement of Claim.
2. Kekecial claims that all of these representations were misleading and deceptive in breach of the ACL. As already noted, it claims the same loss and damage for these alleged breaches, as it claims for alleged breach of the Supply Agreement (that is, the Kekecial Damages claim).
3. Aus Made denies making the claimed representations and the corresponding ACL breaches. It denies that Kekecial is entitled to the loss and damage claimed.
4. In the end, I do not need to decide whether the claimed misleading and deceptive conduct occurred, because, as I will now explain, I am not satisfied that Kekecial has established it suffered any loss, or the entitlement to the damages it claims.
5. I turn now to consider the Kekecial Damages claim.

1. The Kekecial Damages are claimed both pursuant to Kekecial's claims that Aus Made breached the Supply Agreement and Kekecial's claims of the Aus Made parties' alleged misleading and deceptive conduct.
2. The Kekecial Damages claim is for a total of RMB 8,138,350**.** (In the final Statement of Claim, at paragraph [30], it says that this amount is approximately AUD $1,779,971.25. It wants judgment in Australian dollars.)
3. The RMB 8,138,350 is made up of the amounts Kekecial says it is liable for as a result of entering agreements to compensate each of the Myron companies on 10 November 2020, and subsequent payments Kekecial claims were made on its behalf to meet its obligations under those agreements (which is liable to repay). It is the total of:

(a) RMB 4,547,450 arising from the Myron Biotech Compensation Agreement. Andy paid this in four payments between 8 and 11 December 2022, and Kekecial says it is liable to repay Andy; and

(b) RMB 3,610,900 arising from the Myron Trading Compensation Agreement. The Tea Co effectively paid this by a book-keeping entry on 21 December 2022, whereby it reduced the amount Myron Trading owed it. Kekecial says it is liable to repay the Tea Co.

1. Each of the Compensation Agreements were signed by Aiping Liu for the relevant Myron company, and Andy for Kekecial. Andy also signed the Myron Trading Compensation Agreement for the Tea Co. Each agreement had a term providing that due to deficiencies in the scientific testing of the sanitising paper products, the goods supplied by Kekecial do not comply with Chinese laws, and a term whereby Kekecial agreed to make a payment described as a 'refund' - to the value of all the goods sold by Kekecial to the relevant Myron company (with those sales noted in a table) - and another payment to the value of 1/3 of the refund amount, described as a 'penalty'.
2. Kekecial claims that it entered the Compensation Agreements due to the following. It had sold all the goods it purchased from Aus Made to the Myron companies. However, it says that product could not be sold in China, due to the regulatory issues (discussed above). It claims that it was required to compensate the Myron companies for loss and damage they suffered, due to the regulatory matters meaning that they could not sell the End Product in China. This obligation to compensate arose under the overarching agreements Kekecial had entered with the Myron companies in 2019: the Myron Trading Supply Agreement and the Myron Biotech Supply Agreement. Kekecial agreed to pay them compensation in the Compensation Agreements, and bases its claims for loss and damage on that.
3. Mr Williams KC, in final oral submissions for Kekecial, made clear that Kekecial claims that it suffered a loss because it had to compensate the Myron companies (its downstream purchasers) for the fact the product had legal issues which meant they had to stop selling it, and had to get some of the goods they had already supplied to downstream purchasers back.
4. However, as discussed below, Kekecial has not established its entitlement to the damages claimed because it has not established that either of the Myron companies in fact suffered loss, nor that it was reasonable for Kekecial to agree to pay the sums it did by way of compensation.
5. Accordingly, Kekecial has not established that it suffered the Kekecial Damages.

1. In order to show the context in which the Compensation Agreements were made, I highlight some matters here. Further details of contracts and payments between relevant entities are included in the Facts - BP Rolls Issues section of this judgment, above.
2. Andy established Tea Co in 2000. He owns over 85% of the shares, his brother holding the rest. He gave evidence that it was his primary line of business. It manufactures and sells health tea products in China, and has done for 20 years or so. It is 'his' company, as Andy acknowledged in giving evidence.
3. In August 2017, Andy and Haha started talking about doing business together.
4. Myron Trading was established on 4 September 2017. Aiping Liu was its legal representative.
5. In late 2017, Andy's company, Kekecial, placed two purchase orders for canola oil with Haha's company, Aus Made. These orders were filled, and the canola oil was exported to China.
6. On 8 February 2018, Novapharm entered a non-exclusive distribution agreement with Aus Made in relation to the sale of Novapharm's goods in China.
7. On 14 June 2018, Aus Made and Kekecial entered the Disinfectant Supply Agreement (the overarching supply agreement for the sale of barrels of Evocide disinfectant liquid to Kekecial).
8. Myron Biotech was established on 17 November 2018.
9. From 26 November 2018, Andy and his brother Zhendong were the only shareholders of T Biotech, and Andy controlled it.
10. On 26 November 2018 Aus Made and Kekecial entered the Supply Agreement (an overarching supply agreement for the supply of parent rolls of disinfectant paper).
11. On 12 December 2018, Aus Made signed a document allowing Myron Trading to open a flagship store on the Tmall website, and to sell Evocide disinfectant, and disinfectant paper, on that website.
12. On 8 February 2019, Kekecial entered overarching supply agreements with the Myron companies, for the supply of disinfectant paper: the Myron Trading Supply Agreement with Myron Trading, and the Myron Biotech Supply Agreement with Myron Biotech. These agreements included clauses making Kekecial responsible for product packaging and labelling and meeting the requirements of Chinese laws re disinfecting products, broadly mirroring the responsibility Aus Made had to Kekecial under the Supply Agreement between those companies, and including damages clauses if that liability was breached.
13. On 27 February 2019, Shandong Ruhui authorised the use of the Ruhui trademark for two years, to Myron Trading, 'and its affiliates', Myron Biotech and T Biotech:

to engage in the business of manufacturing, distributing and selling products affixed with the abovementioned trademark...

