Li v Xin [2013] VSC 107

2 It will be obvious from this brief description of the dispute that the competing accounts of events are irreconcilable and that one party's version of the critical issues must be false. The task of deciding where the truth lay was not helped by the fact that 10 of the 15 witnesses called were people of Chinese background who gave their evidence through an interpreter. This is not a criticism of the two interpreters. But I was often left with an uneasy feeling that the subtleties of the English language being used by the lawyers were not being properly appreciated by the witnesses. I was also left with the suspicion that on occasions I was not being told the full story by either side.

3 I have been vexed by the problem of what to call the parties and witnesses of Chinese background without appearing disrespectful. Many of them had the same surname of "Li".[1] In order to avoid confusion, I decided to refer to the parties and witnesses of Chinese background generally by their full name without any prefix. With some of them I have added or substituted a non-Chinese given name which they used. With others I have taken the liberty of abbreviating their Chinese name.

4 There were three main witnesses on each side. The plaintiff, Phillips Yiwei Li ("Phillips Li"), is now a geo-technical engineer in Western Australia. At the time of these events he was a student. His father, Duff Tian-Fu Li ("Duff Li") had been, prior to coming to Australia, a senior lecturer in criminal law at the China Political Science and Law University in Beijing. The plaintiff's mother was Lin Qiao. She played a key role in the events relating to the purchase of the Kirkham Road property.

5 The defendant, Cindy Yan Xin, migrated to Australia in August 2007. She was one of three directors of, and shareholders in, the company Qing Qing Australia Group Company Pty Ltd ("Qing Qing"). The other directors and shareholders were Lihua Li ("Lucy Li") and her husband, Donald Leslie Dover. Both of them, but in particular Lucy Li, were very much involved in the events the subject of this dispute.

6 Cindy Yan Xin first met Lucy Li when she started working for her company in China. She worked in an administrative role in its animal husbandry business of breeding cattle. Cindy Yan Xin was a director of Qing Qing between 6 April 2007 and 28 April 2009 and again from 1 August 2009 until 14 April 2012. Cindy Yan Xin said that she first resigned because she wanted to conduct her own business. She rejoined of her "own will" and resigned again because she was residing in New South Wales and it was "inconvenient" to attend meetings.**

**7 This proceeding was commenced on 15 September 2009. On 26 November 2010, the defendant's solicitors, Henley Legal, filed and served a Notice by Legal Practitioner of Ceasing to Act ("Notice of Ceasing to Act").

8 On 3 February 2011, Lansdowne AsJ ordered that the hearing for directions for trial be adjourned to 15 February 2011. Paragraphs 3 and 4 of her Honour's order read as follows:**

1. The Defendant is required to appear on the next occasion.
2. The solicitor of the Plaintiff notify the Defendant of these orders in writing at the address supplied on the notice of ceasing to act and also c/- Henley Legal.

**9 Her Honour's order was duly served on Henley Legal by post, facsimile and email and posted to the defendant at 8 Baillie Court, Frankston on 11 February 2011, which was her address on the Notice.

10 The defendant did not appear at the hearing on 15 February 2011. On that day Daly AsJ ordered that the proceeding be fixed for trial on 22 March 2011 on an estimate of half a day. Her Honour also ordered that a copy of her order be served in accordance with paragraph 4 of the order made on 3 February 2011. Although pleadings had closed, there had been no discovery by either party.

11 When the matter was called on for hearing before me on 22 March 2011, there was no appearance for the defendant. Upon being satisfied that the defendant had been notified of the trial date in accordance with the order of Daly AsJ, I heard evidence from the plaintiff and his mother and gave judgment for the plaintiff at the conclusion of the hearing and declared that she held the Kirkham Road property on trust for the plaintiff.[2]

12 On 24 May 2011, a copy of the authenticated final order together with a proposed transfer of land was posted and faxed to Henley legal.

13 By a summons dated 6 June 2011, the defendant applied, pursuant to r 49.02(2) of the Supreme Court (General Civil Procedure) Rules 2005 ("the Rules"), to set aside the judgment on the basis that she was unaware of the trial date. The application was supported by an affidavit sworn by the defendant on 3 June 2011 ("first affidavit"). The plaintiff responded with an affidavit sworn on 8 August 2011. The defendant swore an affidavit in reply on 29 August 2011 ("second affidavit") and a further affidavit in reply on 13 September 2011 ("third affidavit"). On 30 April 2012, the defendant swore a second further affidavit in reply ("fourth affidavit"). The application was adjourned several times in the Practice Court before eventually being set down for a hearing before me as the Judge who gave the judgment sought to be set aside.[3]

14 In May 2012, the application to set aside the judgment against the defendant was adjourned because it was anticipated that the defendant's solicitor, Mr Lim, who was then appearing as her counsel, would be giving evidence about his telephone conversation, on 7 September 2011, with the defendant's former solicitor, Henry Wong, in which, as referred to by the defendant in her third affidavit, sworn on 13 September 2011, he allegedly made a number of admissions concerning what he had or had not done with respect to forwarding to the defendant the notice given by the plaintiff's solicitors about the trial date. Mr Wong had prepared a draft affidavit disputing virtually all of the defendant's evidence about what Mr Lim had told her of the conversation. In the circumstances, it was agreed by both sides that it would be inappropriate for Mr Lim to appear as both witness and counsel.

15 The application to set aside the judgment was then listed for hearing before me on a two day estimate commencing on 10 September 2012. After hearing opening submissions from counsel for the defendant, I raised with the parties whether it would not be preferable to avoid wasting further time and costs on the issue of whether the judgment should be set aside and instead to recognise the near inevitable result and to use the days already set aside as the start of a hearing of the dispute on its merits. After taking instructions, both parties consented to an order that the judgment be set aside, with the question of the costs thrown away reserved to the end of the new hearing. Counsel for both parties assured me that they would be ready to start the trial the next morning.

16 The reason why I proposed this course was that it seemed to me even at that early stage that an arguable defence on the merits had been raised. As events have shown, it would have been impossible to decide the dispute on the affidavits even with some limited cross-examination, as proposed by counsel for the plaintiff. Further, as the current expression of the relevant principles then stood,[4] it appeared that the fact that there was an arguable defence would almost inevitably outweigh the defendant's failure to attend the first trial, even if I decided that her failure to attend was a deliberate tactic.[5]

17 What I have to confess I did not fully appreciate at the time I made my suggestion, were the consequences of proceeding to trial without the parties having first provided discovery on oath of all relevant documents and without having issued subpoenas and inspected subpoenaed documents prior to the trial commencing. The result was that documents kept appearing throughout the trial sometimes after witnesses had given evidence, which meant that in fairness they had to be recalled. More importantly, some of the documents produced during the trial raised serious concerns about whether they had only recently been prepared and backdated. This occurred despite my urging the parties to quickly consider their position with respect to discovery and to request copies of required documents at an early stage.

18 The other unfortunate consequence of the late change from an application to set aside judgment to the trial itself was that I felt obliged to accommodate counsel's and witnesses' pre-existing commitments. This coupled with some difficulties about my own availability meant that a very disjointed and drawn out hearing resulted.**

**19 A preliminary issue was whether or not Cindy Yan Xin had notice of the trial date of 22 March 2011. This was still a relevant matter because it possibly reflected on the credibility of Cindy Yan Xin and on her attitude to defending the claim against her.

20 In his opening on this issue, the defendant's counsel made the following points:**

(a) Cindy Yan Xin had moved from Lucy Li's property at 8 Baillie Court, Frankston ("the Frankston address") when it was sold in May 2009. Her solicitor Mr Wong should have known she was no longer at this address because he did the conveyancing for Lucy Li of both the sale of the Frankston property and the purchase of a new property in Dromana.

(b) Despite this, the Frankston address was put on the Notice of Ceasing to Act and documents were served there.

(c) Nowhere in the emails allegedly sent by Mr Wong to Cindy Yan Xin was there any mention of any urgency for her to do anything and the trial date was not mentioned. This point arose out of an apparent misreading of the documents produced by Mr Wong and was laid to rest when he produced copies of everything, including the orders, emailed to Cindy Yan Xin.

(d) It was only in May 2011 after she arranged for the documents to be collected that Cindy Yan Xin "first ... realised how serious the matter was".

**21 Cindy Yan Xin said in her first affidavit that in about July 2010 Mr Wong told her that he could not continue to act for her. Cindy Yan Xin claimed that this conversation followed a meeting arranged by Mr Wong at his office to discuss with Duff Li an amicable resolution of the dispute. She said that Duff Li insisted that she attend the meeting without her father. In the end she was unable to attend as she was sick. She said that Duff Li attended and became very abusive accusing her of deliberately refusing to attend the meeting. Cindy Yan Xin said that she "had no more communication" with Mr Wong since that conversation. Mr Wong denied that he made any arrangement with Duff Li or the plaintiff to meet Cindy Yan Xin at his office.

22 In fact, as Cindy Yan Xin acknowledged in her third and fourth affidavits, she had a conference with counsel and Mr Wong on 7 August 2010. Whenever the relationship ended, Cindy Yan Xin said that she accepted Mr Wong's withdrawal with some regret. But she then did nothing about the proceeding including not engaging new solicitors, until May 2011 after she learned that judgment had been entered against her.

23 Significantly, in cross-examination, Cindy Yan Xin said that Lucy Li and Donald Dover accompanied her to the conference with counsel. She said that Mr Wong translated but his Chinese was "not that good". She also said that Lucy Li and Donald Dover waited outside because the barrister's room was "very tiny" and they were called in if there were any issues raised which she could not answer. On the other hand, Mr Wong said that Lucy Li and Donald Dover were the ones providing "the particulars" at the conference. He said that "Yan Xin was silent at all times, after instructions were given from [sic] Donald and Lucy".

24 In her second affidavit, Cindy Yan Xin denied receiving the Notice of Ceasing to Act. She suggested that it may have been sent to the Frankston address. She pointed out that she had not resided at 8 Baillie Court, Frankston since about June 2008 when she shifted to 38 Jackson Way, Dromana. She said that she then moved to Scone in New South Wales in about January 2010. Importantly, she also denied receiving a copy of the order of 3 February 2011 or the order of 15 February 2011. She said she received a call from Henley Legal on or about 26 May 2011 referring to the letter from the plaintiff's solicitors dated 24 May 2011 and that she arranged for a friend in Melbourne to pick up the letter and enclosures and they were faxed to her on the same day.

25 In that affidavit, Cindy Yan Xin also explained that her relationship with her solicitor ended as a result of a misunderstanding. She said that she had been asked by Henley Legal to attend a mediation, but she was sick and could not attend. She misunderstood what her solicitors were advising and they argued and she said that she would not attend any mediation.

26 In her third affidavit, Cindy Yan Xin said that she had made a mistake and that, although Lucy Li purchased the Dromana property in August 2008, she did not move there until May 2009 after Lucy Li's son, Shao Chen Zhu, sold the Frankston property which was owned beneficially by his mother.

27 Cindy Yan Xin gave evidence that she never received "any documents, official letter" telling her that Mr Wong was no longer acting on her behalf. She agreed that she received "quite a few" emails from Mr Wong but they were "all relating to bills". She reluctantly agreed that the only way Mr Wong contacted her was by email. I note that she had not mentioned this in any of her four affidavits. Instead, she had denied receiving anything by post at the Frankston address.

28 Cindy Yan Xin said that when she moved to the country she had difficulty receiving emails because she "had no signal". She had to go to "the Internet bar and check", but when she was in Sydney she checked her emails more regularly.

29 In re-examination, Cindy Yan Xin denied that Mr Wong had told her before the first judgment that he would always communicate by email. She also claimed to have told Mr Wong that she had difficulties receiving email after she moved to the New South Wales country.

30 Mr Wong was called by the plaintiff to give evidence in the trial. Mr Wong said in his affidavit sworn on 1 August 2012 that, following Cindy Yan Xin's refusal to attend a Court ordered mediation, on 25 November 2010 he sent an email to Cindy Yan Xin at her email addresses - xy_cindy@hotmail.com and qqsy.lqq@bigpond.com - enclosing the Notice of Ceasing to Act. He also attached his bill dated 25 November 2010. Mr Wong said that "the email did not bounce and was not returned". He agreed the Notice gave the Frankston address as the defendant's last known address but said that he did not mail these documents to that address.

31 Cindy Yan Xin agreed that the first of these email addresses was her personal email address. The second was Qing Qing's. She said that she did not know who at the company would receive this email. Lucy Li said that the second email address was her address. She agreed that she received emails from Mr Wong at this address and that she would have read them and any attachments. In re-examination she said that she could not remember whether she passed on the messages to Cindy Yan Xin.

32 Mr Wong said that on 27 January 2011, he received an email from Cindy Yan Xin referring to his "request for her to pay" and querying whether some of the items had been "paid before". Cindy Yan Xin did say in her email "just saw your email", which possibly supports her evidence that she did not have continuous access to the internet and that she only read her emails when she was in Sydney. Cindy Yan Xin said in re-examination that her email would have been sent from "the city". But her emailed reply does mean, in my opinion, that she received the email of 25 November 2010 enclosing the Notice of Ceasing to Act. If she received Mr Wong's bill, as she clearly had, she would also have received the Notice. This conclusion is important because Cindy Yan Xin maintained that if she had received the Notice of Ceasing to Act she would have engaged a new firm of solicitors to act for her in defending the plaintiff's claim.

33 Mr Wong said that on 11 February 2011 he received an email from the plaintiff's solicitor enclosing the order of 3 February 2011. He said that on the same day he forwarded this email and attachment to Cindy Yan Xin at her two email addresses. Mr Wong said that "the email did not bounce and was not returned". In his email the plaintiff's solicitor had stated:**

You will note further that Yan Xin is required to appear at the Directions for trial proceeding on 15 February 2011 at 12.00 noon.

**34 Mr Wong said that on 24 February 2011 he received an email from the plaintiff's solicitor enclosing the order of 15 February 2011. He said that on the same day he forwarded this email and attachment to Cindy Yan Xin at her two email addresses. Mr Wong said that "the email did not bounce and was not returned".

35 Mr Wong said that on 24 May 2011 he received a facsimile from the plaintiff's solicitor enclosing the final order of 22 March 2011 and a copy of the transfer of land to be signed by Cindy Yan Xin. He said that on the same day he scanned these documents and then emailed them to Cindy Yan Xin at her two email addresses. Mr Wong said that "the email did not bounce and was not returned". Mr Wong denied giving this letter and enclosures to Cindy Yan Xin or her "friend" or to Lucy Li. He further denied telephoning Cindy Yan Xin on 26 May 2011 or at all in 2011. He was not cross-examined about these denials. On the basis of this evidence, I find that it was Cindy Yan Xin's receipt of Mr Wong's email of 24 May 2011 that stirred her into action.

36 Mr Wong said that between 7 June 2010 and 11 April 2012 he sent about 120 emails to Cindy Yan Xin at her two email addresses. He believed that none of them bounced or returned.

37 I do not accept Cindy Yan Xin's denials that she did not receive the emails and attachments notifying her that she was required to attend Court on 15 February 2011 and that the trial was listed for 22 March 2011. This is just too much of a coincidence when she clearly received the email of 25 November 2010 and, as I have found, she received the email of 24 May 2011. Her ignoring of the issue of emails in her affidavits and her raising of the false issue of postage of the documents to the Frankston address damaged her credibility on this question. Thus, I find that she deliberately chose, for whatever reason, not to attend the trial on 22 March 2011. Perhaps she mistakenly thought that it could not proceed in her absence.

(a) gave a false account of an alleged meeting at Mr Wong's office; and

(b) falsely denied receiving Mr Wong's emails of 25 November 2010, 11 February 2011, 24 February 2011 and 24 May 2011.

39 There remains the unresolved issue of the dispute about what was said in the telephone conversation between Mr Wong and Mr Lim, which took place according to Mr Wong on 5 and not 7 September 2011. In his affidavit Mr Wong relevantly:

(a) denied that he told Mr Lim that he had posted a copy of the order of 3 February 2011 to the Frankston address in about mid February 2011;

(b) denied that he told Mr Lim that he had posted a copy of the order of 15 February 2011 to the Frankston address towards the end of February 2011;

(c) denied that he had any conversation with Mr Lim about "posting" any letter. He said that he told Mr Lim that he always emailed the defendant at the two email addresses he had been given;

(d) denied that he told Mr Lim that, as the letters enclosing the copy orders had not been returned, he did not follow up with a phone call as he thought the defendant was still living at the Frankston address. He said that he knew she lived in New South Wales but he had never been given her address;

(e) denied that he told Mr Lim that he had forgotten that he acted for Shao Chen Zhu in the sale of his property at the Frankston address in May 2009 and that Cindy Yan Xin had shifted out from this house in May 2009. He said this topic had not been raised;

(f) denied that he told Mr Lim that when his process server attempted to serve his Magistrates' Court complaint on Cindy Yan Xin at the Frankston address his process server found out that she was no longer residing at that address. He said that this topic had not been raised and that he did not use any process server in Victoria;

(g) denied that he told Mr Lim that on or about 26 May 2011 when he received the plaintiff's solicitors' letter dated 24 May 2011 and the copy of the order giving judgment for the plaintiff he thought that it was a serious matter and he called Cindy Yan Xin on her mobile to advise her on that day. He said that he did not call Cindy Yan Xin on that day and that he did not have her mobile telephone number;

(h) denied that he told Mr Lim that it was in this telephone conversation that Cindy Yan Xin reminded him that she had already moved to 116 Waverley Street, Scone. He said that he never spoke to Cindy Yan Xin in 2011 and that she had never given him that address;

(i) denied that he told Mr Lim that at Cindy Yan Xin's request he handed a copy of the letter dated 24 May 2011 together with enclosures to Lucy Li. He said that Cindy Yan Xin did not make any such request. As previously stated, he said that he emailed these documents to Cindy Yan Xin; and

(j) denied that he told Mr Lim that Cindy Yan Xin may have given him her address in Scone, but he had forgotten it, and that he admitted that he rarely telephoned Cindy Yan Xin. He said that he had never rang her on her mobile.

**40 Mr Lim did not swear an answering affidavit prior to the adjourned hearing date of the application to set aside the judgment and Mr Wong's evidence was never challenged in cross-examination. In the circumstances, I see no reason not to accept Mr Wong's evidence.

41 As this particular dispute does not affect the credibility of Cindy Yan Xin, given that her third affidavit was presumably prepared by her solicitor and she was only deposing to what she had been told, it is unnecessary to spend further time discussing it. However, it is a matter of concern to me that Mr Lim has never given his version on oath of the telephone conversation and explained how this false account of the conversation came to be put before the Court.**

**42 I propose to start by setting out in roughly chronological order the facts which form the background against which the two competing versions of events have to be assessed. Some of these facts were common ground, some were clearly established by the evidence and the remainder were hotly contested.

43 For some years prior to April 2007, a tofu making business owned by Heng V (Australia) Pty Ltd ("HVA") was carried on at Factory 2, 61 Amberley Crescent, Dandenong ("the Amberley Crescent property"). Duff Li was a part owner of HVA. Lin Qiao managed the business. Duff Li and Lin Qiao leased the premises at Amberley Crescent. The term of the lease was five years commencing on 1 September 2002, with options of further terms of three years and two years. Lin Qiao said that her family had spent over $100,000 installing the equipment in the Amberley Crescent property.

44 The business operated under the registered business name of "Newfield Soya-Bean Food Products" ("the Newfield Soya-Bean business name"). That business name was first registered to HVA on 26 March 2007, although the business, according to the records of Consumer Affairs, had commenced on 1 July 2005. HVA and the Amberley Crescent property were registered by the City of Greater Dandenong ("the Council") under the Food Act 1984 for the year ending 31 December 2007.

45 By a contract of sale initially signed on 20 April 2007, Duff Li and HVA sold the business to Xiao Bing Li as from 24 April 2007 for $65,000 (including stock). Xiao Bing Li said that he bought the business for the purpose of emigrating to Australia. A signature on behalf of Xiao Bing Li dated 20 April 2007 was not identified or explained. However, Xiao Bing Li said that he signed the contract on 23 April 2007, after arriving in Australia for his first and only visit on 22 April 2007. In giving his evidence by video link from China, Xiao Bing Li identified his signature and the date on the contract. He left Australia on 28 April 2007. His arrival and departure dates were confirmed by his passport.

46 In response to a suggestion that Xiao Bing Li was Duff Li's brother, Phillips Li said that Xiao Bing Li was an acquaintance of the family not a relative. Xiao Bing Li said that he had known Duff Li since 1986 but was not related to him. I accept that evidence.

47 On 22 April 2007, Xiao Bing Li became registered as owner of the Newfield Soya-Bean business name, as did Duff Li. Xiao Bing Li said that it should have been in his name alone. HVA ceased to be registered as owner on 23 April 2007 and Duff Li ceased to be registered as owner on 26 July 2007. Phillips Li's parents stayed on as managers of the business for Xiao Bing Li. According to Xiao Bing Li, he authorised Duff Li to manage the business for him. The lease of the Amberley Crescent property remained in the names of Duff Li and Lin Qiao. By a certificate dated 14 January 2008 "Phillips X Lee" [sic] and the Amberley Crescent property were registered by the Council under the Food Act for the year ending 31 December 2008.

