Niu v Lu

File Number(s): 2023/154908

Publication restriction: Nil

JUDGMENT

Introduction

1. The plaintiff, Mr Shichao Niu, seeks the repayment of a debt that he alleges is owed to him by the defendant, Mr Yixin Lu, pursuant to an oral loan agreement entered into between the plaintiff and the defendant in mid-May 2017. Alternatively, Mr Niu alleges that Mr Yu has received a benefit or been enriched at his expense and seeks an accounting from the defendant or restitution.

2. The plaintiff alleges that the terms of the loan agreement provided for him to lend the sum of $260,000 to the defendant for a term of twelve months, commencing on the date that the full amount is advanced, at an interest rate of 10% per annum.

3. The plaintiff alleges that he advanced the money, as agreed, in two tranches, the first of $160,000 on 16 May 2017 and the second of $100,000 on 30 May 2017.

4. The plaintiff alleges that the defendant has failed to repay any of the money advanced to him under the loan agreement.

5. The defendant denies that he entered into a loan agreement with the plaintiff in May 2017 or at all. The defendant denies that he received the advance of any money from the plaintiff, and he denies that he has received any benefit at the expense of the plaintiff, or that he has been enriched at the expense of the plaintiff.

6. The trial of the matter proceeded for three days. The plaintiff, Mr Honggaun Li and Mr John Ganas, a handwriting expert, gave evidence in the plaintiff’s case. The defendant and Mr Clifford Hobden, a handwriting expert, gave evidence in the defendant’s case. Mr Niu, Mr Li and Mr Lu all gave evidence in Standard Chinese (Mandarin) which was interpreted by an accredited interpreter.

7. Mr Niu provided two affidavits, dated 13 February 2024 (‘Niu’s first affidavit’) and 3 May 2024 (‘Niu’s second affidavit’). Mr Niu is sometimes referred to as “Sam”. Mr Li provided three affidavits, dated 3 May 2024 (‘Li’s first affidavit’), 27 September 2024 (‘Li’s second affidavit’) and 30 September 2024 (‘Li’s third affidavit’). Mr Li is sometimes referred to as “Joshua”. Mr Ganas provided a report dated 19 June 2024.

8. Mr Lu provided two affidavits, dated 13 March 2024 (‘Lu’s first affidavit’) and 26 September 2024 (‘Lu’s second affidavit’). Mr Lu is sometimes referred to as “Ricky”.

9. The plaintiff bears the onus of proof, which is proof on the balance of probabilities in accordance with s 140 of the Evidence Act 1995.

Mr Lu’s relationship with Mr Niu and Mr Li prior to May 2017

Mr Niu and Mr Lu

10. Mr Niu says that he was “first introduced” to Mr Lu in 2016 by Mr Li, who he describes as “a mutual friend” (Niu’s first affidavit).

11. Mr Lu did not discuss his relationship with Mr Niu in Lu’s first affidavit, but implied that he was aware of him as a friend of Mr Li.

12. In cross-examination, Mr Lu agreed that he was aware of Mr Niu in May 2017, but denied that he had met him on numerous occasions. He said that he had met him about four or five times, roughly, before May 2017. It was put to him that he had done business with Mr Niu before May 2017, and he agreed. He agreed that he was the General Manager of Australian Capital Funds Management (ACFM) in 2016, and said that he left that position in March or April of 2016. He admitted that both he and Mr Niu were directors of ACFM. Mr Lu said that he joined ACFM in October of 2015 and left in March or April 2016. He was shown an ASIC extract for ACFM which said that he became a director on 7 October 2016 and ceased to be a director in January 2018. Mr Lu said that he had “left the job as a director before that date”. Mr Lu said that he only met Mr Niu three or four times when he was a director of ACFM.

13. In cross-examination, Mr Lu was shown a photograph of himself and his mother visiting Australia Onsung International College (also known as Computer Science College or Institute) in 2016. Mr Lu agreed that he was aware that the College was operated by Mr Niu.

14. In cross-examination, Mr Lu agreed that he went on a business trip to China with Mr Niu and Mr Li in 2016. At first, Mr Lu said that he spoke “just a few words to say hello” to Mr Niu on the trip. Mr Lu said that he and Mr Niu did not like each other. Mr Lu agreed, though, that he and Mr Niu visited an office together in Shanghai, had lunch together and did some sightseeing along the way.

15. In cross-examination Mr Lu clarified that, when he said he saw Mr Niu three or four times when he was a director of ACFM, he meant in the office of ACFM. He agreed that he went to China with Mr Niu whilst he was a director of ACFM and also went to the SHS Law Christmas party, which Mr Niu also attended. He agreed that he had been to lunch with Mr Niu in Chinatown. He agreed that he and his wife went to Mr Niu’s house for a house-warming party, which, he said, was at the invitation of Mr Li.

16. Mr Niu, in Niu’s second affidavit, says that he and Mr Lu met often when Mr Lu worked for ACFM. Mr Niu said that Mr Lu had access to documents signed by Mr Niu during the period when they both worked at ACFM.

Mr Lu and Mr Li

17. In his first affidavit, Mr Lu says that he met Mr Li in about March 2014 “through an English course”.

18. In his first affidavit, Mr Li says that he met Mr Lu at an English course in 2013.

19. Mr Lu says that, in around July 2015, he discussed with Mr Li the service providers to whom Mr Li referred his immigration clients. In about August 2015, Mr Li took Mr Lu to SHS Law in the MLC Centre, Suite 61.02, 19 Martin Place, Sydney, and introduced him to lawyers employed by SHS Law to discuss the services they provided. Mr Lu also visited an accounting firm with Mr Li for the same purpose. Mr Lu became aware that Mr Li was a shareholder of SHS Law.

20. In oral evidence, Mr Lu said that he had a meeting on 23 August 2015 with Mr Li at Mr Li’s home in Chatswood. Mr Lu said that they discussed a business arrangement whereby Midas Consulting (Aust) Pty Ltd (‘Midas’), Mr Lu’s company, would find migration clients and Mr Li would act as the agent and provide “package services”. Mr Lu said that he agreed not to contact Mr Li’s subcontractors, such as “his accountants” without Mr Li’s permission. Mr Lu said that he and Mr Li “talked about the refund policy if the case was not successful” meaning the case being put for the migration client. Mr Lu said that he and Mr Li engaged in business on the terms discussed on 23 August 2015 from that date onwards.

21. In his first affidavit, Mr Li says that, by about October 2014, he was working at SHS Law “to promote its immigration business”. He says that, in that capacity, he introduced Mr Lu to Mr Chan, the Chief Executive Officer of SHS Law, in about August of 2015. Mr Li says that it was his understanding that Mr Lu and Mr Chan entered into a business arrangement regarding immigration clients from China. Mr Li says that he did not derive any benefit from the arrangement between Mr Lu and Mr Chan.

22. Mr Li denies guaranteeing to refund money to Midas’ clients personally “if anything went wrong”.

Midas, SHS Law and Floraison Legal

23. Mr Lu registered Midas on 22 August 2015. Mr Lu and his wife were directors of Midas, but Mr Lu says that his wife did not play an active role in the company.

