Li v Everwell Medical Group Pty Ltd [2025] FedCFamC2G 2069

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025Li v Everwell Medical Group Pty Ltd [2025] FedCFamC2G 2069 | Case summary | Zoe

[7]

An array of witnesses turned out to support the respective cases of Mr Li and the respondents. Perhaps not surprisingly, the witnesses for Mr Li had all at one time been connected to EMG and/or EHC and had since cut ties with the companies. The witnesses for the respondents remained connected to and invested in their success.
It is helpful to identify these witnesses and their relationship to the proceeding at the outset. For Mr Li they comprised:
- Mr Li, who read and relied on his affidavits filed 8 February 2022 (first Li affidavit), 1 March 2022 (second Li affidavit), and 21 March 2022 (third Li affidavit).
- Ms Lu Wang described herself as the former regional manager of NSW for EMG. Her affidavits filed 8 February 2022 and 21 March 2022 were read and relied on.
- Mr Yang Lin, who described himself as the former CEO of the Dalian, China branch for EMG and EHC. His affidavit filed 8 February 2022 was read and relied on.
- Mr Xinying Zhang, who described himself as the former Regional Director Quality Officer of EMG and former shareholder of EMG. His affidavit filed 8 February 2022 was read and relied on.
- Mr Xiaozhong Jin, who described himself as the former Chief Operation Manager of EHC and former shareholder of EMG. His affidavit filed 8 February 2022 was read and relied on.
- Mr Jae Woo, lawyer. Mr Woo's affidavit filed 1 March 2022 was read and relied on to put into evidence letters requesting copies of employee records from EMG and EHC and to note that no response to the requests had been received.
Except for Mr Woo, Mr Lin and Mr Zhang, each of the applicant's witnesses were cross-examined. All of the applicant's witnesses, including Mr Li, gave evidence with the assistance of an interpreter in the Mandarin and English languages.
The respondents' witnesses comprised:
- Mr Haizheng Wang, who between April 2016 and March 2020 was the managing director of EMG and EHC. The respondents read and relied on his affidavit filed 15 March 2022.
- Dr Richard Yang, who described himself as the current CEO of the Everwell Healthcare Group, which comprises various companies in which EHC has an interest and includes EMG and Etewell Group Pty Ltd (Etewell). The respondents read and relied on his affidavit filed 15 March 2022 (Yang affidavit).
- Mr Tao Zhang¸ a director of EMG from April 2016 to March 2020 and a director of EHC since October 2018. The respondents read and relied on his affidavit filed 15 March 2022.
- Dr Eva Wu, a shareholder of EMG and EHC since April 2016, and a former director of EMG. Dr Wu is married to Mr Haizheng Wang. The respondents read and relied on her affidavit filed 15 March 2022.
- Ms Fangyu "Lisa" Ye, a director of EHC since November 2019 and significant investor in the company. The respondents read and relied on her affidavit filed 15 March 2022.
- Mr Lin Fan, a lawyer, whose affidavit filed 15 March 2022 was read and relied on to place into evidence various company records obtained from the database maintained by the Australian Securities and Investment Commission.
- Mr Michael Broughton, whose expert report filed 22 March 2022 was tendered by the respondents and marked as Exhibit R3.
Except for Mr Fan, each of the respondents' witnesses were cross-examined. All of the respondents' witnesses, except for Mr Broughton, gave evidence with the assistance of an interpreter in the Mandarin and English languages.
Objections to affidavits that were not dealt with by agreement, were ruled on during the hearing.
While not all of the evidence is referred to explicitly in these reasons, I have nonetheless considered all of the evidence relied upon by each party, along with the use of contemporaneous notes made during the trial. In the production of these reasons, I have also reviewed transcript for each sitting day.

[8]

The following matters are not controversial.
On 19 February 2016, Mr Li registered EHC as a proprietary company limited by shares. At the time of its incorporation, Mr Li was the sole director and shareholder.
On 7 April 2016, Mr Li registered EMG as a proprietary company limited by shares. While 14 people were appointed as director, it was decided that a "core board" comprising Mr Li, Mr Wang, Ms Yan Shi (who was also secretary) and Mr Zhang (the Board) would be principally responsible for decision making.
In June 2016, the Board of EMG resolved to appoint Mr Li as its CEO. It is Mr Li's case that it was further agreed that he was to be engaged as an employee on a full-time basis and paid a salary of $80,000. The respondents deny this. According to them, the arrangement was that everyone was working on a "paid by shares" basis as there was yet no profit from which salaries could be drawn.
Between 11 July 2016 and 21 October 2018, Mr Li performed the role of CEO for EMG.
On 14 September 2018, the Board met and resolved to restructure EMG so that its shareholders would become shareholders of EHC and its directors would take up directorships in EHC. EHC became the holding company of EMG going forward by virtue of its majority shareholding of this company.
On 9 October 2018, the payments company of EHC, Etewell, began to pay Mr Li the amount of $800 gross per week. These payments were discontinued on 7 May 2019 and then resumed (but paid on a fortnightly basis) across the period 11 December 2019 to 4 February 2020.
On 18 October 2018, a meeting of shareholders of EMG and EHC passed a resolution that Mr Li would assume the role of CEO of EHC. It is Mr Li's case that the meeting attendees also agreed that his salary was to remain the same, being $80,000. The respondents deny that there was any discussion of salary and that instead there was a discussion that che-ma-fei (a Mandarin term for discretionary allowance) might be paid to some directors in the future and contingent on the performance of the EHC Group.
On 15 May 2020, Mr Li ceased in the role of director of EMG.
On 10 September 2020, Mr Li ceased in the role of director and secretary of EHC.
On 13 September 2020, the board of EHC sent Mr Li a letter confirming the end of his "employment". Mr Li contends that the use of the word "employment" and other analogous terms, were consistent with and confirmatory of him being in a relationship of employment with one or both respondents. It is the respondents' case that the use of the word "employment" was inadvertent (or, in the case of the non-English speakers, entirely unknown to them).

[16]

(a) Where the rights and duties of the parties are contained in a written contract (and the contract is not a sham), the obligations established by that contract are decisive of the character of the relationship: Personnel Contracting at [43]-[44], [59] (Kiefel CJ, Keane and Edelman JJ), [172] (Gordon J, Steward J agreeing at [203]). (Whether all of the parties' rights and duties are embodied in the written contract may of course depend on whether the contract has been varied and whether the assertion of relevant rights is subject to any estoppel).

(b) In order to ascertain the relevant rights and obligations, the written contract is to be construed in accordance with established principles of contractual interpretation: Personnel Contracting at [60] (Kiefel CJ, Keane and Edelman JJ), [173] (Gordon J, Steward J agreeing). Those principles allow regard to be had to circumstances surrounding the making of the contract and events and matters, known to the parties at the time of contracting, which assist in identifying the purpose or object of the contract. The nature of the work contracted for and any tools or equipment that the putative employee had to supply may also be relevant to the task of construction. Generally, things said or done after a contract was made are not legitimate aids to its construction.

(c) Flowing from the first two points, the characterisation of the relationship between the parties depends on their contractual rights and not on circumstances, facts or events that do not affect those rights. Thus, a "wide ranging review of the entire history of the parties' dealings" is neither necessary or appropriate for the purpose of characterising the relationship: Personnel Contracting at [59] (Kiefel CJ, Keane and Edelman JJ) (and see [185]-[189] (Gordon J, Steward J agreeing))). A course of dealings between the parties that does not reflect their strict contractual rights, or the fact that certain of those rights have never been exercised, is not relevant (except to the extent that that it might indicate that the contract has been varied or is subject to an estoppel, or that the written contract was a sham): Personnel Contracting at [61] (Kiefel CJ, Keane and Edelman JJ).