48 According to Lin Qiao, a person by the name of David Jie Li started working at the factory in Amberley Crescent in about late September or early October 2007. The defendant's witnesses denied that such a person existed. This is the first important factual dispute and will be considered separately below.

49 Cindy Yan Xin said that she moved permanently to Australia on 12 August 2007. She said that when she moved to Australia she did "all sorts of jobs". At the same time, she was undertaking an English course. She was not working for Qing Qing. She was too busy "sorting out" buying a business for herself. She said that she moved in with Lucy Li and Donald Dover at the Frankston property in May 2008.

50 At some time in 2008, Xiao Bing Li ceased to be the owner of the business. According to the defendant, this was because he sold it to Qing Qing on 1 March 2008 pursuant to a contract dated 10 October 2007, after it had been advertised for sale by Lin Qiao. Cindy Yan Xin said that the purchase price of $150,000 came from her funds in China. According to the plaintiff, the cessation occurred because when, in April 2008, Xiao Bing Li decided that he would not be emigrating to Australia he also decided to close the business down within a few months. This is the second important factual dispute and will be considered separately below.

51 Whether or not the business was sold by Xiao Bing Li, important developments occurred in April and May 2008 concerning the business being conducted at the Amberley Crescent property. For example, on 22 April 2008, Duff Li signed on behalf of Qing Qing an "Application for Transfer of Registration of Food Act Premises" with respect to the Amberley Crescent property and by 24 April 2008 Qing Qing was registered by the Council under the Food Act for the year ending 31 December 2008 in respect of that property.

52 At some time between March and May 2008 Cindy Yan Xin started work in the factory at Amberley Crescent.

53 Then, on 1 May 2008, Duff Li and Lin Qiao signed a Transfer of Lease of the Amberley Crescent property to Qing Qing. The term of the lease was for three years commencing on 1 September 2007 with an option of a further two years. Lucy Li and her husband Donald Dover guaranteed Qing Qing. That company started making rental payments to the agent, Collins Commercial & Industrial Pty Ltd ("Collins Commercial") in May 2008.

54 Next, Xiao Bing Li ceased to be registered as the owner of the Newfield Soya-Bean business name on 6 June 2008 and on the same date Qing Qing became registered as the owner of that business name. There was evidence that this change in registration should have been made on 1 May 2008. The mistake was made by an officer in Consumer Affairs. Just why these events occurred is the third important factual dispute and will be considered separately below.

55 On 3 or 4 May 2008, Lucy Li received a Commonwealth Bank of Australia ("CBA") bank cheque no 116720 for $200,000 which she paid into her bank account on 5 May 2008. There was a dispute concerning from whom Lucy Li had received the bank cheque for $200,000. Lin Qiao said that it was a loan from her to Lucy Li. Lucy Li said that she received the bank cheque from the person she thought was Xiao Bing Li, in the circumstances described below. This is the fourth important factual dispute and will be considered separately below.

56 Sometime in May 2008, Phillips Li entered into a contract to purchase a new home for the Li family at 24 Hartley Link, Endeavour Hills with a loan from BankWest. Cynthia Yu of SNC Finance & Conveyancing in Box Hill acted for the Li family in that transaction and arranged finance for Phillips Li. Phillips Li said that at the time he was working in a vacation job and as the bank only asked for two pay slips, he was able to produce evidence of satisfactory income. He did not tell the bank that this level of income would drop when he went back to university. In any event, the money was coming from his parents. Lin Qiao said that they borrowed from BankWest 95% of the purchase price of $495,000 and stamp duty of $25,360, which came to more than $490,000.

57 According to Giovani (John) Guastella, who was a senior salesman for Cameron Industrial Commercial, Real Estate Agents ("Camerons"), on 13 May 2008 he was contacted by Lin Qiao about the purchase of the Kirkham Road property.

58 On 16 May 2008, Qing Qing signed a lease of the Kirkham Road property, with a right of first refusal to purchase if the owner wanted to sell. The rental was $2,789.58 per calendar month, exclusive of GST. The term set out in the written lease was three years. On that day, Qing Qing paid one month's rent, including GST, ($3,068.54), a documentation fee ($300.00) and the security deposit ($3,068.54).

59 On 16 June 2008, a holding deposit of $1,000 was paid with respect to the purchase of the Kirkham Road property. The $1,000 was paid in cash by Lin Qiao to Camerons. Lin Qiao retained possession of the original receipt in which the purchaser was named as "Xin Yan & or nominees".

60 On 18 June 2008, Cindy Yan Xin signed an offer to purchase the Kirkham Road property for $538,000. Once again the purchaser was said to be "Xin Yan and/or nominees". Angus Clark was named as the agent in that document. He was John Guastella's assistant.

61 Sometime in June 2008, Lucy Li purchased her new house at 38 Jackson Way, Dromana. She and Donald Dover moved there, leaving Cindy Yan Xin and Lucy Li's son living in the Frankston property.

62 On 3 July 2008, Cindy Yan Xin signed an application for a loan from BankWest to assist her to purchase the Kirkham Road property.

63 On 18 July 2008, the balance of the deposit was paid by a CBA bank cheque dated 18 July 2008 in the sum of $52,800 payable to Camerons' trust account. The amount of $52,805.40 was withdrawn from Lucy Li's bank account on that day. Presumably, the extra $5.40 was the cost of the bank cheque. Lucy Li retained possession of the original receipt from Camerons. According to Cindy Yan Xin, the $52,800 was a loan to her by Lucy Li and she signed a receipt acknowledging this. On the other hand, Lin Qiao said the $52,800 was a part repayment of her earlier loan of $200,000 to Lucy Li.

64 On the same day, Cindy Yan Xin signed a Contract Note to purchase the Kirkham Road property from Talawood Pty Ltd for $538,000. The Contract Note stated that the sale of the property was subject to the existing lease to Qing Qing.

65 Cindy Yan Xin and Lucy Li said that, in about August or early September 2008, Duff Li demanded the return of the tofu making business. They said that after discussions with Lin Qiao, it was agreed that the Li family would repay the $150,000 purchase price and would take over the lease of the Kirkham Road property and that there were also discussions about payment for the partly completed fit-out of the Kirkham Road property. Lin Qiao denied any such discussions occurred.

66 Lin Qiao gave evidence that on 30 July 2008 she was diagnosed with bowel cancer. She underwent an operation on 26 August 2008, was in hospital for 11 days and was convalescing at home for 10 days.

67 The events relating to the purchase of the Kirkham Road property prior to settlement and the circumstances surrounding the signing of the lease of that property by Qing Qing constitute the fifth important factual dispute and will be considered separately below.

68 As previously stated, this dispute arose because the plaintiff alleged that the defendant agreed to hold the Kirkham Road property on trust for him. The defendant denied having agreed to do so. Whether there is any evidence of an agreement by the defendant to hold the property on trust for the plaintiff is the sixth important factual dispute and will be considered separately below.

69 The settlement of the purchase of the Kirkham Road property took place on 19 September 2008. It was funded by a loan of $365,000 from BankWest and by the following means:**

(a) a CBA bank cheque dated 18 September 2008 in the sum of $30,000, which was purchased from funds drawn from Lucy Li's bank account;

(b) an ANZ bank cheque dated 18 September 2008 in the sum of $50,000, which was purchased from funds drawn from the bank account of Ou Lu, a friend of Lin Qiao, who lent that amount to Lin Qiao; and

(c) a BankWest bank cheque in the sum of $70,265.88, which was purchased from funds drawn from the plaintiff's BankWest bank account on 18 September 2008.

The three bank cheques totalled $150,265.88. They were all made payable to "National Australia Bank on account of Talawood Pty Ltd" or something very similar. The three cheques were handed by Duff Li to Cynthia Yu at McDonalds in Glen Waverley on 18 September 2008. Duff Li said that Lin Qiao had given him the cheques.

**70 Whilst the above facts were clearly established, there was a dispute between the parties as to why each of these cheques was part of the funds paid at settlement. According to the plaintiff's case, the $30,000 was borrowed by Phillips Li from Lucy Li's husband, Donald Dover, and the other two cheques were provided by or on behalf of the Li family as part of Phillips Li's commitment to fund the purchase of the Kirkham Road property. According to the defendant's case, the $30,000 was borrowed by Cindy Yan Xin from Lucy Li, and the other two cheques were provided by or on behalf of the Li family as part repayment to Cindy Yan Xin of the amount previously invested by her in Qing Qing to enable it to purchase the business from Xiao Bing Li. These conflicting versions will be examined below. This is the seventh important factual dispute and will be considered separately below.

71 Some time in October 2008 Lucy Li and Cindy Yan Xin entered into a loan agreement with respect to the two amounts totalling $82,800 said to have been lent by Lucy Li to Cindy Yan Xin. Pursuant to the charge contained in that document, Lucy Li lodged a caveat over the Kirkham Road property on 27 October 2008.

72 After settlement of the purchase of the Kirkham Road property, the work of fitting out the premises so that they were suitable for a food manufacturing business commenced or continued. It was completed in about January 2009. Who did the fit-out work, for whom it was done and who paid for what is the eighth important factual dispute and will be considered separately below.

73 The ninth important factual dispute is who subsequently made the relevant payments concerning the Kirkham Road property and the defendant's loan in respect of that property and why those payments were made. This topic will be considered separately below.

74 On 17 September 2008, Duff Li, on behalf of Phillips Li and Jian-Huq Zhang, registered the business name of "Newfield HF". On 20 October 2008 Phillips Li and Jian-Huq Zhang incorporated LL King Australia Pty Ltd and this company became the sole proprietor of "Newfield HF" on the same day. Ten days later Jian-Huq Zhang resigned as a director and transferred all his shares in LL King to Phillips Li. The registered address of the business was the Kirkham Road property. Although Phillips Li was the sole director of LL King, its business was run by his parents, in particular his mother, Lin Qiao.

75 Phillips Li said that compared with the old business at Amberley Crescent his company's new business was much more automated and there were extra products such as Japanese tofu and flavoured tofu.

76 Xiao Bing Li said that Duff Li paid $20,000 for the purchase of some of the secondhand equipment in his business. Duff Li produced a copy receipt dated 2 November 2008. He said that his family in China had paid Xiao Bing Li and they had the original receipt, whereas Lin Qiao said that her husband paid Xiao Bing Li when he went back to China in about September 2010.

77 On 10 November 2008, the Li family gave Lucy Li a bank cheque in the sum of $20,000 made payable to "Donald Dover". Lin Qiao said that this was part repayment of the loan of $30,000 by Donald Dover. Lucy Li said that it was payment for Donald Dover transporting equipment from the Amberley Crescent property to the Kirkham Road property.

78 In about November or December 2008, Collins Commercial wrote to Qing Qing advising that it had found a prospective tenant to occupy the Amberley Crescent property as from 29 December 2008, subject to the Council's Health Department passing the property.

79 On 27 January 2009, Onlaws, on behalf of Phillips Li, lodged a caveat on the Kirkham Road property claiming Cindy Yan Xin was a trustee for him by virtue of a Deed of Trust dated 18 September 2008 between Cindy Yan Xin and Phillips Li. As there was no such document signed by her, Cindy Yan Xin issued a notice pursuant to s 89(1) of the Transfer of Land Act 1958 in February 2009 and the caveat was removed in March 2009.

80 On 29 January 2009, the Council issued a certificate that Qing Qing trading as "Newfield" and the Kirkham Road property were registered under the Food Act. Phillips Li said that this was a mistake and on 3 February 2009, the Council issued a certificate that LL King trading as "Newfield HF" and the Kirkham Road property were registered under the Food Act. However, a Business Name certificate dated 3 February 2009 stated that the Newfield Soya-Bean business name was owned by Qing Qing and that the business was carried on at the Kirkham Road property.

81 Lin Qiao said that her family's new business started at the Kirkham Road property at the end of January or early February 2009.

82 Cindy Yan Xin resigned as a director of Qing Qing on 28 April 2009.

83 According to Lin Qiao and Duff Li, David Jie Li and Cindy Yan Xin left the business on 30 April 2009 and both disappeared. Thereafter, Lin Qiao was unable to contact them.

84 On 4 May 2009, Duff Li, on behalf of Phillips Li, lodged a caveat dated 20 March 2009 over the Kirkham Road property claiming Cindy Yan Xin was a trustee for Phillips Li by virtue of a Deed of Trust dated 20 March 2009 between Cindy Yan Xin and Phillips Li. There was no such document signed by Cindy Yan Xin.

85 On the same day, Duff Li wrote on behalf of his wife to Lucy Li, Donald Dover and Henley Legal demanding payment of $220,000 in respect of an alleged loan of $200,000 from Lin Qiao to Lucy Li plus interest.

86 The property at 8 Baillie Court, Frankston was sold in early May 2009. Cindy Yan Xin said that she then resided at Lucy Li's house in Dromana.

87 Also in May 2009, Duff Li, on behalf of Lin Qiao, lodged a caveat over Lucy Li's property in Dromana claiming an interest as chargee. Lucy Li issued a s 89(1) notice in the same month and in July 2009 Lin Qiao's caveat was removed.

88 A sub-lease of the Kirkham Road property was prepared in about April or May 2009 by Camerons. It was signed by Cindy Yan Xin as lessor and by Donald Dover on behalf of Qing Qing as sub-lessor. The sub-lessee was said to be "Yiwei Li T/as Newfield Health Foods". The sub-lease was said to be for two years commencing on 16 May 2009. The monthly rental was stated to be $4,656.39, exclusive of GST. Cindy Yan Xin said that the plaintiff refused to sign.

89 Cindy Yan Xin married Xin Hua Zhu on 15 July 2009. Many of the plaintiff's witnesses said that the person in a passport photograph of Xin Hua Zhu was known to them as David Jie Li.

90 The plaintiff commenced this proceeding on 15 September 2009.

91 As previously stated, the trial was set down for 22 March 2011. The defendant did not appear and I gave judgment for the plaintiff on that day.

92 On 25 March 2011, Lucy Li instructed a debt collection agency to recover the loan amount owed by Cindy Yan Xin. By an email dated 18 May 2011 it advised that contact had been made with Cindy Yan Xin, who was without a job and had no income, but she had agreed to make a payment proposal within nine days.

93 On 4 October 2011, Cindy Yan Xin and Qing Qing entered into an agreement pursuant to which Cindy Yan Xin charged her interest in the Kirkham Road property in respect of an alleged agreement between them dated 28 September 2008. On 10 October 2011, Qing Qing lodged a caveat, dated 5 October 2011, over the Kirkham Road property.

94 On 26 October 2011, Lucy Li sued Cindy Yan Xin in the County Court for the sum of $82,800 plus interest. On 20 December 2011, Lucy Li entered judgment in default of appearance in the County Court proceeding against Cindy Yan Xin.

95 On 30 April 2012, Lucy Li swore her only affidavit in this proceeding.

96 On 28 June 2012, a warrant was issued by Lucy Li against Cindy Yan Xin for the Sheriff to sell the Kirkham Road property pursuant to the above judgment. Her claim was now for $137,693.27.

97 By a letter dated 3 July 2012, the CBA advised that bank cheque no 116720 had been deposited into Lucy Li's account on 5 May 2008.

98 By a letter dated 1 August 2012, the Registrar of Titles informed Phillips Li's solicitors that the warrant had been lodged over the Kirkham Road property and that the dealing would be processed unless an injunction was obtained against the Registrar within 14 days.

99 On 9 August 2012, Phillips Li commenced proceeding no SCI 2012 04578 against Lucy Li, the Registrar of Titles and the Sheriff. On 14 August 2012, I made orders restraining the Registrar of Titles and the Sheriff from taking any further steps in respect of the warrant until further order. On 30 August 2012, Lucy Li swore an affidavit in this other proceeding.

100 Some of these various events following settlement of the purchase of the Kirkham Road property are examined as part of the tenth important factual dispute. This topic will be considered separately below.**

**101 The first important factual dispute is whether a person known as David Jie Li existed. The plaintiff's case was that a person known to the Li family as David Jie Li had played an important role in the events concerning the purchase of the Kirkham Road property in the name of Cindy Yan Xin. The defendant's case was that there was no such person known as David Jie Li, or at least that the defendant did not know any person called David Jie Li and that he had played no part in the relevant events.

102 Cindy Yan Xin's counsel said in opening the application to set aside the judgment that the person David Jie Li was not known to Cindy Yan Xin and that she denied that he was her husband. Counsel then said that Cindy Yan Xin had told him that morning that she had never been married and had never had a partner. In opening the plaintiff's case at the start of the trial, counsel tendered a Certificate of Marriage dated 15 July 2009 between Xin Hua Zhu and Cindy Yan Xin. The certificate stated that their usual occupations were "Unemployed" and "Machine Operator", that the usual place of residence of both was 38 Jackson Way, Dromana (Lucy Li's home), that their conjugal status was "Divorced" and "Never validly married", that they had both been born in Shandong Province in China and that their dates of birth were "03/08/1964" and "23/05/1982". Despite statements by her counsel that Cindy Yan Xin would explain how the false statement was made, she never did.

103 Eight of the plaintiff's witnesses (Phillips Li, Lin Qiao, Duff Li, Xu Dong Qiao, Cynthia Yu, Ou Lu, Sanye Guo and Xian Li) said that there was a person known as David Jie Li. They gave fairly consistent descriptions of him, at least about his age. All bar Cynthia Yu said that David Jie Li had worked in the business at the Amberley Crescent property.

104 Phillips Li said that he understood that David Jie Li was Cindy Yan Xin's husband and Lucy Li's older brother. That was what Lucy Li called him. He said that David Jie Li appeared to be 46 to 48, in his "late 40s". He said that his parents had a close relationship with David Jie Li and through him with his wife Cindy Yan Xin. They became family friends, as did David Jie Li's sister, Lucy Li. Both David Jie Li and Cindy Yan Xin worked in the business conducted at the Amberley Crescent property. Phillips Li said that he met Cindy Yan Xin "on a few occasions" at the factory and later at dinners or lunches with Lucy Li and David Jie Li.

105 Lin Qiao said that David Jie Li started work at the factory in Amberley Crescent in about late September or early October 2007. She said that David Jie Li told her that he was 48 and that he was "a Shandong person". In March or April 2008 he brought his younger sister and his wife to meet the Li family. David Jie Li told her that Cindy Yan Xin was his wife. Lin Qiao said that they looked like they were a couple. They arrived at the factory together in the one car and went home in the one car. Lin Qiao said they both continued to work for the Li family, in the Kirkham Road factory, from early January 2009 until they disappeared at the end of April 2009. She said that she had tried to locate him. She had rung both a home telephone number and his mobile number but there was no answer.

106 Lin Qiao said that when David Jie Li first started working in the business, he gave her his residential address as 8 Baillie Court, Frankston. Lin Qiao said she did not get a tax file number from David Jie Li when he started working in the business. She said that she paid his wages weekly in cash because he said that he had an ABN and could "lodge tax himself". Lin Qiao said that she did not file with the Tax Office an end of year return for David Jie Li, although she did this for other employees of the business. Lin Qiao said that she could bring in from home David Jie Li's ABN, but never did so. Lin Qiao said that when David Jie Li started work in the new business in early 2009, she again paid him in cash.

107 Lin Qiao said that her family hired David Jie Li to supervise the fit-out of the Kirkham Road property. One of the invoices relating to that work, an invoice dated 16 November 2008 from Yarra Valley Refrigeration, had as "the originator" - "Lin David Lucy". Another page of the same invoice listed only "Lin" as the originator.

108 Duff Li said that he first met David Jie Li in about October 2007 when he came to the factory "to do some work". Duff Li said that he estimated David Jie Li was 45 or 46 and about 174 centimetres tall. David Jie Li told him that he came from Shandong Province. David Jie Li later told Duff Li that Lucy Li was his younger sister and that Cindy Yan Xin was his wife. Duff Li said that sometimes Cindy Yan Xin and David Jie Li arrived at work together and left together.

109 Duff Li said that his family often had meals in restaurants with David Jie Li, Lucy Li, Donald Dover and Cindy Yan Xin. In cross-examination, he said he would describe him as a family friend because David Jie Li had eaten dinner in their house about ten or more times. He could not say whether he would describe him as a "close family friend".

110 Cynthia Xia Yu, a conveyancer and mortgage broker, gave evidence that a "David" was introduced to her by Lin Qiao in April 2008 and that he later brought Cindy Yan Xin to her office. Lin Qiao gave evidence that the "David" in question was David Jie Li. Cynthia Yu described David Jie Li as 40 to 45 years old.

111 One of the covers on Cynthia Yu's two relevant files was headed "Yan Xin". Below that there appeared:**

0431 271 088 (David)

0432 554 961 (Yan Xin).

The other file cover had the names of "Yan Xin" and "David" and the above mobile telephone numbers for each of them, as well as the telephone and fax number of Qing Qing. Cynthia Yu said that she first wrote David Jie Li's name and mobile number and later she added Cindy Yan Xin's name and number. She said that David Jie Li gave her his telephone number on the first occasion she met him.