1. Just over a week later, on 6 March 2019 Tea Co loaned Myron Trading, CNY 1 million, its first loan. It was recorded to be for 'turnover of current capital'; that is, cash flow.
2. On 4 April 2019, Kekecial signed its first purchase order for sanitising paper with Aus Made on 4 April 2020,
3. On 15 May 2019 Kekecial and Myron Biotech entered the Escrow Lease Agreement. It provided for Myron Biotech entering a lease for warehouse facilities with a lessor from 1 July 2019 to 30 June 2022 for 'First floor', and May 16 2019 to May 15 2022 for 'Second floor'. It provided for Myron Biotech paying rent to the lessor, but clause 2 provided that Myron Biotech 'may require' Kekecial to pay Myron Biotech those sums back by money or products. It set out something of the relationship between the companies (Party A is Kekecial):

As the disinfection products exported by Party A are large packaged products of Australian origin, they need to be packed into small packages in the area under the supervision of China Customs, and then declared and paid taxes by China Customs before entering the Chinese market. Party A has no warehouse under customs supervision in China. Now Party A entrusts Party B to rent the sub-packaging and storage room and keep it on its behalf to reach the following agreement with Party B:

1. Party A is an Australian import and export trading company and has no repackaging and warehousing turnover site in China.

2. Party B is a company in Huanghua Comprehensive Bonded Zone of Changsha County, which belongs to outside China and can provide the authority of sub-packaging and warehousing products, establishing customs logistics account books and import and export declaration. ...

1. Party A entrusts Party B to lease the west floor ... of building 3, Standard Warehouse, Huanghua Comprehensive Bonded Zone, Changsha, and the rent shall be borne by Party A.

2. After customs clearance and tax payment, Party B shall directly hand over the disinfection products to Hunan Mailun Trading Co., Ltd. (Company outside the supervision of China Customs).

1. Between 27 May 2019 and 1 November 2019 Kekecial on-sold the goods it bought from Aus Made, to the Myron companies. The Myron companies turned them into the End Product, and on-sold them to Shandong Ruhui (as to about 70%), and other Chinese companies. The evidence does not establish if the Myron companies on sold all of the End Product; or if they delivered all that they had sold. (There are invoices in evidence from Myron Trading to Shandong Ruhui, dating from June 2019 until October 2020. Shandong Ruhui later obtained judgment for some goods it had paid Myron Trading for but which had not been supplied.).
2. On 3 June 2019, Myron Trading and Shandong Ruhui entered an agreement (titled '2019 Annual Goods Purchase and Sale Contract') for Shandong Ruhui to purchase Ruhui disinfectant products from Myron Trading.
3. The next day, on 4 June 2019, Andy forwarded, in WeChat, scanned copies of this contract, and four related invoices, to the members of the Disinfection China Subcontracting Program Group.
4. The parties' joint chronology filed in this matter, says that on 5 December 2019, Myron Biotech signed a lease for a warehouse in the Changsha Huanghau Comprehensive Bonded Zone; and Kekecial signed a lease agreement with Myron Biotech. However, that 'lease agreement' between Kekecial and Myron Biotech is clearly a reference to the Escrow Lease Agreement between Kekecial and Myron Biotech, which is dated 15 May 2019, not 5 December 2019. It seems likely that the warehouse lease Myron Biotech entered into was also signed in May (particularly as the Escrow Lease Agreement refers to lease terms commencing 16 May 2019).
5. On 6 February 2020, Changsha Market Supervision published an announcement on its official website **(**the Changsha Announcement). It is the first of the announcements from Chinese authorities that Kekecial relies on in relation to the Regulatory Issues claims in this case. Andy gave evidence that he was told about the announcement by 'Hunan Myron' (that is, one or both of the Myron companies), which, he said, 'come look for trouble with me'. Andy forwarded the Changsha Announcement to Haha and others, via WeChat.
6. On 18 February 2020, Haha contacted the Consulate-General of Australia in Guangzhou with a lengthy letter from Aus Made (dated 11 February 2020). It related to concerns arising out of the investigations referred to in the Changsha Announcement. He wrote, 'it is foreseen that this enacting will cause great loss to the whole network'. The letter was predicated on the investigations relating to the End Products (although during this proceeding, Aus Made submitted that the investigations may have related to other products). The evidence established that Andy was involved in drafting this email. Haha sent it.
7. The Consulate-General then sent a letter to the Foreign and Overseas Chinese Affairs Office of the Changsha Municipal People's Government, seeking to clarify 'a current regulatory issue impacting an Australian company operating in Changsha', and forwarding the Aus Made letter. It sought advice on steps to be taken to resolve the current impasse.
8. On 2 March 2020, the Changsha Municipal People's Government Foreign Affairs Office responded to the Australian Consulate General in Guangzhou, saying relevantly that:

On February 4, 2020, after receiving consumer complaints, the Wangcheng District Administration for Market Regulation inspected the Yangtianhe Pharmacy's Liancheng branch in Changsha. It was found that the disinfectant wipes of the Ruhui brand on the shelves indicated their producer as the Australian KEKECIAL PTY LTD. Advertisements and packaging for these wipes in the store claimed their efficacy as: "Kills over 99.9% of HINI flu virus, hand-foot-mouth disease virus and effectively eradicates rabies virus, measles virus, and HIV," among others. These claims did not specify to consumers that the kill rate is theoretical maximum nor did they clearly indicate the application method, environment, or duration of use. The District Administration for Market Regulation promptly initiated a legal investigation into the Yangtianhe Pharmacy's Liancheng branch in Changsha for alleged false advertising.

