Li v Wu

2.1 The shareholder agreements 4 On 11 August 2006 two agreements styled "shareholder agreements" were executed. 5 The first is an agreement between Mr Wu, Mr Li, Xiu Zhen Ji (Ms Ji) (as "Members") and Golden Enterprise Investments Pty Ltd (GEI) (as the "Company"). There is no dispute that GEI was incorporated in Australia in 2004. Shareholders of GEI as at 11 August 2006 were Mr Li as to 5,500 A class shares (or 55%), Mr Wu as to 2,500 A class shares (or 25%) and Ms Ji as to 2,000 A class shares (or 20%). Mr Li, Mr Wu and Ms Ji were also directors of GEI at this time. All remain shareholders although Mr Li has transferred 2000 of his shares to his wife Hong Chen (Ms Chen). 6 This agreement, the GEI shareholder agreement, contains recitals and provisions which include the following. 7 The recitals are set out in a section entitled Background and are in these terms: BACKGROUND A. The Members are shareholders in the Company and have formed the Company to carry on the Project. B. The Members hold A Class shares in the Company as follows: Tao Wu 2,500 A Class Shares Yu Xin Li 5,500 A Class Shares Xui Zhen Ji 2,000 A Class Shares C. The Members agree to execute this Agreement to regulate their relationship as members of the Company in respect of the management and control of the Company, its business and affairs as is contemplated by the provisions of this Agreement. D. The Members have been afforded the opportunity to obtain independent legal and accounting advice. E. The Company has joined in this Agreement in order to take notice of the provisions contained in this Agreement and as far as is permitted by the Corporations Act to conduct its business and affairs as is contemplated by the provisions of this Agreement. 8 The "Project" is defined by the following terms in cl 1: Land means //insert description//. … Project means: (a) the subdivision of the land; (b) the carrying on of the Works; and (c) the marketing and sale of the Land and the Works. … Works means the development of the Land by: (a) the upgrading and refurbishment of the existing buildings; (b) the construction of improvements in buildings in accordance with the Plans; (c) all associated and ancillary works to be effected on or to the Land. … 9 Despite the parties having had legal representation for the making of the GEI shareholder agreement they omitted the description of the land. Nevertheless, it is reasonably clear form the loan agreement executed at the same time between Mr Li and GEI that the land in question was at Fox Place in Lyneham in the ACT. GEI had contracted to buy this land in January 2005 for the purpose of redevelopment as residential units. I do not accept the submissions for Mr Li that the agreement deliberately leaves the land blank. 10 Substantive provisions of the GEI shareholder agreement include: 2 COMMITMENT TO COMPANY AND PROJECT 2.1 Beginning Project The Members must ensure that the Company begins to establish the Project under the Initial Monthly Program. 2.2 Obligations of Members Each Member must: (a) co-operate and use the Member's best endeavours to ensure that the Company successfully conducts the Project; (b) not reasonably delay any action, approval, direction, determination or decision which is required of the Member; (c) devote all necessary, time, attention, work and effort to the Project; (d) make approvals or decisions that are required of the Members in good faith and in the best interests of the Company and the conduct of the Project as a commercial venture; (e) be just and faithful in the Member's activities and dealings with the other Members; (f) furnish the Directors with a full and correct account and information with regard to all matters and transactions relating to the Project; (g) not do any act or thing which may prejudicially effect the Project, the Company, any Company property or the Company's reputation; and (h) not divulge to any unauthorised person or corporation any information concerning the Project or the Company. … 3 INITIAL CAPITAL The Members agree that their shareholdings reflect their contribution to the capital of the Project. 4 FURTHER FUNDING 4.1 Capital as a Loan The Members acknowledge that they have contributed further funds to the Project by way of unsecured loan to the Company in accordance with the Loan Agreement contained in Schedule 2. 4.2 Sufficient Capital The Members must ensure that the Company has sufficient working capital to conduct the Project under each Monthly Program either from: (a) loans by the Members to the Company; or (b) borrowings by the Company supported by several guarantees from the Members in their Proportionate Share. 4.3 Further Loans The Members agree that any further capital required by the Project which is contributed by a Member by way of a loan is to be in accordance with the schedule to the Loan Agreement contained in Schedule 2. … 5 INDEMNITY In the event that the Company is unable to repay any Member loan (including interest), the other Members, jointly and severally, agree to indemnify that Member for their Proportionate Share of the loan amount. For example, if Yu Xin Li has loaned the Company $1,000,000 and at the completion of the Project the Company is only able to repay $500,000 of that loan, Tao Wu will indemnify Yu Xin Li against 25% of the unpaid amount (being $125,000) and Xiu Zhen Ji will indemnify Yu Xin Li against 20% of the unpaid amount (being $100,000). … 7.5 Responsibilities of the Board The Board is to be responsible for managing the Project and the affairs of the Company including: (a) establishing the general policies of the Company; (b) establishing the strategic priorities and objectives of the Company; (c) establishing the financial objectives and criteria of the Company; (d) determining the matters of a major or unusual nature which are not in the ordinary course of business of the Company; (e) preparing and adopting the Monthly Program for each month of the Project (each Monthly Program is to be finalised within 7 days before the end of the month to which it relates); and (f) monitoring the performance of the Company against the Monthly Programs. … 8 MANAGEMENT AND OPERATIONS 8.1 Obligations of the Each Member Each Member agrees to take any steps which for the time being are within its power and are necessary to cause the Project and the affairs of the Company to be properly and efficiently managed and administered. 8.2 Managing Director The Managing Director is responsible for: (a) the management of all activities of the Company in the conduct of the Project; (b) the day to day management of the financial affairs of the Company; (c) the recruitment of all staff, consultants and sub-contractors as required to meet the staffing and operational requirements of the Project from time to time; (d) the direction of all employees and officers of the Company; and (e) the general administration of the Company; Subject to compliance with the Monthly Programs and directions from the Board from time to time. 8.3 Management and Financial Information The Managing Director must ensure that the Directors receive from the Company sufficient management and financial information and reports to allow them to control the efficient conduct of the Project, including but not limited to the following reports: … 9 LIMITATIONS No Member may without the consent of the Directors: (a) Contract any debt on account of the Company except in the usual and regular course of the Project; (b) employ any of the money, goods or effects of the Company or engage the credit of the Company except upon the account of and for the benefit of the Project; (c) do or allow anything that could result in the property of the Company being seized, attached or taken in execution for all debts greater than $//insert amount//; (d) compound, release or discharge any debt which is due or owing to the Company without receiving the full amount of that debt; (e) lend any money on behalf of the Company; (f) borrow or raise any money on behalf of the Company or give any security over the Company or any part of it in respect of any loan; (g) assign, mortgage or charge its share or interest in the Company or any part of it; or (h) sell or offer for sale any interest in the Company. … 10.3 Unanimous consent The following matters require unanimous consent: (a) the issue or transfer of additional shares; (b) the admission of a new shareholder; (c) any amalgamation or merger with any other business; (d) the sale of the Company, the Project or any other business of the Company; (e) the termination or winding up of the Company; … 17.7 Duration This agreement continues to be binding on each of the Members whilst remaining the registered legal or equitable holders of shares in the Company. 11 The second shareholder agreement is an agreement between Mr Wu, Mr Li, Ms Ji (as "Members") and Spring Grove Enterprises Investment Pty Ltd (SG) (as the "Company"). There is no dispute that SG was incorporated in Australia in January 2005. Shareholders of SG as at 11 August 2006 were Mr Li as to 2,000 A class shares (or 20%), Mr Wu as to 2,500 A class shares (or 25%) and Ms Ji as to 5,500 A class shares (or 55%), with Mr Wu also owning 100 ordinary shares. Mr Li, Mr Wu and Ms Ji were also directors of SG at this time. In February 2005 SG had contracted to purchase a farm at Harden in the ACT. At the same time Mr Wu and SG executed a declaration of trust by which Mr Wu held the Harden property on trust for SG. All remain shareholders. 12 The provisions of this agreement, the SG shareholder agreement, are the same as the provisions of the GEI shareholder agreement other than that the land is defined as the land at Harden and thus the project is the farming enterprise at Harden carried out by SG. In particular, the indemnity provision in cl 5 is identical in both agreements.