**112 Ou Lu said that she knew David Jie Li. She had been introduced to him by Lin Qiao at the Amberley Crescent factory. She described him as 45 or 46 at that time, about 172 to 174 centimetres and "quite good looking". She met him several times at dinners. He initially said that he was single, but later said that he was married to the daughter of a friend. She could not remember meeting the wife. Ou Lu also said that David Jie Li told her that he had a younger sister called "Li Lihua". In cross-examination, she said that she saw David Jie Li at the Amberley Crescent factory "more than three times".

113 Sanye Guo was called by the plaintiff. He migrated from China to Australia in January 2006 on a business investment visa. Initially his kitchenware business was located next door to the Kirkham Road property. He knew Lin Qiao because before he came to Australia his daughter worked for Lin Qiao at the "old factory". Sanye Guo said that he knew David Jie Li. He said that David Jie Li was "over 40" and "quite tall". He met him at both "the old factory and the new factory". He said that when the fit-out work was being done, he saw David Jie Li and Lin Qiao there.

114 Sanye Guo said that David Jie Li had a shop in Box Hill and he had asked him to provide him with televisions. Sanye Guo supplied him with four. David Jie Li returned one and only paid for one. Sanye Guo said he could not find David Jie Li to obtain payment for the other two.

115 Xian Li said that she started work for the business as a process worker in July or August 2007. She left in February or March 2008. Xian Li said that she knew David Jie Li. He started work there about two months after her. He was about 40. When shown the passport photograph of Xin Hua Zhu, she said that it was the person she knew as David Jie Li. Xian Li said that David Jie Li said different things about his marital status. He did not say to whom he was married. Although David Jie Li started as just an ordinary worker, Lin Qiao trusted him and they often went out together. After she left that employment she went back to the factory several times and on one occasion Lin Qiao pointed out Cindy Yan Xin as "David's little wife". Xian Li identified Cindy Yan Xin in court as David Jie Li's "little wife".

116 Cindy Yan Xin said that she did not know Xian Li. She had never met her. She suggested Xian Li had given this evidence because she was a friend of Lin Qiao's.

117 Late in the plaintiff's case, his lawyers obtained by subpoena from the Department of Immigration and Citizenship a copy of the passport of Xin Hua Zhu and a larger photograph of the same person. Both Xian Li and Lin Qiao, initially the only witnesses called by the plaintiff after these documents became available, identified Xin Hua Zhu as the person known to them as David Jie Li. As the defendant's counsel maintained the denial that there was any such person known as David Jie Li, I permitted the plaintiff's counsel to recall Duff Li, Xu Dong Qiao, Cynthia Yu, Ou Lu and Sanye Guo. When recalled, each one of them identified the person in the photograph as David Jie Li. As the plaintiff had returned to his work in Western Australia he was not recalled simply to be shown the passport photograph. In the circumstances, the cost was not warranted.

118 Cindy Yan Xin said in evidence that she did not know anyone called David Jie Li. However, she agreed that Xin Hua Zhu was her husband. They first met in May 2009 and married in July 2009. But:**

After we married our relationship ... was on the rock [sic], so we could not live in harmony so we separated ... [in] early ... 2011.

She said that the last time she had spoken to Xin Hua Zhu was in June 2012. Her home in Australia had been broken into whilst she was in China and amongst the items stolen had been her Chinese passport. She called Xin Hua Zhu, who was then in Australia, to ask whether he knew anything about the incident. She had not spoken to him since despite her best efforts to get hold of him.

**119 Cindy Yan Xin said that Xin Hua Zhu did not have another name and she had never heard him being called "David". Rather surprisingly, Cindy Yan Xin said that she did not know whether Lucy Li and Xin Hua Zhu were related. It turned out, when Lucy Li gave evidence, that Xin Hua Zhu was her first husband and the father of her son. However, Lucy Li said that he had nothing to do with Qing Qing or its business.

120 Cindy Yan Xin said that when she came to Australia she started working for Lucy Li. She lived with Lucy Li at 8 Baillie Court, Frankston and then in Dromana. Xin Hua Zhu did not live there with her before their marriage.

121 Lucy Li denied knowing any David Jie Li. So did Donald Dover and her son (Joel) Shao Chen Zhu. Lucy said that Xin Hua Zhu was her ex-husband. She denied he was called David Jie Li. Rather histrionically she said that she called him "stinky pig". According to her, she had only seen Xin Hua Zhu with Cindy Yan Xin on one or two occasions. Lucy Li said that Cindy Yan Xin knew that Xin Hua Zhu was her ex-husband. She denied that he had ever worked in the business.

122 Donald Dover gave evidence that he did not recognise the person in the photograph of Xin Hua Zhu. He said that he had never met his wife's ex-husband.

123 Shao Chen Zhu denied that either a person called David Jie Li or his natural father had ever lived at the Frankston address or the Dromana address.

124 It was put to Duff Li in cross-examination that Cindy Yan Xin and Lucy Li would give evidence that working in the factory at Amberley Crescent there was a person called David, who was not David Jie Li. Duff Li denied this and no such evidence was given by Cindy Yan Xin or Lucy Li.

125 I note that in Cindy Yan Xin's defence to the amended statement of claim it was not said, in response to the allegation that David Jie Li had signed on behalf of Cindy Yan Xin a receipt for payments made to her, that no such person existed. Instead, it was denied:**

that anything done by David Jie Li was done on her behalf.

**126 There was one other piece of evidence which possibly pointed to the existence of David Jie Li. A company called ACTV Tech Pty Ltd ("ACTV Tech") was incorporated on 21 April 2008, with a paid up capital of 1,000 $1 shares. Its original directors were Jie Feng who held 500 shares, Xiao Bing Li who held 250 shares and Shao Chen Zhu, Lucy Li's son, who held 200 shares. Lucy Li, who at some time held 50 shares in the company, was a director between 1 May 2008 and 2 March 2009. A person by the name of Jei Li became a director on 2 March 2009. He became the owner of 250 shares in May 2009. Shao Chen Zhu, Jie Feng, Xiao Bing Li and Jei Li were still directors of the company when it was deregistered on 13 September 2010.

127 The plaintiff submitted that the person "Jei Li" was David Jie Li. Obviously the spelling was different. But there was some evidentiary basis for the submission. In one of Cynthia Yu's files there was a Suncorp application for Small Business Finance form dated 2 July 2008 and signed by Cindy Yan Xin. The address for Cindy Yan Xin was Unit 1/24 Rose Street, Box Hill. Under the heading "Borrowing Entity" was the name "ACTV Tech Pty Ltd". Cynthia Yu said that she thought this was "David's company or something like that".

128 In opening the defendant's case, counsel told the Court that they definitely wanted Xin Hua Zhu to give evidence. Later, counsel said they now knew that Xin Hua Zhu had gone back to China and leave was sought to arrange for him to give evidence by video link. Later again I was told that they were arranging for him to come to Australia from China and time was needed to have his handwriting tested. This necessitated an adjournment of nearly three weeks. Then when the hearing resumed I was informed that Xin Hua Zhu had said he was not able to make any arrangements to come. No attempt was made to substitute evidence by video link.

129 On the basis of the above evidence, I am satisfied that a person known by the name David Jie Li did indeed exist, and that Xin Hua Zhu, Cindy Yan Xin's possibly estranged husband, was the person known as David Jie Li. The following matters assisted me in reaching that conclusion:**

(a) the evidence of Phillips Li, his parents and uncle that David Jie Li existed;

(b) the evidence of the more or less independent witnesses, Cynthia Yu, Ou Lu, Sanye Guo and Xian Li, that David Jie Li existed;

(c) the fairly consistent descriptions of the person known to the witnesses as David Jie Li;

(d) the use of the name "David" on Cynthia Yu's file;

(e) the use of the name "David" on the invoice from Yarra Valley Refrigeration;

(f) the identification by seven witnesses that the person shown in the passport photograph of Xin Hua Zhu was known to them as David Jie Li;

(g) the denial by Cindy Yan Xin, through her counsel, that she had been married or had a partner;

(h) the statement by Cindy Yan Xin that she did not know whether Lucy Li and Xin Hua Zhu were related. It beggars belief that Cindy Yan Xin did not know that her husband was the ex-husband of her friend, Lucy Li; and

(i) the failure by Xin Hua Zhu to give evidence, either in person or by video link, denying that he was known as David Jie Li and had been involved in the events the subject of this dispute.

**130 In reaching this conclusion I have not placed any weight on the evidence concerning a mobile telephone. Lin Qiao and Duff Li gave evidence that she had provided a mobile telephone to David Jie Li when he was working for them. Its number was 0433 781 083. The records for that number, which was in the name of Lin Qiao, for the period between 9 October 2008 and 3 February 2009 were tendered. They showed 126 calls to Lucy Li and 37 to Cindy Yan Xin. But that does not prove that the calls were made by David Jie Li. Lin Qiao may well have made them. Cindy Yan Xin gave evidence that Lin Qiao sometimes, but "not very often", contacted her by telephone out of working hours. This could explain the unusual times at which some of the calls were made to Cindy Yan Xin's number. She denied that this mobile telephone was used by Xin Hua Zhu. I also note that this number was not that given by "David" to Cynthia Yu.

131 Counsel for the defendant submitted that the plaintiff should have called David Jie Li as a witness and that I should draw an adverse inference against him for not doing so. I do not agree. The plaintiff's case was, in effect, that David Jie Li, Lucy Li and Cindy Yan Xin had conspired together to cheat the plaintiff of his beneficial ownership of the Kirkham Road property. In those circumstances, it is hardly sensible to hold that the plaintiff should have called David Jie Li. Moreover, the question has to be asked why the defendant so strenuously resisted the suggestion that this person was David Jie Li. On her case, she could have admitted there was such a person, denied that he had any authority to act on her behalf and put forward the same arguments as to why the plaintiff's case could not succeed. It seems to me that the reason why the defendant falsely denied the existence of David Jie Li was that admitting that he was involved undermined her defence to the plaintiff's claim, particularly when it turned out that Xin Hua Zhu, Cindy Yan Xin's possibly estranged husband, was the person known as David Jie Li.**

**132 In her first affidavit, Cindy Yan Xin stated that in or about September 2007 Lin Qiao advertised the business for sale in a Chinese newspaper. She said that at that time she went to see Lin Qiao, who told her she wanted to sell the New Field Soya-Bean Food Products business because she was recently divorced and wanted to stop working there. She said that Lin Qiao showed her a copy of her divorce certificate. She also said that Lin Qiao told her that the business was owned by Duff Li's brother in China, Xiao Bing Li, also known as Philips X Lee/Li. It was not put to Lin Qiao in cross-examination that she was recently divorced.

133 When Cindy Yan Xin came to give her evidence she corrected this part of her first affidavit. She said it was Lucy Li and not her who had taken all these steps and negotiated with Lin Qiao. The explanation for the false statements in the affidavit was that it was prepared in a "rush". However, this basic and glaring mistake in the first affidavit was not corrected in either of Cindy Yan Xin's following three affidavits, even though other mistakes were. Cindy Yan Xin agreed in cross-examination that her second affidavit had been prepared after she had sat down with her solicitor, Mr Lim, and gone through the plaintiff's affidavit paragraph by paragraph in Mandarin giving him instructions when she disputed something. She agreed that on this occasion there was no rush.

134 In her affidavit in this proceeding sworn on 30 April 2012, Lucy Li made no mention of the glaring error in Cindy Yan Xin's first affidavit. This was despite the fact that Lucy Li referred to Cindy Yan Xin's first affidavit and corrected another mistake. Lucy Li did say, however, in her affidavit that she met Lin Qiao to discuss the purchase of the business from Xiao Bing Li and that Lin Qiao told her that Xiao Bing Li was Duff Li's brother. Lucy Li gave evidence that this meeting took place in about September 2007. Lucy Li said that she heard from a friend that the business was advertised for sale in a Chinese newspaper. Lucy Li said that after speaking to Lin Qiao she spoke by telephone to Cindy Yan Xin and told her about the possibility of buying the business. After thinking about it, Cindy Yan Xin rang her back and agreed to go ahead.

135 Lin Qiao denied ever advertising the business for sale. She said that the suggestion was ridiculous. It was not her business to sell. The advertisement was never produced.

136 Cindy Yan Xin gave evidence that in about October 2007 Lucy Li contacted her and "mentioned that one business was available which was suitable for my business migration purpose". Cindy Yan Xin said she was interested. Lucy Li told her later that "she had already signed some sort of agreement with the other side" and that Cindy Yan Xin had better get her money ready. Cindy Yan Xin said that before she came to Australia she had already intended to do some sort of business so she transferred the money she had borrowed against the security of her house in China, about 980,000 Chinese yuan or renminbi ("RMB"), into her parents' account.

137 Cindy Yan Xin further said in her first affidavit that on or about 12 October 2007, Lin Qiao arranged for a contract of sale of the business to be signed. She said that the contract was between Xiao Bing Li, also known as Phillips X Lee/Li, "who was then still in China", and "our company", Qing Qing, and that the purchase price was $150,000. She produced as an exhibit to her affidavit "a copy of the Contract of Sale" but it was missing the first two pages and therefore had no signatures. It consisted of the Particulars of Sale on page 3, general conditions on pages 4 to 9, special conditions on pages 10 to 15, three schedules on page 15, a Schedule of Fixtures, Fittings and Equipment as the next page, a 2006-2007 rate notice as the next page, a Certificate of Audit dated 22 January 2008 as the next page and an invoice dated 16 August 2007 from the agent, Collins Commercial, to Duff Li and Lin Qiao, the tenants of the Amberley Crescent property, as the last page. In the Particulars of Sale the vendor was stated to be Phillips X Lee/Li. The Certificate of Audit stated that "Newfield Soy Products Pty Ltd" had been audited to the requirements of the Victorian Food Act 1984 and certified that the business complied with the requisite food safety standards. The address of that business was not given.

138 The defendant's counsel sought to put what was said to be the original of the contract of sale to Lin Qiao. This was a bound document. It had the first two pages included. On the first page the vendor was again named as Phillips X Lee/Li. On the second page Phillips X Lee/Li, Lucy Li and Cindy Yan Xin had purportedly signed on 10 October 2007. Other additional pages were a Certificate of Registration of the business name dated 23 April 2007, and Certificate of Registration of the Amberley Crescent property under the Food Act dated 14 January 2008. The inclusion of the two documents respectively dated 14 and 22 January 2008 meant that either the so-called original was a false document or it had not been signed in October 2007. Even after this was pointed out, the defendant's counsel put to Lin Qiao that this was the document which she gave to Lucy Li to sign in October 2007. He said that these were his instructions from Lucy Li.

139 Lucy Li later gave evidence of different events in an attempt to explain how this apparent impossibility occurred. She said that what was signed on 12 October 2007 was "only a few pages" not a formal contract. She could not remember how many pages there were, but was "sure" the schedule of fixtures and fittings was included. Lucy Li said that Lin Qiao produced two copies of the "contract" with Phillips X Lee/Li's signature already on them. Lucy Li signed the two copies of the "contract" and Lin Qiao then took both of them away. Lucy Li was unable to give a satisfactory explanation why she did not retain one set of the papers as evidence of what her company had just purchased. She suggested that Lin Qiao had said there were "a lot of things that have not been done yet". But she also said that she thought she needed two signatures on behalf of Qing Qing, which would have been a reason to keep both copies and then return one to Lin Qiao when she had obtained the second signature.

140 Lucy Li said that on 1 March 2008 Lin Qiao showed her two copies of the bound contract. She said that she kept one copy and Lin Qiao took the other away. Cindy Yan Xin said that she signed two copies of the bound contract in May 2008. She said that Lucy Li and Lin Qiao were present when she signed. The date and the other two signatures were on the document when she signed.

141 Having Cindy Yan Xin sign a contract which had already been performed was said to have been done to help her immigration application. Surely better evidence for that purpose would have been proof of Cindy Yan Xin paying the $150,000 to purchase the business. Lucy Li said that it was a loan by Cindy Yan Xin to Qing Qing. Donald Dover said the same. But there was no document produced showing that a written loan agreement between Cindy Yan Xin and Qing Qing had been entered into. When asked what the point of signing was, when allegedly the business had already been transferred and the purchase price paid, Cindy Yan Xin said:**

Well I signed this document looks ... more reasonable to me.

**142 Cindy Yan Xin also said that the two copies she signed were taken by Lucy Li because it was something to do with the company. She suggested a copy of the bound agreement may have been given to, and retained by, Mr Wong. However, Lucy Li said that she kept one copy and gave the other one to Lin Qiao.

143 Donald Dover said his wife showed him a copy of the bound contract in March 2008. He did not sign it as the second director of Qing Qing. Instead, Lucy Li told him that she had to get Cindy Yan Xin's signature when she arrived. Donald Dover said that he remembered the time he saw it because it was after the settlement of the purchase of the business.

144 There was no satisfactory explanation of why the incomplete "contract" and not the bound copy of the contract was exhibited to Cindy Yan Xin's first affidavit. Counsel simply said that it had been "overlooked". That seems highly unlikely given its importance to the defendant's case. The bound copy of the contract did not appear until it was exhibited to Lucy Li's affidavit, sworn on 30 August 2012 in proceeding no SCI 2012 04578. Prior to that, it was not exhibited to any of Cindy Yan Xin's four affidavits nor was it exhibited to Lucy Li's affidavit in this proceeding. The plaintiff's counsel submitted that the obvious explanation was that the bound copy was fabricated and that the person putting it together had mistakenly included the two 2008 documents.

145 Lin Qiao was asked to look at only the first 15 pages of the alleged original Contract of Sale. She said that she had never seen that document before and had not given it to Lucy Li. She said that she did not know Lucy Li in October 2007.

146 Lucy Li gave evidence that about the end of March 2008 when she was at the Amberley Crescent factory Lin Qiao introduced her to a man as Xiao Bing Li, the person from whom Qing Qing had bought the business. She said, however, that the person she met was not the Xiao Bing Li who gave evidence by video link from China.

147 Xiao Bing Li gave evidence that he never sold the business. He said that he closed it down in August 2008. He denied that it was his signature in the bound copy of the contract of sale. He said that he did not know Cindy Yan Xin, Lihua Li, Donald Dover or David Jie Li and had never heard of the company Qing Qing.

148 The Particulars of Sale referred to a deposit of $15,000, to a maximum stock value of $20,000, and to a settlement date of 1 March 2008. Cindy Yan Xin said in her first affidavit that "on or about 1 March 2008 I paid the full purchase price of $150,000 and the cost of stock to Xiao Bing Li aka Phillips X Lee/Li and Qing Qing took over the business". No further details were given of this transaction in her affidavits. When asked by me about how much she had paid for the stock, Cindy Yan Xin replied that she thought the $150,000 included the stock. This was not what the contract said and was not what she had sworn in her first affidavit. Cindy Yan Xin agreed that she had never met the man who claimed to be Xiao Bing Li or Phillips X Lee/Li.

149 When Cindy Yan Xin gave evidence, she attempted to say that her parents had paid Xiao Bing Li, in China, with her money on the due date for settlement, 1 March 2008. Cindy Yan Xin said that Lucy Li gave her Xiao Bing Li's contact number which she passed on to her parents in China so that they could pay Xiao Bing Li in China. No records of the parents' account, showing this money going into and out of the account, were produced. Cindy Yan Xin said that she could not make the payment herself as she was in Australia on that date. This was obviously correct but was contrary to Lucy Li's and Donald Dover's evidence that Cindy Yan Xin did not arrive in Australia until May 2008.

150 To show that she had the $150,000, Cindy Yan Xin produced in re-examination a "multi-functional account book" in her name with the Shenzhen Development Bank Co Ltd. It was not an original. The three pages were all photocopies. Cindy Yan Xin said that she had inherited her grandmother's house and she used that property as a security to borrow RMB950,000 (equivalent of $150,000) from the bank. The third page of this exhibit showed an advance of RMB950,000 on 14 June 2007 which was withdrawn in three amounts that day (RMB530,000, RMB400,000 and RMB20,000). RMB20,000 was repaid into the account on 12 July 2007. There followed a number of smaller debits and credits, most of them occurring after Cindy Yan Xin arrived in Australia. The last entry on the page was dated 14 February 2008.

151 The defendant's reliance on this document was puzzling. According to the bank book, the advance was made and the funds withdrawn before there was any talk of Cindy Yan Xin purchasing, or lending money to Qing Qing to purchase, the business in Australia. Further, there was no proof that this amount of money was paid to Xiao Bing Li on 1 March 2008. There were no bank records and no receipt. Moreover, there was no proper documentary proof that this third page actually related to Cindy Yan Xin's bank account although it probably does.

152 None of these complicated financial dealings were mentioned by Cindy Yan Xin in any of her four affidavits.

153 Lucy Li gave evidence, almost as a throw away line, that Lin Qiao had said to her that "the other side, talking about China, received the money". This was never put to Lin Qiao and I do not accept that it was said.