Currently, the investigation is solely focused on the false advertising by the Yiangtianhe Pharmacy's Liancheng branch in Changsha and does not pertain to the quality of the advertised products or involve the suppliers and manufacturers. We advise the Australian company to cooperate actively, suggesting targeted improvement measures to mitigate or eliminate adverse impacts. Our office will continue to monitor the follow-up proceedings of the case. ...

1. On 13 March 2020, at 11.08 am, Andy messaged the Disinfection Project WeChat group:

It's not toilsome. The sales is very poor. For Tmall shop, the sales is less than two thousand per day.

1. On 28 April 2020 Andy sent Haha a WeChat message which included the following:

... . And due to the investigation by market supervision bureau, from the Spring Festival till now, other sellers have been afraid to sell disinfectant tissues. They asked to return goods and refund the disinfectant tissues worth of over 9 million yuan. ...

1. On 1 September 2020 Novapharm's solicitors wrote back, refusing to refund the deposit that Aus Made had paid on the Novapharm BP rolls contract.
2. Tea Co made three loans to Myron Trading in late September: on 21 September 2020 for CNY 3,000,000; on 22 September 2020 for CNY 4,500,000 and on 23 September 2020, for CNY 2,500,000.
3. The Tea Co's final loan to Myron Trading was made about six weeks later, on 2 November 2020, for CNY 1,100,000.
4. On 2 November 2020 - the same day as the Tea Co's final loan to Myron Trading - Andy sent Haha a lengthy demand email. It is worth setting out in full here, given the way the Kekecial Damages claim is framed. Its subject line stated, 'please repay the overdue payment and negotiate to dispose the loss to Chinese importers and distributors'. The body of the email said:

Hello. Your Ruhui disinfectant napkin of AUS MADE EXPRESS INTERNAITONAL GROUP has not been legally registered in China, and your labels and logos have violated the laws and regulations of China. You are investigated by the Market Supervision Administration of Changsha City on February 5, 2020 because there is no legal evidence to prove the product function indicated in the label and logo and no virus detection report, CMA qualification and legal effect but you are involved in the false publicity and make a breach of the Advertising Law to result in a fine of RMB 200,000 on the retail drug store. You are also identified as the typical case and exposed on the internet, as a result, no retail drug store in the market can dare to continuously sell the products. A link to the relevant situations has been sent to you by WeChat on February 9, 2020. On September 10, 2020, Changsha Health Commission as the specific laws enforcement authority of disinfectant products imposed an administrative punishment on the drug store controlled by Changsha SINOPHARM. Since the label and logo of Ruhui disinfectant napkin you supply have already violated the Methods for the Administration of Disinfection Products, punishment decision has been disclosed on the internet. All the labels, logos and the test report of Ruhui disinfectant napkin are provided by your company and the qualifications thereof are not in compliance with the laws of China, thus causing huge losses to our Kekecial's importer-Hunan Mailun Commerce Trading Co., Ltd. and distributor-Hunan Tiantianqing Biotechnology Co., Ltd. Today we received an Email from our Chinese importer-Hunan Mailun Commerce Trading Co., Ltd. to claim for the return and losses.

Now our Kekecial Company and our importer-Hunan Mailun Commerce Trading Co., Ltd. and distributor-Hunan Tiantianqing Biotechnology Co., Ltd. claim that:

1. On April 28, 2020, I communicated with you on WeChat for your repayment of AUD 793,608.33 to Kekecial Company, including the product payment of AUD 691,931.89 and the prepaid freight of AUD 101,676.44. Later you only made a repayment of the air freight I have prepaid for you, and AUD 691,931.89 has not yet been repaid. In June, you sent me an Email, unilaterally specifying to change such overdue payment into the deposit of Ruhui disinfectant napkin. This is absolutely unacceptable. In our contract, written purchase order should be placed for the product purchased, specifying the product name, quantity, specification, price and the date of delivery. It is unacceptable to conclude the purchase contract on telephone or WeChat. Our Kekecial Company does not acknowledge your contract or conclude the 10 containers of Ruhui disinfectant napkin purchase contract with AUS MADE EXPRESS INTERNAITONAL GROUP. Hope that you can repay Kekecial Company the product payment of AUD 691,931.89 prior to November 10, 2020.

2. AUS MADE EXPRESS INTERNAITONAL GROUP is a brand dealer. As specified in the contract, you should provide the labels, logos and relevant test reports and own the legal qualifications but you violated the regulations. You know that your Ruhui disinfectant napkin test report has no legal virus CMA test qualifications but cause us for import and export trade and sale, as a result, we are subject to the case investigation and punishment by several laws enforcement departments in Hunan, China. Therefore, Kekecial Company's distributor-Hunan Tiantianqing Biotechnology Company received a return of more than 9 million from the drug store. Plus the market advertising investment, the loss reached RMB 18 million. The Company immediately commenced the bankruptcy proceedings. Hope that the loss arising from illegality of your labels and logos may be solved through negotiation with you. Since Ruhui disinfectant napkin violates the laws of China, we have to terminate any purchase contract. Hope that the direct loss arising from return may be properly solved.