(d) Once the contours of the legal relationship are identified, its characterisation often hinges on two considerations: the extent to which the putative employer has the right to control how, when and where the putative employee performs the work; and the extent to which the putative employee can be seen to be working in their own business as distinct from the putative employer's business: Personnel Contracting at [36]-[39], [73] (Kiefel CJ, Keane and Edelman JJ), [113] (Gageler and Gleeson JJ), [180]-[183] (Gordon J, Steward J agreeing). Both of these involve questions of degree.

(e) The contractual provisions likely to be relevant include those that deal with the mode of remuneration, provision and maintenance of equipment, the obligation to work and hours of work, provision for holidays, deduction of income tax, whether work can be delegated, and the right to exercise direction and control: Personnel Contracting at [113] (Gageler and Gleeson JJ), [174] (Gordon J, Steward J agreeing).

(f) The label that the parties attach to their relationship is not determinative and rarely of assistance: Personnel Contracting at [63], [66] (Kiefel CJ, Keane and Edelman JJ), [184] (Gordon J, Steward J agreeing).

[19]

Mr Li submits that the answer to this question is "yes". He submits that the Court should find that he first met with Mr Wang, Ms Shi and Mr Zhang in or about June or July 2016 and that during this meeting, it was agreed that Mr Li would become the CEO of EMG from that date.
Mr Li submits that following from this discussion, an oral contract for him to work as the first respondent's CEO was formed. Over the course of the next few weeks, Mr Li's role as CEO was further discussed and on about 11 July 2016, he received a letter of appointment as the first respondent's CEO. He submits that this letter was "signed" by the application of the common seal of the first respondent on the document.
Mr Li submits that from the above conversation, and subsequent memorialisation of the oral contract through the letter of appointment, the parties intended to enter into a legally binding agreement.
Mr Li acknowledges that the witnesses for EMG deny that they entered into a binding employment agreement with him but submits that when viewed objectively, the Court should conclude that the words and conduct of Mr Li and the first respondent evinced an intention that they intended to assume legally binding contractual obligations to each other, consistent with the principles identified in authorities such as Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at [25] and Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81; (2012) 289 ALR 237 at [14].
Mr Li submits that the Court should bear firmly in mind the construction principles identified in cases such as Personnel Contracting and Jamsek and not be distracted by the attempts made by the respondents to infer from Mr Li's behaviour in continuing to work for EMG without pay for two years, that there was never an agreement for EMG to employ him as a salaried CEO.
Mr Li is also critical of the respondents' efforts to on the one hand call in aid the two pay slips provided to him in around July 2016 as recording information that is inconsistent with the first contract, whereas, on the other hand, asking the Court to ignore the payslips relating to the period from 1 October 2018 to 27 September 2020 as offending the principle that post-conduct behaviour should not ordinarily be taken into account in the construction exercise. Mr Li submits that the disparate treatment reflects only that these later payslips are unfavourable to the respondents and they are unable to explain them.
As far as the payslips from July 2016 are concerned, Mr Li submits that the Court should form the view that they establish an intention between the parties that payment was to be made some time in the future by way of backpay. Put simply, if there was no intention to pay or backpay Mr Li a salary, the respondents' conduct in issuing the payslips cannot be rationalised.
Mr Li submits that the Court should accept his evidence that he performed work for other entities on the basis that he did so for the benefit of the respondents' group of companies but that in any case, whether he performed work for related companies should have no bearing on the legal test of whether a contract of employment was formed between him and EMG in July 2016.

[20]

The respondents submit that in approaching this first question (and those later questions concerned with ascertaining whether there was a contract of employment between Mr Li and the respondents) the Court should take account of the construction principles referred to by the High Court in the decisions of Personnel Contracting and Jamsek.
The respondents emphasise the following as having application to this case.
First, the focus of the Court determination is on the circumstances surrounding the making of the alleged contract, what was known to the parties at the time of the alleged contracts were said to be entered into, and objective evidence that assists in identifying the purpose or object of the alleged contracts (if validly formed).
It follows (according to the respondents) that the Court should pay special attention to evidence in respect of the parties' knowledge and understanding in the lead up to and around 11 July 2016 when the alleged first contract was said to have been formed, with the same temporal lens applied to the alleged second contract and its purported variation.
Second, post-contractual conduct, i.e. how the relationship played out in practice between Mr Li and either respondent, has no bearing on the existence and nature of contractual obligations between the parties, particularly in circumstances where no sham contracting or estoppel issues have been raised. Similarly, the conduct, knowledge and understanding of those witnesses who joined EMG or EHC after the purported making of the alleged first and second contracts are of limited relevance, unless such conduct, knowledge or understanding could be said to relate somehow to the time the contracts were entered into or varied.
Third, whatever "labels" the parties ascribed to the arrangement between them is not determinative. It is common ground that Mr Li held the title of "CEO" of the respondents at relevant times. However, the respondents submit that this "label" says nothing about whether legal rights and obligations existed pursuant to any contract of employment between the parties.
Relatedly, the respondents submit that the fact that Mr Li was a company director and shareholder of the respondents until 15 May 2020 and accordingly was obligated pursuant to a "statutory contract" created by s 140 of the Corporations Act 2001 (Cth) (Corporations Act) to observe the company rules, does not have the automatic consequence that he was in a second type of relationship with either respondent, including a relationship of employment.
The respondents submit that Mr Li has failed to discharge his onus of proving that there was ever a validly formed contract, let alone a contract of employment.
The respondents submit that no contract of employment was ever formed between Mr Li and either respondent for the following reasons.
First, for a contract to be validly formed, axiomatically, there must be offer, acceptance and consideration. There must also be finality and certainty in the essential terms of the agreement. The respondents submit that the arrangement between the parties in this proceeding lacks all of these essential elements required to form a valid contract.
Second, there was no obligation arising pursuant to contract for Mr Li to perform work for the respondents in exchange for a fixed remuneration. It followed that even if a contract arose, it could not be said that the nature of the legal relationship between the parties was one of employment.
The respondents submit that in respect of the alleged first contract, the flaw in Mr Li's case reveals itself as follows, and with the focus firmly on the events on or around 11 July 2016.
The respondents submit that the evidence of Mr Wang and Mr Zhang establishes that the agreement between the founders of EMG was that Mr Li and themselves would be directors of the company, with no need to contribute capital. The four core directors (identified earlier as the Board) would not draw a salary but would be paid if, and when, their shares yielded a dividend. The respondents note that Mr Li did not dispute that he did not contribute financially to EMG and made the concession that it was predominantly the money of investors that helped start the first medical clinic in Nunawading.
The respondents point to a series of circumstances which they say cast serious doubt on the credibility and plausibility of the contractual arrangement for which Mr Li contends.
They submit that given EMG was incorporated in April 2016 and had at this time only received $90,000 in investment, which was sufficient to staff just one clinic in June 2016, it was improbable that a mere three months after incorporation, the company would have had the financial capacity or appetite to employ Mr Li on a salary of $80,000. They note that EMG did not make any payments to Mr Li from July 2016 to 9 October 2018, when payments of $800 per week commenced.
The respondents characterise as "inexplicable" and "absurd" the conduct of Mr Li in acquiescing in this arrangement, including in circumstances where he maintained that from the opening of the Nunawading clinic in 2016, EMG had enough money to pay him a salary. They submit that in order to accept Mr Li's case, the Court would be required to accept as plausible that Mr Li would agree to be employed full-time without pay for over two years on a vague, undocumented "promise" that EMG would pay him at some future unspecified date.
The respondents submit it to be further significant that despite not being paid, Mr Li did not resign and did not record in any written document the amount of salary he now says is owed to him.
The respondents submit that even if the Court was prepared to suspend reality and accept the factual premise of Mr Li's case, the arrangement lacks contractual certainty as to fundamental matters, such as the amount of salary, necessary to give rise to a valid and enforceable contract. They submit that the arrangement is further obscured by Mr Li's evidence that there was a purported promise to backpay him for agreed salary, yet no information was put before the Court as to when such back payment would start and in what amount. Put simply, the Court could not be satisfied that Mr Li and EMG had any concluded bargain.
The respondents submit that Mr Li's conduct in acting as the CEO of EMG without pay for two years is consistent instead with their version of events, by which his exertions would be rewarded by an increase in the value of his shares and any future dividends if the company was to turn a profit.
The respondents further submit that Mr Li's pleaded case is irreconcilable with his own evidence about the issuing of payslips - a topic that will be explored below. The respondents note the payslips allegedly issued to Mr Li in or around July 2016 incorrectly record Mr Li's position as "manager" and his pay as $2,307.70 per fortnight, which equates to $65,681.98 per annum, inclusive of superannuation. The respondents submit it to be a matter of some significance that Mr Li did not attempt to correct his position from "manager" to "CEO" and neither did he dispute the amount recorded on the pay slip, which was substantially less than the salary of $80,000 (exclusive of superannuation) that Mr Li claims he was contractually promised.
The respondents submit that the explanation offered by Mr Li, which was to the effect that the pay slips were a draft designed to keep a record of his salary, is "absurd" and "inexplicable" especially given Mr Li's evidence that he understood he would be back paid any amount owed in the future.
Despite these irregularities with the payslips, the respondents characterise them as the best contemporaneous evidence before the Court that the alleged first contract was never in fact formed. This is so because the payslips directly contradict and disprove Mr Li's pleaded case that the parties agreed he would be employed as the "CEO" on a salary of $80,000 exclusive of superannuation. The respondents submit it to be further significant that despite the existence of these payslips, no payment was in fact made at the time of their creation or in the ensuing two years. The respondents invite the Court to infer that it is only because the parties understood there was no obligation to pay Mr Li that they acted with apparent carelessness in creating and signing the payslips.
The respondents submit that the payslips provided belatedly in the proceeding by Mr Li which are said to relate to the period from 9 October 2018 and record weekly payments from Etewell to Mr Li of $800 (gross)[3] do not assist Mr Li's case. They submit that the payslips are examples of the type of post-contractual conduct that the High Court in Jamsek and Personnel Contracting cautioned against relying upon for the construction exercise. The respondents submit that in any case, the information recorded in these payslips is again inconsistent with Mr Li's pleaded case that it was a term of his contract that he receives a salary of $80,000. The payslips record the applicant as being on a salary of $41,600 per annum.
The final argument deployed by the respondents is that despite claiming that he worked exclusively for EMG under the alleged first contract, Mr Li acted as the director of several companies at the time, including:

[40]

While Mr Zhang, the recipient of the WeChat message, was not deterred from giving evidence and did so, the day following its receipt, I am left in no doubt that the message sent by Mr Li was intended to have an intimidatory effect on him and the evidence that it was anticipated he would give; this being a matter that proceeded on affidavit evidence. The decision to send the message reflects adversely on the credit of Mr Li. It means that I should treat with circumspection the evidence of Mr Li on topics about which Mr Zhang gave contrary evidence.
As far as Mr Zhang was concerned, my impression of him as a witness was that he, above all other witnesses, gave evidence in a direct and forthright manner. While it is true, as Mr Li notes, that he gave inconsistent evidence on the topics of whether the respondents conducted any business in China and had difficulty reconciling his precise title; equivocating between finance director of the respondents and the person with responsibility for obtaining funding, I do not consider that these inconsistencies are of such quality to impugn his credit as a whole. The second, especially, was very likely a result of misinterpretation.
Mr Wang was criticised by the applicant for giving inconsistent evidence on the topic of whether the respondents had any business in China and whether there was any discussion between himself and Mr Li to the effect that if the respondents started to make profits, they could start paying Mr Li a che-ma-fei and if the profits were very good, then the respondents might even be able to make up for the periods that Mr Li missed out on payments.
It was noted that in his affidavit, Mr Wang had adverted to a discussion of this kind but when cross-examined, he equivocated before settling on the answer that any such discussion would have been to three or four people, rather than to Mr Li alone.[9] I have considered this movement in Mr Wang's evidence but do not consider that it provides a basis to reject as unreliable everything said by him in this proceeding. I do not consider that it provides a basis to reject his evidence about central matters bearing on the question of whether the parties intended to enter into a binding contract, of employment, or otherwise.
Which brings me to my findings on this question.
While the parties framed the first issue in conclusory terms, i.e. whether a contract of employment was entered into between Mr Li and the first respondent, on or around 11 July 2016, there are several antecedent questions that inform the answer to this question.
First and foremost, the Court must be satisfied that a contract was validly formed which in turn requires proof of the following conditions:
- There was an agreement between the parties, typically based on an offer and acceptance;
- Each party has provided consideration in return for the obligations undertaken by the other;
- The parties must have intended to create legal relations; and
- The agreement must be certain and complete.
As would be apparent, for Mr Li to enjoy success on issue one, the Court must accept that the conversation that he deposes took place in June or July 2016 did in fact occur and, in the manner, described. It is this conversation alone that conveys an offer to employ Mr Li as CEO and is the occasion on which Mr Li communicates his acceptance, although I acknowledge that this could occur latterly through the performance of tasks associated with the role of CEO.
The discussion, importantly, is the only occasion (on Mr Li's case) that remuneration is expressly mentioned. This is important because the offer to pay remuneration provides evidence of valuable consideration. I accept that the language used during the discussion communicates an intention on the part of those who participated in the meeting and purported to represent the first respondent, to create legal relations.
However, I find that the agreement ostensibly brokered during this meeting (on Mr Li's case) fails at the last hurdle. This is because it was framed in terms that left open how and when the first respondent would perform its essential obligation to remunerate Mr Li for the work that he was performing. On Mr Li's version of the discussion, the first respondent was not able to pay him the salary upfront but would be able to do so "within a year". It is clear from this exchange, that the first respondent retained a complete discretion to determine when and on what terms (or indeed if), it would perform the sole obligation cast on it.
To be clear however, I am not persuaded that the discussion alleged by Mr Li did in fact take place. I prefer the evidence of Mr Wang and Mr Zhang to that of Mr Li, who, as I have earlier recorded, engaged in conduct that reflects adversely on his credit and demonstrates a lack of respect for the judicial process through which he seeks to vindicate his claims. Furthermore, the account of the discussion receives no corroboration from a meeting record or even notes produced by Mr Li, at or around the time it ostensibly occurred.
There are other factors that reinforce my decision about the contract. The first reflects what might be characterised as the circumstances surrounding the making of the alleged contract and events and matters known to the parties at the time of contracting, which assist in identifying its object and purpose. At the time that the alleged first contract was purportedly agreed, the first respondent was undoubtedly in "start-up" mode with little capital, given that none of the founders had invested beyond the modest amount required for the purchase of shares and the $90,000 that was invested in the Nunawading clinic. While the founders might have harboured hopes that the first respondent would in time generate a profit, this had not yet been realised. The more natural arrangement, reflecting these operating conditions, is one whereby work performed voluntarily was to be rewarded through share ownership and profit share.
As far as Mr Li relies on the letter of appointment reproduced above at [75] as supporting his contractual claim, it is noteworthy that both Mr Wang and Mr Zhang disclaim any knowledge of the document. And while the respondents don't go so as far as alleging that it was fraudulently procured, its provenance is of doubtful origin. In any case, it does no more than confirm what is not in doubt; that Mr Li was appointed as CEO for the first respondent. Curiously, the letter of appointment says nothing about the terms of Mr Li's appointment, including whether he was to be remunerated.
The same can be said for the two anomalous payslips that were said to have been created in July 2016. It was Mr Li's evidence that he received two payslips from Mr Wang on behalf of EMG, the first dated 11 July 2016 and the second dated 25 July 2016. The pay slips record information including:[10]