2.2 The issues 13 There are six issues which must be determined in respect of this claim. First, do the shareholder agreements remain in force and effect? Second, and if so, has Mr Li made any member loans to GEI and/or SG? Third, and if so, what member loans by Mr Li remain unpaid by GEI and/or SG? Fourth, are GEI and/or SG unable to repay any such loans? Fifth, and if so, what is Mr Wu's liability to Mr Li under the indemnity provisions? Sixth, does any other principle preclude recovery by Mr Li?

2.3 Issue 1 (do shareholder agreements remain in force and effect) 14 The submissions for Mr Wu advanced two reasons in support of the proposition that the shareholder agreements had ceased to operate. The first involves the construction of the agreements. The second involves the effect of the agreement entered into in February 2008. 15 As noted, I do not accept the submission for Mr Li that the GEI shareholder agreement leaves the identification of the land deliberately blank with the intention that the agreement defines "Project" as any project which GEI might take on. At the time of the agreement GEI owned and proposed to develop the land at Fox Place, Lyneham. Had the agreement been intended to define as part of the "Project" anything other than the development of the land at Fox Place, Lyneham then the agreement could have provided to this effect. There are a number of parts of the agreement which remain incomplete, not only the definition of the land. The loan agreement in schedule 2 is missing from the executed copy although this may be inferred to have been intended to be the loan agreement executed between Mr Li and GEI on the same day. Further, there is a date missing from the definition of "Initial Monthly Program". The name "Tom" has been inserted between two // marks followed by a question mark in the definition of "Managing Director". Construed in the context of the objective surrounding circumstances it is plain that the parties all intended the land defined in the GEI shareholder agreement to be the land at Fox Place, Lyneham. To this extent I accept the submissions for Mr Wu. 16 I do not accept that the effect of this is that the GEI shareholder agreement simply ceased to operate once the development at Fox Place, Lyneham was completed in 2009. Although the Project has a large role in the terms of the GEI shareholder agreement the scope of the agreement extends beyond the Project. For example, the obligation in cl 2.2(d) extends to the need to act in the best interests of GEI. Clause 2.2(e) imposes a general obligation of being just and faithful in the member's activities and dealings with other members. Clauses 2.2(g) and (h) contemplate other property of GEI, not just the Project. The same might be said of cl 2.3. Clause 6, dealing with dividends and loan repayments by GEI, is also unconnected to the Project. Clauses 7.5 and 8.1 contemplate affairs of GEI outside the scope of the Project. Under cl 7.5(b) the parties must have contemplated that strategic priorities of GEI might include other projects. Clause 9 permits debts and use of GEI's assets for purposes other than the Project provided, however, the Directors consent. Clause 15 contemplates winding up of the company but not merely because the Project has been completed. Clause 17.7 provides for the agreement to continue to bind members for so long as they remain shareholders. All of these provisions indicate that the GEI shareholder agreement remains in operation. That, however, does not answer the question about the meaning of cl 5, the indemnity provision. 17 The basic principles of contractual construction were summarised in Steggles Ltd v Yarrabee Chicken Company Pty Ltd [2012] FCAFC 91 as follows: [56] The proper approach to construction…of the contract is to construe it by reference to the principle of objectivity stated by the High Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22] and Toll (FGCT) Pty Ltd Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. [57] That approach requires the Court to ascertain the intention of the parties by reference to what a reasonable person would understand the language of the contract to mean. It: … normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. See Toll at [40]; and also see Pacific Carriers at [22]. [58] It is well accepted that a commercial contract such as the present is to be construed fairly and broadly but the Court has no power to remake a contract for the purpose of avoiding a result which may be considered unjust Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 (ABC v APRA) at 109. [59] That said, in approaching the construction of the contract, if a detailed, semantic and syntactical analysis of words in a commercial contract will lead to a conclusion that flouts business common sense, it must be made to yield to business common sense: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [43] citing Antaios Companios Naviera SA v Salem-Rederiesna AB [1985] AC 191 at 201; see also ABC v APRA at 109. 18 I accept that the application of these principles might reasonably lead to different conclusions. Ultimately, my conclusion is this. Clause 5 must be construed in context. The immediate context is that at the time of the GEI shareholder agreement, and as the terms of that agreement disclose, GEI had one project in contemplation, the development of Fox Place at Lyneham. The other immediate context of cl 5 is cll 3 and 4. Clause 3 records that the shareholdings of the members reflect their proportionate contributions to the capital of the Project. Clause 4.1 records, as is the fact, that further funds have been lent to GEI for the Project. Clause 4.2 obliges the members to ensure that GEI has sufficient funds to carry out the Project either by way of further loans or by way of GEI borrowing money supported by guarantees for the members proportionate to their shareholdings. In this context, what is the meaning of "any Member loan" in cl 5? In my view, "any Member loan" in cl 5 would be understood by a reasonable person to mean any loan from a member in accordance with cll 4.1, 4.2, 4.3 and 4.4(a). Accordingly, "any member loan" means loans for the purpose of the Project, being the project at Fox Place, Lyneham. 