3. Hunan Mailun Commerce Trading Co., Ltd. as Kekecial Company's partner importer and distributor has made an investment of RMB 10 million in the equipment and plant specific to Ruhui disinfectant napkin and may issue invoice. Since the equipment cannot be used to produce Ruhui disinfectant napkin, the loss on such investment should be borne by you. In addition, the existing 3 containers of disinfectant napkin of Hunan Mailun Commerce Trading in the warehouse in the Comprehensive Bonded Area, Huanghua Airport, Changsha, Hunan may also face with the return, and this issue should be also solved through negotiation.

Looking forward to your reply to the aforesaid requirements by Email.

1. On 10 November 2020 - eight days after Andy' demand email to Haha - Kekecial entered the Compensation Agreements it relies on for the Kekecial Damages claim.
2. On 10 November 2020, just 8 days after this email was sent - and without any response being received from Aus Made - Kekecial claims that it entered compensation agreements with each of the Myron companies.

1. The Myron Trading Compensation Agreement was a tripartite agreement between Kekecial, Myron Trading and Tea Co. Andy signed for Kekecial and Tea Co; Aiping Liu for Myron Trading. It included terms to the following effect:

(a) Kekecial agreed to pay Myron Trading RMB 4,694,170 (being a 'refund' of RMB 3,610,900 and a 'penalty' of RMB 1,083,270) (clause 4.1).

(b) Kekecial 'hereby entrusts' Tea Co 'to help it repay' the RMB 4,694,170 (clause 4.2).

(c) Myron Trading owes Tea Co a loan of RMB 12,100,000 plus interest of RMB 1,774,660 (clause 4.3).

(d) Tea Co agrees to 'indemnify' Myron Trading in the amount of RMB 4,694,170 for and on behalf of Kekecial by deducting that amount from the loan debt owed to it by Myron Trading, and, after deduction, Kekecial is taken to have paid the indemnity of RMB 4,694,170 (clause 4.4).

(e) Kekecial shall repay to the Tea Co a debt in the sum of 4,694,170 within 5 years in the form of cash or actual goods (clause 5).

1. The Myron Biotech Compensation Agreement was between Kekecial and Myron Biotech. Andy signed for Kekecial; Aiping Liu for Myron Trading. By it, Kekecial agreed to pay Myron Biotech RMB 5,885,685 (being a 'refund' of RMB 4,527,450 and a 'penalty' of RMB 1,358,235) (clause 4.1). The payments were not due until after judgment in Kekecial's litigation against Aus Made and Haha in Victoria, Australia (clause 4.2). That is, they were not due until after this judgment was given.
2. Kekecial issued this court proceeding three weeks after the Compensation Agreements, on 1 December 2020. As discussed below, it did not claim any loss and damage at that time, and did not mention it had entered agreements to pay the Myron companies compensation.
3. On 21 December 2020 the Tea Co reduced the amount Myron Trading owed it by RMB 3,610,900 . This was the 'refund' amount Kekecial had agreed to pay under the Myron Trading Compensation Agreement. The 'penalty' amount was not paid. Tea Co made a book-keeping entry in the Myron Trading loan account, noting those amounts as 'Offsetting the compensation amount of Kekecial Pty Ltd'. Kekecial claims that it is liable to repay Tea Co this amount. It is part of the Kekecial Damages claim.
4. There is an Agreement on Equity Transfer dated 10 December 2021, made between Andy and Aiping Liu, in evidence. By it, Andy agreed to pay Aiping Liu RMB 40,000, for 80% of Myron Biotech's shares, and to assume Myron Biotech's debts. It has an unusual clause relating to how the proceeds of compensation to be paid to Myron Biotech under the Myron Biotech Agreement are to be dealt with:

4. Party A (Liu Aiping) was the former shareholder and legal representative of Hunan Myron Biotechnology Co., Ltd as of December 10, 2021. The beneficiaries of the compensation agreement on disinfecting paper concluded between Kekecial Pty Ltd (an Australian company) and Hunan Myron Biotechnology Co., Ltd on November 10, 2020 were Liu Aiping and other shareholders. Such compensation was given to the formal shareholders. After receipt of the compensation by Hunan Myron Biotechnology Co., Ltd, Liu Aiping shall distribute the compensation. Hunan Myron Biotechnology Co., Ltd shall cooperate and shall not intervene with such distribution. Party B (Yang Zhenhua) and Hunan Myron Biotechnology Co., Ltd subject to the change shall not benefit from such compensation.