[42]

In circumstances where, in important respects, the information recorded in these payslips clashes violently with the terms of the alleged first contract, Mr Li was questioned as to why he signed both payslips, without seeking correction of either the employment classification, or the rate of pay.
Mr Li's evidence was unconvincing. He told the Court that he did ask about correcting the record but was told by Mr Wang that "it's not a big deal" as he (Mr Wang) would correct it when the payment was made.[11] Mr Li described the payslips as "just a draft" for the purpose of keeping a record of the salary, with the "actual amount" to be paid when it came time for payment. Mr Li was dismissive of the suggestion that it should have been important to him to ensure that the record was accurate, so that he would have something to refer to in the future. He said that he trusted Mr Wang would keep his promises.[12]
Mr Wang, for his part, acknowledged that it was his signature that appeared on both payslips, but could not recall an occasion when he signed them. He denied giving instructions to the first respondent's accountant or anyone else to create these payslips as this would have been inconsistent with the agreement that EMG did not pay salaries.
Ultimately, I do not need to make findings as to the circumstances in which the payslips relied upon by Mr Li came into existence. That is because they contain information that operates inconsistently with his claim that there was an agreement between the parties to employ him in the role of CEO on a salary of $80,000. I am not satisfied that the fact of their creation in any way vindicates Mr Li's claim. As I have earlier observed, their existence serves only to obfuscate rather than to clarify and confirm the character of the arrangement for which he contends.
As I noted earlier, for Mr Li to enjoy success on issue one (as for all issues) I must feel an actual persuasion of the existence of the first contract, which persuasion eludes me for all the reasons identified above. Furthermore, while I acknowledge that humans do not act uniformly and that their behaviours are not always rational or predictable or susceptible to evaluation against a standardised norm, I am troubled by Mr Li's acquiescence in a situation where he acted as the CEO of EMG for two years without any pay. Mr Li was no shrinking violet and was assertive, bordering on rude at times, in his exchanges with counsel. I consider it unlikely that he would not have protested loudly had his entitlements been dishonoured. Instead, I consider his conduct to be consistent with a scenario where he understood that his effort would be rewarded by an increase in the value of his shares and any future dividends if the company was to turn a profit. It is apparent that Mr Li had considerable latitude as to the way he chose to apply his time and energy to EMG and its related companies, which freedom is also more synonymous with a volunteer for profit relationship, than one of employment.
It follows from my finding that Mr Li did not enter into a contract of employment with EMG on or around 11 July 2016 that I am unable to be satisfied that he was employed by EMG pursuant to such contract from 11 July 2016 until 21 October 2018 as its CEO, this being the question posed by issue number two. It is also the case - a matter acknowledged in the phrasing of the questions as predicated on a "yes" answer - that the successive issues appearing under the heading "The First Respondent", being numbers three up to and including 22, do not fall for consideration.
The next issue that arises is whether Mr Li entered into a contract of employment with the second respondent on or around 22 October 2018.

[45]

The respondents' primary submission is that if the Court accepts that the alleged first contract was not in fact formed (as I have found) then it should follow that the alleged second contract also did not arise, as it was said to involve a transfer of employment of EMG to EHC following the restructure in September-October 2018.
There is much force in the respondents' argument. However, in circumstances where the respondents also raised for consideration, further aspects of Mr Li's case which they contend, should arouse the suspicion of the Court and pour further cold water on his case theory, I will identify these and then make findings as to their resolution.
In the first category, the respondents single out for criticism the meeting minutes that Mr Li seeks to rely on, being minutes of a meeting held on 14 September 2018[13] and 18 October 2018.[14] The respondents submit that there are certain characteristics of these minutes that cast real doubt on their authenticity and provenance. The respondents identify these as follows.
First, the meeting minutes tendered by Mr Li were not uniform insofar as some were drafted in English, some in Chinese and some in a mixture of both languages. In circumstances where EMG and EHC had directors who only spoke Mandarin in the workplace - this being Mr Wang, Mr Zhang and Ms Ye - this was said to be curious. It was also not explained (because she was not called to give evidence) whether Ms Shi (who prepared the minutes) was proficient in English or had the capacity to translate Chinese conversations into Engligh language meeting minutes.
Second, as Mr Wang observed, Ms Shi took minutes at company meetings by hand. Yet, all of the meeting minutes annexed to Mr Li's affidavits were typed. There was no evidence that Ms Shi was the person who typed these purported minutes or that the typed-up minutes were an accurate reflection of Ms Shi's handwritten notes.
Third, there was no evidence that the Board of EMG or EHC adopted these meeting minutes as the official records of the company. Dr Yang, Mr Wang and Mr Zhang, who attended one or both of the restructuring meetings, gave evidence that they had never seen the meeting minutes before.
Fourth, all of the meeting minutes tendered by Mr Li, including of the two critical meetings, were differently formatted and structured. The respondents submitted that this was difficult to reconcile with Mr Li's evidence that these minutes were created by the same person, Ms Shi.
Fifth, in circumstances where Mr Li explained the provenance of the meeting minutes as having been provided to him by Ms Shi, his failure to call Ms Shi as a witness in the proceeding meant that a Jones v Dunkel inference ought to be drawn that had Mr Li called Ms Shi to prove the provenance and authenticity of these meeting minutes, her evidence would not have assisted him.
The respondents submitted that the onus rested on Mr Li as the party tendering the meeting minutes to establish authenticity. They submitted that this could not be accomplished simply by drawing inferences from the face of the document where there was no other evidence to indicate provenance (referring to Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 4) [2011] FCA 578; 194 FCR 479 at [14]).
In these circumstances, the respondents submitted that the Court should not give weight to any of the meeting minutes of 14 September 2018, 18 October 2018 or any other date tendered by Mr Li as Mr Li had not discharged the burden of proving that the meeting minutes were genuine and accurate business records of the respondents, and in the face of the respondents' denials, they did not possess this character.
The respondents submitted that two consequences followed Mr Li's failure to prove the authenticity and provenance of the meeting minutes. The first was that the Court should infer that Mr Li, in seeking to rely on inauthentic or unreliable meeting minutes of uncertain provenance to further his case, was not a witness of truth. The second, was that there was no corroborating documentary evidence about the formation of the alleged second contract. It would fall on the Court therefore to decide whether Mr Li should be believed on his recollection of the restructure meetings at which the alleged second contract was said to have been formed, or whether the Court should prefer the evidence of Mr Wang, Mr Zhang and Dr Yang on this subject.
The respondents submitted that Mr Li's recollection of the meeting was not credible. This submission reflected what they characterised as the objective fact that as at 14 September 2018, Mr Li had not been paid a cent by EMG and therefore could not have had a salary to transfer over to EHC.
The same analysis was said to apply to Mr Li's evidence that on 18 October 2018, Mr Wang said that his (Mr Li's) position would change from the CEO of EMG to EHC, effective from 22 October 2018 and that "Mr Li will remain on the same salary". Given that Mr Li had not ever been paid a salary by EMG prior to the restructure, Mr Wang would have no reason to stipulate that he would "remain on the same salary". The respondents noted that Mr Wang denied having said this and that the purported meeting minutes were silent on what they described as the important decision by the Board to appoint a CEO, including the start date of that appointment, salary and superannuation.
The respondents submitted that by contrast, the evidence of Mr Wang, Dr Yang and Mr Zhang was credible and consistent with the parties' dealings and the commercial realities facing the EMG and EHC businesses in September/October 2018. Mr Wang and Mr Zhang both recalled that at the meeting on 14 September 2018, it was agreed that EHC would take over EMG, and that the shareholders and directors of EMG would transfer to EHC and be given shares in EHC.
The respondents submitted that on the topic of the meeting on 18 October 2018, both Mr Wang and Mr Zhang gave evidence that there was no discussion that Mr Li would "remain on the same salary" with EHC, as their understanding was that Mr Li was not on any salary at all prior to that point. This evidence was said to be consistent with the fact that Mr Li did not receive any payment from EMG until 9 October 2018, and even then, only $800 per week and not the $80,000 per annum plus superannuation that he said he was contractually promised. The respondents submitted it to be further consistent with Mr Li's acknowledgement in a WeChat text message exchanged with Dr Yang on 1 July 2019, in which Mr Li protested that "I don't really want to get into an argument, I have too much to do every day! I have put the most energy into Everwell and I don't get a salary, for what? This is too unfair on me!".[15]
The respondents made the final submission that the consistent evidence of Dr Yang, Mr Wang and Mr Zhang was that neither EMG nor EHC was in a financial position to pay Mr Li as a salaried employee as at October 2018. According to Dr Yang, with the exception of a medical clinic in Nunawading, EHC and its subsidiaries did not make any profit. This was said to be corroborated by the profit and loss statement and balance sheet of the payment company, Etewell, which disclosed that other than a small profit of $35,953 in 2017/18, Etewell sustained large losses for the 2018/19 and 2019/20 financial years.[16] The respondents submitted that it was difficult to see how the EHC Board could have agreed to pay Mr Li as a salaried CEO in October 2018 given these strained financial circumstances.