154 Counsel for the defendant suggested that two cash payments into the plaintiff's Citibank account were the funds paid for the purchase of the business being returned to Australia. They were the sum of $100,000 on 28 March 2008 and the sum of $80,000 on 31 March 2008. However, the plaintiff's counsel pointed out that on 20 March 2008, Lin Qiao had sold her home at 4 Hollygreen Drive, Wheelers Hill for $530,000. Out of the settlement proceeds, the sum of $264,491.15 was paid to Phillips Li. That amount was paid into his Westpac bank account on that day, increasing the credit balance to $265,583.49. On 28 March 2008, the sum of $100,000 was withdrawn from the plaintiff's Westpac bank account. On 31 March 2008, a further sum of $100,000 was withdrawn from the same account. The two withdrawals from the Westpac bank account left it with a credit balance of over $64,000. The two deposits into the Citibank account reduced a debit balance of about $200,000 to one of about $20,000. By a redraw of $130,000 on 11 April 2008 and one of $55,000 on 7 May 2008, the debit balance of the Citibank account was increased to over $200,000. In my opinion, these transactions do not assist the defendant's claim to have paid $150,000 for Qing Qing to purchase Xiao Bing Li's business.

155 Counsel for the defendant made much of the fact that both versions of the contract between Xiao Bing Li and Qing Qing contained a list of equipment which matched the list contained in the contract between Duff Li and HVA and Xiao Bing Li. It was submitted that the presence of this page proved that the contract for the sale to Qing Qing had come from Lin Qiao. How else could it have been in an October 2007 contract? But it was not until 3 June 2011, when the document was included in the partial contract exhibited to Cindy Yan Xin's first affidavit, that I can be sure that Cindy Yan Xin or Lucy Li had possession of it. There could be any number of explanations for either or both of them having possession of this document prior to 3 June 2011. For example, there may have been a passing of a copy of this document to Qing Qing when the lease was transferred in May 2008. The same argument applies to the other documents found in the partial contract and to the similarity in the details of the lease in the two contracts.

156 Lin Qiao also made the point that some of the equipment sold to Xiao Bing Li in April 2007 had been thrown away a few months later. Thus, the list of equipment in the alleged October 2007 contract would not, in any event, have been the same. But the defendant's case was that this contract was prepared by Lin Qiao and she may not have bothered to update the schedule of equipment from one contract to the next.

157 More significant, in my opinion, was the omission of the bound copy of the alleged contract from Cindy Yan Xin's first affidavit. It only came to light after the problems with the partial contract were pointed out.

158 Further, under the alleged contract, the sale of the business was due to occur on 1 March 2008. Supposedly the purchase price was paid on that day. Yet there was no suggestion that the business changed hands before the end of April at the earliest. Moreover, there was no explanation as to why the lease of the Amberley Crescent property was transferred on 1 May and not 1 March 2008.

159 In my opinion, the following matters pointed to the conclusion that there was no contract between Qing Qing and Xiao Bing Li, also known as Phillips X Lee/Li, to purchase Xiao Bing Li's tofu business:**

(a) Cindy Yan Xin's false evidence in her first affidavit about the initial contact with Lin Qiao;

(b) the delay in producing a full version of the alleged contract;

(c) the fact that both versions of the contract contained one or two documents dated in 2008 which cast doubt on the evidence that the contact was signed in October 2007;

(d) the implausibility of Lucy Li's evidence about the signing of "a few pages" of the contract in October 2007 with a bound version being produced in March 2008;

(e) the implausibility of Lin Qiao selling Xiao Bing Li's business knowing that she would be found out when he came to Australia, as he still intended to do in October 2007;

(f) the lack of evidence of the payment of $150,000 to Xiao Bing Li (no explanation was given for the failure to call Cindy Yan Xin's father or mother about the alleged payment in China); and

(g) Cindy Yan Xin's confused evidence about what she paid for the purchase of the business.

However, before making any such finding it is necessary to consider whether the next topic impacts in any way on my preliminary conclusion.

**160 Xiao Bing Li said that, in about April 2008, he decided to close his business down in the next few months when he decided that he would not be emigrating to Australia. It is not clear to me why Xiao Bing Li decided to close his business rather than attempt to sell it. There was a suggestion by him that at the time the business was not doing that well, but this was never really explored. Duff Li said that Xiao Bing Li had told him that as he was not migrating to Australia he did not "have any means to look after this business".

161 Xiao Bing Li said that he told Duff Li of his decision in April 2008. Duff Li then told his wife. She said that she then told David Jie Li that the business was going to close.

162 The plaintiff's case was that David Jie Li then offered to manage Xiao Bing Li's business but that instead of operating it properly he siphoned off into Qing Qing's bank account payments that should have gone into the bank account of Xiao Bing Li's business. It seems that the plaintiff's case also was that it was agreed with Qing Qing's directors that as Xiao Bing Li's business gradually reduced, Qing Qing could step into the breach and operate its own business from the Amberley Crescent property.

163 That version of the confused events of April and May 2008 does not explain why it was necessary to transfer everything into Qing Qing's name at this early stage (see paragraphs 51-54 above). Those steps fit much more easily with the defendant's case that Qing Qing had purchased Xiao Bing Li's business. I turn then to examine these events in more detail.

164 Lin Qiao said that at the end of April, beginning of May 2008, David Jie Li said to her that she was "very busy at the moment". He offered to manage Xiao Bing Li's business for her and said that he would do it better than her. David Jie Li also said that "maybe his sister will put some investment in it". Lin Qiao said that she agreed that David Jie Li could "manage everything". She said that "he dealt with everything", including paying the rent, arranging the making of the tofu and selling to customers. Lin Qiao said that Duff Li was not with her during this discussion.

165 Lin Qiao said that she and her husband decided that they did not want their names on the lease of the Amberley Crescent property any more. David Jie Li suggested that the lease be transferred to Qing Qing. She said that Xiao Bing Li was not involved in this transfer and that she had not told him about handing the management of his business to David Jie Li. However, Phillips Li had said in his affidavit, which Lin Qiao had sworn in her affidavit was true and correct, that his parents had told him that Xiao Bing Li had told them to sign the transfer of lease. Lin Qiao could not really explain this conflict. Eventually, she suggested that Duff Li may have talked to Xiao Bing Li about the transfer. Lin Qiao also said that she did not know why Qing Qing wanted the transfer of the lease of the Amberley Crescent property.

166 The defendant's counsel put to Lin Qiao that Cindy Yan Xin and Lucy Li would both give evidence that Cindy Yan Xin first met Lin Qiao in or about May 2008 at the Amberley Crescent factory after Qing Qing had purchased the business from Xiao Bing Li. Lin Qiao maintained that she met Cindy Yan Xin in about April 2008. Cindy Yan Xin said that she did not start work at Amberley Crescent until June 2008. She said that initially Lin Qiao "did not leave the business, she was still working in the factory". Lin Qiao passed on some of the business management to Lucy Li.

167 Duff Li said that when Xiao Bing Li told him that he was closing down his business, Xiao Bing Li said to him that he could transfer the lease to some other people. When told about this, David Jie Li said to Duff Li that he could help him "to rent this place to another company". Duff Li said that he and his wife asked David Jie Li to manage Xiao Bing Li's business. Duff Li said that he did not know what kind of business Qing Qing was going to conduct at the Amberley Crescent property.

168 The "Application for Transfer of Registration of Food Act Premises" was signed by Duff Li on behalf of Qing Qing. Initially, Duff Li denied any involvement with the making of this application but eventually he admitted that he completed most of it. The email address he gave was his company's not Qing Qing's. Counsel for the defendant submitted that the signature of Xiao Bing Li on this application was forged by Duff Li. Reference was made to an application in May 2007 where, counsel submitted, it was clear that Duff Li had forged Xiao Bing Li's signature. In the absence of expert handwriting evidence it is not possible to make any finding on this issue. In any event, it is only of peripheral relevance as Duff Li was authorised to act on behalf of Xiao Bing Li.

169 By a letter to Xiao Bing Li dated 23 April 2008, the Council gave notice of works that had to be carried out at the Amberley Crescent property. By a second letter addressed to the General Manager of Qing Qing also dated 23 April 2008, the Council approved Qing Qing's application for transfer of the food registration subject to satisfactory completion of the works set out in the above letter. As a result of correspondence from the Council dated 23 April 2008, Lucy Li and Donald Dover knew that there were problems with making the Amberley Crescent premises comply with Council requirements. Donald Dover said that he told his wife that the purchase of the business was useless without a transfer of the lease.

170 Lucy Li said that she discussed with Lin Qiao the lease of Amberley Crescent and other business name and health certificate requirements being transferred to Qing Qing. Lin Qiao said that they would handle that. Lucy Li said that Qing Qing took over the business in April. She said that Qing Qing paid rent to Collins Commercial for the Amberley Crescent property from May until approximately November or December 2008.

171 Donald Dover said that he did not inspect the Amberley Crescent property before Qing Qing purchased the business. He saw the outside in March 2008 but had not gone inside until around April when Lucy asked him to have a look because of some problems with the Council. He said that he told his wife that the vendor of the business needed to fix up the problems and that "the business wouldn't be worth one cent without that lease". He said that he left it to Lucy and he understood that the food registration did go through in Qing Qing's name.

172 Donald Dover said that after 1 May 2008 Lucy Li was managing the business. Lin Qiao was assisting, as required by the contract of sale. Lin Qiao agreed that she sometimes went to the Amberley Crescent factory between May and August 2008, but not very often.

173 Lin Qiao signed an Exclusive Lease & Manage Authority dated 22 May 2008 on behalf of Qing Qing in favour of Collins Commercial in respect of the Amberley Crescent property. It was put to her that she had no authority to sign on behalf of Qing Qing and that she did not tell Lucy Li, Donald Dover or Cindy Yan Xin what she had done. Lin Qiao said that she was helping out Qing Qing and the agent had insisted that she sign the document even though she could not read this document and did not understand what it meant. Lin Qiao said Lucy Li knew about this. No evidence was led from Lucy Li, Donald Dover or Cindy Yan Xin about Lin Qiao's allegedly unauthorised actions. On the contrary, in final submissions the defendant's counsel stated that Lucy Li requested Lin Qiao to find a new tenant and referred to this document.

174 Cindy Yan Xin said that in about June 2008 she went to Sydney with Lucy Li, Donald Dover and Lin Qiao. The purpose was for Lin Qiao to introduce them to the customers in Sydney, such as Bead Foods Pty Ltd, Eagle Claw Pty Ltd and Tixana Pty Ltd. Lucy Li described them as wholesalers. Lin Qiao agreed in cross-examination that these companies were amongst the business' major purchasers. She agreed that at some stage (not necessarily on 1 June 2008) she went to Sydney with Cindy Yan Xin, Lucy Li and Donald Dover. Lin Qiao said that the purpose of the trip was to visit Sydney but agreed that while they were there she introduced the others to these customers. She agreed that Qing Qing paid for the overnight hotel accommodation, but she could not remember whether Qing Qing also paid for the air tickets. Lin Qiao also said that she paid for a few meals.

175 Qing Qing's bank statements were tendered to show numerous payments into its account by these three companies between 6 May and 14 November 2008.

176 Lin Qiao said, when asked in cross-examination about the fact that Qing Qing received payments from the three named major purchasers, that she warned David Jie Li that what he was doing was illegal. She said that Qing Qing was receiving "quite a lot" of money which should have been credited to Xiao Bing Li's account. Duff Li said that at the time they knew David Jie Li had taken money from the business and given it to Qing Qing, but they did not know how much. He said that it was only after they saw Qing Qing's Westpac statements that they realised that David Jie Li had paid Xiao Bing Li's money into Qing Qing's account and used it to pay rent on both properties and other expenses.

177 Exhibit 22 was an exercise book in Lin Qiao's handwriting which she said she gave to Lucy Li in August just before she went for her surgery. Some of the entries related to the payment of wages and superannuation in July 2008. The defendant's counsel put to Lin Qiao that this showed that she was involved in the management of the business. Lin Qiao replied that she was simply helping David Jie Li.

178 Exhibit 37 was another exercise book with some handwriting in it. Lin Qiao denied that it was her handwriting. Duff Li said that, apart from the last page, the handwriting looked like his wife's handwriting. Lin Qiao said that she may have given these books to Lucy Li.

179 Lucy Li said that she first saw these exercise books in about July 2008. At that time "sister Qiao" was in poor health and was hospitalised. Lucy Li said she had been asking for the exercise books. They contained employee details and recipes. Some of the handwriting in the books was hers. She said that at the time she was "fully engaged with the renovation work in other premises".

180 The defendant's counsel submitted that the fact that Lin Qiao handed the exercise books to Lucy Li showed that Qing Qing had purchased the business. But it was also consistent with Lin Qiao handing over management of the existing business to David Jie Li and Lucy Li.

181 Lin Qiao said that some of the employees listed as working for LL King between 10 January and 30 June 2009 also worked for Xiao Bing Li in 2008 - David Jie Li, Cindy Yan Xin, Huo Yu Qua and maybe Xin Tian. Lin Qiao then said that Xiao Bing Li's business kept producing small things, "finishing work", until December 2008. The defendant's counsel submitted that Xiao Bing Li's business could not have continued to operate at the Amberley Crescent property after May 2008 because Qing Qing was then operating the business there. This submission presupposes Qing Qing had purchased the business. If only management had been handed over, then there was no reason why Xiao Bing Li's old business could not be running down at the same time as any new business started by Qing Qing could not have been getting underway.

182 Business records for Qing Qing showed that it was employing staff and paying wages and superannuation for them for various periods from 1 July to 12 November 2008, at the latest. The defendant's counsel put to Lin Qiao that these records showed that the employees were working for Qing Qing and not for Xiao Bing Li's business. Lin Qiao's response was that this was all managed by David Jie Li. Donald Dover said that he prepared these records and his wife signed them.

183 By an undated letter Collins Commercial wrote to "Lyn" of Qing Qing advising that a new tenant had been found for the Amberley Crescent property as from 29 December 2008. Qing Qing was required to pay rental until that date, a further $5,180 for rental shortfall and a leasing fee of $2,285 plus GST. The proposal was accepted by Duff Li signing the letter on behalf of "the tenant". Lin Qiao said that her family paid over $10,000 to Collins Commercial because Qing Qing did not pay the rent. Phillips Li's bank statements were produced for the period 5 December 2008 to 6 February 2009. They showed withdrawals approaching the amount mentioned by Lin Qiao, which were said to have been payments to Collins Commercial.

184 By an invoice dated 28 January 2009, Collins Commercial charged Qing Qing the sum of $4,480.11, said to be still outstanding for rent, rental shortfall, GST, pro-rata rates and electrical maintenance. It appears that Qing Qing may have settled by paying $2,830.00 but this is not clear.

185 Cindy Yan Xin denied that instead of buying Xiao Bing Li's business Qing Qing simply continued to trade his business using his goodwill and paying the proceeds of sales into Qing Qing's bank account.

186 The plaintiff's counsel put to Lucy Li that it made no sense for Qing Qing to purchase a business that was about to be closed down. He suggested if it obtained a transfer of the lease, it could simply carry on the business. She did not accept that this had occurred.

187 What this analysis shows, in my opinion, was that the Li family and the directors of Qing Qing were assisting each other in rearranging the management of the business being conducted at the Amberley Crescent property. It was only later that the friendly relationship fell apart. Just what that relationship was at this stage was one of the areas where I felt that I was not being told the full story by either side. The undisputed facts set out above were pretty much consistent with each side's version of events. I therefore consider that I can now find that there was no contract between Qing Qing and Xiao Bing Li, also known as Phillips X Lee/Li, to purchase Xiao Bing Li's tofu business.**

**188 Lin Qiao gave evidence that in May 2008 she agreed to, and did, lend the sum of $200,000 to Lucy Li. She produced a photocopy of a loan agreement dated 4 May 2008 which she said was signed by her and by Lucy Li. David Jie Li had purportedly witnessed Lucy Li's signature. Lin Qiao said that she was unable to produce the original of the loan agreement because it had been torn up by Lucy Li in the circumstances referred to below. However, Lin Qiao had kept a photocopy of the loan agreement. She said that Duff Li had drafted the loan agreement.

1. Ms Lin QIAO will lend/or loan the total sum of AUD$200,000.00 to Ms Li-Hau LI [sic] on/and since the 5th day of May 2008.
2. Ms Li-Hua LI will borrow the total sum of AUD$200,000.00 from Ms Lin QIAO on/and since the 5th day of May 2008.
3. Ms Li-Hua LI agreed to return the above-mentioned total sum of AUD$200,000.00 together with the Interest Rate of 10.0% within 12 months since the 5th day of May 2008 upto the 4th day of May 2009.
4. Ms Li-Hua LI has greed [sic] that, she should further repay AUD$200,000.00 together with the total sum of Interests by using her property under her own name/s and/or her business name.
5. If any dispute arise between the two parties to this Agreement in relation to its interpretation or operation or any matter arising out of it, disputing parties shall meet and negotiate in good faith with a view to resolving that dispute.
6. This Agreement constitutes the sola [sic] and entire the agreement between the parties in relation the subject of the Agreement.

**190 Lin Qiao said that she lent Lucy Li the $200,000 by handing her on 4 May 2008 Commonwealth Bank of Australia bank cheque no 116720 dated 3 May 2008 in the sum of $200,000 after Lucy Li signed the loan agreement. She said that David Jie Li and Duff Li were also present when this occurred. Lin Qiao said that the funds for this bank cheque were withdrawn from the account of her brother, Xu Dong Qiao, on 3 May 2008. She said that in about April 2008 she lent her brother between $200,000 and $220,000 in two or three payments from the proceeds of selling the house at Wheelers Hill. But as has been seen, those proceeds were paid to Phillips Li. Thus, the source of her funds was unknown.

191 In cross-examination, Lin Qiao said that Lucy Li told her the $200,000 was for investment in some other business, "a television station or something". It was put to Lin Qiao that she would not have lent Lucy Li $200,000 at a time when she was looking to purchase a factory. She replied:**

I maybe use that and I maybe have borrow - I maybe will - would borrow some money and I maybe have some other savings and from all various places I will pay the deposit. Also I could ask them to pay me back some of it.

**192 Xu Dong Qiao in his affidavit said that on or about 1 May 2008 he borrowed money from his sister, Lin Qiao, by her depositing $200,000 into his bank account. He said that Lin Qiao told him that this sum was part of the proceeds of sale of her former home in Wheelers Hill which she had sold in about March 2008.

193 Lucy Li denied borrowing $200,000 from Lin Qiao and denied signing the loan agreement. She said that she had not seen the document until after this proceeding had commenced. She said in her affidavit, sworn on 30 April 2012, that she believed her signature was forged and that Cindy Yan Xin's solicitors had asked for the original so that it could be examined by an expert. Lucy Li denied the tearing up incident described by Lin Qiao.

194 Lucy Li denied receiving "the CBA Bank cheque of $200,000" from Lin Qiao. In her affidavit, she said that Cindy Yan Xin's solicitors had issued a subpoena to the CBA seeking documents, including the bank cheque "to show who purchased it and whether it was presented for payment and if so who presented it for payment?" The facsimile letter from Cindy Yan Xin's solicitors to Phillips Li's solicitors dated 30 April 2012 stated, in part, that their client had instructed them that:**

1. Lihua Li furiously denies she had borrowed $200,000 from Lin Qiao;
2. Lihua Li furiously denies signing the agreement allegedly dated 4 May 2008; and
3. Lihua Li denies receiving or cashing $200,000 CBA Cheque No 116720

...

Lihua Li informed us that she will lodge a police ... [sic] so that the police can investigate to determine ... who cashed the CBA Bank cheque for $200,000.

195 The bank records showed a different story. According to the CBA the bank cheque for $200,000 was drawn from a joint account in the names of Xu Dong Qiao and his wife, Wen Hui Zhu. The bank statements for this account for the period between 19 March and 30 May 2008 showed that:

(a) on 28 April 2008 a deposit of $105,000 was made;

(b) the credit balance as at 2 May 2008 was $107,862.70;

(c) on 5 May 2008 a cash deposit of $100,000 was made, and there were two withdrawals - one for $5,000 and one for $200,000.

**196 The bank cheque for $200,000 payable to Lucy Li was purchased on 3 May 2008, which was a Saturday. This transaction only showed up in the bank records on the next working day, being Monday 5 May 2008. Presumably the other entries appearing in the bank statements on 5 May 2008 also occurred on 3 May 2008 as otherwise there would have not been enough funds in Xu Dong Qiao's account to enable the bank cheque to be purchased.

197 According to the CBA's letter dated 3 July 2012, bank cheque no 116720 was deposited into an account in the name of Lihua Li of 38 Jackson Way, Dromana on 5 May 2008. Contrary to the defendant's position, this means that the plaintiff's chronology would make sense - cash deposit made and bank cheque purchased on Saturday 3 May; agreement prepared on Sunday 4 May and signed that day and bank cheque handed over on that day; and bank cheque presented for payment on 5 May.

198 On 30 August 2012, Lucy Li swore an affidavit in proceeding no SCI 2012 04578 which had been commenced by Phillips Li to restrain the Registrar of Titles from processing the warrant which had been lodged over the Kirkham Road property by Lucy Li. In that affidavit, Lucy Li said that:**

On or about 3 May 2008 Li Xiao Xiao Bing Li (the Plaintiff's uncle) gave me a bank cheque for $200,000. He asked me to deposit the money into my bank account as he had no bank account in his name in Australia at that point in time. I asked him why he could not deposit the cheque into Qiao Lin's (his brother's wife's) bank account. He told me that she was on a pension so could not disclose this amount of money. He also told me that the money was for him to invest in a company called ACTV Tech Pty Ltd ... The money was deposited into my account on 5 May 2008.