19 The same conclusion applies to the SG shareholder agreement. The agreement continues to operate. However, the indemnity in cl 5 relates to "any Member loan" within the meaning of cl 4. Such member loans are loans for the purpose of the Project meaning the project at Harden. 20 This, however, is not an end to the matter because Mr Li and Mr Wu (but not Ms Ji) entered into a subsequent agreement, being the February 2008 agreement. As the second argument for Mr Wu relates to the February 2008 agreement it is convenient to deal with that argument before considering its relevance to cl 5 of the shareholder agreements. 21 As to the second argument for Mr Wu, relating to the 2008 agreement, the position is clear. While there was an issue about translation it is apparent from the evidence of David Huang, translator and interpreter of the Mandarin language into English, that the 2008 agreement which was entered into by Mr Li and Mr Wu on 18 February 2008, does not state that new projects will be undertaken by new companies. To the contrary, the 2008 agreement provides that: Subsequent to the settlement of this project the company/companies operate/s other projects and businesses. If the Investor has not recovered the investment and profits listed in Project A, then its funds recoverable (including money and assets) shall continue to be regarded as the amounts of individual investment into the new project pursuant to the corresponding amounts. The corresponding interest shall continue to be calculated as well. 22 Accordingly, contrary to the submission for Mr Wu, it cannot be said that the 2008 agreement brought the GEI and SG shareholder agreements to an end. Nor could it rationally do so. Ms Ji is a party to the GEI and SG shareholder agreements but not to the 2008 agreement. 23 There are other relevant provisions of the 2008 agreement. Although Ms Ji is not a party to that agreement and thus cannot be bound by it, Mr Li and Mr Wu are parties and are bound by its provisions. That agreement records that GEI had completed the project at Fox Place, Lyneham. It is apparent this project was profitable whereas SG's operations were not. The agreement records that the shareholders (in fact, just Mr Li and Mr Wu) wished to consolidate the finances of the two companies and have funds repaid according to their proportionate shareholdings in each. The 2008 agreement records that, on this basis, Mr Li was due to be repaid $5,336,422.91 on account of his shareholding in GEI and $735,894.15 on account of his shareholding in SG, or a total of $6,072,317.06. All other shareholders had sustained losses due to their lesser holding in GEI and greater holding in the loss-making SG. The agreement then records that if the losses of Hong Chen (by then a part substitute shareholder for Mr Li) and Ms Ji (but not Mr Wu) were deducted from Mr Li's entitlement he was owed $5,751,925.37 by GEI and SG. The 2008 agreement continues as follows: This figure ($5,751,925.37) shall be treated as a shareholder's loan given by Li Yuxin to Golden, for the project operations of Golden. The amount owed by Tao Wu, ie AUD $88,277.48 shall be taken as an amount owed to Golden. Interest shall be calculated on the abovementioned amounts owed to/by based on Australia's prevailing interest rate(s) of comparable length. 24 In other words, Mr Li and Mr Wu agreed that the amounts owed to Mr Li by GEI and SG, netted off against the losses incurred by Hong Chen and Ms Ji, were to be treated as a shareholder's loan by Mr Li to GEI. Accordingly, as between themselves, Mr Li and Mr Wu agreed that this amount, $5,751,925.37, was a member's loan for the purposes of the GEI shareholder agreement, "Golden" in the 2008 agreement being a reference to GEI. By this Mr Wu and Mr Li agreed that this amount was a member loan within the meaning of the GEI shareholder agreement including cl 5, the indemnity provision. The terms of the 2008 agreement also included Mr Li's loans to SG up to that point. Hence, the figure of $5,751,925.37 is all inclusive. Mr Li cannot have any separate claim under cl 5 of the SG agreement for money he lent to SG before the 2008 agreement because the figure of $5,751,925.37 is the amount he and Mr Wu agreed represented the total owed to Mr Li and the debt was that of GEI alone. In this regard, it does not matter that GEI is not itself a party to the 2008 agreement. The 2008 agreement binds Mr Li and Mr Wu and the present claim is by Mr Li against Mr Wu. 25 For these reasons as at 18 February 2008, by entry into the 2008 agreement, Mr Wu admitted and is bound by the provision of the agreement to the effect that Mr Li had lent to GEI as member's loans the sum of $5,751,925.37 and that such loans were subject to the indemnity in cl 5 of the GEI shareholder agreement. The figure of $4,520,349.20 on which Mr Li relies is also set out in the 2008 agreement. That agreement records that Mr Li in fact lent GEI $4,520,349.20 "excluding amounts used for O'Malley, personal amounts and amounts used for the farm". On the same principle it is not now open to Mr Wu, a party to that agreement, to resile from the position recorded therein. Although Mr Li relied on this latter figure it is clear from the 2008 agreement that the deal between Mr Li and Mr Wu went further and treated all loans by Mr Li to GEI and SG as loans to GEI within the meaning of the GEI shareholder agreement. As between themselves Mr Li and Mr Wu were free to make that agreement and both remain bound by it.