[49]

Mr Li was not moved in any significant way on this account during cross-examination. He insisted that Mr Wang had said during the meeting of directors that took place on 14 September 2018 that "the salaries of the core employee shareholders will be transferred to the Everwell Healthcare" and that this statement was intended to comprehend Mr Li in his role as CEO.
As the respondents note, Mr Wang who was present at the meeting on that date, acknowledges that there was general agreement that EHC would take over EMG and that in exchange, the shareholders of each company would be given shares in EHC. It was Mr Wang's evidence that it was also agreed that the original board members of EMG would remain the same in the EHC board. However, Mr Wang was firm in his denial that he described Mr Li as a core "employee" shareholder, given his belief that he did not have the status of an employee (or gu-yuan)
Mr Zhang was also present at the meeting of directors on 14 September 2018. It was his evidence that at this meeting, Mr Li proposed that the Board move their shares to Mr Li's company, EHC. Mr Zhang denied that Mr Wang had used the word "employee" in connection with the shareholders and that he recalled him instead referring to "directors" or "shareholders" being transferred. He also denied hearing Mr Wang use the word "salaries" (or its Mandarin equivalent xin-zi, or gong-zi) in connection with the core shareholders being transferred to EHC. Mr Zhang explained that the company did not have enough money to pay fixed salaries at that time. He also gave evidence, that was not challenged, that Mr Li had been motivated to propose the restructure to remove from the business three (unnamed) shareholders who Mr Li considered had not been pulling their weight. According to Mr Zhang, these three shareholders were not issued shares in EHC.
As to the meeting of 18 October 2018, Mr Li's account, from which he did not stray in cross-examination, was as follows:
1. On about 18 October 2018 at 7.30 pm, I attended a Shareholders' meeting of EMG and EHG at the Nunawading Clinic. A few attendees were there in person and others were present by Audio Visual Link. A number of matters were discussed, one of which was that my employment as CEO of EMG was to be transferred to EH, who was to pay me instead. My salary was to remain the same at $80,000. In this regard, we had a conversation in Mandarin in which we said:

[53]

Ms Wang further deposed (at [19] and [20] of her affidavit filed 8 February 2022 that:
1. There were other changes and confirmations of employment positions. All proposed changes and confirmations of employment positions were agreed by all attendees by them raising their hand in support. At no time did I hear or see any attendee object to the changes and confirmation of employment positions.
2. Further, the proposal to start back payments of part of salary to senior management was met with overwhelming agreement. Several attendees said: "Yes, finally" or "It's about time". This was also voted on with a show of hands, which was agreed.
Ms Wang was cross-examined on her recollection of this meeting. She continued to insist that there was discussion at the meeting about the transfer of Mr Li's salary. Ms Wang was unable to say what Mr Li's salary was at this time. She was also unable to say when Mr Li started to get paid.
As adverted to in the respondents' submissions, Mr Li produced several meeting minutes as annexures to his second affidavit. He deposed to having received these meeting minutes from Ms Shi, who he said had been instructed to take notes at meetings and whom he had observed doing so during most if not all, meetings of the first and the second respondent.
Debate ensued at hearing as to whether Mr Li should be permitted to tender these documents as "business records". The debate was resolved in favour of their production, reflecting concessions made by the respondents' counsel that Ms Shi was the company secretary of both respondents and had been charged at relevant times with the responsibility to take notes.
However, despite their admission, questions remain as to whether the Court should place any weight on the meeting minutes, including for the reasons identified by the respondents and recorded above at [115] to [124]. This reflects the common law principle that there is a distinction between matters of authenticity going to the adducing of evidence and matters going to the credibility and weight of documentary evidence once it has been authenticated and judged admissible: Australian Securities and Investment Commission v Rich (2005) 216 ALR 320; [2005] NSWSC 417 at [118].
In addition to the anomalies identified by the respondents in their submissions about the appearance of the meeting minutes, questions are asked - in my view, quite legitimately - about whether the meeting minutes were in fact adopted by the body who they purported to represent and/or bind.
In this respect, the evidence of each of Mr Wang, Mr Zhang and Dr Yang was they had never (before this proceeding) seen the meeting minutes of 14 September 2018 or 18 October 2018.
The Court has been given no reason to disbelieve any of these witnesses, on this topic. Indeed, the ignorance of these witnesses about these documents is not surprising given that the meeting minutes are not signed by the Chair (or indeed any person), as is a requirement of s 251A(1) of the Corporations Act. It is also the case, that matters that are described by Mr Li as being the subject of resolution, are not identified in the minutes as possessing this character. Nonetheless, as Mr Li observed, when taken to the meeting minutes, the respondents' witnesses agreed that they accurately recorded a significant proportion of the matters that had been discussed. The point of difference, this being something Mr Li seizes upon, was that both Mr Wang and Mr Zhang firmly denied that there had been any mention of the payment of salary to anybody, including to Mr Li.
In order to understand the significance of the meeting minutes that bear on the construction of the alleged second contract, it is necessary to reproduce them. At trial, Mr Li produced copies of the original (comprising a mix of Mandarin and English) and a certified English translation which read:

[55]

Everwell Medical Group Pty Ltd

Meeting Minutes

18 Oct 2018

Shareholders

Present: Haizheng Wang, Guo Li, Yiming Wu, Richard Yang, Tian Zhang, TaoZhang, Yan Shi, (Lu Wang, Yan Shi, Yang Lin, Xinying Zhang, Mingshu Wu through video or audio)

Add: 7:30 pm at Meeting room, 353 Whitehorse Road, Nunawading, VIC 3131

_________________________________________________________________

1. Work report of each clinic (Yiming Wu, Richard Yang)

2. Report on business cooperation in China (Yang Lin)

3. Restructuring of the company (Haizheng Wang, Guo Li)

Haizheng Wang pointed out that EVERWELLMEDICAL GROUP currently holds the shares of the chain clinic GP business, but due to the need for business expansion, it plans to develop other businesses, such as in medical cosmetology, dentistry, ophthalmology, pharmaceutics and other branches. The Group decides to appoint EVERWELL HEALTHCARE PTY LTD as the holding company, and transfer most hardworking shareholders of the former EVERWELL MEDICAL GROUP PTY LTD to EVERWELL HEALTHCARE PTY LTD, which will also hold the shares of the brand company as the parent company. EVERWELL HEALTHCARE PTY LTD will hold the shares respectively of:

Everwell Medical Group Ptd Ltd of general practice;

Evincy Cosmetic Group Pty Ltd of cosmetology;

Beya Dental Group Pty Ltd of dentistry;

Lifeco Nature Pty Ltd of pharmaceutics;

Etewell Group Pty Ltd of medical management;

Wellvison Eye Group Pty Ltd of ophthalmology, etc.

The adjustment was inspired by Alibaba, which adopts different brands to share risks. This can be conducive to business separation and independent sales.

In terms of positions in the new Group, Guo Li will be the CEO/President and vice chairman of the parent company, EVERWELL HEALTHCARE PTY LTD. Haizheng Wang will be the chairman of the board. Yan Shi will be the IT director and secretary of the director. Tao Zhang will be the finance director and executive director. Yiming Wu will be the medical director. Richard Yang will be the deputy medical director. Zhang Tian will be the director of nursing Wang Lu will continue to be the manager of the New South Wales region. Lin Yang will continue to be the president of the Chinese region. Xinying Zhang will be the medical quality officer of the Chinese region. Mingshu Wu will be the medical technology officer of the Chinese region.

Etewell Group Pty Ltd, the medical management company, will charge management fees from each clinic and branch company, which was used to pay the salary and expenses of the senior management team. The salary standard was also proposed, and the attendees agreed by a show of hands without any objection.

Li Guo introduced the business positioning and future development of each branch-In the future, which was highly recognized by everyone.

4. Future business outlook (each shareholder took turns to speak).

[56]

Assuming in Mr Li's favour, that I was prepared to accept the meeting minutes as entirely accurate, I am not persuaded that they support Mr Li's case that he was party to a second contract of employment with EHC. My lack of satisfaction reflects the following considerations.
First, the minutes of 14 September 2018 say nothing about a transfer of salary to shareholders but instead reflect the agreed position, that the shareholders of EMG, or at least some of them (those that are "hardworking") would move across to EHC when it assumed control of the Everwell Health Care group of companies. Mr Li in his evidence says that the concept of a core group of "employee shareholders" was also discussed at this meeting but did not make its way into the minutes.
I have some difficulty with the concept of a group of "employee shareholders". This is because, apart from Mr Li and possibly Ms Wang, although it was not entirely clear, there was no suggestion from Mr Li, that any other shareholder was entitled to remuneration on account of being in a relationship of employment with either the first or the second respondent. The reference to "employee shareholders" as indicative of some homogenous group, is difficult to reconcile with the evidence. Furthermore, it has not been adequately explained by Mr Li why he alone (and possibly Ms Wang) was singled out for his efforts. According to Mr Zhang, whose evidence I found generally to be given without prevarication, told the Court that "all the shareholders, more than 10 of us, we worked for five or six years, we didn't get paid at all".[17]
Second, although Mr Li relies on the meeting minutes of 18 October 2018 because they record that salary was to be paid to the "senior management team", they do not descend into the type of detail that one might expect to see on a topic of such importance to Mr Li. As the respondents correctly point out, nowhere in this meeting record is there reference to Mr Li being employed in the role of CEO or that he will be entitled to a salary of any amount, let alone the amount of $80,000 for which Mr Li contends in this proceeding. This absence of detail is perplexing in circumstances where Mr Li, on his own case, was denied payment of salary that had been contractually agreed for a period of over two years. It is implausible that he would not have insisted on this detail being the subject of a resolution and then reduced to writing. Furthermore, to the extent that there was a supposed agreement to commence "back-pay" of salaries, it is not explained why this important detail does not make its way into the records of the company.
Mr Li was questioned as to the omission of this detail. His response was dismissive. For example, when it was put to him that there was no discussion prior to 14 September 2018 and no discussion on 14 September 2018 about him being a salaried CEO of the second respondent, he said:[18]

[58]

Finally, it is to be recalled that Mr Li contends, in relation to the alleged second contract, that although it initially took the form of an oral contract, it was reduced to writing on 20 January 2020, being the date on which (according to Mr Li) he signed a written contract of employment with the second respondent. This document, and the circumstances in which it came to be executed, will be the focus of the next part of this judgment. However, in the present context, I am not convinced that it assists Mr Li's case.
While I acknowledge that circumstances and events surrounding the making of an alleged contract may be interrogated as an aid to its construction, and that this approach may be applied more liberally in the case of an oral contract, there must be limits, including temporal ones, to this approach. It would not be appropriate in this case to look to a document that came into existence some 15 months after the alleged second contract was said to have been agreed and which says nothing about the rights of the parties to that contract, as a means of shedding light on its construction or lending evidentiary support to its existence.
Mr Li has not discharged his onus of persuading me that he was party to a contract of employment with the second respondent agreed in around October 2018. My lack of satisfaction reflects the matters discussed above. However, it is important to also recall first principles. The fact that Mr Li did perform the work of CEO is not sufficient to show that he was bound to perform that work, or that he performed it under a level of control consistent with employment; as distinct from the usual control which a board exercises over a director or CEO who is subject to a statutory contract. Mr Li furnished sparse evidence to suggest that the parties conducted themselves in a manner indicative of a relationship of employment. I find that the answer to issue number 23 is "no".
It follows from my finding in relation to issue number 23 that I am also not satisfied that Mr Li was employed by the second respondent pursuant to the alleged second contract from around 22 October 2018 until on or about 27 September 2020 as its CEO, this being the subject of issue number 24. These findings make redundant issues 25 and 26 which follow. The next question that requires determination is that captured by issue number 27.