She then said that on Friday 9 May 2008, Xiao Bing Li requested her to pay him the $200,000 back in cash by Sunday 11 May 2008. She did this from cash in her safe, where she always held fluctuating amounts between $50,000 and $300,000 for Qing Qing's business activities. She referred to cash withdrawals from her bank account, including $40,000 on both 3 and 11 March 2008 and $27,700 on 30 April 2008. Lucy Li again denied borrowing $200,000 from Lin Qiao.

**199 This extraordinary evidence by Lucy Li only appeared after the letter from the CBA dated 3 July 2012 revealed that bank cheque no 116720 was deposited into her bank account on 5 May 2008.

200 In her oral evidence, Lucy Li said that in about the middle of April, she could not remember the exact date, she met the person she knew as Xiao Bing Li at the factory at Amberley Crescent. Lucy Li said that he later asked her whether he could use her bank account to put in the money he had to invest in Australia. He gave her a bank cheque for $200,000 "on about 4 May 2008". Lin Qiao took her to a Commonwealth Bank branch in the Dandenong area that was open on the Saturday. Lucy Li said that this person wanted to invest in the company ACTV Tech. Lucy Li was asked whether this person told her anything else. Her answer was:**

He said that when I received these cheque about one week later and he said well, a few days later he asked me, "Well, could you provide me a receipt", and I said, "OK, I'll give you a receipt". And I said, "How can you verify these two cheques?" So and then he gave me two receipts from ACTV boss so we want to show the original receipt - two receipts now.

**201 Lucy Li said in her affidavit in the other proceeding that this person produced two receipts from ACTV Tech "as evidence of Li Xiao Bing's [sic] involvement in ACTV and his bona fides".

202 The first of these documents referred to by Lucy Li was a "Receipt" signed by Shaobo Li stating that he had received $500,000 from Xiao Bing Li "as his investment in ACTV Tech Pty Ltd, for the management and development of ACTV Tech Pty Ltd". It was dated 26 April 2008. The second document was an "Authority" signed by Shaobo Li stating that Charming Green Investments Pty Ltd authorised the setting up of "a branch company", ACTV Tech. It relevantly confirmed that Xiao Bing Li held 25% of the shares in the branch company. It was also dated 26 April 2008.

203 I note that these two documents do not seem to me to serve the purpose for which they were allegedly handed over. In fact, they arguably contradict it because they purport to show that this person calling himself Xiao Bing Li had already invested in ACTV Tech before allegedly giving the $200,000 to Lucy Li.

204 Lucy Li said that she gave this person a receipt which he returned to her when she repaid him his $200,000 in cash. She said this was a Chinese custom. She no longer had that receipt. Despite the reference to the Chinese custom, Lucy Li apparently retained his documents. She said that she thought he would come back for them.

205 Lucy Li was cross-examined about the above assertions and about how she failed to mention in her responses before 3 July 2012 the account she later gave about how she had received the bank cheque for $200,000. Her answers were most unconvincing.

206 Donald Dover said that he was home on a Sunday when his wife brought a Chinese man to the house. He saw money being transferred but did not know how much. He said Lucy Li had a safe in the house.

207 Lin Qiao said that she asked Lucy Li to repay $52,800 of the loan of $200,000 as she did not then have the funds to pay the balance of the deposit for the purchase of the Kirkham Road property. Lucy Li said she would, if Lin Qiao brought the loan agreement she had signed to the meeting arranged for about midday on 18 July 2008. Lin Qiao said that she took the original of the loan agreement to the meeting intending just to show it to Lucy Li, not to give it to her. She was shocked and surprised when Lucy Li tore up the agreement. She then told Lucy Li to give her the cheque. Lucy Li denied that this had occurred. Lin Qiao said Lucy Li did not ask for a written acknowledgement that she had repaid $52,800 of the $200,000 loan. She said that they were still good friends at this time.

208 Duff Li said that before settlement Lin Qiao told him about Lucy Li tearing up the original of the loan agreement. He said that they were not worried because they had a copy of it.

209 Lucy Li also stated in her affidavit in this proceeding that on 4 May 2009, Duff Li sent a letter on behalf of Lin Qiao to her, her husband and Henley Legal demanding payment of $220,000 in respect of the alleged loan. The letter from Duff Li was in Chinese. Lucy Li pointed out that Lin Qiao had never commenced any court proceeding against her. Neither Duff Li nor Lin Qiao explained why Lucy Li had not been sued for $147,200 plus a considerable amount for interest at 10% per annum.

210 Counsel for the defendant submitted that it was highly unlikely that Lin Qiao would agree to lend Lucy Li $200,000 in May 2008 when they had only met in April 2008. I agree that this does appear to be most unusual but not as unusual as Lucy Li's version of events. Moreover, it is clear from the evidence of John Guastella that the two women had formed a close business relationship. Further, the facts are that $200,000 went into Lin Qiao's brother's account from where it was withdrawn and paid into Lucy Li's account.

211 For the following reasons I accept that Lin Qiao lent Lucy Li the sum of $200,000:**

(a) the $200,000 paid into Lucy Li's account on Monday 5 May 2008 came from the joint account of Xu Dong Qiao and his wife. Xu Dong Qiao was Lin Qiao's brother and the funds had only recently been paid into that account by, I accept, Lin Qiao;

(b) Lucy Li's initial protestations about the suggestion that she had received the bank cheque for $200,000 were quite misleading in that she failed to mention the $200,000 she later claimed to have received from the person purporting to be Xiao Bing Li ("the false Xiao Bing Li");

(c) Lucy Li's story that she received $200,000 by bank cheque from the false Xiao Bing Li person for minding as he did not have a bank account and that she then paid it back in cash was quite implausible. Why would that person need to enlist Lucy Li's assistance when the $200,000 was already in a bank account? This evidence only appeared after it became clear that the plaintiff had evidence to prove that the $200,000 bank cheque had been paid into Lucy Li's bank account;

(d) the inherent improbability of Lucy Li holding $200,000 in cash. In the three months prior to 11 May 2008, Lucy Li could only point to a total of $107,700 in cash withdrawals, which may well have been used for other purposes during that period. The other withdrawals she relied on were made in 2003 and 2004; and

(e) the lack of any documentation about the return of the $200,000 in cash to the false Xiao Bing Li. Given all of the other records she claimed to have kept, it seems strange that Lucy Li had nothing in writing showing that she had paid back the false Xiao Bing Li his $200,000 in cash. Without it she had no proof that she had repaid him his $200,000 should he subsequently claim that she still owed him $200,000.

**212 I have reached this conclusion despite the fact that I was not persuaded that there was a written loan agreement between Lin Qiao and Lucy Li. The explanation as to what happened to the original was not convincing. All that was produced was a photocopy which could have been fairly easily forged.

213 I have also not overlooked the fact that in May 2009 Duff Li wrote to Lucy Li demanding payment of the full amount of the loan of $200,000 plus interest. On his version of events, Lucy Li had repaid $52,800 by this stage. Also, Lin Qiao has not taken any steps to sue Lucy Li for the outstanding balance of $147,200 plus interest which on her version of events would still be owing. This may well have something to do with the costs of the fit-out, some of which were clearly paid for by Qing Qing.**

The Kirkham Road Property - Events Prior to Settlement

**214 The plaintiff's version of the purchase of the Kirkham Road property was as follows. Lin Qiao said that she started looking for other premises because the family had decided to start up a new business of their own. She said that she went to various agents and located the property at 4/2-4 Kirkham Road, Dandenong South. Lin Qiao said she decided to buy the Kirkham Road property, renovate it and then start a tofu making business there.

215 Duff Li said that his wife drew his attention to the Kirkham Road property in early May 2008. She had begun searching for a property for a new business for their son in April 2008.

216 John Guastella of Camerons handled the leasing and sale of the Kirkham Road property. He said that the first relevant contact he had was from Lin Qiao on 13 May 2008. She was interested in purchasing the property. John Guastella said that Lin Qiao always came to the office with Lucy Li "but Lin Qiao was the one I did all the negotiating with". Lin Qiao did all of the talking. He did no negotiating with Lucy Li. He thought Lin Qiao and Lucy Li were partners and friends. He only met Cindy Yan Xin "at the end". Lin Qiao had asked that the contract be put in Cindy Yan Xin's name. He understood that the funding was being provided by the partners, Lin Qiao and Lucy Li. John Guastella said that he showed Lin Qiao and Lucy Li, and perhaps Lin Qiao's husband, through the property. Cindy Yan Xin never inspected it.

217 However, the next relevant event was that Qing Qing entered into a lease of the Kirkham Road property on 16 May 2008. Cindy Yan Xin said in her first affidavit that because of size and health standard problems with the Amberley Crescent property, Qing Qing took the lease on different premises. She said that Qing Qing started to fit out the empty shell of a building at the Kirkham Road property to obtain registration as a food premises, but it then decided to buy the property because most of the fit-out would become fixtures.

218 Although the lease to Qing Qing was expressed to be for three years, John Guastella's recollection was that it was really only for three months. In evidence in chief he said that a short term lease was subsequently entered into in order to avoid paying GST on the purchase. He thought that the lease could have been backdated. However, in cross-examination he was taken to his company's receipts for the payment of the first month's rental and for the bond. Both documents were dated 16 May 2008. Those payments were made in response to a letter from him dated 15 May 2008. He therefore agreed that the lease was probably not backdated, although his recollection was that it had been.

219 John Guastella said that Andrew Langdon, the owner of Talawood, was happy to go along with a three month lease "on the proviso that the property was being sold". John Guastella said that by mistake his company charged Talawood two commissions - one for leasing and one for selling. The leasing commission was refunded when the mistake was drawn to his attention by Andrew Langdon. There was confirmation of this evidence in Andrew Langdon's facsimile dated 25 August 2008 which referred to the lease being only "3 mths" and the purchaser/tenant being exempt from GST. John Guastella said that the bond was refunded to Qing Qing "after the contract of sale had gone through". Donald Dover agreed that the agent returned the bond when Cindy Yan Xin became the owner.

220 Cindy Yan Xin and Lucy Li were pressed to explain why Qing Qing would sign a lease of the Kirkham Road property only 15 days after taking an assignment of the Amberley Crescent property. Obviously, Qing Qing was then liable for the rent of two premises until they could move out of Amberley Crescent. But it makes sense that having decided to move to bigger premises, Qing Qing had to keep the former premises until the new premises were ready for production of the tofu.

221 Cindy Yan Xin said that there were three reasons why they took on the second lease. First, the council had indicated that the Amberley Crescent premises were not up to "health standard". It would have cost a lot of money to fix this up. Secondly, the Amberley Crescent premises were too small. They did not realise that until they took over the business. She never gave a third reason.

222 Counsel for the defendant tendered a letter to the Council dated 8 May 2008 signed by Duff Li on behalf of Newfield Soya-Bean Food Products and Phillips X Lee/Li in which it was stated that:**

The new owner has been looking a [sic] new factory in Dandenong industry area and then will be building a new food factory.

Counsel submitted that this confirmed the defendant's case that Lucy Li found the Kirkham Road property and that Qing Qing decided to lease it before deciding instead that Cindy Yan Xin would purchase it. Duff Li's explanation of what he was trying to say in this letter was very hard to follow.

**223 Lin Qiao said that at the time she did not know that Qing Qing had entered into a lease of the Kirkham Road property on 16 May 2008. She said that she found out later. She insisted that when the Li family bought the property there was no lease. In re-examination, Lin Qiao said that no one asked her or told her about Qing Qing entering into a lease of the Kirkham Road property before that lease was entered into. She then contradicted her earlier evidence by saying that she thought she learned about the lease about the time, maybe before, the balance of the deposit was paid. She also said that just before the settlement the agent told her that there would not be any lease.

224 When Lin Qiao was recalled, she gave evidence that when she bought the property John Guastella talked to her about GST. He told her that if there was a lease on the property, she could save some money on GST.

225 Duff Li said that he did not know that Qing Qing were already in possession of the Kirkham Road property prior to settlement. But he then said that Lin Qiao told him about the lease over the Kirkham Road property at some time after payment of the holding deposit and before payment of the balance of the deposit. He said that Lin Qiao told him that the agent had said that the lease was not long term, only for about three months, in order to save the purchaser paying GST.

226 John Guastella said that he believed Lin Qiao was present when Lucy Li signed the lease. He said that it was "hard to imagine" that Lin Qiao did not know about the lease.

227 The evidence from the plaintiff's witnesses that the property was bought with vacant possession was clearly wrong.

228 It was put to Cindy Yan Xin that Qing Qing's lease of the Kirkham Road property was a legitimate lease, but one intended to be discharged after settlement of the purchase of the property. She replied:**

Any specific issues of the company I don't know.

She also said that she did not know whether the security deposit was refunded after settlement.

**229 Counsel for the plaintiff said that the plaintiff accepted that Qing Qing paid the rent of the Kirkham Road property for July and August 2008 on top of what had been paid in May. June was rent free as provided in the lease. It was a legitimate lease and that was why the food premises registration and energy applications were made and issued in Qing Qing's name. But the plaintiff's position was that the rent of both premises actually came out of the income from Xiao Bing Li's business.

230 Counsel put to Lucy Li that Qing Qing took the lease of the Kirkham Road property as a favour to Lin Qiao because it would reduce by 10% the amount that would have to be paid to purchase that property and that Qing Qing then co-operated in making applications for things such as electricity and gas supplies. Lucy Li did not agree, but she did agree that in about February 2009 the Li family paid approximately $3,000 out of the cost for the services of about $10,690.

231 Donald Dover said that he told Lucy Li that the lease had to have a special condition about natural gas being provided to the property because the boiler ran on natural gas. Donald Dover was a sub-contractor welder/boilermaker. He obviously understood the technical matters he talked about. He said that Qing Qing had paid half the cost of installing the gas. He thought it was still paying the other half.

232 Donald Dover explained the steps then taken by Qing Qing to obtain registration as food manufacturing premises. Thus, for example, by a letter dated 23 May 2008, Andrew Langdon wrote to John Guastella authorising "the tenants" at that property "to have gas connected at the above mentioned property". Then, on 28 May 2008, Qing Qing signed an "Application for the Approval of Plans of a Proposed Premises" with respect to the Kirkham Road property and lodged it with the Council. Later, by a letter dated 25 June 2008, South East Water Limited sent to Qing Qing a Trade Waste Consent Agreement with respect to the Kirkham Road property.

233 I return now to the events surrounding the purchase. Lucy Li said in her affidavit in this proceeding that the reason why Qing Qing did not purchase the Kirkham Road property itself was because Cindy Yan Xin wanted to purchase a property to assist her in her application for business migration and she was able to obtain a loan.

234 Lin Qiao said that she spoke by telephone to Cynthia Yu about obtaining a loan to purchase the Kirkham Road property. After doing an assessment, Cynthia Yu told her that Phillips Li could not get a loan because of the Endeavour Hills property. Cynthia Yu suggested that the property could be bought using another person as nominee or in partnership with another person. With the former approach, Cynthia Yu advised that a caveat could be lodged to protect Phillips Li's interest. Lin Qiao said that she subsequently spoke to a lawyer but did not instruct him to lodge a caveat.

235 Lin Qiao said in cross-examination that the Kirkham Road property was not bought in Phillips Li's name because there were "difficulties" in him obtaining a loan. It was not purchased in her name because she was sick and her job or income was "not quite steady". Although she was not diagnosed with bowel cancer until 30 July 2008, Lin Qiao said that she had had diabetes for the last 18 years. It was not purchased in Duff Li's name because he had heart disease, his income was not steady and he had decided to retire.

236 Lin Qiao said that David Jie Li suggested that his wife, Cindy Yan Xin, could help with the purchase. She went with David Jie Li to see Cynthia Yu. Cindy Yan Xin then went with David Jie Li to Cynthia Yu to apply for a loan. Lin Qiao said that she did not use David Jie Li, a person she trusted, to purchase the property because he said that his wife was more suitable.

237 Duff Li said that initially they wanted to buy the property in their son's name but there was some problem with the loan because the Endeavour Hills house had been bought in the son's name and he was still a student.

238 The defendant's counsel put to Phillips Li that the fact that he obtained a loan for the purchase of the Endeavour Hills property showed that his statement in his affidavit that he could not obtain a bank loan because he was a university student was untrue. Phillips Li said that he could get a loan but not a loan of the required amount. He was working part time but not earning enough.

239 Cynthia Yu gave evidence that Lin Qiao came to see her and introduced David Jie Li to her. He later brought Cindy Yan Xin in to her office. Cindy Yan Xin said that Lin Qiao introduced her to Cynthia Yu. Cynthia Yu sought a loan from BankWest for Cindy Yan Xin. She said that all of the instructions on financial matters regarding this purchase came from Lin Qiao, she "arranged all the settlement things". She said that she was "confused" about who the beneficial owner was but thought that Lin Qiao and Cindy Yan Xin had an "agreement or something".

240 In her four affidavits, Cindy Yan Xin said nothing about how the loan was arranged and who acted for her in the transaction. She did say, however, that the original price being asked was $555,000 but it was reduced to $538,000 because the landlord/vendor had not connected the gas supply. She said that it was agreed that this would become Qing Qing's responsibility and the purchase price was reduced accordingly.

241 Lin Qiao said that she paid the holding deposit of $1,000 from her own cash, ten $100 notes. Cindy Yan Xin's name was on the receipt because of the discussions she had had with David Jie Li and Cindy Yan Xin.

242 In her first affidavit, Cindy Yan Xin said that she paid the sum of $1,000 "on the signing of the Contract Note on or about 18 July 2008" and a further sum of $52,800 to the selling agent "on or about 18 July 2008". Counsel for the plaintiff submitted that it was only after Cindy Yan Xin saw the evidence that it became common ground that the holding deposit of $1,000 was paid on 16 June 2008 by Lin Qiao. In her oral evidence Cindy Yan Xin acknowledged that she had not paid the $1,000 personally. It was also not paid "on the signing of the contract". That event did not occur until just over a month later. Cindy Yan Xin's explanation for Lin Qiao making the payment was illogical:**

So on that day the workload was very heavy in the factory and I did not have a ... vehicle so it was difficult for me to go to the bank to withdraw the money to pay the agent so instead I gave this money to Lin Qiao.

**243 Cindy Yan Xin said that she had never asked Lin Qiao for the receipt for $1,000 because she was the one purchasing the property and she knew that the agent acknowledged receiving the money, "so it's not important to me". She said that she and Lucy Li had both rung the agent.

244 Lucy Li said that she was present at the factory when Cindy Yan Xin gave the $1,000 to Lin Qiao. She said that she was intending to take it to the agent but she did not have time so "sister Qiao went".

245 I have already referred to Lin Qiao's evidence about what happened when she received the bank cheque for $52,800 from Lucy Li. According to the plaintiff, the balance of the deposit, $52,800, came from Lucy Li as part repayment of the loan of $200,000 from Lin Qiao a short time before. Lin Qiao said that when she took the bank cheque for $52,800 to pay to the selling agent on 18 July 2008, she took Cindy Yan Xin with her because she had to sign the Contract Note.

246 Lucy Li said that she took Cindy Yan Xin to the agent to pay that money and that the agent gave her the receipt. She still had possession of the original receipt at the trial.

247 Cynthia Yu's file contained a copy of the application for a loan dated 3 July 2008 which was signed by Cindy Yan Xin. The details of applicant page recorded that Cindy Yan Xin was, and had for ten months been, living at 8 Baillie Court, Frankston; that her contact telephone number was 0431 271 088; that her email address was xy_cindy@hotmail.com, that her occupation was office clerk; that she was, and had been for ten months, employed by Qing Qing and that her annual salary was $52,000. There were various sub-headings under the heading "What you own? (Assets)". The entry for "Other property/land at" was left blank. Under the sub-heading "Savings (Institution and Branch)", there was listed:**

CBA $ 50,000

Bank of China $200,000.

In the "Debt Service Calculations" form Cindy Yan Xin was said to be living "rent free with her Asian uncle, hence no residential rental expense". Accompanying the loan application were two slips headed "Payroll Advice" for the week commencing 9 and 16 June 2008, showing Cindy Yan Xin receiving a gross weekly pay of $1,000 and a net pay of $788 from Qing Qing. There was also a letter from Qing Qing signed by Lucy Li as General Manager confirming that Cindy Yan Xin had been "employed by our company as Full time office clerk since August 2007".

**248 Rather surprisingly, Donald Dover gave evidence that Cindy Yan Xin was not employed by Qing Qing even though she worked in the business. He said that Lucy Li was paid a wage, but Cindy Yan Xin was not.

249 Lin Qiao said that she inspected the Kirkham Road property with the agent from Camerons prior to the purchase. It was vacant and empty inside. Lin Qiao said that she was handed the key to the Kirkham Road property by the agent on the afternoon after the settlement.

250 Cynthia Yu said that prior to settlement of the Kirkham Road property, Lin Qiao asked her whether Phillips Li's name could be added to the contract as the "nominee". Cynthia Yu said that she refused because the matter was raised after the loan had been approved, but she did say that before settlement she told Lin Qiao to lodge a caveat over the Kirkham Road property because "she pay the money, she gave them the money".