2.4 Issue 2 (member loans by Mr Li) 26 The submissions for Mr Wu asserted that for there to be a member loan within the meaning of cl 5 Mr Li had to be the direct source of any money he paid to GEI or SG. Accordingly, if Mr Li arranged for money to be transferred to GEI or SG through an intermediary then there was no member loan. 27 I disagree, and not only because of the provisions of the 2008 agreement. In Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753 at [20] (subject to appeal on a different question) Edmonds J said: The essence of a loan of money from A to B is a corresponding contemporaneous obligation on the part of B to repay the money transferred from A to B: Commissioner of Taxation v Radilo Enterprises Pty Ltd (1997) 72 FCR 300 at 313 per Sackville and Lehane JJ; Commissioner of Taxation v Firth (2002) 120 FCR 450 at [73] per Sackville and Finn JJ. Absent that obligation, the transfer of the money from A to B is something else - a gift, a payment by direction, a payment or repayment of an anterior obligation - but it is not a loan. The obligation of repayment is not proved by subsequent payment of the same amount, let alone a different amount, from B to A; that may be explicable by reference to another obligation or circumstance having nothing to do with the original payment from A to B. Rather, the obligation of repayment is proved by the terms of the contract under which the money was transferred from A to B. 28 Where a party (A) causes another party (B) to transfer money to a third party (C) then the character of the transaction is also to be found in the nature of C's obligation of repayment. In the present case there is no real doubt on the evidence that Mr Li and GEI operated on the basis that GEI was bound by repayment obligations to Mr Li and not to any intervening entity that Mr Li caused to make the transfers. It is not the case, as Mr Wu's submissions would have it, that there is no evidence about the intervening entities. There is evidence that Mr Li and Mr Li alone caused those entities to transfer money to GEI. None of those entities, some of which Mr Li controls, have made any contrary claim to repayment. Moreover, by its conduct in allocating such funds to Mr Li's loan account in its books and records, GEI accepted that it had an obligation of repayment to GEI. In these circumstances the issue about intervening entities is a distraction. GEI's own books and records are an admission that Mr Li lent money to GEI which GEI had an obligation to repay to Mr Li. The same general conclusions apply in respect of Mr Li's loans to SG. 29 One of the features of this case is that neither party called evidence from an accountant. Instead, the parties attempted to make good their cases from documentary sources and affidavits from lay witnesses. 30 The first documentary source is the Viisum accounts. These are accounts prepared by Dominic Bartone, accountant of Viisum, at the instructions of the liquidator of the entire Golden group of companies including GEI and SG. However, I do not consider these accounts reliable for three reasons. First, as Mr Bartone's evidence disclosed the accounts have never been finalised. Second, as Mr Bartone's evidence also disclosed the accounts contain at least one major error which he has been instructed to correct. Third, I cannot infer as I might otherwise have done that there are no other errors in the accounts or matters which require clarification because the accounts do not reflect the current position of the liquidator, as (for example) the liquidator's correspondence to the solicitor for Mr Li makes clear. 31 For these reasons to the extent that Mr Li's claims relied on the Viisum accounts the claims do not have a sound evidentiary foundation. 32 The second documentary source in respect of the loans made by Mr Li to GEI and SG is the February 2008 agreement between Mr Li and Mr Wu. As should be apparent, I consider that the agreement performs at least two functions. First, it is a contract between Mr Li and Mr Wu and operates according to its terms. Second, it contains admissions by both Mr Li and Mr Wu. I can see no reason why the parties should not be bound by those admissions. As set out above, the 2008 agreement, at least as between Mr Li and Mr Wu for the purposes of cl 5 of the GEI shareholder agreement, effectively deems that Mr Li loaned GEI $5,751,925.37 as at 18 February 2008. The 2008 agreement also records that Mr Li in fact lent GEI $4,520,349.20 "excluding amounts used for O'Malley, personal amounts and amounts used for the farm". O'Malley is Mr Li's own home which was constructed. Personal amounts are amounts expended on Mr Li and his family while in Australia. The farm is the property at Harden. 33 Contrary to the submissions for Mr Wu I can see no basis to construe this provision as indicating that these personal expenses have not been deducted from the amount of $4,520,349.20. The language of the 2008 agreement does not support the submission for Mr Wu. In context, it also makes little sense because the whole purpose of the 2008 agreement was to work out the net position of each party and provide a basis for future work together between Mr Li and Mr Wu. Hence, the 2008 agreement sets out calculations under which the total (netted off) amount owing to Mr Li was $5,336,422.91, Mr Wu was owed $13,353.19 with Hong Chen and Ms Ji both having incurred a loss of $48,402.11 each. The 2008 agreement says that if these figures are not repatriated (that is, repaid) then these amounts shall continue to be regarded as the amounts of individual investment into any new project and the corresponding interest shall continue to be calculated. In other words, at least as between Mr Li and Mr Wu, for any new project these amounts, if not repaid (which they were not), were to be treated as loans for the new project and also subject to the indemnity provisions in cl 5. 34 Consistent with my primary conclusion above, I consider that the effect of the 2008 agreement is that as between Mr Li and Mr Wu it must be taken that Mr Li loaned GEI $5,751,925.37 as at 18 February 2008. The statement of agreed facts records additional loans by Mr Li to GEI after 18 February 2008 of $134,448.76 on 15 December 2010 and $136,363.24 on 11 January 2011. There were no loans from Mr Li to SG after 18 February 2008.

2.5 Issues 3, 4 and 5 (member loans not repaid by GEI/SG) 35 I accept the submission for Mr Wu that, to the extent GEI paid any personal expense by or for Mr Li or his family, then that must be treated as a repayment of Mr Li's loans to GEI. I do not accept, however, that the same can be said of any payment which Mr Wu claims another company made for the benefit of Mr Li. Leaving aside any issues of credit of Mr Wu and Mr Li, apart from the 2008 agreement there is no evidence that Mr Li and Mr Wu agreed that any such netting off should take place. If some company other than GEI has a claim against Mr Li that it paid some personal expense for Mr Li then the recovery of that debt is a matter for that company. 36 Accordingly, it is only payments that GEI made for the benefit of Mr Li or his family that need to be taken into account. There are two ways of approaching this issue on the evidence. 