1. Filed company records for Myron Biotech indicate that on 21 December 2021, Andy became the majority shareholder of Myron Biotech, and its legal representative. He is shown to have invested RMB 1.6 million. (I note that this is 80% of the Myron Biotech shares, consistent with the Agreement on Equity Transfer. However, the amount invested is much higher than the amount the Agreement on Equity Transfer records that he paid Aiping Liu for the shares).
2. On 16 December 2021 a Supplementary Agreement on Escrow Lease was entered between Kekecial and Myron Trading. It allows Kekecial to pay 2,950,408 yuan said to be due to Myron Trading under the Escrow Lease Agreement (of 15 May 2019), by letting Myron Trading 'use' 80 barrels of disinfectant liquid as compensation. This document was provided to the Aus Made parties for the first time in July 2022**.**
3. There is a Deed of Loan in evidence, between Andy and Kekecial dated (in handwriting) 6 December 2022, and signed by Andy on behalf of Kekecial as well as his own behalf. The Deed of Loan provides that the Lender (Andy) 'will make' various payments to Myron Biotech as directed by the Kekecial. Only after Aus Made's solicitors requested the native electronic copy did Kekecial's solicitors disclose, in a letter of 29 April 2024, that the Deed of Loan had been backdated. Andy had emailed his accountant about it on or around 6 December 2002, but it was only provided to him in March 2023, as the accountant was busy. It follows that it must have been signed some time after March 2023, though when was not made clear.
4. Between 8 and 11 December 2022, Andy paid Myron Biotech RMB 4,527,450. He was the majority shareholder of Myron Biotech at the time. This was the 'refund amount Kekecial had agreed pay under the Myron Biotech Compensation Agreement. The 'penalty' amount was not paid. Kekecial claims that it is liable to repay Andy this amount. It is part of the Kekecial Damages claim.
5. On 18 January 2023 Myron Biotech was selling Novapharm's disinfectant paper online, as indicated in a screenshot from the JD.com website in evidence. Aeris is named as manufacturer. There were over 1,000 product reviews for the product.
6. On 14 September 2023 Andy ceased being a director and legal representative of Myron Biotech.

Evolution of Kekecial's claims for loss and damage

1. Kekecial's claims for loss and damage evolved, in contradictory ways, through these proceedings, and highly relevant documents were produced years after the dates they bear, and years into the litigation. This has understandably given rise to concerns some of these documents were not created on the dates they bear. This is particularly so, as the Deed of Loan between Andy and Kekecial was backdated, and this only came to light after Aus Made pursued the issue of when it had been entered into.
2. For several years of this litigation, Kekecial denied ever on-selling the goods it had purchased from Aus Made. It then changed its claim to rely on an allegation it had sold them to the Myron companies; and that, following the regulatory issues which arose, Kekecial entered the Myron Biotech Compensation Agreement, and the Myron Trading Compensation Agreement, on 10 November 2020. Its claimed losses stem from those agreements.
3. However, when Kekecial issued proceedings three weeks later, on 1 December 2020, the initial statement of claim (drafted by a solicitor) simply sought rescission of the Supply Agreement or a declaration that it was unenforceable (and not, to be clear, any damages).
4. A year and a half later, on 2 June 2021, it filed an amended statement of claim (settled by junior counsel for the Kekecial parties). In the amended statement of claim, Kekecial sought a refund of the money it had paid Aus Made under the Supply Agreement, and an indemnity for loss and damage. It pleaded that the goods it had purchased had no value to it, and it continued to seek rescission of the Supply Agreement. It specifically pleaded, in relation to its claimed loss, only the following, at [30]:

The product is in storage and has not been sold. Storage costs have been incurred.

1. Nine months later, on 12 April 2022, after Kekecial was asked to discover further documents including those relating to its dealings with the Myron companies, Kekecial's then solicitors wrote to Aus Made's solicitors (the 12 April letter), saying that their client instructed that he did not have any 'sales agreements or invoices' between Kekecial and Myron Trading or Myron Biotech (in other words, Kekecial did not have any purchase orders or invoices relating to sales of the Raw End Product with those companies in its possession). I note that this was consistent with the pleadings then in place, stating that the product had not been sold (implicitly, sold by Kekecial).
2. The 12 April letter discovered documents relating to the arrangements about leasing of the warehouse from which the Myron companies operated: two warehouse lease agreements dated December 2019 between Myron Biotech and a landlord: and the Escrow Lease Agreement dated May 2019, and Supplementary Agreement to the Escrow Lease dated 16 December 2021, both between Kekecial and Myron Biotech.
3. Andy was cross-examined about the 12 April 2022 letter, and agreed that, following his solicitor asking him to produce documents, he gave his solicitor instructions to write saying there were no sales agreements or invoices because:

I did not want to produce documents. I didn't know about Australia laws as in how it regulates compensation matters when there's stipulation in agreements. ... By saying that I was trying to - by saying that actually, I was unwilling to provide such documents, I thought the International Sale of Goods Agreement with Haha would be suffice.

1. Three months later, on 8 July 2022, Kekecial first provided a copy to Aus Made of the Myron Supply Agreements, both dated 8 February 2019; and also produced a swathe of payment records, purchase orders and sales invoices relating to sales between Kekecial and the Myron companies. (In other words, documents he had previously denied having).
2. On 24 April 2023, Kekecial filed a further amended statement of claim. In it, Kekecial finally made the Kekecial Damages claims it now pursues, arising from the Compensation Agreements and referencing the Myron Supply Agreements.
3. The application to further amend the statement of claim was supported by an affidavit of solicitor Feng Lin dated 3 February 2023. It attached a number of new documents (new to Aus Made and the Court, at least), including the Compensation Agreements dated 20 November 2021, the Agreement on Equity Transfer between Andy and Aiping Liu, dated 10 December 2021, and a payment receipt for Andy's payments to Myron Biotech between 9 and 11 December 2021. In the affidavit, Lin said he had emailed the proposed further amended statement of claim to the solicitor for the Aus Made parties on 22 December 2022, and that (at paragraph 6) 'the amendments reflect recent instructions and document that I had been given'. He said that Andy had instructed him that Andy had travelled to cities in China on business and experienced frequent lockdowns due to the China Covid-Zero policy, that Andy 'had difficulties giving us the instructions and accessing and collecting his documents', and that (as of late November 2022) it was easier for Andy to give full instructions now he was in Melbourne.
4. In this day of email and online connectivity, I do not accept that any of those reasons are adequate reasons, or explanations, for the Kekecial parties not providing those documents or instructions in a timely fashion. The Kekecial parties had discovery obligations: serious obligations to provide relevant documents.
5. To refer to the most obvious missing documents, Kekecial claims to have entered the Myron Trading Compensation Agreement and the Myron Trading Compensation Agreement in 10 November 2020 - before these proceedings were even issued. Yet Andy did not tell his solicitor or counsel about them until some time in late 2022, or Aus Made about them until December 2022. And it is these Compensation Agreements that it relies on to make out its damages claim.
6. Andy was cross-examined that in fact he did not discover documents - which were later produced and are relied on by the Kekecial parties - because they did not exist at that time. He denied that.
7. Having considered all this evidence, I am not satisfied on the balance of probability that the invoices between Kekecial and the Myron companies, the Myron Supply Agreements, the Compensation Agreements, the purchase orders between the Myron companies and Kekecial, and the Agreement on Equity Transfer, were all entered into on the dates that are noted on those documents.
8. And, even assuming that they were entered on the dates they bear, I am not satisfied that Kekecial has established its entitlement to the Kekecial Damages.