24. Mr Lu’s purpose in registering Midas was to use it to provide migration consulting services in Australia. Midas was deregistered on 25 October 2017 (see the ASIC record at Court Book p 47).

25. SHS Law was a legal firm which was operating by 2015, with Mr Chan as its CEO. Mr Li worked at SHS Law as a promoter of its immigration business. Mr Li is neither a legal practitioner nor a registered migration agent (transcript p 47).

26. Mr Li says, in his second affidavit, that he introduced Mr Lu to Mr Chan in August 2015 in the SHS Law office in the MLC Centre in Sydney. Mr Li says that it was his understanding that Mr Chan and Mr Lu entered into a business arrangement in which Mr Lu, through Midas, would find and refer Chinese clients requiring assistance in obtaining visas to SHS Law, and SHS Law would pay a commission to Midas.

27. Mr Lu says, in his first affidavit, that his arrangement was with Mr Li, who represented SHS Law as one of his “subcontractors” to whom he would refer migration clients. Other subcontractors included migration agents and accountants. Mr Lu says that the arrangement was that Mr Lu would refer a migration client to Mr Li and transfer the service fee to an account designated by Mr Li. If the visa application was unsuccessful, Mr Li would refund the service fee.

28. Mr Lu denied ever meeting Mr Chan in the offices of SHS Law. In cross-examination, Mr Lu said that he met Mr Chan once, briefly, in the food court of the MLC building. Mr Lu said that he was referring clients to Mr Li a long time before he met Mr Chan.

29. Mr Li says that Mr Lu was an employee of SHS Law. Mr Li annexed to his third affidavit a photograph of a business card for “Ricky Lu Marketing Manager” at “SHS Law”. Under the words SHS Law, is written “Since 1888”. The address on the card is “Suite 61.02 Level 61 MLC Centre 19 Martin Place Sydney NSW 2000 Australia”.

30. Mr Lu denies that he was ever an employee of SHS Law and says that the photograph of the business card is fake.

31. Mr Lu says, in Lu’s second affidavit, that Mr Li told him, in about August 2015, at the offices of SHS Law, that Mr Li held about $100,000 worth of shares in SHS Law.

32. Mr Lu says, in his second affidavit, that he entered into an arrangement with Mr Li, personally, to co-operate in offering migration services. Mr Lu says that, from 23 August 2015 to 6 September 2016, Mr Li “collected around $76,000 cash from Midas”.

33. Mr Li, in his third affidavit, says that he did not receive any commission or benefit from the referrals from Mr Lu. Mr Li said that he never agreed to guarantee that he would pay back the fees paid by clients of Mr Lu or Midas in the event that anything went wrong. Mr Li further denies that he told Mr Lu that he would personally refund the fees of Midas’ clients who did not receive a visa through SHS Law within 10 days. Mr Li says that he understood that all transactions relating to Mr Lu’s introduction of his clients to SHS Law were made between SHS Law and either Mr Lu or Midas, directly.

34. Mr Li is the sole director and shareholder of J & E Galaxy International Pty Ltd. In cross-examination, Mr Li agreed that he was purely an employee of SHS Law and that was the limit of his dealings with SHS Law. He was then asked if he obtained any commissions or referrals from SHS law, and Mr Li said that he could not remember. An invoice dated 16 December 2016 from J & E Galaxy International Pty Ltd to SHS Law Pty Ltd for “Referral fee & Consultant fee” in the sum of $4,545.45 was then produced to Mr Li. Mr Li agreed that J & E Galaxy International Pty Ltd was his company, but said that he could not remember what the invoice was for.

35. Mr Lu became aware in around March 2017 that Mr Chan had “disappeared”. Mr Lu says that he became aware, at the same time, that a number of Midas’ clients had engaged SHS Law through Mr Li. Collectively, Midas’ clients had paid $800,000 AUD to SHS Law. Most, if not all, of that money had “been dissipated by Joshua Chan, illegally, causing that firm to effectively collapse”, Mr Lu says in Lu’s first affidavit.

36. Mr Li says that SHS Law “collapsed” in about March 2017 following investigations into allegations that Mr Chan was withdrawing funds from SHS Law without authority. Mr Li was an employee of SHS Law at the time (Li’s first affidavit).

37. Mr Lu says that, in late May 2017, he had a telephone call with Mr Li in which Mr Li told him that he was setting up a new law firm and asked Mr Lu to hold Mr Li’s shares on Mr Li’s behalf because Mr Li had “so many creditors asking for repayment”. Mr Li says that Mr Lu could “be responsible for marketing, day-to-day management of the business” according to Mr Lu (see Lu’s first affidavit).

38. ICO Team Pty Ltd (“ICO”) was registered on 5 June 2017 and began trading as Floraison Legal. Initially, the sole shareholder and director was Cedric Sze Chun Ng.

39. Mr Lu began working for Floraison Legal on 6 June 2017.

40. Mr Lu says that Floraison Legal was at Suite 65, Level 6, 650 George Street, Sydney until about October 2017 when it moved to Suite 22, Level 5/591 George Street, Sydney.

41. Mr Li says that, in about September 2017, Mr Li asked Mr Niu to hold 15% of the shares in ICO on his behalf and “to be appointed as a director of ICO on my behalf”. Mr Li says that this was to avoid complications that his involvement in SHS Law might have had on the application to register ICO. Mr Li says, at paragraph 25 of Li’s first affidavit:

Sam [ie Mr Niu] did not participate in the management of the company except for signing some paperwork under my direction. It was mostly Lu, Ng and myself managing the company, operating the business and receiving payments from the company.

42. Mr Niu says that he was registered as a shareholder of ICO on 18 September 2017 and that he held the shares on Mr Li’s behalf and would not, therefore, be paid dividends (Niu’s second affidavit).

43. Mr Lu says that he was given 20% of the shares in ICO as security for the fulfilment of Mr Li’s obligation to Midas’ clients (see Lu’s second affidavit).

44. The Current and Historical Company Extract for ICO dated 20 June 2023 (annexure “YL C” to Lu’s first affidavit) says that Mr Niu previously held 15 shares in ICO and Mr Lu previously held 20 shares in ICO. A total of 100 shares have been issued in ICO.

Mr Niu’s allegation that he had a meeting with Mr Lu in May 2017

45. In his first affidavit, Mr Niu says the following:

6. In or around early May 2017, Lu and I had a conversation at the offices of Floraison Legal (5/591 George Street in Sydney). In particular, Lu approached me and had a conversation with words to the following effect:

Lu: Sam, you know that I previously worked for SHS Law, and the boss ran away with the trust money. This trust money included the money my immigration clients deposited in. Now they are chasing me for a refund. I am unable to give them back the money. Can you lend me some money for me to pay back my customers?

Me: How much do you need?

Lu: I need $260,000. I can pay you back within 12 months. Our new firm Floraison is operating well. I can use the profits from this law firm to repay you.

Me: Are you willing to pay me interest?