[67]

Mr Li: ...Ms Ye was engaged with - Ms Ye was working with an interpreter at that time and also, Gavin and I explained clearly what this contract was about to her. So she was aware of what this contract is.

Ms Zhou: And what did you explain to her about this contract?

Mr Li: It's a standard process. Like, we would explain the role and duties of the employment and we will read each paragraph and translate that into Chinese.

Ms Zhou: So you and Mr Gavin Jin translated every paragraph of this contract to her...

Mr Li: Yes.

Ms Zhou: ...in the 10 minutes to half hour that you had to sign this contract.

Mr Li: We actually sent this contract to her beforehand and make some explanation on that occasion and we spend extra time in doing this meeting, like, explaining more details to her. And also, this contract was drafted by a professional lawyer and the board of directors meeting decided that we would use it as a template to hire positions of senior management and, therefore, board of directors meeting explained that to - explained this contract to us and so that we are willing to sign on it. Therefore, and Xiaozhong Jin and Lisa were fully aware what this contract was about.

Ms Zhou: So you said that you and Mr Jin had sent this contract to Lisa before the day.

Mr Li: Yes. And we discussed this contract with her as well.

Ms Zhou: And when did you do that?

Mr Li: I cannot remember the specific date.

Ms Zhou: But was it on the same day or a couple of days before?

Mr Li: I cannot recall because this contract was revised a couple of times.

Ms Zhou: Now, it's being revised a few times.

Mr Li: Because this contract was revised and we signed on the finalised version of it.

...

Ms Zhou: Mr Li, I want to suggest to you that the only reason you asked Lisa to witness this contract was because she didn't understand English.

Mr Li: That's not the case. That's truly not the case. That's not the case because Lisa could use a translation app to understand what this English about. You know, the translation app is very powerful nowadays, and it can translate PDF documents. And I - as I said - or explained the content of the contract to her. And at that time, Lisa engaged with an assistant to help her understand the English. Therefore, there's no barrier for her to understand what the English is about....

[74]

Ms Ye did not divert from this account in cross-examination. She was resolute (and credible) in her evidence that Mr Jin had simply presented her with the contract, asked for her signature and dismissed her enquiry as to what it was about. She described as "impossible" the idea that she would have indicated her agreement with a proposal to pay Mr Li $100,000 per year.[24]
Contextually, the evidence of Ms Ye has the imprimatur of truth. It was not in dispute that Ms Ye made significant investments in EHC. First, in November 2019 she invested two million dollars in EHC for which she negotiated a conservative salary of $75,000 per annum and a share allocation of 5%. She became a director of EHC, along with Mr Li and Mr Wang. Later, Ms Ye made a further investment of between one and two million dollars with her company, Ye's Corporation Pty Ltd, becoming the majority shareholder of EHC with approximately 70.5% shareholding. Ms Ye was the only director who had also invested in the company.
I prefer the evidence of Ms Ye over that of Mr Li and Mr Jin. I find that Ms Ye did not understand the meaning of the document that she signed, including because neither Mr Li nor Mr Jin took steps to explain its content to her. I also find that Ms Ye did not apply the seal of EMG to the document and in all likelihood, it was Mr Li who did so.
While Ms Ye might be criticised for failing to inform herself as to the nature of the document to which she applied her signature, I accept her evidence that at the time she did so, she trusted both Mr Li and Mr Jin.
These findings cast doubt on Mr Li's assertion that his contract of employment reflected a resolution of the Board of Directors. As of January 2020, the directors of EHC comprised himself, Ms Ye, Mr Tao Zhang, Mr Jin and Mr Wang.
Ms Ye's attitude to the contract of employment has been identified. Mr Zhang's evidence was that the first time he saw the employment contract was in the context of this proceeding. He deposed that Mr Li would often express anger that Ms Ye was receiving a salary, when he was not and had said to Mr Zhang that he (Mr Li) should be paid $100,000. Mr Zhang recalled a conversation with Mr Li in January 2020, during which Mr Li complained about Ms Ye's salary (again). Mr Li told Mr Zhang that he was going to take a salary to which Mr Zhang did not reply, and the subject was not mentioned again.
Mr Wang's evidence on the topic was that he, like Mr Zhang, had not seen a copy of the employment contract prior to this proceeding. He deposed that at no time, whether prior to joining the EHC board on 23 October 2018, or afterwards, did Mr Li or anybody else ask him for permission to employ Mr Li, and certainly not for a salary of $100,000 per annum. Mr Wang denied being asked permission to use the seal of EHC.
In his third affidavit, Mr Li annexed a set of meeting minutes dated 16 January 2020 which he sought to rely on as a business record.[25] According to Mr Li, the meeting was of the second respondent, EHC, and was attended by himself, Mr Wang, Mr Zhang, Dr Yang, Ms Ye, Mr Zhang, Ms Shi and Mr Shen.
Mr Li deposed that among other things, it was discussed and agreed during the meeting that Mr Jin would be paid an annual salary of $99,000 and that he (Mr Li) would be paid an annual salary of $100,000. According to Mr Li, it was Mr Wang who had proposed these resolutions to the meeting. When it came to Mr Li, he had said "Does everyone agree that Dr Guo Li's annual salary will be increased from 1 February 2022 (sic)". According to Mr Li, all attendees then indicated their agreement by saying "Yes" or "Agree".
There are several difficulties with Mr Li's evidence, not least that it operates on the continuation of an arrangement that I have previously found did not exist, i.e. that he was employed on a salary of $80,000.
It is also problematic because Mr Wang, who Mr Li identified as the mover of the resolution, gave unchallenged evidence that he did not attend the meeting of 16 January 2020 because he was in China at the time.[26] Mr Wang acknowledged that Mr Jin was being paid a salary of $99,000 per annum. He said to the extent that Mr Li had raised the issue of a salary with him (outside the context of the meeting), the issue had never been resolved.[27]
Mr Zhang recalled being at the meeting. It was his evidence that it was agreed that Mr Jin was to be paid an annual salary of $99,000. However, he denied that there was any discussion at all about Mr Li's salary.[28]
Ms Ye recalled being present at the meeting of 16 January 2020. She had no recollection of point ten of the meeting (which referred to both Mr Jin and Mr Li being paid a salary) having been discussed.[29]
Dr Yang participated in the meeting. His evidence was that he recalled nine out of the ten items that were noted in the minutes but when it came to the final item, ten, which was the adoption of an annual salary for Mr Jin and Mr Li, he could only recall a discussion about a salary for Mr Jin.
Dr Yang explained that he had been angered about the idea that Mr Jin would receive a salary as he considered it to run counter to the "code". Dr Yang said that he wished them to give Mr Jin a share, not cash, "because everyone knew there was no cash in it".[30] Dr Yang could not recall whether the issue of Mr Jin's salary had been resolved as he left the meeting early, feeling frustrated. Dr Yang could not recall who remained in the meeting at this time. He properly conceded that he could not say one way or the other, whether Mr Li's salary was discussed after he left the meeting.
While I have considered the prospect that the respondents' witnesses aligned to falsely deny that agreement was reached during the meeting of 16 January 2020 to pay Mr Li a salary of $100,000 as CEO of the second respondent, I am not convinced that the evidence should be construed in this way.
Apart from Mr Wang's participation in the meeting being inaccurately recorded, the minutes have the appearance of being in draft form. Furthermore, like the minutes from 2018 that have been earlier discussed, they have not been signed by anybody, including the unidentified Chair of the meeting.
I do not accept that the minutes provide evidence that the directors of EHC resolved to employ Mr Li in the role of CEO and on a salary of $100,000.
Finally, for the avoidance of doubt, I accept the submissions of the respondents that the contract witnessed by Ms Ye and sealed with EMG's seal was not validly executed in accordance with s 127 of the Corporations Act and not binding on EHC. Section 127 requires the fixing of a common seal to be witnessed by two directors or a director and a company secretary, which did not occur here with respect to either EMG or EHC.
This does not alter the analysis but merely reinforces my view that had Mr Li been granted leave to prosecute his alternative case, he would not have persuaded me that it had merit.