1. In circumstances where Kekecial claims it needed to compensate the Myron companies for their losses, it is striking that there is no evidence (other than Andy's oral evidence) that the Myron companies had suffered loss and damage as a result of the claimed breaches, or of what that loss and damage was.
2. As I have made clear already, I do not accept Andy's evidence on contentious matters unless backed up by contemporaneous evidence.
3. There is no evidence that either Myron company ever made a demand to Kekecial for compensation or damages. That, one would expect, would be the first thing required before a major compensation payment was agreed to. Nor is there evidence of any complaint or demand being made upon the Myron companies by those companies they sold products to.
4. Andy gave oral evidence of Myron Trading sending an email claiming losses to Kekecial, but did not produce the email. I am not satisfied it existed.
5. The one contemporaneous document relating to any claim from a Myron company around this time is in the email that Andy sent Haha on 2 November 2020 (set out in the 'Facts - Kekecial Damages' section of this judgment, above.)
6. It hinders, rather than helping support Kekecial's Damages claims.
7. The email refers to losses by:

... our Kekecial Company and our importer-Hunan Mailun Commerce Trading Co., Ltd, and distributor Hunan Tiantianqing Biotechnology Co., ...

1. Myron Trading has not been called Hunan Mailun Commerce Trading Co in any other documents I have seen, but I am prepared to accept this was meant to be a reference to Hunan Mailun Trading Co, which Myron Trading was sometimes referred to, since Andy refers to the company as 'our importer'.
2. So the email refers to losses Kekecial, Myron Trading and T Biotech have purportedly suffered.
3. In it, Andy claims that 'distributor' _Hunan Tiantianqing Biotechnology Co., Ltd. (_that is, T Biotech) had goods returned to it:

Hunan Tiantianqing Biotechnology Company received a return of more than 9 million from the drug store.

1. T Biotech is Andy's company. Kekecial had no contract with it. And there is no evidence, anyway, to support the assertion that goods were actually returned to it. There is no evidence of any loss it suffered or how that relates to the Myron companies' supposed losses.
2. The 2 November email does not even refer to Myron Biotech, let alone any demand by, or loss suffered by, Myron Biotech.
3. I do not accept the assertions made by Andy in this email, as to losses he claims that Kekecial, Myron Trading, and T Biotech suffered as amounting to any proof of what those companies in fact lost. There is nothing to support the claims.
4. There are contemporaneous messages and documents which suggest that after the regulatory issues arose with Chinese authorities in relation to Ruhui disinfectant products, there was some drop in sales of those products in online stores, and in pharmacies, but there is no evidence to establish how much, and of course, any drop in sales occurred further down the sales chain. There is no evidence of what sales, if any, the Myron companies lost (that they otherwise would have made), or of any goods being returned to them, or of claims being made on them.
5. It was not clear whether the Myron companies had already on-sold all of the End Product they had produced by the time the Compensation Agreements were entered; or if so, the total that was on-sold. Whatever had been sold was, of course, sold at a profit. There is no evidence to show that the Myron companies still had Raw Product and could not sell it.
6. There is no evidence that Myron Biotech actually on-sold any of the goods. The only invoices in evidence relating to onward sales are between Myron Trading and Shandong Ruhui.

Amounts Kekecial agreed to pay were not reasonable

1. I am not satisfied that the amounts Kekecial agreed to pay in the Compensation Agreements (and the amounts it claims Andy, and Tea Co, paid on its behalf) were reasonable compensation for losses the Myron companies suffered.
2. Andy gave evidence that the Compensation Agreements were drafted by 'Hunan Myron'. He said he did not seek any legal advice, saying, 'This is how we do things', and that he thought that what was agreed was reasonable compensation. Obviously, Andy's belief is not sufficient to establish the reasonableness of the amounts Kekecial agreed to pay.
3. He gave evidence that the figures which Kekecial agreed to pay related to the Myron companies' losses, 'suffered due to their marketing investment'.

And the figure was only a reflection on the purchase price described in our contract. Because when we entered into a contract there was an allocation of risk - or risks - between the parties so we were simply just following what was agreed upon in our contract.