Lu: What interest do you want?

Me: I will do it for 10% interest per annum. So you will pay back the principal plus 10% interest in one year’s time?

Lu: Yes, I can do that.

Me: OK deal. Let me know when and where to send the money.

46. Mr Niu says that Mr Li was present during the conversation.

47. Mr Niu says that, shortly after the conversation, Mr Lu provided the bank account details of Midas to him by WeChat, but that he did not have a copy of that WeChat message because “the messages were not backed up when I switched mobile devices”.

48. Mr Niu says:

11. Upon receiving the details of Lu’s nominated bank account, I transferred the $260,000 to Lu in two tranches as follows:

a. $160,000 on 16 May 2017; and

b. $100,000 on 30 May 2017.

49. In cross-examination, Mr Niu was asked if being requested to pay the money into a Midas bank account raised any concern with him. Mr Niu said that it did raise a concern, and he said that he asked Mr Lu what would happen if Mr Lu was unable to repay him at the end of the year. Mr Niu said that Mr Lu told him, before Mr Niu advanced the money, that he had a property at Box Hill “which was going to be on sale, he would use this money to pay him back within one year” (transcript p 14).

50. Mr Niu gave evidence to the effect that he understood that Mr Lu and his wife owned the Box Hill property jointly. The property was subject to a mortgage and Mr Lu and his wife had equity in the property worth approximately $150,000 to $200,000.

51. Mr Niu agreed that he did not think to ask for a written agreement or for security for the loan.

52. In his first affidavit, Mr Lu says that, after Mr Chan disappeared with SHS’s trust fund having been dissipated, he and Mr Li met “every single weekday at the foyer of the MLC centre to discuss this issue”. Mr Lu says that Mr Li told him “on many occasions” that Mr Li would find the money, including by trying to borrow money from his friends. Mr Lu says:

30 In or about May 2017, again at the foyer of MLC centre, I recall having a conversation with Joshua Li to the following effect:

Joshua Li: I have borrowed some money from my friends. You don’t need to know who they are in any detail, but Midas should receive some money soon, and there is more to come. Please be patient as I will make sure Midas is repaid.

31 On or about 16 May 2017, I recall having a conversation with Joshua Li to the following effect:

Joshua Li: Look, I borrowed some money from Sam Niu [The Plaintiff] to pay Midas. Could you provide me with Midas’ bank details? You will receive the part of the money I owe you today… it is going to be $160,000. I promise, I will repay some more within the next month.

Me: Okay, I will send you Midas’ account details…

I do not exactly recall how the account (CBA Account) details of Midas were provided to Joshua Li.

53. Mr Lu says that $160,000 was received in Midas’ bank account on the same day as the above conversation with Mr Li (16 May 2017) and further says, in his first affidavit:

35 I did not have any conversation with the Plaintiff before or after receiving the funds around this time.

36 Subsequently, Midas, through my instructions, conducted various transfers to promptly return the full amount of AUD$160,000 to its clients, who were rightfully owed these funds by Joshua Li.

37 I never personally received these funds.

54. Mr Lu says that, in late May 2017, he had a further conversation with Mr Li “to the following effect” (Lu’s first affidavit at paragraph 38):

Joshua Li: I have borrowed another AUD$100,000 and it will be transferred to Midas’ account soon. This means I would have made a repayment of $260,000.

Me: Okay…

Joshua Li: However … I am sorry but I cannot fulfill the previous commitment to repay AUD$400,000 due to some short-term constraints I am currently in… I will repay the remaining $540,000 as soon as I can. I will let you know as soon as possible the schedule when Midas will receive those further funds.

55. In his first affidavit, Mr Lu says:

39 On 30 May 2017, Midas received AUD$100,000 into Midas’ CBA account.

40 At the time, I do not recall taking any notice where the funds had been remitted from.

41 Again, I did not have any conversation with the Plaintiff before or after receiving the funds around this time.

42. Subsequently, Midas conducted various transfers to promptly return the full amount of AUD$100,000.00 to its clients, who were rightfully owed these funds by Joshua Li.

43 Again, I never personally received these funds.

56. In cross-examination, Mr Lu said that his understanding was that the funds paid to Midas were on account of Mr Li’s debt to Midas (transcript p 93).

57. Mr Lu denies that the conversation Mr Niu says that he had with him in early May 2017 ever took place. Mr Lu denies ever meeting Mr Niu at Suite 21, Level 5/591 George Street, Sydney. Mr Lu said that Floraison Legal moved to Suite 22, Level 5/591 George Street, Sydney in or around October 2017. Prior to that, the offices of Floraison Legal were at Suite 65, Level 6, 650 George Street, Sydney. Mr Li, in his first affidavit, says that he is not sure where the meeting took place. He says that it might have been at Floraison Legal’s office at 650 George Street, Sydney or at 309 Castlereagh Street, Sydney which was the office of one of Mr Niu’s companies.

58. In cross-examination, Mr Niu said that he was not aware that the clients who were owed money were clients of Midas. He denied knowing, at the time that he transferred the money, that Midas was a company owned by Mr Lu and his wife.

59. In Niu’s second affidavit, Mr Niu responds to Lu’s first affidavit and denies lending Mr Li $160,000 to be used by Mr Li to repay money to Midas or Mr Lu. Mr Niu says that he and Mr Lu “interacted in person various times before and after the $160,000 was advanced to Midas”. Mr Niu says:

10 I recall at around that time (ie, around May 2017), we had conversations in person in words to the following effect:

a. I recall saying to Lu that because of “cash flow issues”, I could only lend him $160,000, instead of $260,000.

b. In response, Lu told me that $160,000 was “not enough” to refund his immigration clients. He told me these clients were making “threats” to him and his family, and he desperately needed to borrow $260,000.

c. I then agreed to advance an additional $100,000.

60. In cross-examination, Mr Niu was asked about his second affidavit, and he agreed that he prepared it after reading Mr Lu’s first affidavit in order to reply to that affidavit.

61. In cross-examination, Mr Niu said that he was, in fact, having cash flow issues at the time that he paid $160,000 into the Midas bank account, and it was not just something that he told Mr Lu. It was put to Mr Niu that he was not, in fact, experiencing cash flow problems at the relevant time, and Mr Niu said:

A. The truth is I did have cashflow issues, but I chose to lend the funds to him.

62. Mr Niu was then shown the statement for the account belonging to him from which the $160,000 had been paid to Midas on 16 May 2017. The statement showed that the balance of the account on 16 May 2017 was $2,180,175. He was asked again whether he had cash flow issues at the time, and the following exchange took place:

A. Yes, because I had a lot of business going on at the time. I need to be prepared for those business. I can’t lend all my money to others.