37 If, as Mr Li maintained, the figure of $4,520,349.20 is used as Mr Li's member loans to GEI (based on the 2008 agreement) then, as I have said, I consider that this figure has already been netted off against all of Mr Li's personal expenses paid by GEI as at 18 February 2008. If the loans after 18 February 2008 are added to $4,520,349.20 the total is $4,791,161.20. From this must be deducted all of the personal expenses of Mr Li paid by GEI after 18 February 2008. The position of SG is relevant only if this approach is adopted because the other approach, which I prefer, is based on the consolidated GEI and SG position agreed to by Mr Li and Mr Wu in the 2008 agreement. As to SG the 2008 agreement records that Mr Li lent SG $644,865.76. Mr Li lent no further money to SG after 18 February 2008. SG did not pay any of Mr Li's personal expenses or otherwise repay the loan. The reason I prefer an approach based on the consolidated GEI and SG position is that the 2008 agreement establishes as between Mr Li and Mr Wu that for all purposes of the GEI shareholder agreement as at 18 February 2008 Mr Li had lent GEI $5,751,925.37. Mr Li also lent GEI $134,448.76 and $136,363.24 or a total of $270,812 after 18 February 2008. Accordingly, the total amount Mr Li lent to GEI as member loans is $6,022,737.30. According to a summary created by Mr Wu from GEI's accounts as agreed between the parties the total in Mr Li's loan account for GEI (meaning his personal expenses paid by GEI) is $1,257,123.54 before 18 February 2008 and another $807,644.50 after that date. Both figures are exclusive of GST. 38 Under cl 5 of the GEI shareholder agreement (as continued by the 2008 agreement) the liability of Mr Wu under the indemnity is as to 25% of any member loans that GEI cannot repay. The same applies under cl 5 of the SG shareholder agreement. 39 It is apparent that, but for the liquidator's belief that he may be able to claw back from Mr Li money that Mr Li might succeed in claiming against Mr Wu in this proceeding, the liquidation is complete. Leaving aside any claim the liquidator might have against Mr Li it is apparent that, at best, the completion of the liquidation might see the companies repay to creditors less than 1 cent in the dollar. Mr Li allowed for a repayment of GEI to him at the liquidation of $50,502.11. I accept this allowance. Mr Li submitted that he would receive nothing from the liquidation of SG which I also accept. Hence, like GEI, SG cannot repay the member loans. 40 Having regard to these considerations, the approach to Mr Li's entitlement under the indemnity in cl 5 of the GEI shareholder agreement which I consider supported by the terms of the agreements between Mr Li and Mr Wu, involves a calculation as follows: Li member loans to GEI in total: $6,022,737.30 less GEI repayment of Li loans in total: $2,064,768.00 GEI dividend to Li in liquidation: $50,502.11 Balance: $3,907,467.20 25% owed by Wu to Li (cl 5): $976,866.80 41 As noted, SG may be disregarded on this approach. 42 The alternative calculation, for which Mr Li contended, is: GEI Li member loans to GEI in total: $4,791,161.20 less GEI repayment of Li loans after 18/2/08: $807,644.50 GEI dividend to Li in liquidation: $50,502.11 Balance: $3,933,014.60 25% owed by Wu to Li (cl 5): $983,253.65 SG Li member loans to SG in total: $644,865.76. Less SG repayment of Li loans: $0.00 SG dividend to Li in liquidation: $0.00 Balance: $644,865.76 25% owed by Wu to Li (cl 5): $161,216.44 GEI and SG total: $1,144,470 43 I accept that my preferred calculation was not put for Mr Li and, accordingly, not responded to by Mr Wu. However, it is based on the same agreements. The claim that Mr Li put yields a higher sum but it does so without taking into account all of the terms of the 2008 agreement. Mr Li is bound by that agreement as is Mr Wu. In addition, the issue about whether Mr Li's personal expenses paid by GEI had been deducted or not as at 18 February 2008 is irrelevant on my preferred approach. Otherwise, I consider it appropriate that GST be excluded. I know nothing of Mr Li's GST position and he should not get both the prospect of a GST input credit and damages on account of having paid GST. While I prefer my construction of the 2008 agreement which results in Mr Wu owing Mr Li $976, 866.80 (plus interest) under the indemnity the GEI shareholder agreement, but for that preference, I would have accepted Mr Li's claim to the extent set out above, $1, 144, 470 (plus interest).

2.6 Issue 6 (recovery precluded) 44 It was submitted for Mr Wu that the principle in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 precluded recovery. In Ballard v Multiplex Ltd (2008) 68 ACSR 208; [2008] NSWSC 1019 McDougall J explained the principle in these terms: [32] In Prudential, the plaintiff was a shareholder in the first defendant Newman Industries. The plaintiff alleged that two directors of Newman Industries had entered into a conspiracy, for the benefit of a third party, to injure Newman Industries and, indirectly, its shareholders. The trial judge found that the conspiracy had been made good, and awarded damages. In substance, the Court of Appeal exonerated the directors. Along the way, their Lordships considered the rule in Foss v Harbottle (1843) 2 Hare 461 ; (1843) 67 ER 189. After an extensive review of the authorities, their Lordships said at 222-223 that a shareholder in a company cannot recover damages simply because the company itself has suffered damage which results in diminution in the market value of the shares, or in dividends. Such loss, their Lordships said, was "merely a reflection of the loss suffered by the company"… [33] The principle has been considered on a number of occasions. The House of Lords considered it in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1. Lord Bingham of Cornhill considered that the decision in Prudential, and a number of other decisions to which his Lordship referred, established three propositions. His Lordship said at 35-36 that: Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholders' shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if that company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss … Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding … Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by the breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other … [34] Lord Millett (with whose analysis on this point Lord Goff of Chieveley expressly agreed) expressed himself to similar effect at 62: Where the company suffers loss as a result of a wrong to the shareholder but has no cause of action in respect of its loss, the shareholder can sue and recover damages for his own loss, whether of a capital or income nature, measured by the dimension in the value of his shareholding. He must, of course, show that he has an independent cause of action of his own and that he has suffered personal loss caused by the defendant's actionable wrong. Since the company itself has no cause of action in respect of its loss, its assets are not depleted by the recovery of damages by the shareholder. The position is, however, different where the company suffers loss caused by the breach of a duty owed both to the company and to the shareholder. In such a case the shareholder's loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own course of action. If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved. [35] Lord Millett returned to the question of "reflective loss" at 66. He said that it "extends beyond the diminution of the value of the shares; it extends to the loss of dividends … and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds'. At 67, his Lordship noted that the rule did not prevent the shareholder (subject to the principles governing remoteness of damage) from recovering "in respect of a loss which he has sustained by reason of his inability to have recourse to the company's funds and which the company would not have sustained itself". 45 I do not see how the facts of Mr Li's claims under the indemnity provisions of the shareholder agreements engage these principles. Nothing in the evidence indicates that the companies have a cause of action against Mr Wu whereas, by virtue of the indemnity provisions of the shareholder agreements, Mr Li does have a cause of action against Mr Wu. Nor is it apparent that the losses Mr Li has suffered are the same as the losses of the companies. It is also the case that Mr Wu's position is that he has done nothing which would enable GEI or SG to take any action against him. If this is so (and the evidence indicates that the liquidator does not intend any such action) then it is not apparent how Mr Wu can also contend that the principles in Prudential Assurance preclude recovery by Mr Lu under the indemnity provisions.