251 The analysis of the events surrounding Qing Qing's leasing of the Kirkham Road property shows once again, in my opinion, that the Li family and the directors of Qing Qing were still on friendly terms and were co-operating with each other. Once again the undisputed facts were pretty much consistent with each side's version of events, although I must say that if Qing Qing had only entered into the lease to assist the Li family, it did an extraordinary amount of preparatory work. Nevertheless, there was strong evidence from John Guastella and Andrew Langdon's correspondence that despite the lease being for three years it was only intended to last for three months.

252 The same general observations can be made, in my opinion, about the analysis of the events surrounding the purchase of the Kirkham Road property, namely, that the undisputed facts were pretty much consistent with each side's version of events. Importantly, however, the evidence of John Guastella and Cynthia Yu confirms the primary role played by Lin Qiao. Just why Lin Qiao should have been so heavily involved in a purchase by one of her employees was never satisfactorily explained. Lin Qiao's role contrasts with Cindy Yan Xin's lack of detail about the transaction in her affidavits and oral evidence. Significantly, Cynthia Yu had some understanding that Lin Qiao and Cindy Yan Xin had an "agreement or something" about who the beneficial owner was. I also note that she also said that she advised Lin Qiao to lodge a caveat over the property because she had paid the money. Nevertheless, before reaching any final conclusion, I will continue my consideration of the other areas of dispute.**

**253 In the plaintiff's statement of claim endorsed on the writ, it was pleaded that Cindy Yan Xin had "declared in writing" that she held the Kirkham Road property upon trust for Phillips Li. The particulars of allegation said that "the declaration is contained in Deed of Trust dated 18 September 2008 and 20 March 2009 ..."

254 On 29 July 2010, copies of these documents, which had not been signed by the defendant, were forwarded to her solicitor, Mr Wong. In the amended statement of claim dated 30 July 2010, it was pleaded that Cindy Yan Xin had orally declared that she held the property upon trust for Phillips Li and that she had approved the two trust documents but said she would not sign them because she was an honourable person who could be trusted.

255 Duff Li said that he and Lin Qiao had instructed the solicitors in this proceeding. Whilst he agreed that Cindy Yan Xin had not signed either Deed of Trust he pointed out that his son had.

256 Duff Li said that he and Lin Qiao spoke to David Jie Li about the difficulty they were having in obtaining a loan to buy the Kirkham Road property in Phillips Li's name. He said that there were two or three conversations between Duff Li, Lin Qiao and David Jie Li. Lucy Li participated on one occasion and Cindy Yan Xin on one occasion. David Jie Li suggested that they could use Cindy Yan Xin's name to buy the property. He told Duff Li and Lin Qiao that she was "a very trustworthy person" and they could trust her.

257 Lin Qiao said that in a discussion between David Jie Li, Cindy Yan Xin, Lucy Li, Duff Li and herself in about May 2008 it was agreed that Cindy Yan Xin would be a trustee of the Kirkham Road property for Phillips Li. David Jie Li suggested that Cindy Yan Xin be the nominee purchaser. Lin Qiao said that if Cindy Yan Xin had not agreed they would not have asked her to be the buyer of the property. Lin Qiao said that it was agreed that the Li family would pay all of the expenses incurred in purchasing the property, including all of the mortgage repayments.

258 Cindy Yan Xin denied that she purchased the Kirkham Road property on trust for Phillips Li. She said that she had only met Phillips Li "on one occasion at a restaurant in Dandenong late July 2008". She said she hardly knew him or anything about him.

259 Lucy Li denied being involved in discussions about Cindy Yan Xin holding the Kirkham Road property on trust.

260 Duff Li said that he drafted the first trust document and asked Cindy Yan Xin to sign it a day or two before settlement in accordance with their earlier discussions. He said that Cindy Yan Xin said that she could not make a decision on the issue. She had to speak to Lucy Li and David Jie Li, who would decide. Duff Li said he asked David Jie Li why Cindy Yan Xin had not signed and David Jie Li said that Cindy Yan Xin was a trustworthy person and that there would be no problem.

261 Duff Li was challenged about his evidence that the first such document had been drafted before settlement. But recital 10 of that document read as follows:**

Party B [Phillips Li], after Party A [Yan Xin] has received the mortgage from the bank, is to, prior to the execution of the Contract of Sale of Real Estate, and prior to the settlement of the property right, i.e., before 18th September 2008, pay directly to the above-mentioned vendor an initial payment of AUD$150,265.88.

The detailed execution time, location and method are to be confirmed by Party A and Party B after proper negotiation, and are to be implemented accordingly.

This wording suggested that the document had been drafted before settlement.

**262 Lin Qiao gave evidence that she saw the first trust document before settlement. She said that Duff Li told her that shortly after settlement he had asked Cindy Yan Xin to sign a document (mostly in Chinese) acknowledging that she held the property on trust. This one had a typed date of "the day of September 2008". Lin Qiao said that Cindy Yan Xin had refused saying that she was an honourable person and they could trust her. The defendant's counsel queried why the plaintiff's family would make cash payments to Cindy Yan Xin after that refusal, say between October and December 2008, without receiving any written receipt from Cindy Yan Xin.

263 There was a second document (mostly in Chinese) which had the typed date of 20 March 2009. Duff Li said that he also prepared the second trust document after discussing it further with David Jie Li, Lucy Li and Cindy Yan Xin, but mostly David Jie Li. He gave a copy to David Jie Li and one to Cindy Yan Xin. She would not sign. The explanation was the same - we are friends, you should trust us.

264 Lin Qiao said that she saw the second one in about March after it had been amended many times by Duff Li.

265 Cindy Yan Xin denied that she had ever seen the trust documents before, that she had been asked by anyone to sign them or that she authorised anyone to sign them on her behalf.

266 The terms of the first trust document provided that Phillips Li would, within six months of the acquisition of the Kirkham Road property, engage a lawyer to prepare and lodge a caveat (clause 4), that Cindy Yan Xin would then hire a lawyer to prepare a Power of Attorney and that Phillips Li would be "responsible for the management, and other relevant issues in relation to business with Bank West" (clause 5), that within two years after the acquisition of the Kirkham Road property Cindy Yan Xin would "unconditionally transfer" it to Phillips Li and "put it under" Phillips Li's name (clause 6), that, prior to transferring the title to Phillips Li, Cindy Yan Xin would not "make any decisions unilaterally in relation to the property" (clause 7) and that, before Phillips Li's "free acquisition" of the Kirkham Road property, Phillips Li had "the unconditioned right, at no costs, to use" that property (clause 9).

267 Two other clauses were the subject of some debate. Clause 8 provided that Phillips Li would, within two years, before Cindy Yan Xin transferred the Kirkham Road property, return to Cindy Yan Xin "a sum of AUD$52,800.00, being the initial payment made by Party A in the purchase". This appeared to support Cindy Yan Xin's case. However, Duff Li's explanation was that this clause was inserted before it was agreed that the $52,800 would be treated as part repayment of the $200,000 Lucy Li owed to Lin Qiao. He pointed out that this obligation did not appear in the later document.

268 Clause 10 provided that "all assets in and attached to the above-mentioned property and the nearby areas" were owned by Phillips Li "completely and independently, including all the following [sic], fitted and installed by Party B ...". There then followed an extensive list of facilities, machinery and equipment, including "water facilities and supply, and sewerage, gas facilities and supply" and "office facilities and equipments [sic]". Counsel for the defendant submitted that the wording of this clause indicated that it had been drafted well after settlement of the purchase of the Kirkham Road property. Duff Li said that the document was drafted on the basis of what was to happen, that is prospectively, in order to protect Phillips Li.

269 Other changes between the two trust documents were that:**

(a) in the later document there are references to Phillips Li paying $122,500.88 before settlement and another $20,000 "between October and December 2008" to Cindy Yan Xin "toward the loan and interest", making the total paid by him $142,500.88, and

(b) in clause 7 of the later document the transfer of the property by Cindy Yan Xin to Phillips Li is to occur "within five years' time".

**270 Phillips Li gave some rather confused evidence about having been asked by his father immediately prior to the settlement of the Kirkham Road property to sign a document which he did. He could not remember whether he signed one or two copies of that document. It appeared from his description of what he saw of the document that it was the Deed of Trust dated 18 September 2008. Duff Li gave evidence that he gave the two copies of this document signed by Phillips Li to Cindy Yan Xin and Lucy Li for Cindy Yan Xin to sign but they were never returned.

271 The analysis of these events reveals two points which, in my opinion, must be regarded as favouring the defendant's version of events. First, there was the strange inclusion in the first trust document of the reference to Cindy Yan Xin having paid $52,000. Secondly, there was the submission by counsel for the defendant that it was most unlikely the Li family would continue to make payments to Cindy Yan Xin when she had failed or refused to sign a trust document acknowledging that she held the property on trust for Phillips Li.

272 Further, counsel for the defendant submitted that it should be held that the two trust documents were manufactured by Duff Li well into 2009 and that they were never shown to Cindy Yan Xin. This may well be correct but as it is now common ground that the trust documents were never signed by Cindy Yan Xin their importance is significantly lessened.

273 In my opinion, the most critical issue for determination is whether there is any credible evidence that Cindy Yan Xin verbally agreed to hold the Kirkham Road property on trust for the plaintiff. If I accept the evidence of Lin Qiao and Duff Li on this point it is, in my opinion, sufficient to establish the trust arrangement. If, on the other hand, I accept the denials of Cindy Yan Xin and Lucy Li then there is no evidence on which to make a finding of the trust arrangement.

274 Counsel for the defendant also submitted that there was no reason for the defendant to agree to purchase the Kirkham Road property on trust for Phillips Li. They pointed out how recent her relationship with the Li family was and how risky it was for her to accept a liability for a $365,000 debt for no apparent reason. Counsel also submitted that the purchase of the Kirkham Road property was intended to support the defendant's subsequent application for a permanent residence visa and entering into this transaction might well prevent her from taking on another loan. Finally, counsel submitted that there was no satisfactory explanation of why the Li family did not on this occasion purchase a property in the name of one of the members of that family. Once again, before reaching any final conclusion, I will continue my consideration of the other areas of dispute.**

275 The purchase of the Kirkham Road property settled on 19 September 2008. The statement of settlement shows that BankWest provided a total of $334,175.71. The purchaser needed to find a further $150,265.88, on top of the loan from BankWest to finalise the settlement. According to the plaintiff, the plaintiff's family provided this amount exactly by means of three separate sources:

(a) $30,000 borrowed from Lucy Li's husband, Donald Dover;

(b) $50,000 borrowed from a family friend, Ou Lu; and

(c) $70,265.88 drawn from the plaintiff's BankWest account.

276 According to the defendant, the further $150,265.88 was provided by the same three bank cheques but the explanation for each cheque was different. Cindy Yan Xin said that:

(b) the bank cheques for $50,000 and $70,265.88 were a partial repayment by Lin Qiao to her of the $150,000 she said she had paid to purchase the business.

**277 Cindy Yan Xin's explanation for the $120,265.88 from Lin Qiao was as follows. She said that in about September 2008, Duff Li came to the Kirkham Road property and, in a very abusive manner, demanded the return of the business to him, saying that Lin Qiao and/or his brother had no right to sell it to Qing Qing. Lin Qiao was present when this happened. Duff Li and Lin Qiao quarrelled. Cindy Yan Xin said that she and "the company" talked it over and decided that things could not go on like this so "the company" talked to Lin Qiao and she agreed to return the $150,000 to Cindy Yan Xin. A few days later, Lin Qiao told "us that she will return the $150,000 to me if we agreed" to transfer the business back to Duff Li. She said they agreed because they did not want to have any quarrel with Duff Li who claimed to be a lawyer in Australia and China. Cindy Yan Xin agreed that there was no written evidence of the agreement for the Li family to buy back the business. She also agreed that it would have been in the interests of both parties to document such an agreement. She said it was agreed verbally but she did not know the details. Cindy Yan Xin said in her first affidavit that Lin Qiao repaid her about $120,000 but had not paid the balance of $30,000 or the cost of the stock. In the evidence at the hearing neither Cindy Yan Xin nor Lucy Li mentioned paying for stock.

278 Lucy Li gave evidence that in early September 2008 Duff Li came into the factory and said to her and Cindy Yan Xin that he wanted the business back. He abused them. They talked to Lin Qiao and said to her that if her family wanted the business back then "the $150,000" would have to be repaid. Lucy Li said that Lin Qiao agreed to repay the $150,000. However, she said that there was also the question of the costs incurred by Qing Qing in renovating the Kirkham Road property and no agreement was reached on this matter. They were still negotiating at the end of 2008.

279 Lin Qiao said that a few days before settlement she found that she did not have enough money to go to the settlement. She therefore asked Lucy Li if she could "lend me $30,000". She said that she asked Lucy Li "because she owed me money at the time and because we were good friends". Lin Qiao said that Lucy Li replied that she did not have the money but that Donald Dover could lend it to Lin Qiao. She said that Lucy Li later gave her a bank cheque for $30,000 saying it was from Donald Dover.

280 Lin Qiao said in cross-examination that she could have insisted Lucy Li repay her the $30,000 but she thought they were still friends and Lucy Li said that she would get Donald Dover to lend Lin Qiao the money.

281 Lin Qiao said that they had repaid Donald Dover $20,000 of the $30,000 borrowed. She produced a BankWest bank cheque dated 10 November 2008 in the sum of $20,000 payable to "Donald Dover". The funds for this bank cheque were withdrawn from the plaintiff's BankWest account on 10 November 2008. Donald Dover agreed that this cheque was received by Lucy Li and was paid into his bank account. He also agreed that the $20,000 was then transferred into Lucy Li's account perhaps via a joint account. Lucy Li's bank statement shows a credit transfer of $20,000 on 17 November 2008.

282 The defendant's counsel put to Lin Qiao that that cheque was given to Donald Dover as payment for transporting the equipment from Amberley Crescent to the Kirkham Road property. Lin Qiao denied this. The question arising is why would the Li family be paying Donald Dover for that work? Cindy Yan Xin's case was that Qing Qing moved its business from Amberley Crescent to the Kirkham Road property between May 2008, when it obtained a lease of the latter property, and January 2009, when it received final Council approval. Donald Dover's explanation was not convincing. He seemed to be saying that Lucy Li asked him to do the relocation work because negotiations were still continuing between Qing Qing and the Li family over ownership of the business. But it was not yet the Li family's business because they were still $30,000 short in paying for the purchase back of the business. (It seems to have been accepted that all of the references to "$30,000" was a rounding. The real shortfall was $29,734.12).

283 Ou Lu gave evidence confirming that she had lent Lin Qiao $50,000 on 18 September 2008. Her bank statement showed a withdrawal of that amount on that day. Ou Lu said that Lin Qiao repaid her on 17 October 2008. Her bank statement showed a deposit of $50,000 on that day. A statement of settlement of the sale of a property at 20 Birdwood Avenue, Dandenong on 16 October 2008 showed that part of the purchase price was a cheque in favour of Ou Lu in the sum of $50,000. This property was owned by the Li family and had been financed by Citigroup.

284 Cindy Yan Xin said that she met Lin Qiao the day before settlement. According to Cindy Yan Xin, Lin Qiao said that she did not have any money with her, so Cindy Yan Xin gave the $30,000 cheque to her to give to Cynthia Yu along with the rest of the money that Lin Qiao would be providing. Cindy Yan Xin gave no evidence about why she happened to have a bank cheque for $30,000 payable to Talawood already in her possession. There is also the question of why it was Cindy Yan Xin and not Qing Qing who was receiving the money. Cindy Yan Xin's explanation was that she had paid the $150,000, even though it was Qing Qing which had allegedly purchased the business.

285 Lin Qiao said that she gave the three bank cheques to Duff Li. Both Cynthia Yu and Duff Li gave evidence that on the day before the settlement Duff Li met Cynthia Yu at McDonalds in Glen Waverley and handed to her these three bank cheques. Duff Li said that he got the cheques from Lin Qiao. Counsel for the defendant submitted that it was not credible that Duff Li would hand over the cheques to allow the purchase to settle when Cindy Yan Xin had allegedly failed or refused to sign the first Deed of Trust.

286 Cindy Yan Xin's explanation for Lin Qiao and not herself handling all of the purchase transactions was that they were "friends" and on "good terms". Cindy Yan Xin also said that she did not have a vehicle, lived far away and her English was not that good. However, Cindy Yan Xin agreed that Cynthia Yu spoke Mandarin. Cindy Yan Xin said that she saw Cynthia Yu two or three times. Once she went by herself, once with Lin Qiao and once Lin Qiao arranged for a friend to accompany her.

287 Cindy Yan Xin said that the plaintiff's parents agreed to pay her rent. She also asserted that normally the tenant of a commercial property would pay all outgoings. She said that she therefore forwarded the Council rate notices to LL King for payment, but there was no response. In her defence to the amended statement of claim, Cindy Yan Xin pleaded that she and Lin Qiao agreed that the business Lin Qiao had purchased back from Cindy Yan Xin could still be conducted at the Kirkham Road property and that Lin Qiao (or an entity associated with her) would enter into a lease with Cindy Yan Xin and would make rental payments to her. It was further pleaded that although a written lease was never signed, Lin Qiao (or an entity associated with her) took exclusive possession of the premises and commenced paying rent. Why did Cindy Yan Xin or Qing Qing not sue for rent or for possession of the property if full rent was not being paid? Neither Qing Qing nor Cindy Yan Xin has issued any legal proceedings to recover the extra amount owing.

288 Cindy Yan Xin said that she entered into a loan agreement with Lucy Li with respect to the two amounts totalling $82,800. The loan agreement has Henley Legal letterhead on the first page. It is dated 18 September 2008, but it also states that it was signed by both Lucy Li and Cindy Yan Xin on "this ... October 2008". Cindy Yan Xin said that the loan document was signed "on the settlement day when I got the loan of $30,000". She said it was on 18 or 19 September 2008, she could not "remember it clearly". She also said that she was not "clear" about why the loan agreement had an October 2008 date in it. She later gave evidence that the loan agreement was provided "at a later stage" and was "signed when the document was prepared by the lawyer ... after the settlement". Under the loan agreement, repayment was due on 31 December 2008 including interest at 15% per annum ($3,539.12). The default interest rate was 22%.

289 Pursuant to the charge contained in the loan agreement, on 27 October 2008 a caveat by Lucy Li was registered on the title to the Kirkham Road property. It appears that Phillips Li's legal advisers only became aware of this caveat shortly before the first trial. An invoice from Mr Wong's firm, Henley Legal, dated 30 November 2008, charged for preparation of the loan agreement and the lodging of the caveat on 27 October 2008.

290 Lucy Li said that the loan agreement between her and Cindy Yan Xin was signed in approximately October 2008. I accept that evidence. If that is so, then David Jie Li, Lucy Li and Cindy Yan Xin must have decided by this time to attempt to defraud Phillips Li of his property by denying the trust arrangement. Whilst it does mean that a lot of careful planning must have gone into the fraudulent scheme, it is consistent with Duff Li's evidence concerning Cindy Yan Xin's failure to sign the first trust document before the settlement occurred.

291 Well after the hearing commenced, the defendant also produced as part of her case two receipts in Chinese signed by Cindy Yan Xin and witnessed by Donald Dover. The first was dated 18 July 2008 acknowledging the loan of $52,800 and the second was dated 18 September 2008 acknowledging the loan of $30,000. Cindy Yan Xin said that she signed each document on the date it bore. Each recorded that the loan was until 31 December 2008. This was the first time there had been any mention of these receipts. Cindy Yan Xin denied that they had been created after 30 April 2012. Lucy Li also gave evidence that each receipt was signed by Cindy Yan Xin and given to her on the date it bore.

292 The two receipts were mirror images of each other. Apart from the dates and the amounts, the wording was exactly the same and the spacing was the same. Lucy Li's son, Shao Chen Zhu, gave evidence that he typed the first document on the computer at Lucy Li's home and saved it and that the second document was prepared from the first, with only the dates and amounts being changed. This possibly explains the similarity in appearance. Despite the loan agreement being signed, Lucy Li maintained that she had kept these receipts in her files. After a great deal of obfuscation, Lucy Li appeared to say that she kept the two receipts with the loan agreement. In that case, one wonders why they were not produced before when the loan agreement was exhibited to Cindy Yan Xin's first affidavit.

293 Lucy Li agreed that at the time the two sums were lent they were lent unsecured. She had not thought about that issue at that time. If the loan agreements were as set out in the receipts then Cindy Yan Xin was not in default until she did not repay the loans on 31 December 2008. There was no agreement to pay interest and no agreement to give a charge over the Kirkham Road property as security for repayment. Arguably, therefore, there was no consideration for this extra obligation imposed on Cindy Yan Xin by the loan agreement made sometime in October 2008.

294 Once again, in my opinion, the established facts could match either side's version of events. I will defer for the present my conclusion about which version of the sources of the funds is correct. But before leaving this topic I should indicate that I am not satisfied that the two receipts dated 18 July 2008 and 18 September 2008 were genuine. What clearly was a genuine document was the loan agreement between Cindy Yan Xin and Lucy Li. But Cindy Yan Xin's contradictory evidence about when the loan agreement was signed leads me to conclude that the receipts were not signed by her on the date each receipt bore. Their late production was highly suspicious.**

**295 Phillips Li said that before settlement he looked at the Kirkham Road property once from the outside. Some time after settlement he went inside the property. His mother had the keys. The factory was virtually empty apart from tools and other equipment such as ladders lying about. He said that: "there was nothing, no machinery there. It wasn't ready for production". There was no one there carrying out renovations.