Q. And between 16 May and 30 May, no further money came into the bank.

A. Deposit to which account?

Q. No money came into this bank account between 16 May and 30 May. Can you see that?

A. No – no. That’s right.

Q. That’s right, and then on 30 May, you advanced the other 100,000.

…

A. Yes.

63. In cross-examination, Mr Niu said that Mr Lu had requested $260,000, and that Mr Niu had agreed to give him $160,000. He said that he transferred $160,000, following which Mr Lu came back to him and said that $160,000 was not enough, and asked for a further $100,000, which Mr Niu agreed to, transferring that amount on 30 May 2017. This evidence contradicts Mr Niu’s affidavit evidence of a single meeting in May 2017 at which an agreement for a loan of $260,000 was made.

64. In cross-examination, Mr Niu agreed that although he told Mr Lu that he could only lend him $160,000 because of cash flow issues, in truth he did not wish to give him more than $160,000 at that time.

65. In cross-examination, Mr Niu confirmed the accuracy of his account, in Niu’s first affidavit, of his conversation with Mr Lu at the May 2017 meeting (see [45] above). Later in cross-examination, it was put to Mr Niu that his account of his initial conversation with Mr Lu, set out at [45] above, could not be accurate. The conversation is alleged to have occurred before 16 May 2017 and Floraison Legal was not registered until June 2017. Therefore, Mr Lu cannot have said “Our new firm Floraison is operating well”, because, at the time, it was not operating at all. The following exchange took place:

Q: So he could not have said to you the words, “Our new firm Floraison is operating well”, correct?

A. However, he did say there is a lot of things being prepared. We have prepared – we have prepared a lot, and for this business, during this period, everything has gone smoothly.

66. Mr Niu agreed that he considered that the loan to Mr Lu was repayable with interest in May 2018, a year from May 2017. He was then taken to a letter of demand to Mr Lu, dated 11 December 2019, from Summer Lawyers (Court Book p 32), who were acting on behalf of Mr Niu. The letter forms annexure D to Niu’s first affidavit. The letter says, in part:

We act for Shichao Niu (Shichao) and advise as follows:

1. In or about May 2018, you and Shichao entered into an agreement (Loan Agreement), the terms of which included that:

a. Shichao would make a loan of $260,000 to you;

b. Interest would accrue on the loan at 10% per annum; and

c. The loan was repayable by you in 12 months from the date the principal amount or any part thereof was advanced by Shichao to you (or at your direction), whichever date was the earlier.

2. Pursuant to the Loan Agreement, between May and August 2018, Shichao advanced the total sum of $260,000 to you.

3. You have been unwilling or unable to repay the principal amount advanced by Shichao, which remains in significant arrears.

4. Shichao demands the repayment of the loan amount under the Agreement plus interest and costs in the sum of $295,859.51 within 14 days of this letter.

…

67. In cross-examination, Mr Niu confirmed that he arranged for Summer Lawyers to send the letter. He agreed that he read it before it was sent. He agreed with what the letter said: that the agreement was made in May 2018 and the money advanced between May and August 2018. The following exchange took place:

Q. So, on your case, on your affidavit, by this point, Ricky owes you money and you’re concerned about repayment. Correct? By 11 December 2019, you’re concerned about Ricky repaying you the loan agreement you say was between you. Correct?

A. What time? What Year?

…

Q. 11 December 2019. It’s the date of the letter.

A Okay. I think – yes, I think he would fail what he promised to do and I – I seek legal advice.

68. Mr Li, in Li’s first affidavit (3 May 2024), says:

26 In or around May 2017, at the same time Lu and I were discussing the establishment of Floraison Legal, Lu and I had a conversation, the substance of which was as follows:

a. Lu said that many of Midas’ clients had paid money to SHS, but now that the funds were misappropriated, the clients have been following up with Lu every day to get their money back;

b. Lu asked me if he could “borrow” some money; [sic]

c. I told Lu that I could not lend him any money at the time, because my clients were also chasing me up for a refund;

d. He asked me whether I could help to ask Sam to lend him some money because Sam was wealthier and I had a better relationship with Sam than he did; and

e. I said I would help him to ask Sam.

27 Shortly after the conversation above, Sam and I had a conversation, the substance of which was as follows:

a. I told Sam that Lu was short on cash at the moment and that he owed a lot to Midas’ clients.

b. I told Sam that Lu would like to borrow money from him.

c. Sam said he would talk to Lu.

28 On or around early May 2017, Sam, Lu and I met in person where I observed Sam and Lu had a conversation, the substance of which was as follows:

a. Sam said he would agree to lend $260,000 to Lu but that the money would have to be paid within 1 year and Lu would have to pay 10% interest; and

b. I also recall Lu saying that he would try to make the repayment earlier than one year if possible.

29 I cannot be sure about at which office we met. It might be at the office of Floraison Legal of at 650 George Street, Sydney, or 309 Castlereagh Street, Sydney, which was the office of Sam’s other company.

69. In Li’s third affidavit, he denies Mr Lu’s account of the conversations between them concerning a loan from Mr Niu to Mr Lu.

70. In cross-examination, Mr Li confirmed his affidavit evidence that he was present at a meeting with Mr Lu and Mr Niu in early May 2017 at which Mr Lu asked Mr Niu to lend him $260,000 and Mr Niu said to Mr Lu that he would lend him $260,000. He confirmed that he did not remember Mr Niu agreeing to lend Mr Lu $160,000; the conversation about $260,000 was all that he witnessed.

71. Mr Li’s evidence is inconsistent with the account of the alleged loan given by Mr Niu in cross-examination.

72. A subpoena was served upon Mr Li, requiring Mr Li to produce, among other things, “Copies of all documents recording communication” between Mr Li and Mr Niu “(including but not limited to text messages, WeChat messages and emails) in the period from 1 May 2017 to 11 December 2019 in relation to Mr Yixin Lu”. In cross-examination, Mr Li agreed that he did not produce any documents in response to the requirement to produce all communications between him and Mr Niu for the period specified. He said that he did not have any messages responsive to that part of the subpoena.

73. In cross-examination, Mr Lu reiterated that he never borrowed money from Mr Niu, and he did not ask him for a loan of $260,000 in May 2017.

74. Mr Lu agreed that Mr Niu paid $160,000 into Midas’ bank account (“Midas’ transaction account”) on 16 May 2017 and a further $100,000 on 30 May 2017. Mr Lu agreed that he was in control of the Midas account. He said that the money from Mr Niu was paid on behalf of Mr Li as a debt repayment to Midas.

75. On 17 May 2017, Mr Lu transferred $80,000 to Yanfei Deng and transferred $80,000 to Midas’ savings account.

76. On 22 May 2017, Mr Lu transferred $99,572.81 from Midas’ savings account to Midas’ transaction account. This sum included the remaining $80,000 from Mr Niu. Mr Lu then paid $100,000 to Yan Liu from Midas’ transaction account.

77. On 30 May 2017, after the sum of $100,000 was received into Midas’ transaction account from Mr Niu, Mr Lu transferred it to Midas’ savings account. On 1 June 2017, he transferred it back to Midas’ transaction account. On 2 June 2017, Mr Lu transferred $100,000 to Fan Gailing from Midas’ transaction account.