3. MISLEADING AND DECEPTIVE CONDUCT CLAIM 46 Mr Li claims against Mr Wu under the Fair Trading Act which applies provisions of the Australian Consumer Law to the ACT. By this method a person contravenes the Fair Trading Act if, in trade or commerce, the person is guilty of misleading and deceptive conduct, and is liable for damages for conduct caused by such contravention. 47 Although more instances of alleged misleading and deceptive conduct were pleaded and pressed initially, the claim reduced to one proposition. The proposition is that Mr Wu engaged in misleading and deceptive conduct when he represented to Mr Li between 15 and 18 February 2008 that he, Mr Wu, either himself or through his wife had contributed approximately $570,000 to the purchase of the De Burgh Street property. 48 Mr Wu initially denied that he made any such representation in his defence but agreed in cross-examination that he had done so. The 2008 agreement expressly refers to Mr Wu's investment into GEI as including "approx. $570,000 for newly acquired property". This amount, together with $470,00 otherwise said to have been invested by Mr Wu in GEI, make up the $1,054,839.78 set out in the 2008 agreement as Mr Wu's investment in GEI (with interest, $1,179,883.83) in circumstances where the 2008 agreement also records that Mr Wu had been repaid by GEI an amount of $1,106,028 whereas Mr Li (by far the major investor) had been repaid nothing at that time (his personal expenses having already been deducted leaving the figure of $4,520,349.20 plus interest owed to him). 49 The true position is that the approximately $570,000 that Mr Wu used to purchase the De Burgh Street property included an amount of $95,019 that Mr Wu had arranged GEI itself to lend to another company of Mr Wu's Golden International Investments Pty Ltd (GII). In other words, I infer that Mr Wu was using an amount of $95,019 that was a debt GII owed to GEI as a justification for claiming in the 2008 agreement that he was owed an amount inclusive of $95,019. It must be acknowledged that Mr Wu alleged Mr Li knew about this loan and thus that he did not mislead Mr Li. Two considerations indicate to the contrary. 50 First, if that is so then it would have been contrary to the purpose of the 2008 agreement for the figure of $95,019 to have been represented as part of the loan from Mr Wu to GEI. The 2008 agreement is detailed in terms of monetary amounts. There is no possible reason for the 2008 agreement to have credited GEI's own $95,019 as a loan from Mr Wu to GEI unless Mr Li had been led to believe that Mr Wu had funded the $570,00 purchase of the De Burgh Street property from sources other than GEI. 51 Second, and in contrast to Mr Li, I found Mr Wu a most unimpressive witness. He was frequently evasive. He routinely appeared to change his evidence when it suited him including denying he had said things in the witness box and using allegedly flawed interpretation as his excuse. I formed the strong impression that he understood English reasonably well and used the interpreter to give him more time to formulate his answers and to shield himself from direct cross-examination. The fact is he had acted as Mr Li's interpreter on many occasions during their dealings. Mr Wu has lived in Australia since 1990. He obtained a Masters Degree in International Management from the Australian National University in 2004. The course was conducted and examined in English and Mandarin. I accept that the conclusions about Mr Wu's lack of credit as a witness should not be drawn lightly. But the unfavourable impression I formed of Mr Wu given both the content of and manner in which he gave evidence was so strong that these matters must be said. The examples of the lack of credibility of his evidence are so numerous that selecting examples is not easy. Nevertheless, I consider it clear that Mr Wu was in the business of referring prospective Chinese immigrants to Australia to migration agents for a fee from about 2000 onwards. His denials were unconvincing in the face of the uncontested evidence of Ian See and indeed Mr Wu's own evidence, let alone that of Mr Li. I consider it clear that Mr Wu did perceive Mr Li, a wealthy Chinese businessman who wanted to migrate to Australia with his family, a good prospect not only for Mr Wu's migration business but also for the future advancement of Mr Wu's business ambitions in Australia. I consider it clear that Mr Wu's insistence that Mr Li knew from the outset about the companies Mr Wu had established, Golden Crop Australia Pty Ltd, GII, and Golden Constructions Pty Ltd, unconvincing. Mr Wu may not have deliberately concealed the existence of those companies from Mr Li in a fraudulent manner but the evidence indicates that he did not take any step to ensure that Mr Li was aware of those companies or the dealings of those companies with GEI which Mr Wu arranged. 52 I do not accept the submission that Mr Wu was having difficulties with the interpretation of questions to him and his answers. It was clear from the course of his evidence as a whole that, when it suited him, he understood English and when it did not suit him he relied on the interpretation and alleged misinterpretations. This is not apparent from the transcript which records only the questions and answers in English. But it was apparent from the hearing. Mr Wu, when he wanted to make a point, would speak in English. Sometimes he would not wait for the translation of the question into Mandarin. On almost every occasion when I gave a direct instruction to Mr Wu he would respond in English before the instruction had been translated. Moreover, none of the other Mandarin-speaking witnesses seemed to have any problem with the interpretation and it did not cause them to obfuscate, retract evidence, deny what documents disclosed to be true until the documents were put to him, and make self-justifying speeches when it suited. When there was a problem with an interpreter during one morning of Mr Wu's evidence the problem was quickly picked up and the interpreter replaced. 53 Given these conclusions it is unnecessary to consider the additional submission for Mr Li that Mr Wu forged Hong Chen's signature on various documents. The claim related solely to Mr Wu's credit and was confounded by a number of evidentiary difficulties which do not warrant further analysis. 