296 Lin Qiao said that she obtained the key to the Kirkham Road property from the agent after settlement. She and Duff Li then visited the property. The factory was empty apart from various tools. In cross-examination, Lin Qiao expanded her answer about the state of the Kirkham Road property when she first visited it after settlement. She said that there had been "some small changes". She said that she did not see preparations for a grease trap but did see "a big box". She did not see any steel beams for a mezzanine floor. She did not agree that by the time of settlement "significant fit-out works" had already been done in the Kirkham Road property by Qing Qing.

297 Duff Li said that he went inside the Kirkham Road property once at about the time they paid the balance of the deposit. There were two workmen there drinking beer. No fit-out work had been done. Duff Li said that after settlement he saw the grease trap partly completed.

298 Lucy Li said that Qing Qing always had the keys to the Kirkham Road property because it was the tenant before settlement and it was carrying out fit-out works.

299 Lin Qiao's explanation for why David Jie Li was signing pay slips for the period from 3 October to 24 December 2008 was that he offered to "renovate" the Kirkham Road factory at a cheap rate. She said that she paid him a 10% deposit in June or July. David Jie Li normally went there to work in the evening. Cindy Yan Xin went as well. Lin Qiao said that before settlement:**

The reason he could go into that factory is because he said his sister rented that factory. He could enter it, we couldn't. That's what happened.

300 Phillips Li said in his affidavit that his family arranged for the fit-out work to be done at the property. He said that part of that work was done by Lucy Li and Donald Dover, who carried on "their own private building business". He said that it was agreed by Lin Qiao and Lucy Li that the cost of that work would be offset against the loan of $200,000. Phillips Li also said in his affidavit that the Li family had paid Qing Qing for the fit-out works done by it by setting off the amount owed against Lucy Li's debt of $200,000 less $52,800. Although both his parents swore affidavits that Phillips Li's affidavit was correct, they did not agree in cross-examination that his evidence on this point was correct. They said that there was no such set-off. In fact, Lin Qiao said that her family did not hire Qing Qing to do the work. They hired David Jie Li. He may have hired Qing Qing, but that was a matter between them. Duff Li also denied that the fit-out work was done by Qing Qing. He said that they had not paid that company a cent and it had not sought payment from them. The money was paid to David Jie Li. Duff Li said:

David's relationship with Qing Qing company has nothing to do with us.

**301 Phillips Li said that his family paid approximately another $125,000 for further fit-out work not carried out by Lucy Li and Donald Dover. Tax invoices and receipts were produced to support that claim. Lin Qiao said that it was for "the renovation", materials and labour, and that they also bought "machinery to put into the factory".

302 Lin Qiao agreed in cross-examination that between August 2008 and January 2009 some of the equipment was moved from the old premises to the new premises. But she said that they also bought "some new equipment". Lin Qiao also said that she paid Xiao Bing Li $20,000 for some of the old equipment.

303 Lin Qiao also said that David Jie Li helped the Li family move the equipment to the Kirkham Road property. She said that she also hired people to assist with the move. She denied the suggestion that most of the equipment was transported by Donald Dover.

304 Duff Li said that the fit-out works were done by his family, some before settlement and most after. His family paid "labour fees and wages". In cross-examination he said that he could not say what work was done before settlement because "we authorised Li Jie [sic] to do this job". Duff Li said that David Jie Li was able to gain access to the Kirkham Road property before settlement because he was Lucy Li's older brother and at this time "Qing Qing ran this property". He did some drainage work, roofing for the coolroom and a timber frame for a mezzanine floor. Duff Li said that David Jie Li did not finish the job because "he ran away with Xin Yan" on 30 April 2009. They "suddenly disappeared" that morning. But everyone seemed to have agreed that the work was finished some months before that event. Duff Li said that he thought they had paid David Jie Li about $20,000. He later said the amount paid might be closer to $40,000. He said that the receipts constituting exhibit 28 were payment for this work and that David Jie Li had purchased all the materials.

305 Duff Li said that the business being conducted at the Amberley Crescent property "ceased gradually". There was still some production for clients. Duff Li said that he could not say on which day production ceased completely. Later he said about October or November.

306 Cindy Yan Xin said in her first affidavit that Qing Qing spent about $83,000 in equipment and materials (excluding labour costs) in fitting out the Kirkham Road property. She produced a list of these expenses said to have been incurred between 27 May and 29 December 2008. They totalled $229,397.09. She said that in about February 2009 the Council did a final inspection and approved the premises. By a Council certificate dated 29 January 2009, Qing Qing trading as "Newfield" and the Kirkham Road property were registered under the Food Act for the year ending 31 December 2009.

307 However, in her first affidavit Cindy Yan Xin said that shortly after 29 January 2009, Duff Li forcefully took over the operation of the business at the property. He refused to pay the balance of $30,000 and the cost of the stock to her. Cindy Yan Xin said that Duff Li forcefully took back all major clients the business had been supplying and changing the payment details to Phillips Li's company trading as Newfield HF.

308 Lucy Li said that in about October 2008 Qing Qing moved its equipment from the Amberley Crescent property to the Kirkham Road property. She said that if the full purchase price had been repaid, the equipment moved to the Kirkham Road property would have belonged to the Li family. But she said that as the full price was not repaid, Qing Qing kept the business, paid the rent and owned the equipment transferred from Amberley Crescent.

309 Lucy Li corrected her affidavit in this proceeding so that it said that about $90,000 had been spent on the cost of materials.

310 Lucy Li said that "officially" she left the business in about November 2008 but at that stage they were "still engaged in negotiation" with Lin Qiao's family "in talking about this business". She said that "the renovation was still continuing". Lucy Li agreed that there was no written contract for the re-sale of the business to the Li family.

311 Lucy Li said in her affidavit in this proceeding that in January 2009 the plaintiff and his family just took over possession of the property without paying any money to Qing Qing. Duff Li agreed to pay rent as a sub-lessee, but Qing Qing never received any rent from the plaintiff.

312 Phillips Li said that for some unknown reason on 29 January 2009 Qing Qing wrongfully obtained registration by the Council of the Kirkham Road property in its name. He said that "this anomaly was quickly corrected on 3 February 2009". A Council certificate dated 3 February 2009 for registration of the property to be used for the purpose of "Food Manufacturer" for the year ending 31 December 2009 was issued to LL King trading as "Newfield HF".

313 Sanye Guo said that on many occasions he supplied some goods for the tofu business. He dealt with Lin Qiao, never with David Jie Li. He produced two invoices from his company, Australia Huibao Pty Ltd, to "New Field HF" dated 31 November [sic] 2008 and 4 January 2009 for tofu making equipment and other products. He said that the goods would have been delivered shortly before the date of the invoice.

314 Donald Dover said that he dismantled the equipment at Amberley Crescent and transported the smaller items to the Kirkham Road property and connected it up. He said his wife asked him if he would be prepared to do this work. He said that he would charge $20,000. He did not render an invoice. It was not done through the company. He said that Phillips Li paid him $20,000 for this work. He never saw the cheque. It was given to Lucy Li.

315 Donald Dover described the work done by the various tradesmen in fitting out the factory. He said that this work commenced in June 2008. He estimated that the materials cost about $94,000 and the labour around $140,000.

316 This topic was the subject of the most confusing and contradictory evidence. It is not at all clear to me what, if any, fit-out work had been commenced prior to settlement and what fit-out work was done after settlement. One reason for the uncertainty is that counsel for both sides agreed that it was not necessary as part of this dispute, because there was no claim on foot by Qing Qing for payment for the work performed by it, to resolve what they called "the building case" as this would have further lengthened the trial.

317 Nevertheless, this was an area where I found the evidence of Duff Li and Lin Qiao to be unsatisfactory. It seemed to me that rather than agreeing that Qing Qing had performed some of the work, which might expose them to some claim in the future, they were overly insistent that their contractual relations were with David Jie Li.

318 The most relevant finding, however, is that I consider that both the Li family and Qing Qing were involved in arranging, carrying out and paying for the fit-out work, and that each side's version can be seen as consistent with that finding.**

**319 The plaintiff's case was that he or his family on his behalf had paid all of the instalments due on Cindy Yan Xin's loan from BankWest, either by giving her cash each month to cover the instalments or by paying the approximate amount due directly to BankWest.

320 The plaintiff relied first of all on exhibit 10, which was an original receipt for four payments of "cash ... handed to Cindy Yan Xin ... to pay the bank loan interest to the Bank for the Factory". This document, which was written by Lin Qiao, was signed by Cindy Yan Xin and dated 17 January 2009. The payments were listed as follows:**

Initially the last figure was $3,000.00 but this had been crossed out. The following entry was also crossed out:

The document also stated that in about October 2008 "we returned $1,230.00 to Cindy Yan Xin for the Property Valuing Service (operated by the Bank) and paid $35.00 to Cindy Yan Xin for her Bank's fine".

321 Cindy Yan Xin denied receiving these four cash payments from the plaintiff's family. In her fourth affidavit, Cindy Yan Xin said that the payments were received by her from Qing Qing. She said that she remembered signing a handwritten document "which had the bottom half and I believe that the top half of the document with payment figures were not there". She pointed out that "in any event ... [the document] merely said that I received the various payments but it did not say from whom". In cross-examination, Cindy Yan Xin agreed that Lin Qiao asked her to sign the document. She said that her "impression" was that when she signed it "there wasn't much writing on this paper only a part of it". She said that she could not remember clearly and then went on to assert that what was on the document was:

The sum of money for about one or two payments, and then the money was paid by the company.

**322 When Cindy Yan Xin was asked why Lin Qiao would be asking her to sign a document listing payments made by Qing Qing, she answered that Lin Qiao was "the one managing the company". Cindy Yan Xin said that Lin Qiao told her that this was "the money paid by the company for your rental", so she signed. Incredibly she said that Lin Qiao told her that she had to "provide a receipt to the company".

323 Cindy Yan Xin said that the source of the funds for the payment of her first monthly instalment of $3,150.26 in October 2008 was a cheque from Qing Qing. She then said that the source of funds for the payment of each of the monthly instalments between November 2008 and July 2009 was:**

from my payment there from work ... work paid it into my bank account and I paid it from my bank account.

**324 In cross-examination, she corrected this evidence by saying that part of the second instalment, "$1414 was also paid by the company" by cheque. The rest were all paid by her.

325 Lucy Li said that Qing Qing paid rent to Cindy Yan Xin as follows:**

(a) on or about 20 October 2008 the sum of $3,000 by cheque no 200086; and

(b) on or about 17 November 2008 the sum of $1,415.26 by cheque no 200093.

Lucy Li produced bank statement and cash book entries supporting above evidence.

**326 The various bank statements and other documents revealed the following. Lucy Li signed a Qing Qing cheque no 200086 dated 16 October 2008 in the sum of $3,000.00 payable to "cash for Ms Yan Xin". That cheque was debited to Qing Qing's Westpac bank account on 20 October 2008. It was credited to Cindy Yan Xin's CBA bank account on the same day, making the credit balance in that account $3,406.94. A withdrawal of $3,150.26 was debited to Cindy Yan Xin's CBA bank account on 21 October 2008 and credited to her BankWest account on 20 October 2008.[6] That transfer was reversed on 22 October 2008 presumably because the funds from the Qing Qing cheque had not yet been cleared. An unpaid cheque fee of $35 was debited to Cindy Yan Xin's CBA bank account on 22 October 2008. The transfer was eventually credited to Cindy Yan Xin's BankWest account on 24 October 2008 and debited to her CBA account on 27 October 2008.

327 This suggests to me that most of Cindy Yan Xin's first instalment on her BankWest loan came from Qing Qing's cheque for $3,000.00. But that does not mean that the Li family did not give Cindy Yan Xin $3,150.26 in cash on or about 19 October 2008. How else did they know the amount of Cindy Yan Xin's instalment?

328 Next, Lucy Li signed a Qing Qing cheque no 200093 dated 17 November 2008 in the sum of $1,415.26 payable to "Yan Xin". That cheque was debited to Qing Qing's Westpac bank account on 18 November 2008. It was credited to Cindy Yan Xin's CBA bank account on the same day, together with (one or more other cheque or cheques or possibly cash totalling) $3,000.00, making the credit balance in that account $4,442.94. A withdrawal of $2,810.91 was debited to Cindy Yan Xin's CBA account on 20 November 2008 and credited to her BankWest account on 19 November 2008.

329 This suggests to me that Qing Qing's cheque was not for the payment of the instalment. The source of the funds for that instalment was probably the further $3,000.00 paid into Cindy Yan Xin's CBA account at the same time as the cheque. That $3,000.00 could be the $3,000.00 said by the Li family to have been paid by them on or about 19 November 2008. Lin Qiao said that Cindy Yan Xin did not "correctly report to me the exact amount so I gave $3,000 estimated money" [sic].

330 The defendant submitted that these two payments by Qing Qing to Cindy Yan Xin were rent for the months of October and November 2008. The amount of rent said to be due on the sixteenth day of each month was $2,789.58 exclusive of GST. The two payments by Qing Qing do not match its purported rental liability.

331 A cash deposit of $3,000.00 was credited to Cindy Yan Xin's CBA account on 19 December 2008, making the credit balance in that account $3,026.05. A withdrawal of $2,809.30 was debited to that account on 22 December 2008 and credited to Cindy Yan Xin's BankWest account on 19 December 2008. This matches the Li family's claim to have paid Cindy Yan Xin $3,000.00 in cash on or about 19 December 2008.

332 A cash deposit of $2,900 was credited to Cindy Yan Xin's CBA account on 19 January 2009, making the credit balance in that account $3,070.75. A withdrawal of $2,737.56 was debited to that account on 20 January 2009 and credited to Cindy Yan Xin's BankWest account on the same day. This matches the Li family's claim to have paid Cindy Yan Xin $2,900.00 in cash on or about 19 January 2009. Lin Qiao rejected the suggestion that Cindy Yan Xin did not receive any of these four payments. She said:**

I paid her and later I wrote it and she signed it.

**333 One further point should be noted about the receipt dated 17 January 2009. It was said in that document that Phillips Li's family paid $1,230 "for the Property Valuing Service" and $35 for Cindy Yan Xin's "bank's fine". Her bank statement shows that on 14 August 2008 "Prepaid Fees" of $1,230 were credited to her as yet undrawn loan account and that on 19 September 2008 a "Security Assessment Fee" of $615 (being half of $1,230) was debited, "Legal Fees Collected" of $717.50 was debited, "Vic Govt Title Search" of $10.59 was debited, and a "Business Loan Application Fee" of $1,825 was debited. Further, as previously stated, there was a bank charge of $35 to Cindy Yan Xin's CBA bank account on 22 October 2008. How did Lin Qiao know to include these two amounts in exhibit 10 unless they had been paid by the Li family?

334 The plaintiff also relied on exhibit 11, which was another original receipt for payments made to Cindy Yan Xin in cash to pay the interest on her loan. This document was purportedly signed by David Jie Li and dated 17 April 2009.

335 Phillips Li said in his affidavit that he had been told by his mother that it had been signed by Cindy Yan Xin's husband, David Jie Li. This critical allegation was not addressed by Cindy Yan Xin in her first three affidavits, even though she responded directly to Phillips Li's affidavit in her second affidavit. One might have thought Cindy Yan Xin would immediately have denied two matters in that part of Phillips Li's affidavit - that David Jie Li was her husband and that she did not know anyone called David Jie Li. Cindy Yan Xin said that she instructed Mr Lim from the outset that she was not married to David Jie Li.

336 In fact, Cindy Yan Xin said nothing about these documents until her fourth affidavit after her solicitors had uplifted the originals for forensic testing. In that affidavit she denied receiving the payments set out in exhibit 11 from the plaintiff or his parents. She continued:**

I do not even know who Jie Li is and he is certainly not my husband. I did not authorise Jie Li to sign ... [exhibit 11] or any other documents on my behalf.

337 Lin Qiao said that she wrote out this document because she had made more payments to Cindy Yan Xin than were recorded on the first receipt. Lin Qiao said that she asked Cindy Yan Xin to sign but she said that she had to ask Lucy Li or David Jie Li. Lin Qiao said that she then said to David Jie Li that Cindy Yan Xin should sign because she had been paid the money. David Jie Li agreed that he would ask Cindy Yan Xin to sign. When Lin Qiao asked again, David Jie Li said that Cindy Yan Xin had signed but had lost it and that he would sign the new document. The payments were listed as follows:

There appears to be duplication in respect of the first payment on this receipt, which repeats what originally appeared on the first receipt signed by Cindy Yan Xin. However, Lin Qiao referred to these receipts as evidencing payments for eight months. She said that the last one was for the period up to 19 May 2009. I agree with that, but I still think there is duplication.

**338 A cash deposit of $2,900.00 was credited to Cindy Yan Xin's CBA account on 19 February 2009, making the credit balance in that account $2,929.19. A withdrawal of $2,570.90 from that account was matched by a credit to Cindy Yan Xin's BankWest account on 19 February 2009. The cash deposit matches the Li family's claim to have paid Cindy Yan Xin $2,900.00 in cash on or about 19 February 2009.

339 A cash deposit of $2,200.00 was credited to Cindy Yan Xin's CBA account on 16 March 2009, making the credit balance in that account $2,199.80. A withdrawal of $2,069.20 from that account was matched by a credit to Cindy Yan Xin's BankWest account on 20 March 2009. The cash deposit of $2,200.00 compares with the Li family's claim to have paid Cindy Yan Xin $2,600.00 in cash on or about 19 March 2009. Cindy Yan Xin may have kept $400 for herself.

340 Interestingly, there were then a number of cash deposits to Cindy Yan Xin's CBA account: $2,300.00 on 24 March, $1,300.00 on 31 March, $1,800.00 on 6 April, $800.00 on 14 April and $550.00 on 17 April 2009. No evidence was led about these specific deposits.

341 A cash deposit of $2,500.00 was credited to Cindy Yan Xin's CBA account on 20 April 2009, making the credit balance in that account $5,036.60. A withdrawal of $2,364.80 from that account was matched by a credit to Cindy Yan Xin's BankWest account on 20 April 2009. The cash deposit of $2,500.00 compares with the Li family's claim to have paid Cindy Yan Xin $2,600.00 in cash on or about 19 April 2009. Cindy Yan Xin may have kept $100 for herself.

342 The two receipts, exhibits 10 and 11, were in Chinese. A translation by Duff Li into English was tendered by the plaintiff with each exhibit. In response to a question from me, counsel for the defendant said that the defendant did not accept that the translation was accurate. However, no other translation was tendered by the defendant and the topic was never mentioned again.

343 In my opinion, exhibits 10 and 11 are strong evidence for the plaintiff. Why would Cindy Yan Xin be signing a receipt acknowledging payments by Qing Qing to her? She was a part owner of Qing Qing. Cindy Yan Xin never explained why the Li family would have possession of these two original receipts. Cindy Yan Xin's case on the affidavits was about doubting her signature, rather than explaining how a document she had signed for Qing Qing finished up with the Li family. Further, the above evidence does not support Cindy Yan Xin's claim that she thought that the payments set out in exhibit 10 were received by her from Qing Qing. At best, only the cheque for $3,000 and the cheque for $1,415.26 could have been payments by Qing Qing. That is, an amount of $4,415.26 out of a total of $12,050.26 for the four monthly instalments, or a total of $13,315.26 if the additional amounts paid by Cindy Yan Xin to BankWest are included.

344 Lin Qiao said that after Cindy Yan Xin and David Jie Li disappeared, she did not know how to continue making the mortgage repayments. Cynthia Yu gave her the BankWest account details and helped her fill out a form for a direct transfer. Cynthia Yu agreed that this had occurred. She said that Lin Qiao told her that she wanted to pay the arrears.

345 There was a further cash deposit of $1,300.00 in Cindy Yan Xin's CBA account on 28 April 2009, but there was no further deposit before 20 May 2009. On that day, a transfer of $2,143.10 was made from Cindy Yan Xin's CBA account to her BankWest account. It was reversed on the following day because of insufficient funds in the CBA account. On 3 June 2009, a transfer of $2,150.00 was made from Cindy Yan Xin's CBA account to her BankWest account, but it was also reversed on the following day because of insufficient funds.

346 On 11 June 2009, Lin Qiao and Duff Li arranged with BankWest for there to be a direct debit arrangement from LL King's account with Westpac to the credit of Cindy Yan Xin's loan account with BankWest. The amount to be debited each month was "$ Minimum". Phillips Li or Duff Li signed the form on behalf of LL King. Lin Qiao said that only one payment was made under this arrangement. This one payment would appear to be the credit transfer from "LL King Australia PL" of $2,200 to Cindy Yan Xin's BankWest account on 15 June 2009. On 20 June 2009, Cindy Yan Xin wrote to BankWest complaining about BankWest "discussing my account details and loan arrangement with Mr Phillips Yiwei Li of Newfield Health Foods". She said she did not want her loan repayments to be taken from Phillips Li's account. They should be paid into her CBA account or through BankWest BPay. As a result of the complaint by Cindy Yan Xin, there was a message on BankWest's tellers' computers saying that such payments were not allowed.