1. The reference to the 'contract' there is to the Myron Supply Agreements. These provide, in general terms, that if the products Kekecial supplied the relevant Myron company were not able to be legally sold in China, then Kekecial should repay the relevant Myron company the cost of those goods as 'compensation for material damage'. They also provide that because the relevant Myron company 'and its downstream distributors at all levels put a huge amount of advertising in Hunan province and on the Internet', if Kekecial breaches the contract, causing the relevant Myron company 'and its downstream distributors' to be unable to sell the goods legally, 'it will cause huge losses', therefore Kekecial 'shall also bear 30% of the total amount of goods purchased as liquidated damages'.
2. In other words, these Myron Supply Agreements set up the basis for the payment regime agreed to in the Compensation Agreements: they provide for repayment of the purchase price of all the affected goods, and an additional 30% payment. In the Compensation Agreements, these sums are described as 'refund' and 'penalty'.
3. But - and this a big But - although Myron Supply Agreements were referred to in later versions of the statement of claim, and the Compensation Agreements were pleaded as being entered into pursuant to them - Kekecial did not,in fact, rely on the repayment or damages clauses in them in making submissions in support of the Kekecial Damages claim in this proceeding. It did not argue that the Myron Compensation Agreements represented reasonable compensation for Myron losses because of the provisions of the Myron Supply Agreements, nor that Kekecial needed to pay those amounts because of those clauses in the Myron Supply Agreements.
4. This may well have been because the Myron Supply Agreements have significant difficulties themselves in terms of founding the Kekecial Damages claims. That includes the fact that the 'penalty' which was provided for under each agreement arises from marketing costs purportedly expended by the relevant Myron company. There was no evidence of those marketing costs. And, had the terms of the Myron Supply Agreements been relied on, no doubt Aus Made would have defended on the basis that those clauses regarding loss and damage amounted to a penalty (under contract law). In any event, the Myron Supply Agreements were only mentioned in passing in the course of the trial, including in the parties' final submissions.
5. I note that only 11 days after the Myron Trading Compensation Agreement was entered, providing for payment of both a 'refund' and a 'penalty' amount, Tea Co purportedly paid the agreed refund amount only, by its book-keeping entry. Two years after the Myron Biotech Compensation Agreement, Andy purportedly paid the agreed refund amount only. The 'penalty' amounts due under the agreements were never paid (or claimed). These were significant sums, being 1/3 of the value of the 'refund' payments. In the paragraph 28F and 28J of the final Statement of Claim, Kekecial pleads that the 'penalty' amounts were forgiven on the basis of prompt payment. No evidence was given about this.
6. I am also not satisfied that the claims agreed to be paid under the Compensation Agreements and the amounts paid represent reasonable compensation in light of how interlinked the Myron companies, Tea Co, T Biotech and Andy's interests were.
7. First, a few comments about the Myron Trading Compensation Agreement, and the payment Tea Co made in relation to that (by reducing the amount of its loan account with Myron Trading).
8. The Myron companies were only established once Andy and Haha's business plans for Australia-China trade got going. Tea Co - Andy's company - then loaned Myron Trading a lot of money on 6 March 2019. That was its first advance to Myron Trading. This was around the time that the Myron companies started processing the product Kekecial sold them into the End Product.
9. I infer that Tea Co made that first advance to give Myron Trading funds to assist it with the work involved in repackaging the Raw End Products.
10. Tea Co also made loans to Myron Trading in the couple of months before it entered the Compensation Agreement: on 21 September 2020 for CNY 3,000,000, on 22 September 2020 for CNY 4,500,000, on 23 September 2020, for CNY 2,500,000, and on 2 November 2020, for CNY 1,100,000.
11. Asked about why Tea Co had lent Myron Trading money, Andy said that Myron Trading was short of funds:

... so it just so happened that the Tiantianqing Tea Co had some extra money and the tea company would charge - would only receive an interest which is a normal practice in China

1. He said about the first loan, that, in 2019, Myron Trading was 'a bit tight in terms of funding' and sought to borrow from him:

... in 2019 they had other businesses to do which would be money and they were a bit tight in terms of funding so they borrow - they sought to borrow money from me. ...

1. Andy said he was willing for Tea Co to loan the money to Myron Trading:

Because previously the two people from the Hunan Myron company, Iaiping and Wang Hong were my colleagues. We were in good relationships and we were doing import and export trading businesses together [in] Changsha Airport free trading zone. In 2019 they told me that they would like to continue their lines of businesses, however, they would need money. That's why I lent a sum of 1 million to them, the primary reason being I wanted to earn interest. If I were to deposit my money with the bank the interest rate was so small, it was marginal, but if I loaned money to them, we would apply the normal bank mortgage interest rate which was pretty okay.