54 In contrast, and contrary to the submissions for Mr Wu, I found Mr Li's evidence to be of a different kind altogether. Mr Li was a careful witness. Although he speaks no English and thus was genuinely dependent on the interpretation unlike, it must be said, Mr Wu, Mr Li's evidence was clear, cogent and convincing. He did not seek to obfuscate as Mr Wu frequently did. His answers were intelligible. They were also basically consistent with the contemporaneous documents whereas Mr Wu's evidence, frequently, was not. The evidence of Mr Zhi Fu was also of the same quality as that of Mr Li. As such, I accept the version of events given by Mr Li and Mr Fu rather than Mr Wu where there is material dispute. Contrary to the submissions for Mr Wu I do not see any of the changes in the case of Mr Li as undermining his credit. The changes were appropriate having regard to the evidence as it emerged. Mr Li's current lack of any trust in Mr Wu is understandable given what he now knows about Mr Wu's conduct. In particular, insofar as Mr Wu's payment to himself of either $1.1 or $1.4 million from the accounts of GEI I found most unconvincing Mr Wu's evidence that most of this went to creditors of GEI. I cannot understand why GEI would not directly pay creditors from GEI's own funds. Yet that is not what occurred. Instead, Mr Wu paid the entire amount to himself and then said he arranged to pay creditors. This is an unusual course of action to say the least. Moreover, it is not apparent from the evidence what payments were made to creditors of GEI. I do not consider Mr Wu's evidence reliable in this regard. Indeed, I found his evidence so unreliable in so many respects that it is impossible to rely on any aspect of his evidence unless independently corroborated by documents which Mr Wu had no involvement in preparing. As to the $1.1 or $1.4 million from the accounts of GEI, I consider that Mr Wu paid himself the money. Whether because he considered himself a creditor of GEI or not there is no doubt Mr Wu paid himself that money without the knowledge or consent of Mr Li. This is why it was important upon Mr Fu discovering the payment in the reconciliation undertaken before entry into the 2008 agreement that Mr Wu present himself to Mr Li as having repaid to himself money that GEI owed him, including the $95,019 which Mr Wu had in fact borrowed from GEI itself to fund the purchase of the De Burgh Street property. 55 For these reasons I do not accept Mr Wu's evidence that Mr Li knew that Mr Wu had caused GII to borrow $95,019 from GEI for the purchase of the De Burgh Street property. I am satisfied that Mr Wu induced Mr Li into believing that he, Mr Wu, was the sole source of the $570,000 used to acquire the De Burgh Street property and that this should be credited as part of Mr Wu's loans to GEI. 56 Although it is true that Mr Li initially alleged more misrepresentations than this, I infer from Mr Li's evidence that there is no possibility that he would have done any further business with Mr Wu had he known the true position before 18 February 2008; that Mr Wu had arranged for GEI to loan Mr Wu's company $95,019 for the purchase of the De Burgh Street property. The simple reason for this is that had he known this it would have been obvious to Mr Li that he could not trust Mr Wu. Even though Mr Li generally wanted to keep doing business in Australia it is inconceivable that he would have wanted to do business with a person who used GEI's own money to give himself a credit as a debtor to that amount of GEI. The conduct of Mr Wu in this regard was inescapably dishonest and designed to advance himself at Mr Li's expense. The fact that this was done in a context where Mr Wu had paid to himself from GEI $1,106,028 whereas Mr Li had been repaid nothing at that time is inconsistent with any willingness on Mr Li's part to continue to do business with Mr Wu had Mr Li known the truth. 57 As a result, the business relationship between Mr Li and Mr Wu would have ended at that time subject to the finalisation of all outstanding matters relating to the development at Fox Place, Lyneham and the project at Harden. Mr Li would not have lent any further money to GEI or to any of the companies of Mr Wu that Mr Li did ultimately find out about. 58 However, I do not agree with the method of calculation of loss put forward for Mr Li. It is not at all clear what Mr Li's net position would have been had GEI and SG been wound up in February 2008. The February 2008 agreement does not support an inference that GEI and SG would have been able then to repay Mr Li's loans whichever way they might be calculated. This is where the evidence of an accountant would have been critical. I have no basis for knowing what the alternative position would have been if GEI and SG had been wound up in February 2008 without engaging in pure speculation. However, what I do know is that Mr Li would not have advanced any further funds to GEI or to any company associated with Mr Wu. The difficulty in this regard is that I am not satisfied on the evidence that Mr Li did not get the benefit of at least some or perhaps all of these funds through the construction of his house at O'Malley and I am not able on the evidence to work out what Mr Li's real loss might be. The party claiming to have suffered loss bear the onus of proof. While damage need only be proved "with as much precision as the subject matter reasonably permitted" (Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10 at [37]), a calculation based entirely on speculation rather than rational inference is not permitted. 59 Mr Li, accordingly, has not proved his loss by reason of Mr Wu's misleading and deceptive conduct.

4. BREACHES OF CONTRACT 60 Mr Li alleges that on 23 March 2005 he and Mr Wu entered into an agreement in respect of the operations of GEI and SG. Mr Wu denies this. The agreement is said to be constituted by a set of minutes of a meeting of directors of GEI and SG which took place on 23 March 2005. The minutes are unsigned. They include the following provisions:
   1. Appoint Chief Finance Officer Directors agree to appoint Ian See as Company A and Company B's Chief Finance Officer.
   2. Strengthen company internal control. Directors agree on the below internal control measures: A Board structure: For the purpose of complying with Australian Migration Laws for obtaining Visa 163, directors for Company A and Company B will be: Company A: Xiuzhen Ji, Company B: Yuxin Li. The Board may appoint acting director. B The board may appoint a General Manager to manage the business and affairs of Company A and Company B; Tao Wu will serve as the role of General Manager. C Bank Signatory: The Board agrees Company A and Company to set up Accounts A and B. All company profits to be deposited into Account A, all outgoing expenses and funds to be transferred from Account A to Account B, outgoing expenses to be drawn from Account B. Account A signatory is company director, the General Manager shall have authority to withdraw funds less than $3000AUD from account B, the director shall have authority to withdraw funds more than $3000AUD. D Accountant: Company shall appoint an experienced accountant to record and produce financial statements on a long term basis. The appointment of the accountant must be approved by the Chief Financial Officer. E Checks: The Chief Financial Officer or delegate shall perform checks on Company A and Company B every two to three months. F Monthly Funds Plan: At the end of each month, the General Manager shall present to director the proceeding [sic] month's funds plan. Any expenditure not within the monthly funds plan requires special approval from director. …
   3. General Manager's letter of appointment: The Board agrees to appoint a General Manager. Tao Wu and Ian See are to be responsible for letter of appointment.
   4. Restrictions of the General Manager: (A) B Account: less than $3000AUD: single signatory; (B) Administrative expenses: independent approval, unlimited funds; (C) For projects expenses outside the bank's scope: $10,000AUD: independent approval: General Manager to request director for approval; (D) Approval limits of company's projects: General manager to request approval from the Board.