347 Lin Qiao said that after that she paid at the Fountain Gate branch. Her solicitor told her to pay $94 for every day in the month.

348 On 13 July 2009, a transfer of $2,300.83 was made from Cindy Yan Xin's CBA account to her BankWest account. It was reversed on the following day because of insufficient funds.

349 The defendant's counsel referred in final submissions to a list of payments which, they submitted, had been paid by Cindy Yan Xin to BankWest. The list included a payment of $2,143.10 allegedly made on 19 May 2009; a payment of $2,150.00 allegedly made on 2 June 2009 and a payment of $2,300.83 allegedly made on 19 July 2009. As shown above, transfers of these amounts from Cindy Yan Xin's CBA account did occur on or about these dates, but what was overlooked in counsel's submission was that each of these transfers was subsequently reversed because of insufficient funds.

350 The position was, therefore, that Cindy Yan Xin had defaulted on several interest payments. In her first affidavit, Cindy Yan Xin made the extraordinary assertion that:**

In order to force them to pay rent, I stopped making the loan repayments in or about June 2009 and as at 19 August 2009 I was in arrears amounting to $6,791.66.

I say "extraordinary' because this is not how you would expect the beneficial owner of a factory to behave. Cindy Yan Xin said that a Notice of Demand was sent to her at the property by BankWest on or about 22 August 2009 and that it came to Phillips Li's knowledge. The Notice of Demand sought payment of the whole amount outstanding, namely, $372,197.05. Lin Qiao said that through the family's solicitor it was arranged with BankWest that LL King would pay the arrears. On 22 August 2009 a cheque in the sum of $6,791.66 was deposited "at Fountain Gate" to the credit of Cindy Yan Xin's BankWest account. This brought the outstanding balance back to the original loan amount of $365,000. The payment of $6,791.66 was debited to LL King's account on 24 August 2009.

**351 However, in her second affidavit, Cindy Yan Xin denied that she "deliberately stopped making payment to BankWest to action a default by the bank against me and therefore bringing about the loss of that asset". She said that it was the plaintiff and his parents who deliberately stopped paying her rent knowing that she would not be able to make the mortgage payments by herself without receiving rent payments from them. If that is the case, how did Cindy Yan Xin make the mortgage payments between December 2008 and May 2009? If the money came from the plaintiff's family, why was it being paid? On the defendant's version of events no rent was due to her from the Li family until February 2009 at the earliest.

Since settlement of my purchase of the Property in September 2008 until 10 July 2009, I made the mortgage repayments every month to BankWest and collected rent from Qing Qing.

This was obviously incorrect as Qing Qing only made the two payments. In any event, why would Qing Qing be paying her rent until July 2009 when, according to Cindy Yan Xin, Duff Li had forcefully taken possession of the property in late January 2009? Cindy Yan Xin agreed in cross-examination that this statement "was not right". This shows confusion on her part as to her story.

**353 In her evidence, Cindy Yan Xin said that she funded the payment of the monthly instalments on her BankWest loan from her wages. She said that she worked for the Li family between December 2008 and April 2009. She said she had difficulty finding another job, so she continued to work at that business so that she could earn enough money to pay the BankWest loan. She said that she was paid about $12 per hour and agreed that for a 40 hour week she would receive about $480 gross. She then said that she had two jobs - working in the tofu business and as a waitress. Cindy Yan Xin said that her weekly take home pay, after tax, from both jobs was between $700 and $800 per week. She agreed that monthly it was about $3,000. She said that she did not have much in the way of expenses because she was living at Lucy Li's place. In re-examination, Cindy Yan Xin added "savings" as a source of funds for her payment of the monthly instalments. The above evidence does not, in my opinion, support her claim to have funded the monthly instalments prior to May or June 2009, when she defaulted.

354 In cross-examination, Cindy Yan Xin said that at this time she was "really hard up with money". She stated that "one of the reasons" for stopping payment was to force the Li family to pay rent. She agreed that she had taken no steps to evict them from the property. She said that she found them "hard people to deal with".

355 After resolution of the Notice of Demand, Cindy Yan Xin's BankWest bank statements show the following payments, described as "Cheque Deposit at Fountain Gate", in reduction of her loan:**

Phillips Li gave evidence that he or his mother had continued to pay the monthly instalments on the BankWest loan as set out above and produced receipts from BankWest for most, if not all, of the "Cheque Deposits at Fountain Gate". The Li family has continued to pay the monthly instalments on the loan.

**356 There was also one payment of $1,000.00, described as "Cash Deposit at Hornsby Store" on 14 March 2010, which was credited to Cindy Yan Xin's BankWest account on 15 March 2010. This may have been paid by Cindy Yan Xin, but she was not asked about it.

357 The dispute about the non-payment of the mortgage instalments was followed by the issue of the writ on 15 September 2009.

358 Cindy Yan Xin said that each of the monthly amounts paid by the Li family to meet the interest due on her loan was only about half what they should have been paying by way of rental. She said the rent should be about $4,500 per month. Her explanation as to why she did not sue or counterclaim for possession or for unpaid rent if the full rent was not being paid was confusing and unconvincing.

359 The plaintiff's case was that he or his family had also paid all outgoings on the Kirkham Road property from September 2008. Phillips Li produced an Owners Corporation Fee Notice for the Kirkham Road property for the period from 1 November 2008 to 31 October 2009 in the sum of $3,042.90, and a receipt for payment of this amount, due on 1 January 2009, on 2 June 2009. He also produced accounts from South East Water for the Kirkham Road property due June 2009, September 2009, June 2010 and September 2010, and receipts for payment of the respective amounts of $967.05, $951.10, $1,122.45 and $1,186.45 in these months. I am satisfied that all of the above payments were made by the Li family. But this does not establish that the Li family has paid all of the outgoings in respect of the property. Most of the above payments were made after August 2009, leaving a gap for the period commencing 19 September 2008. Further, the rates for the 2010, 2011 and 2012 years were outstanding at the time of the hearing.

360 In her first affidavit, Cindy Yan Xin said that Phillips Li and Duff Li refused to pay rent to her or to pay any outgoings for using the Kirkham Road property. She said that Duff Li said that Phillips Li owned the property because he had provided the $120,000 paid by Lin Qiao to Cindy Yan Xin. She said that she had, therefore, paid all the water rates, Council rates and body corporate fees for the Kirkham Road property between September 2008 and May 2011. But she exhibited no documents to her affidavits in support of this claim, although she was able to show, when giving evidence, that the 2009 Council rates of $1,912.91 were paid by her on 2 March 2009 using her ANZ Gold credit card. But there was no evidence that she had paid any other outgoings.

361 In my opinion, the following facts from the above analysis point to the conclusion that the plaintiff had met all of the instalments on the defendant's loan and paid some of the outgoings as the beneficial owner of the Kirkham Road property and not the tenant:**

(a) the receipt for four payments, exhibit 10, signed by Cindy Yan Xin;

(b) the receipt for four payments, exhibit 11, signed by David Jie Li;

(c) the fact that Lin Qiao had prepared these receipts and retained possession of them;

(d) the efforts Lin Qiao made to ensure that she could keep making the monthly instalments;

(e) Cindy Yan Xin's extraordinary statement that she deliberately stopped making the loan repayments;

(f) the inconsistencies in Cindy Yan Xin's evidence about how she funded the loan repayments; and

(g) the failure by Cindy Yan Xin to seek possession of the property or the alleged unpaid rent for a period of about four years (up to the end of the hearing).

**362 Before considering the final topic, I should say something about the credibility of the witnesses. Duff Li and Lin Qiao were the plaintiff's main witnesses as he had very little personal involvement in the relevant events. However, he did give evidence and I generally found him to be a credible witness.

363 Whilst I accept much of the evidence given by Duff Li and Lin Qiao, there were contradictions internally and between each other. But generally this does not apply to the critical areas of evidence discussed above. Where on these critical issues their evidence conflicted with the evidence of the defendant and her witnesses, I prefer the evidence of Duff Li and Lin Qiao. However, my criticism that I was not being told the full story applies to these witnesses.

364 One particular attack was made on Lin Qiao's reliability as a witness. Both Lucy Li and Cindy Yan Xin alleged that Lin Qiao was in receipt of Centrelink welfare payments and therefore that she could not have lent Lucy Li $200,000. In opening, the defendant's counsel said that they had "evidence of that". On the second occasion Lin Qiao gave evidence she was asked whether she had "at any time" (my emphasis) been "on welfare payment". She became very agitated but appeared to say she had. She was then asked what was the basis for a payment from the government. Her answer was to the effect that she was interviewed and sometimes she received a payment and sometimes she did not. The generality of the first question meant that the answer did not rule out that Lin Qiao could have had $200,000 to lend to Lucy Li. Certainly there did not appear to be any shortage of assets belonging to the Li family.

365 The defendant was not an impressive witness. Her evidence was full of contradictions and she often resorted to saying that she did not know the relevant facts. This may well have been true because I was left with the distinct impression that she had really been a pawn in the hands of people such as David Jie Li and Lucy Li. She seemed prepared to do whatever she was told, regardless of the consequences to her credibility.

366 I am afraid to say that I have great difficulty in accepting any of Lucy Li's evidence on the critical issues. In my opinion, she told many untruths, as set out above. I also consider that her husband, Donald Dover, was not telling the truth when he supported her evidence on critical issues. He gave the appearance of knowing what he had to say and simply saying it.

367 It is not necessary to say anything specific about the plaintiff's other witnesses. I have previously indicated that I regarded them as witnesses of truth.**

**368 Duff Li's conduct in lodging caveats over the Kirkham Road property and Lucy Li's Dromana property was rightly criticised by counsel for the defendant. Members of the public must understand that they cannot lodge caveats based on false claims and rely on the potential difficulties for the owner in removing the caveat as bargaining chips in a dispute.[7] Duff Li had no basis for lodging caveats based on signed Deeds of Trust. There were no such documents. Duff Li said that he did not tell the solicitors that Cindy Yan Xin had signed the Deed of Trust, he just told them that they had the agreement with Cindy Yan Xin. I do not accept that explanation for the wording of the caveats. His action in lodging the caveat over the Dromana property was even more reprehensible. I cannot emphasise enough that Duff Li's actions in this respect did nothing to assist his son's claim.

369 However, in my opinion, the conduct of Lucy Li and to a lesser extent, Cindy Yan Xin, in respect of two other subsequent transactions was even more reprehensible. First, there was the cynical and deceitful attempt by Lucy Li to have the Kirkham Road property sold by the Sheriff. I consider that Lucy Li's engagement of a debt collector to recover the amount allegedly owned by her friend Cindy Yan Xin was just a smokescreen. After all, Cindy Yan Xin said that Lucy Li discussed with her before suing her that she would be doing so and that Lucy Li also told her that once she got judgment she would try, through the services of the Sheriff, to sell the Kirkham Road property.

370 Lucy Li could not really explain why Qing Qing had not sued the Li family for $260,000 ($30,000 plus $230,000) when she had sued her friend, Cindy Yan Xin, for $82,500.

371 Had it not been for the warning notice from the Registrar of Titles and the swift reaction by the plaintiff's lawyers, this plan might have succeeded with the property being sold and the proceeds disbursed before the plaintiff knew what was happening. Moreover, all of these steps were taken when both Lucy Li and Cindy Yan Xin knew at the time:**

that there was an existing judgment of this Court declaring that Phillips Li was the beneficial owner of the Kirkham Road property and that unless and until that judgment was set aside Cindy Yan Xin had no beneficial interest in that property.

372 Secondly, there was the even more outrageous episode of October 2011. Lucy Li said in her affidavit in this proceeding that all fit-out works were undertaken by Qing Qing on its own behalf as the owner of the business conducted at the property. She said that Qing Qing did not receive any payment from the plaintiff's family and that she did not agree to set off the costs of the fit-out works against the alleged $200,000 loan. In her affidavit in the other proceeding Lucy Li had sworn that in addition to the Li family still owing a further $30,000 for the purchasing back of the business, it owed Qing Qing $230,000 for the fit-out. Lucy Li said:

Qiao Lin and family have never paid the $30,000 balance nor have they reimbursed Qing Qing for $230,000 spent on refurbishment of Kirkham Road.

373 Contrary to this evidence, on 10 October 2011 K & P Legal Services Pty Ltd on behalf of Qing Qing lodged a caveat dated 5 October 2011 over the Kirkham Road property in which Qing Qing claimed "an equitable interest as chargee pursuant to a Deed made between the Caveator and the Registered Proprietor dated 4th day of October 2011". The Deed dated 4 October 2011 referred to an agreement dated 28 September 2008 pursuant to which it was said that Cindy Yan Xin owed Qing Qing $230,000 for the cost of the fit-out of the Kirkham Road property. The Deed contained agreement by Cindy Yan Xin to pay the debt of $230,000 plus interest "at the rate of 25% per annum calculated daily beginning from the date of this Deed". The Deed further provided as follows:

1. Both parties agree that Qing Qing shall be entitled to lodge a caveat over the Land whilst the Land is subject to a mortgage or if the Land is not subject to a mortgage, Qing Qing shall be entitled to hold the original title of the Land and to lodge a mortgage over the Land.

1. Yan Xin represents and warrants to Qing Qing that no action, suit, investigation or proceeding is pending or known to be threatened against Yan Xin before any Court, Tribunal or administrative agency, the outcome of which, by itself or taken together with other such litigation, might have a material and adverse effect upon the financial status or solvency of Yan Xin.

374 How both Cindy Yan Xin, on her own behalf, and Lucy Li and Donald Dover, as the directors of Qing Qing, could enter into a Deed containing the last clause quoted above is quite extraordinary. Each of them knew that at that time there was an existing judgment of the Court declaring that Phillips Li was the beneficial owner of the Kirkham Road property and that unless and until that judgment was set aside, Cindy Yan Xin had no beneficial interest in the Kirkham Road property. Cindy Yan Xin said that she understood that the Deed gave Qing Qing security rights over the Kirkham Road property. She said she signed:

Because I really owed ... the money, so I just, ... decided to do so.

375 The next day Cindy Yan Xin gave evidence throwing doubt on whether she had in fact signed the Deed. It was not available in Court, as she said she had left her copy at her home in New South Wales, and Lucy Li had not yet provided a copy to Cindy Yan Xin's solicitors. When pressed about whether or not she had signed the Deed, Cindy Yan Xin replied:

**376 Lucy Li had great difficulty in explaining how these documents came to be entered into. Referring to the Deed dated 4 October 2011, she said that Qing Qing had spent a "lot of money on the renovation" and she had "sent a lot of the invoices to Yiwei" (presumably she meant the plaintiff and his family) to no avail. She said that when she got the promise from Cindy Yan Xin, they signed the agreement.

377 Lucy Li said that she did not think about the effect of the judgment in favour of the plaintiff at the time the Deed was prepared. She said that Qing Qing had paid out a lot of money and the intention was to protect Qing Qing's position.

378 Donald Dover said that the fit-out "being an asset of the building, Yan Xin would owe us the money for the fit-out". He said he was told this was agreed in September 2008.

379 The agreement dated 28 September 2008 was an even more extraordinary document. It provided that Qing Qing would carry out and Cindy Yan Xin would pay for the works described in the special conditions. Article 1 of those special conditions contained the Scope of Work. It was a quite detailed description of the fit-out work required to have the Kirkham Road property registered as suitable food manufacturing premises by the Council. Article 2 provided that the work was to be "substantially completed" no later than 28 February 2009. Article 3 provided that this was a "Fixed Price Contract" and that Cindy Yan Xin agreed to pay a total price of $230,000 "for construction of the internal fit-out of the building" within 90 days of the final inspection by the Council and registration of the premises "to allow food manufacture".

380 This document was prepared by Donald Dover. He said that everything changed in September 2008, but he maintained that no fit-out work was done for the Li family. No mention was made of this agreement allegedly signed in September 2008 until after the hearing had been going for many days.

381 I do not accept that this was a genuine document entered into on 28 September 2008. I do not understand why Cindy Yan Xin as the purported owner/landlord of the Kirkham Road property would have agreed to be liable for the cost of the fit-out when it was said that the Li family was liable for this debt. I reject the idea that this was a fixed price contract which, as it happened, appears to have miraculously anticipated the claimed cost to Qing Qing - $230,000 compared with $229,397.09. Further, if after 28 September 2008 Qing Qing was carrying out this work at Cindy Yan Xin's expense, why are there so many invoices where payments have been made by the Li family.

382 Lucy Li said that an independent person assessed that the cost of renovating the premises as a food processing plant would probably be $350,000. They thought that if Qing Qing did the work the cost might be $200,000 or a bit more. She said that at the time they did not think about the ramifications to either Cindy Yan Xin or Qing Qing if the fixed price turned out to be in error.

383 Donald Dover said that in September 2008 he had "a rough idea" of the likely final cost because nearly everything had been purchased by then. In cross-examination, Donald Dover said that they came in "fairly close" to the figure of $230,000 for the fit-out cost. Yet in re-examination he said that the actual costs were more than $100,000 extra!

384 I am satisfied that the Deed dated 4 October 2011 and the agreement dated 28 September 2008 were both created in about early October 2011 by Cindy Yan Xin, Lucy Li and Donald Dover in a desperate attempt to obtain some payment to them should Cindy Yan Xin's defence of the plaintiff's claim not be successful because either her application to set aside the judgment in favour of the plaintiff was rejected or she lost at any eventual rehearing.

385 In my opinion, as is only appropriate, these two reprehensible attempts to deprive the plaintiff of the full fruits of his claim should he be successful, have been extremely damaging to the credibility of Cindy Yan Xin and Lucy Li. The same applies to Donald Dover given his clear involvement in the second transaction, even if it has not been shown that he had any involvement in the first.**

386 In the above discussion I have sometimes said that the established or undisputed facts of a particular topic could fit either of the competing versions. Nevertheless, looking at the dispute as a whole I have come to the conclusion that the plaintiff has made out his claim that the defendant holds the Kirkham Road property on trust for him. I have reached that conclusion for the following reasons:

(a) The findings that David Jie Li existed and that Xin Hua Zhu was the person known as David Jie Li were important because according to the plaintiff's case David Jie Li played a key role in the events leading to this dispute and on the other hand the defendant's case was weakened by the false denial of David Jie Li's existence.

(b) The finding that Qing Qing did not purchase Xiao Bing Li's tofu business was important because the allegation to the contrary was a key plank in the defendant's explanation of the sources of the funds paid at the settlement of the purchase of the property. Without the alleged purchase there could be no alleged re-purchase and therefore no reason for the Li family to be paying $120,265.88 at settlement.

(c) The finding that Lucy Li did not receive the $200,000 bank cheque from the false Xiao Bing Li was important because it was another key plank in the defendant's explanation of the sources of the funds paid at the settlement. If, as I found, Lin Qiao did lend the $200,000 to Lucy Li then this made the plaintiff's case about the source of the $82,800 that much more likely and undermined the defendant's case that she had borrowed these funds from Lucy Li.

(d) The evidence of John Guastella and Cynthia Yu confirmed the primary role played by Lin Qiao and supported her version of who did what with respect to the purchase of the Kirkham Road property.

(e) I am satisfied that I should accept the evidence of Duff Li and Lin Qiao concerning the discussions which resulted in the trust arrangement.

(f) I am also satisfied that it was the Li family who provided the $150,265.88 needed at settlement in the way described by Lin Qiao.

(g) I am satisfied that I should find that the plaintiff or the Li family on his behalf made all of the payments referred to above as the beneficial owner of the property and not in some other capacity, such as tenant.

(h) The conduct of Cindy Yan Xin in participating in the reprehensible attempts by Lucy Li and, to a lesser extent, her husband to subvert the outcome of this proceeding destroyed what remained of her credibility as a reliable witness.

387 Because I have found on the facts that there was an express agreement by the defendant to hold the Kirkham Road property on trust for the plaintiff, it is not necessary to consider what other equitable remedies might be available to the plaintiff given the financial contributions he, or his family on his behalf, have made to the purchase of that property.

388 Once the parties have had an opportunity to read this judgment I will hear submissions on the form of final orders and on the question of costs. It seems to me that, in the circumstances, more detailed orders may be required than were previously made.

[1] The defendant's interpreter, Mr Li, in answer to a question as to whether he was related to any of the witnesses or parties, informed me that there were approximately 120 million people with that surname in China.

[2] Li v Xin [2011] VSC 121.

[3] Schafer v Blyth [1920] 3 KB 140; Brygel v Stoneham, Supreme Court of Victoria, unreported, 4 April 1997 (Batt J); Perpetual Trustees Victoria Limited v Xiao [2012] VSC 65.

[4] Xiao v Perpetual Trustees Victoria Ltd [2012] VSCA 85 (Buchanan and Mandie JJA) granting leave to appeal.

[5] See now Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2012] VSCA 316 (Weinberg, Harper and Priest JJA).

[6] Apparent discrepancies in the dates are presumably due to the time difference between Victoria and Western Australia.

[7] Goldstraw v Goldstraw [2002] VSC 491, [39] (Dodds-Streeton J); Weingarten v Fletcher [2003] VSC 448, [5]; Maxwell v Moorabool Developments Pty Ltd [2004] VSC 392, [264].