Events after May 2018

78. No repayment of $260,0000 was made to Mr Niu twelve months after that sum was paid to Midas or at all.

79. In his first affidavit, Mr Niu said that he had a meeting with Mr Lu and Mr Li in around mid-2018 at which Mr Niu asked Mr Lu when he was going to repay the loan. Mr Niu says that Mr Lu promised to sell a property registered in his wife’s name in Baulkham Hills. Mr Niu says that Mr Lu said that his share of the net proceeds from the sale would be around $150,000 and that he would give that amount to Mr Niu. Mr Niu agreed to wait.

80. Mr Niu says that he “continuously” called Mr Lu from mid 2018 to late 2019 to demand repayment. Mr Niu says that the calls did not “go through” to Mr Lu from the end of 2019. Mr Niu says that he lost contact with Mr Lu because Mr Lu would not answer his phone calls and blocked him from WeChat.

81. Mr Niu says that he sent a letter of demand to Mr Lu via Summer Lawyers on 11 December 2019. The letter was annexed to his first affidavit and its contents are set out above, at [66].

82. The letter gives May 2018 as the date for the formation of the Loan Agreement, but the agreement the subject of these proceedings is alleged to have been made in May 2017. The letter says that Mr Niu advanced $260,000 to Mr Lu “between May and August 2018”. The payments, totalling $260,000, made by Mr Niu, which are the subject of these proceedings, were made in May 2017 to Midas.

83. Mr Lu denies that he ever received the letter of demand.

84. Mr Niu’s statement of claim was filed on 15 May 2023, one day before the expiration of the period of six years from the date of the first payment by him into Midas’ bank account. Mr Niu said, in cross-examination, that difficulties in his business life, Covid, and his mother’s illness were the reasons for the delay.

85. Mr Li, in his first affidavit, relied on some of the voice messages between Mr Lu and him from 20 October 2017 to 20 December 2017 and 17-18 July 2019. The voice messages were in Chinese and recorded in the WeChat app. They have been transcribed into Chinese and translated into English. They are annexed to Li’s first affidavit.

86. In response to a subpoena, Mr Li produced a USB which contains many more voice messages, many of which have not been transcribed or translated. Mr Li has not produced any voice messages between Mr Niu and him.

87. It is plain from the translated voice messages annexed to Mr Li’s first affidavit that both Mr Li and Mr Lu were making an effort to gather funds to fulfill a perceived moral, reputational or legal obligation to clients in China.

88. On 20 October 2017, the following exchange of voice messages took place between Mr Li and Mr Lu:

Mr Li: Also, my situation is especially embarrassing, at Brother Yao’s side, wether it was for my mother’s retirement, or it was for my younger brother, I have taken it out of quite some reluctance. I think it is okay if you need to use it in a hurry; once the one year has elapsed my mother will surely ask me for this sum of money, my friend(s) and several clients of mine have also got phone calls; I have borrowed everywhere that I can and the situation is no better than that of yours. [sic]

Mr Lu: Thank you Hongguan, mainly if we can get over the difficulties this time we can earn the money again. I think it is still possible to earn the money again, whether it is on the part of the law firm or the stock market, money can still be earned, and the money for my family members’ retirement can also be earned, as long as we are given time and environment; just that the time is too short and it is so hasty; let us not tell them for now, people can earn money Hongguan, we cannot earn the money, I just would not be misguided by that. [sic]

89. In his affidavit, Mr Li interpreted this exchange as a request from him to Mr Lu to repay money allegedly loaned to him by Mr Lu followed by Mr Lu failing to deny that he borrowed money from Mr Li, and promising that Mr Li’s mother’s money would be repaid. Mr Lu denies borrowing money from Mr Li.

90. I do not accept Mr Li’s interpretation of the messages. It is more consistent with the text of the messages if they are read as relating to joint efforts by Mr Li and Mr Lu to repay the migration clients of SHS Law affected by Mr Chan’s departure with the funds of the trust fund.

91. Mr Li says, in his first affidavit, that he loaned money to Mr Lu on two occasions. The first time was in November 2016 when Mr Lu allegedly asked for a loan of RMB 300,000 (about $60,000 AUD). Mr Li says that he agreed to the loan and advanced the money to bank accounts nominated by Mr Lu, namely:

92. On 25 December 2015, RMB 50,000 to “Lu’s friend” Guan Tangs’ bank account.

93. On 29 December 2015, RMB 190,000 in two tranches of RMB 95,000 to Lu’s bank account.

94. On 3 November 2016, RMB 50,000 to Lu’s account.

95. Mr Li also says that he agreed, on 18 July 2017, to lend $24,000 to Mr Lu for 24 months. Mr Li said that he transferred $50,000 to Mr Lu’s wife’s sister’s bank account “as directed by Lu”.

96. Mr Li’s evidence is the only evidence that the transactions in [91] and [92] represented loans to Mr Lu.

97. Mr Lu denied borrowing RMB 300,000 from Mr Li. Mr Lu said that he held some money in his bank account for Mr Li prior to it being transferred to a stockbroker in China on behalf of Mr Li. Mr Lu annexed a screen shot of a transaction record showing a transfer of RMB 296,530 to Yaohui Li, the stockbroker. Mr Lu said that the RMB 296,530 was RMB 190,000 of Mr Li’s money and the balance was Mr Lu’s money. Mr Lu said that the RMB 50,000 transferred to him by Mr Li was repayment for a loan from him to Mr Li on 14 October 2016.

98. On 20 December 2017, the following exchange of voice messages took place between Mr Li and Mr Lu:

Mr Lu: I am really thinking about 1.Repay the money. 2. Help you out with the law firm. 3. I did not think about make a fortune.

Mr Li : I did not expect to rely on the law firm to make money and it will be another two or three years for us to repay the money.

I am thinking about paying back the debt that we should pay back first.

Before September next year Sam will also ask for his 28 + interest.

(3 messages)

Mr Lu: Um, once repayment is done, will do it with absolute best to make money for you and I would not want it.

Will keep my word.

(2 Messages)

96. In his affidavit, Mr Li interpreted Mr Lu’s last message as Mr Lu saying: “after he paid it all back to Sam, he would continue working harder to make more money for the repayment”. This is not what the translation of the message says. The message referred to the repayment in the passive voice, and could equally refer to repayment to Mr Niu by Mr Li.

97. Mr Li does not rely on any voice messages from December of 2017 to 16 July 2019. On 17 July 2019, the following exchange of voice messages took place:

Mr Li: What are you busy with, let us have a phone call if available, have you settled the property of yours and Dongfang SU has been asking me as to when you will pay him the price difference.

Also, do you have any news at your end, you said that time will talk and six months have lapsed, but not a sound from you at all.

With Sam, with respect to what my mum and I lent you, is there any progress at all at your end?

[3 messages]

Mr Lu: The money matter is not to be joked like this. I did not borrow money from you, your mother or sam. It is you who still owe me several hundreds of thousand of Australian dollars.