   5. Tao Wu's loan agreement: In relation to Mr. Li's personal loan to Tao Wu, both parties must have a shareholder loan agreement in writing setting out the terms of the agreement. Mr Li to request Ian See to assist in this matter. 61 I do not accept that these minutes constitute or record any form of binding agreement between Mr Li and Mr Wu. They are a record (unsigned and incomplete on their face) of a meeting between Mr Li and Mr Wu about the operation of SG and GEI. I do not consider that the parties could have intended to be contractually bound by the terms of the minutes. The minutes record a proposed operational plan and no more. For example, Mr See was never appointed the chief financial officer of GEI or SG. Some of the provisions are incapable of enforcement (Mr See performing certain tasks every two or three months). It is objectively unlikely that Mr Li and Mr Wu intended to create between them a binding contract by a set of meeting minutes. While the arrangement is of a commercial nature where an intention to create legal relations is often presumed, the subject-matter of the minutes and the fact that they are on their face minutes of a meeting of directors is sufficient to persuade me that there could not have been any intention of Mr Li and Mr Wu being contractually bound by the terms of the minutes. 62 If I am incorrect in this regard then it is necessary to record that I also do not accept the term that Mr Li contended had to be implied into the March 2005 agreement. The implied term has three elements. First, that Mr Wu would conduct the operations of GEI and SG and report back to Mr Li and Ms Ji. Second, that Mr Wu was bound to adhere to any directions given or policies established by Mr Li. Third, that when exercising a discretion Mr Wu was bound to act in the interests of Mr Li and Ms Ji. I do not consider that the "Chinese business model" (which I accept exists as a matter of fact in some commercial dealings between Chinese people) has anything much to do with this issue. Under Australian law, even if the March 2005 agreement is a contract, it is simply not necessary to imply these terms to give business efficacy to this contract. Moreover, the third element of the term would be inconsistent with the obligation Mr Wu would have to act in the best interests of the companies. 63 For these reasons insofar as Mr Li's breach of contract claims relied on the March 2005 agreement, they cannot be accepted. 64 Mr Li also relied on the GEI and SG shareholder agreements. Clauses alleged to have been breached by Mr Wu are cll 2.2(d), 2.2(e), 2.2(f), 2.2(g), 9(e), 17.2, 17.4 and 17.6. Unfortunately, the evidence and submissions for Mr Li remained at high level of generality in this regard. The fact that I accept the submissions for Mr Li that Mr Wu has no credit as a witness does not translate into automatic acceptance of any generalised proposition that he breached his contractual obligations on numerous unspecific occasions. Many of the pleaded breaches were not pressed in final submissions and thus I do not deal with them. However, three classes of (more or less) specific breaches are also identified as follows: (a) Wu caused GEI to lend substantial sums of money to other 'Golden' companies. He managed both ends of each such transaction. Each transaction was effected without Li's knowledge, approval or consent. So far as Li knew, with one qualification the money that he lent to GEI remained in that company, together with the money that GEI earned, and the assets that were created as a consequence of Li's investment in GEI. The qualification relates to the money lent by GEI to Spring Grove insofar as it is reflected in the February 2008 Agreement. Li's evidence was that, if he had known of loans made by GEI to other 'Golden' companies, he would never have approved them. (b) Wu caused 'Golden' companies other than GEI and Spring Grove to acquire and hold assets. Again, he did so without Li's knowledge, approval or consent. (c) Wu failed to comply with Li's direction in February 2008 to pay GEI's liability for GST in the amount of approximately $900,000, and then concealed his default in that respect. 65 The second allegation may be dismissed immediately. I am unable to see that those facts (which I accept) constitute breach of the shareholder agreements. If the general good faith obligation is relied upon then breach of it could not be proved by the mere fact that Mr Wu caused other companies to acquire properties and no more. The submissions for Mr Li did not assist in understanding how this conduct is said to give rise to a breach of the shareholder agreements. 66 The first allegation was pleaded as Mr Wu having procured GEI to: lend GII $95,000 in 2007 (which was used for the purchase of the De Burgh Street property); increase an authorised loan to SG from $165,500 to $200,800 thereafter; between June 2007 and June 2008 lend Golden Constructions approximately $1.6 million and Golden Crop $338,123 and increase the unauthorised loan to GII from $95,019 to $346,915 and to SG from $200,800 to $251,712; between 1 July 2008 to 30 June 2009 lend SG $607,036 and Mr Wu's company Fairstar Computers Pty Ltd $154,868 all without the knowledge or consent of Mr Li other than the initial loan by GEI to SG of $165,500. 67 What loans have been proved leaving aside the Viisum accounts which I do not accept as reliable? 68 Mr Wu admitted that he caused GEI to lend GII $95,019 for the purpose of financing, in part, GII's purchase of the De Burgh Street property. I accept Mr Li's evidence that he did not know about this loan and did not authorise it. However, at this time Mr Wu was the sole director of GEI and thus cl 9(e) of the GEI shareholder agreement did not prohibit him from arranging this loan. No other provision of the GEI shareholder agreement has been proved to have been breached by this transaction. As noted, I do not accept that the March 2005 agreement was a contract and thus its provisions cannot be relied upon by Mr Li. 69 All other transactions rely on the Viisum accounts and thus have not been proved. 70 The third allegation appears to depend on the purported March 2005 agreement as a source of Mr Wu being obliged to comply with Mr Li's directions. The submissions for Mr Li did not suggest this obligation arose from the GEI shareholder agreement. As such, the claim must fail because I do not accept that the March 2005 agreement was a contract. 71 For these reasons Mr Li has not proved that Mr Wu breached any contractual obligation as pleaded.

5. BREACHES OF FIDUCIARY DUTY 72 The problem with Mr Li's claim for equitable compensation for breach of fiduciary duty is that, ultimately, the compensation claimed is for the proportion of liquidator's fees expended on dealing with the liquidation of the companies that Mr Wu had incorporated without Mr Li's knowledge or consent (GII, Golden Crop and Golden Constructions). The argument is that these companies were caused to be incorporated by Mr Wu in breach of his fiduciary duty to Mr Li. Even assuming in Mr Li's favour the existence of fiduciary obligations owed to him by Mr Wu (and, on the facts of this case, that claim is not without merit), the problem is that even in the intended final submissions for Mr Li reference was made only to the total cost of the liquidation and no calculation of the so-called "wasted" expenditure (that is, wasted on the liquidation of the companies Mr Wu caused to be incorporated) was provided. The calculation was first provided after the hearing in a supplementary note that I granted leave to be filed. But, as the further submissions for Mr Wu which I also granted leave to be filed rightly said, not only has Mr Wu had no opportunity to call evidence to meet this claim but also the figure is simply an apparently arbitrary proportion of the total cost of the liquidation. On this basis the objection of Mr Wu to Mr Li being able to rely on this claim in the Second Further Amended Statement of Claim (also filed pursuant to my direction after final submissions in an attempt to clarify what claims were now pressed by Mr Li) is sound. Accordingly, leave is granted to Mr Li to rely on the Second Further Amended Statement of Claim other than para 207(k) in respect of equitable compensation.

6. CONCLUSIONS 73 For the reasons set out above I consider that Mr Li has established his claim against Mr Wu under the indemnity in cl 5 of the GEI shareholder agreement. Mr Wu's liability to Mr Li in this regard is $976, 866.80. Mr Li is entitled to interest on that sum. 74 Mr Li established that Mr Wu engaged in misleading and deceptive conduct in procuring entry into the 2008 agreement but failed to prove loss or damage. 75 Mr Li has not proved any breach of contract by Mr Wu. 76 Mr Li's claim for equitable compensation for breach of fiduciary duty should not be permitted because of a failure by Mr Li to articulate in sufficient time the basis for the claim for compensation. In any event, the calculation of the compensation is arbitrary and unsupportable. 77 The parties are directed to confer and to file agreed or competing proposed orders reflecting these reasons for judgment, including orders for costs, within 14 days. The matter will be listed thereafter for the making of orders, if agreed, or a further hearing on the orders as necessary. I certify that the preceding seventy seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.