[76]

Mr Li's efforts did not go entirely unrewarded. It is agreed that during his tenure as CEO of either the first or second respondent he received the following payments:
- From 9 October 2018 to 7 May 2019, the amount of $800 gross per week;
- From 11 December 2019 to 4 February 2020, the amount of $1,600 gross per fortnight;
- From 19 February 2020 to 28 May 2020, the amount of $3,846 gross per fortnight, save for a one-off payment of $22,400 on 24 April 2020; and
- From 10 June 2020 to 15 September 2020, the amount of $1,500 gross per fortnight.
Mr Li submitted that the fact that these payments, which originated from the payment company Etewell, were made to him was evidence of his employment status. The payments of $800 per week were said to represent half of Mr Li's initial salary of $80,000 (allowing for the withholding of PAYG tax). Mr Li described them as "back payments" which he said had been authorised at a meeting of the EMG board in September 2018. Mr Li became defensive when it was brought to his attention that the meeting minutes of 14 September 2018 said nothing on the topic. Mr Li's explanation was that the meeting minutes did not record everything.[31]
As far as the payments of $1,600 per fortnight, which resumed after a six-month hiatus, were concerned. Mr Li said that they were also referable to salary "back payments". He insisted that the fact that these payments had resumed, at around the same time as Ms Ye made her investment of two million dollars in the second respondent, was pure serendipity.
When the payment amount increased to $2,826 per fortnight (gross amount of $3,846), Mr Li attributed this to the increase in salary he (on his case) had obtained in February 2020. It was put to him that this payment had not been authorised and that he or someone at his direction, had made this payment from the Etewell account, after Mr Li had obtained Ms Ye's signature on the employment contract. Mr Li denied this, reverting to his explanation (which has been discredited) that the salary was approved by the board of directors. Mr Li did not provide an explanation for the lump sum payment of $22,400 and did not challenge the evidence of the respondents that the regular payments of $1,500 were referable to the Job Keeper subsidy scheme.
The respondents on the other hand said that the payments of $800 per week were discretionary payments or che-ma-fei, which notably had not been made for a period of over two years (from 11 July 2016 to 8 October 2018. Mr Wang gave evidence that the decision to make these payments to Mr Li was made at a meeting of the EHC board. Mr Wang could not account for the use of the term "salary" in the spreadsheet which recorded these payments.[32]
Ms Ye was not aware of the payments of $800 per week. She had understood that Mr Li was not drawing a salary or an allowance from the business. She had no idea that from February 2020 the rate of payment had increased to $2,826.15 per fortnight. Ms Ye's evidence was that she did not authorise the increase. Mr Wang's evidence was that no one had sought his permission to increase the payment beyond the $800 per week, including to the amount of $2,826.15 per fortnight (after tax). Ms Ye was not aware of the one-off lump sum payment and did not authorise it. It was her evidence that the payments to Mr Li of $1,500 gross per fortnight were referable to the Job keeper subsidy which she had directed the company accountant to apply for in June 2020, based on Mr Li's status as a director of the second respondent.
At hearing a not insubstantial amount of time was spent on the topic of whether payments made had the legal quality of salary or whether instead, they were discretionary payments. The term utilised by the respondents' witnesses was che-ma-fei.
Mr Broughton, from whom a report was commissioned by the respondents' lawyers, is a NAATI certified translator for Chinese to English and English to Chinese. He holds a Bachelor of Arts degree majoring in Chinese and a Master of Translation (Chinese) degree, both obtained from the University of Melbourne. He provides translation services and teaches translation at the University of Melbourne. Mr Broughton's qualifications and expertise to produce a report on topics including what circumstances confer the status of gu-yuan on a person who performs work or provides services, rather than some other status (such as volunteer, contractor, or non-employed company director) was not challenged by Mr Li.
Mr Broughton identified personal subordination as the most important factor in determining a labour relationship under the law of the People's Republic of China (PRC).[33] He explained that the importance of personal subordination in defining a labour relationship meant that it was difficult for any company director to be considered a gu-yuan (employee).[34] The picture under PRC law was more complex however when it came to a CEO who legally at least, might assume the standing of a "manager" and in turn be understood to be a gu-yuan of a company.[35]
On the other hand, while the gu-yuan status of a CEO under PRC law might be unclear, the evidence of Mr Broughton was that the conferral of the title CEO in Chinese common parlance was said to almost certainly not lead a listener to believe that the person with the title of CEO held gu-yuan status. This was because, in standard speech, the English title CEO is often seen as the equivalent of "boss" [lao-ban] and positioned in direct contrast to the concept of gu-yuan. In simple terms, a CEO cannot employ themselves.[36] I note, in passing, that a number of the respondents' witnesses referred to Mr Li as conducting himself like "the boss" or "the big boss".[37]
In cross-examination, Mr Broughton explained that while the term "non-employed company director" was not frequently used in a PRC legal context, it is a recognised "imported concept" used to refer to such positions outside of China in an external jurisdiction's legal framework.[38]
Mr Broughton acknowledged that it was difficult to fix a precise meaning to the term che-ma-fei. For example, it is defined in the dictionary to mean an allowance for, or reimbursement of, a transportation expense. However, it takes on other meanings, including a payment to a contractor, or even a bribe in the context of journalism; the notion of a "red pocket" or "red envelope".[39] Mr Broughton agreed however with the proposition put to him that it was safe to say that che-ma-fei is separate from the concept of salary.[40]
In the end, the use of language by the parties has not been determinative because I accept the submissions of the respondents that the history of payments made to Mr Li is inconsistent with the notion that the respondents had assumed a legal obligation to pay him on terms compatible with an employment relationship. Instead, the payments, which were of variable frequency and amount, and which were suspended for a period of six months because, on Mr Li's account, it became unsustainable in May 2019 for EHC to pay him,[41] are more amenable to characterisation as discretionary payments. In the end the precise character does not matter however as I am not satisfied that they support Mr Li's case.
Furthermore, the evidence in this case exposes the reality that there was a lack of rigour and discipline by those involved in the running and oversight of the respondent companies which makes it unsafe to place reliance on matters said or recorded as definitive proof of a particular state of affairs. Much of the evidence, including as it concerns payments made to Mr Li, and their character, is simply unreliable.
Further, while the respondents fell short of alleging fraud or misappropriation by Mr Li of company funds, an inference is available, by virtue of Mr Li's relationship to Etewell, that he had the opportunity to direct payments to his own account without questions being asked or scrutiny applied. The uncontroverted evidence is that Mr Li incorporated Etewell in July 2015 and was a director of the company from the time of incorporation until 15 May 2020. It was Mr Li's evidence that Ms Shi could authorise payments from the Etewell account through her own online login.[42] Of course, the Court did not hear evidence from Ms Shi.

At a glance

Court

Decision date

Before

Source

Judgment (105 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (22)