Bro it is you who owe me money, it is not you asking me, but I ask you for money; you need to figure out the situation properly

What you owe me is roughly three part, and the biggest part is several hundreds of thousand of Australian dollars and at the beginning you raise [end of page]

98. In his second affidavit, Mr Lu says that Mr Li told him several times from 1 June 2017 to 24 August 2017 that an agreement needed to be drafted, recording Mr Li’s loan from Mr Niu because Mr Niu was demanding payment from Mr Li, and the terms upon which the loan would be repaid needed to be set out. Mr Lu says that Mr Li told him that the terms of the agreement should include:

a. Joshua Li’s personal loan of $260,000 from Sam;

b. 15 of 99 of further ICO shares (being 15% of all shares) be issued to Sam as security for Joshua Li’s debt;

c. 20 of 99 of further ICO shares be issued (being 20% of all shares) to me as security for Joshua Li’s obligation to Midas; and

d. I was to hold a further 50 of 99 newly issued shares of ICO on behalf of Joshua Li.

99. Mr Lu says that Mr Li provided him with a draft of the proposed loan agreement in August 2017 and asked him to revise the draft. On 17 August 2017, Mr Niu came to the Floraison Legal Office at 3:20pm, when Mr Li was not in the office but Mr Lu was. Mr Lu provided a copy of the translation of the WeChat messages exchanged between Mr Li and Mr Lu at the time. These messages were present on the USB provided by Mr Li in response to a subpoena. Relevantly, the messages are as follows:

Mr Lu: Sam is here.

It seems he’s looking for you.

I wrote a draft, take a look.

[3 messages]

Mr Li: Oh, he didn’t call me.

…

Mr Lu sent Mr Li a document

Mr Li: Okay

Let’s discuss it tomorrow; I’ll take a look first.

100. The WeChat transcript includes messages from 6:15am onwards on 18 August 2017 in which Mr Lu and Mr Li agree to meet that morning.

101. Mr Lu annexed a copy of the draft agreement sent in the WeChat message to his second affidavit. It says:

Repayment Agreement

Party A: Shichao Niu

Party B: Hongguan Li

Party C: Yixin Lu

1. Party B borrowed AUD 260,000 from Party A between March and June 2017. The loan interest rate is 10% annually. The repayment date is before July 15, 2018. Early repayment is allowed.

2. After mutual agreement between Party A, Party B and Party C, Party B will repay Party A the principal and interest before July 15, 2018. The repayment source will be the profit dividends (totalling 85% for the three parties) from Floraison Legal Law Firm’s net profit for the fiscal year 2017, after deducting Cedric’s 15% share of dividends.

3. After Party A recovers the loan, from July 1, 2018, Party A will hold a 15% share of Floraison Legal Law Firm.

Party A (Signature):

Party B (Signature):

Party C (Signature):

102. Mr Lu says, in his second affidavit, that he and Mr Li met in the morning of 18 August 2017 and discussed the draft document. Mr Lu says that he did not do anything further with respect to the drafting of the agreement until 24 August 2017.

103. In his first affidavit, Mr Lu says that he had a meeting on 24 August 2017 with Mr Niu and Mr Li at 650 George Street, Sydney. Mr Lu says, in his affidavit:

At this Meeting, words to the following were exchanged. [sic]

The Plaintiff: You know, Joshua is my best friend. A few months ago, he was in urgent need and verbally asked to borrow money from me, saying it was for repaying Midas. I agreed and lent him AUD $260,000.00. Following his instructions, I directly transferred the amount to Midas in two transactions. At that time, we didn’t formalize the loan agreement in writing. Now, I’m quite worried about the AUD $260,000 not being paid back to me. So, I have asked Joshua to organise this meeting so that Joshua and I can discuss the details of that loan agreement and put this in writing, and I want to have you here as a witness for us.

Me: Ok, that’s fine with me. However, I also need to mention that Josua also owed Midas’ clients a further AUD $540,000. Joshua and I have an arrangement that needs to be put in writing as well.

Joshua: Alright, I will prepare and produce some documents to put all this in writing.

104. Mr Lu says that, about an hour later, the meeting reconvened and Mr Li produced two documents written in Mandarin, one entitled “Repayment Agreement” and the other “Shareholding Proxy Agreement”. Mr Lu says that he and Mr Li executed the “Shareholding Proxy Agreement” and that he, Mr Li and Mr Niu executed the “Repayment Agreement”.

105. Both the Mandarin version of the two agreements and the English translation of them were annexed to Mr Lu’s first affidavit. Of course, only the Mandarin versions of each agreement bear signatures. The Mandarin version of each agreement has a handwritten date, “24/08/2017”, next to each of the handwritten signatures.

106. The Repayment Agreement provides as follows:

Repayment Agreement

Party A: SHICHAO NIU

Party B: HONGGUAN LI

Party C: YIXIN LU

1. Between March and June 2017, Party B borrowed AUD 260,000 from Party A. The loan carries an annual interest rate of 10%. The repayment date is set for July 15, 2018, with the option of early repayment.

2. Floraison Legal is a shareholding law firm registered and established on June 5, 2017. According to the registration documents, Party A owns 15% of the shares, and Party C owns 70% of the registered shares. Within Party C’s registered shares, Party C actually owns 20% of the shares, while the remaining 50% of the shares are held by Party C on behalf of Party B.

3. The date of establishment until June 30, 2018, is considered the first fiscal year. July 1, 2018, to June 30, 2019, is considered the second fiscal year, and so on.

4. The three parties (A, B and C) agree that by July 15, 2018, Party B will repay Party A the principal amount plus interest. The repayment will be sourced from the dividends of the shareholding (85% collectively) of Floraison Legal’s net profits for the fiscal year 2017 – 2018, after deducting Cedric’s 15% shareholding dividends.

5. In the first fiscal year, with the 85% collective shares, after deducting a reasonable annual salary for Party B, the remaining funds will be used to settle Party C’s customer debts of AUD 540,000. Any outstanding debts that cannot be settled in the current year will be carried over to the next fiscal year, and so on.

6. Once Party C’s customer debts are fully cleared, the 85% collective shares will be used to repay Party B’s customers with AUD 800,000, after deducting Party B’s reasonable annual salary. This process will continue in the same manner for any outstanding debts in subsequent years.

7. After both Party B and Party C’s customer debts are fully cleared, the three parties will exercise their respective shareholding rights to enjoy dividends.

8. In the future, when Floraison Legal provides share incentives to lawyers, Party A will transfer a portion of their shares.

Party A (Signature): SHICHAO NIU (handwritten) Date: 24/08/2017

Party B (Signature): HONGGUAN LI (handwritten) Date: 24/08/2017

Party C (Signature): YIXIN LU (handwritten) Date: 24/08/2017

107. The Shareholding Proxy Agreement is between Mr Lu and Mr Li and says (in the translation):

Party A: YIXIN LU

Party B: HONGGUAN LI

Regarding the shareholding proxy of ICO Team management Pty Ltd (Floraison Legal), Party A and Party B agree to the following terms:

1. Floraison Legal is a shareholding law firm registered and established on June 5, 2017. According to the registration documents, Cedric owns 15% of the shares, Sam NIU owns 15% of the shares, and Party A owns 70% of the registered shares.