1. There is no evidence of any other businesses being run by Myron Trading.
2. The loan agreements in evidence between Tea Co and Myron Trading refer to the money paid as being 'turnover of current capital' of Myron Trading (that is, cash flow).
3. The total that Andy claimed Tea Co 'just so happened' to have available to lend Myron Trading, because Myron Trading was 'a bit tight in terms of funding' was a very substantial sum: RMB 12,000,000. No security was provided.
4. I am not satisfied that these were arms-length loans. This adds to the reasons I am not satisfied that the amounts paid or agreed to be paid were reasonable compensation.
5. Second, some comments about the Myron Biotech Compensation Agreement and the payments Andy made in relation to that.
6. That agreement was entered into when Andy was not on the record as a shareholder or as legal representative. However, he became both of these later (on 21 December 2021). Importantly, in December 2022, when Andy paid the money to Myron Biotech which Kekecial relies on its Kekecial Damages claim, he was a shareholder and legal representative of Myron Biotech. The payments were not due under the Myron Biotech Compensation Agreement at the time Andy made them; they were not due to be paid until after judgement in this case.
7. The extent of Andy's financial investment in the company is unclear. In an Information of Change document (similar to a company search), Andy is recorded as having invested RMB 1.6 million. How and when such investment occurred is not shown: it is a much higher figure than the RMB 40,000 shown in the Agreement to Transfer document dated 10 December 2021, between him and Aiping Liu, for her 80% shareholding.
8. Kekecial relies on the Deed of Loan Andy signed with Myron Biotech and Andy, which is dated (in handwriting) 6 December 2022 to support its claim that the money Andy paid was a loan.
9. The Deed of Loan provides that the Lender (Andy) 'will make' various payments to Myron Biotech as directed by the Borrower (Kekecial).
10. However, as discussed above, Andy backdated the Deed of Loan. It was not signed until at least March 2023. This means that the executed Deed of Loan postdates the payments made (which were made from 8 to 11 December 2022). Aus Made submits that because the Deed post-dates the alleged payments, as a matter of fact and law, Andy's payments were not made pursuant to it. It relies on Netage Pty Ltd v Cantley (1985) 6 IPR 200, 208 (Young J):

"A deed is presumed to have been made upon the date appearing on the face of it but if it is established by evidence that the deed is made on some other day then the date on the deed is entirely disregarded and it operates from the date it was in fact made."

1. I agree with this analysis. The payments were not made pursuant to the Deed of Loan. However, I accept that as between Andy and Myron Biotech the money he advanced was nonetheless a loan. It is not unusual for people involved with companies to lend those companies money.
2. I note too that the 'penalty' which was agreed to be paid under the Myron Biotech Compensation Agreement, purportedly arises from the fact machinery bought by Myron Biotech to process the sanitising paper was unable to be used following the regulatory issues.
3. Even if Myron Biotech had purchased that machinery - and there is no evidence it was the purchaser - I am not satisfied that Myron Biotech was entitled to compensation for this on the basis claimed, namely that it could no longer be used. The equipment was used by Myron Biotech after the Compensation Agreement was entered, when Myron Biotech obtained goods directly from Novapharm. A copy of a webpage dated 18 January 2023 shows that Myron Biotech had purchased sanitising paper products directly from Novapharm at that time (the website refers to Aeris), and listed those products for sale on its online website.
4. Further, the Myron Biotech Compensation Agreement purports to compensate Myron Biotech on the basis that Myron Biotech had purchased goods from Kekecial. I am not satisfied as to the validity of the purchase orders and other documents supporting such purchases, given the timing of when they were produced and other matters discussed above. All the contemporaneous payment records show payments from Myron Trading to Kekecial - not Myron Biotech.

1. Kekecial has not satisfied me of its entitlement to the Kekecial Damages. It has not claimed loss and damage for breach of the Supply Agreement, or for Aus Made's alleged misleading and deceptive conduct, as arising in any other way.
2. I will order that Aus Made pay Kekecial nominal damages for breach of the Supply Agreement, as no loss has been proved. I will award $1.00 in nominal damages.

1. In summary, I find as follows as to the issues in this proceeding:
2. As to the BP Rolls Issues:

(a) I am not satisfied that the BP Rolls Contract was entered into between Aus Made and Kekecial. It follows that Aus Made's counterclaim based on alleged breaches by Kekecial of a BP Rolls Contract fails.

(b) I am not satisfied that Kekecial made the BP Rolls Order Representations.

(c) As it has not established the BP Rolls Contract, Aus Made must repay the overpayment of $291,931.89. (Aus Made agreed that this would follow if it did not establish that contract was made.)

(d) I find that the $400,000 advanced by Kekecial to Aus Made around 6 March 2020 was a loan repayable on demand. Aus Made must repay it.

(e) As a result of my findings on Kekecial's loan claim, it is not necessary to decide Kekecial's alternative claim to the $400,000 based on restitution. However, were I wrong in finding that the $400,000 payment was made by way of loan, I would find that Kekecial was entitled to restitution to that extent.

(f) I am not satisfied that Aus Made and Haha made the Advance Representation.

(a) I am satisfied that Aus Made breached the Supply Agreement.

(b) Kekecial has not established it suffered any loss and damage as a result of the breach of the Supply Agreement, and thus, is entitled to an award of nominal damages only. I award $1.00 nominal damages.

(c) I do not need to deal with Kekecial's misleading and deceptive conduct claims, as no loss and damage was established in any event (loss and damage being a necessary part of that cause of action).

1. I will give judgment for Kekecial on its claim.
2. I will order that Aus Made pay Kekecial:

1. I will dismiss the counterclaim.
2. I direct that the parties confer about these reasons for judgment with a view to agreeing upon the final orders to be made giving effect to the judgment including orders for costs. If the parties cannot agree, then they should file:

(a) any affidavit material on which they rely together with an outline of submissions by 4:00pm on 7 July 2025;

(b) any reply material and submissions by 4 pm on 14 July 2025.

1. The submissions are limited to six A4 pages, and the reply submissions are limited to three A4 pages. Each set of submissions should have a minimum 12-point typeface, 1.5 spacing and 40mm margins on either side of the page. Unless I consider a hearing is required, I will decide the issue of costs and the form of final order on the papers.

I certify that these 130 pages are a true copy of the reasons for decision of Her Honour Judge Marks delivered on 20 June 2025.