2. Within Party A’s registered shares, Party A actually owns 20% of the shares, while the remaining 50% of the shares are held by Party A on behalf of Party B. The ownership rights of these shares belong to Party B. Party A will unconditionally cooperate with Party B for the transfer of those shares whenever requested by Party B.

3. The date of establishment until June 30, 2018, is considered the first fiscal year. July 1, 2018, to June 30, 2019, is considered the second fiscal year, and so on.

4. In the first fiscal year, Party A, Party B and Sam NIU collectively own 85% of the shares. After deducting a reasonable annual salary for Party B, the remaining funds will be used to settle Party A’s customer debts of AUD 540,000. Any outstanding debts that cannot be settled in the current year will be carried over to the next fiscal year and so on.

5. Once Party A’s customer debts are fully settled, the 85% collective shares, after deducting Party B’s reasonable annual salary, will be used to repay Party B’s customers with AUD 800,000. This process will continue in the same manner.

6. After both parties’ customer debts are fully cleared, Party A and Party B will exercise their respective shareholding rights to enjoy dividends.

This agreement is hereby confirmed!

Party A: YIXIN LU (handwritten)

Party B: HONGGUAN LI (handwritten)

108. Mr Lu says that, from May 2018, he reduced his attendance and work at Floraison Legal because Mr Li had not paid the funds promised under the Repayment Agreement and the Shareholding Proxy Agreement. He was also not being paid “the salary I was entitled to at Floraison Legal”.

109. Mr Lu says that he resigned formally from Floraison Legal on 22 July 2019, by sending a resignation letter.

110. Mr Niu denies that a meeting took place at Floraison Legal on 24 August 2017. He denies signing the Repayment Agreement and says that he does not agree with its terms. He further says that he was not registered as a shareholder of Floraison Legal until 18 September 2018 and the shares he held were held on trust for Mr Li.

111. Mr Li, in his first affidavit, says:

55. I refer to paragraph 51 to 58 and say that the “Repayment Agreement” and “Shareholder Proxy” documents were not prepared by me. Rather, they were prepared by Lu (or his solicitor).

56. I do not recall signing the “Repayment Agreement” and “Shareholder Proxy”. …Lu owed me money and, as such, I would not have entered into such an agreement with Lu. I deny entering into any repayment agreement with Lu because I did not owe him any money. It was he who owed me money. In addition, as of August 2017, only Ng had shares in ICO. As such, the shareholding arrangement stated in the two documents were incorrect and I would never sign this incorrect document.

112. It was put to Mr Li that Mr Lu sent him a draft of the repayment agreement (see [101], above) on 17 August 2017, and Mr Li agreed that he had. The following exchange took place (transcript p 63):

Q Why were you sent the draft of that agreement?

A. I don’t know.

Q. What did you do with the draft agreement?

A. I didn’t think it was reasonable. I didn’t do anything.

Q. When you got the draft and it identified you as having borrowed money, did you not go back to Ricky and say, “What is this?”

A. I don’t remember.

113. It was put to Mr Li that Floraison Legal was always going to be his firm, and he agreed. It was put to Mr Li that Mr Lu and Mr Niu were given shares as part of an agreement under which Mr Li would repay debts that he owed. Mr Li denied this. It was put to Mr Li that, in effect, the shares were given to Mr Lu and Mr Niu as security. Mr Li said, “I have no idea” (transcript p 67).

114. It was put to Mr Li that Mr Li had failed to pay Mr Niu the debt Mr Li owed Mr Niu, and Mr Li denied it. The following exchange then took place (transcript p 70):

Q. So instead you’ve made up a story to try and get Ricky to pay that debt.

A. No.

Q. And if it was an oral agreement between Ricky and Sam, then when you got the draft repayment agreement you wouldn’t forget what happened after that. Because if Ricky actually owed the money, you would have reacted quite strongly to a draft written agreement that says you owed the money.

A. No.

Q. And you certainly wouldn’t have continued to do business with Ricky if he had falsely tried to create a debt in your name.

A. I don’t understand what you mean.

Q. The draft written agreement names you as the borrower. It was sent to you on 17 August. I took you to it earlier. Ricky sent you that document. And if Ricky had falsely identified you as owing money to Sam, you would not have been comfortable continuing to do business. What do you say to that?

A. Because he has been cheating on me all through the time.

The Expert Evidence

Mr Ganas, in his report, on Mr Niu’s signature

115. Mr Ganas has a Bachelor of Science, a Postgraduate Diploma in Forensic Science, a Graduate Diploma in Computer Science, an Associated Diploma in Applied Photography and a Certificate IV in Biometric Technologies. He previously held the position of Unit Leader of the Document Examination Unit and Manager Digital Sciences Group of the Forensic Services Department, Victoria Police and is presently the principal examiner and Director of QD Forensics Pty Ltd, which is a private company providing forensic document examination and digital examination services. Mr Ganas is the past chairperson of the Senior Managers of Australian and New Zealand Forensic Laboratories Document Examination Specialist Advisory Group, a member and past president of the Australian and New Zealand Forensic Science Society, Vic Branch, a member of the Australasian Society of Forensic Document Examiners and a member of the Australian and New Zealand Society of Evidence Based Policing.

116. Mr Ganas gave evidence in the plaintiff’s case. His instructions came from the plaintiff’s solicitors.

117. Mr Ganas was provided with reproductions of sixteen Chinese character (Hanzi) signatures of Mr Niu (sample signatures) to compare with the signature attributed to Mr Niu on the Repayment Agreement. Mr Ganas understood that the sample signatures span a date range from September 2015 to May 2024.

118. Mr Ganas, in his report, dealt only with Mr Niu’s signature on the Repayment Agreement and did not address Mr Li’s signatures on the Repayment Agreement and the Shareholding Proxy Agreement. Mr Ganas had not seen the original Repayment Agreement when he wrote his report, but had seen only a copy.

119. Mr Niu’s signature is comprised of three characters.

120. In his report, Mr Ganas said:

35. The questioned Shichao Niu signature appearing on the Repayment Agreement, Q1, bears pictorial similarities to the signature samples however displays significant differences in construction and fluency when compared to the sample set. The differences are typical of simulation behaviour.

121. Mr Ganas found nine “feature dissimilarities” between the Repayment Agreement signature attributed to Mr Niu and the sixteen sample signatures. The first character displays some dissimilarities at the blunt start, the connection/turning point, the relative position and the blunt stop/no hook. The second character displays some dissimilarities at the left sided hook, the hook/spur and the blunt stop. The third character displays some dissimilarities at the blunt stop and the loop.

122. Mr Ganas said that his observations provided little support for the idea that the Repayment Agreement signature “is a variation of the sample writer’s signature not represented in the sample group”.

123. Mr Ganas also said that the “evidence” (meaning the sample signatures and the Repayment Agreement signature) “provides little support that the questioned signature is the result of disguise behaviour by the sample writer”.

124. Mr Ganas concluded, in his report:

41. Based on my examination, as well as the limitations and assumptions outlined above, it is my opinion that the evidence provides very strong support for the hypothesis (H2), that is, that the questioned Shichao Niu signature appearing on the Repayment Agreement, Q1, was not written by the writer of the sample signatures and is the product of a simulation/forgery process.

Mr Hobden, in his report, on Mr Niu’s signature

125. Mr Hobden holds a Diploma of Information Management, a Diploma of Forensic Information (Public Safety) and a Diploma of Forensic Document Examination. He is a Fellow of the Australasian College of Biomedical Scientists and a member of the Australasian Society of Forensic Document Examiners and the Australian and New Zealand Forensic Science Society. He underwent five years training by forensic document examination experts with the NSW Police Forensic Services Group and was the Commander of the Document Examination Section of the NSW Police Forensic Services Group from 2006- 2010. He has been an expert witness for more than 20 years, including in the Supreme, District and Coronial jurisdictions.

126. Mr Hobden gave evidence in the defendant’s case. He was instructed by the defendant’s solicitors.

127. Mr Hobden considered Mr Niu’s signature on the Repayment Agreement with fifteen sample signatures. Mr Hobden also considered Mr Li’s signature on the Repayment Agreement and on the Shareholding Proxy Agreement and compared them with fifteen sample signatures of Mr Li’s.

128. In his report, Mr Hobden said that Mr Niu’s signature, which is comprised of three Chinese characters, is of medium complexity. A signature of low complexity is more likely to be forged undetectably than a signature of high complexity. Mr Hobden also said that Mr Niu’s signature includes a number of straight pen strokes and pen lifts. Combining these features raises the chance of undetectable forgery compared with a signature “made up of a lengthy series of unbroken curved pen strokes where evidence of copying such as waver and tremor are more likely to be revealed”.

129. Mr Hobden analysed the components of each of the characters which comprise Mr Niu’s signature. Mr Hobden noted that the signing of a formal document, such as a passport, is likely to be “a more controlled and careful creation of a signature than a passenger card form”. Mr Hobden said that caution should be applied in assessing any single difference between the signatures. He noted that there is a natural variation between the signatures provided as specimen signatures.

130. Mr Hobden said:

8(f) There are no significant dissimilarities between the questioned and specimen Niu signatures. I observe no evidence of waver tremor, or any indication to support the proposition that the questioned signature is non-genuine. However, when comparing the questioned signature to the specimen signatures, the foremost difficulty is in forming a conclusion as to whether the questioned signature is a very well executed copy by a writer other than the specimen writer to the point that its status as a copy is undetectable. I repeat my observation that the fact that much of the design of this signature consists of short pen strokes with multiple pen lifts. This is a significant advantage as it gives the copier an opportunity to stop, assess and recommence with the option between strokes to more advantageously assess the accuracy of the copy not just as to the design but the size and ratios of the designs. I also attempt to take into account the skill of a writer experienced in writing Chinese script and the assumption they may have an example or example of specimen signatures to copy as well as the time to practice the copying. I conclude that this signature is vulnerable to a skilled copier recreating the specimen signatures with little or no evidence of copying and I concede I may not be able to detect this copying.

Mr Hobden, in his report, on Mr Li’s signature

131. Mr Hobden compared fifteen of Mr Li’s sample signatures with the signature attributed to Mr Li on the Repayment Agreement and the Shareholding Proxy Agreement.

132. Mr Hobden said:

9(a) The specimen signatures consist of a design and construction that is of no obvious close similarity to either a Chinese or Latin script and instead consists of a simple series of basic pen strokes to form a signature of a significantly low level of complexity. … The significance of the degree of complexity is that a signature of low complexity is significantly more likely to be able to be copied to a degree of perfection that is undetectable.

(b) There are sufficient consistent identifying features found in the Li specimen signatures to support the proposition that they have all been written by one person. These features include letter design, spacing, height ratios, slope and gradient of various strokes. …

133. Mr Hobden further said:

9(c) There is natural variation found throughout the specimen signatures that is consistent with the number of signatures and allows an assessment of what are the parameters of this variation. Despite variations found in the number of peaks, ratios and other design features, any variation between the questioned signatures and the specimen signatures are within these parameters.

(d) There are no significant dissimilarities between the questioned and specimen Li signatures. I observe no evidence of waver, tremor or any indication to support the proposition that the questioned signature is non-genuine.

134. Mr Hobden went on to conclude that, because of the low complexity of the signature, it is vulnerable to undetectable copying, and for that reason, he said:

I err on the side of caution and form an inconclusive opinion as to whether this signature is written by the specimen writer.

135. Mr Hobden further said, in relation to Mr Li’s signature:

9(e) If the two questioned signatures are forgeries, I observe that they show similar variations between each other as are found between specimen examples and this would be evidence of a skilled copier as opposed to an unskilled copier. However, again, I stress I am unable to form a conclusion that the two questioned specimen signatures are genuine or not, including whether one is genuine and the other not.

Experts’ concurrent evidence

136. Mr Ganas and Mr Hobden gave oral evidence concurrently.

137. The experts agreed that each of them had based his report on a different set of sample signatures of Mr Niu and that the two sets had only two signatures in common.

138. The sample signatures provided to Mr Ganas ranged in date from 21 September 2015 to 13 May 2024, with two samples from 2017, the same year as the Repayment Agreement. One signature was from 2018. Five of the samples were undated. In cross-examination, Mr Ganas agreed that, ideally, in assessing the authenticity of a signature, it was useful to have a number of signatures from around the same time as the signature in question. In this case, however, Mr Ganas said that his sample set was quite consistent across the years, so that the range of dates did not pose a limitation.

139. The sample set used by Mr Hobden included two signatures from 2014, seven signatures from 2016 and four from 2017. The last sample, S13, was not dated, but was from a drivers licence which will expire on 21 December 2026.

140. Mr Ganas agreed that sample signatures 1, 2, 3a and 3b in Mr Hobden’s sample set, which were not in Mr Ganas’ sample set, displayed a high degree of similarity with Mr Niu’s signature on the Repayment Agreement. Mr Ganas agreed that those four sample signatures were more similar to the signature next to Mr Niu’s name on the Repayment Agreement than the sample signatures with which he had been provided and upon which he based his report. Sample signatures 3a and 3b were written in June of 2016.

141. In cross-examination, Mr Ganas was taken through a detailed examination of the differences in the formation of each character in various examples of the signature. It is plain from that exchange that the sample signatures display a range of variations of several kinds. The variation which gave Mr Ganas the most concern in the signature attributed to Mr Niu on the Repayment Agreement was a “left sided hook” on the top of the second upright stroke of the second character, which Mr Ganas believed was not present on any of the sample signatures (see p 159 Court Book, feature dissimilarity number 5). On Mr Ganas’ analysis, in all of the sample signatures, the hook in question started on the right hand side and not the left hand side of the upright stroke.

142. Mr Ganas also said that the loop at the end of the third character of the signature next to Mr Niu’s name on the Repayment Agreement had a loop at the end of the third character which only appeared in one of the sample signatures, being signature 3c in Mr Hobden’s report (see p 159 Court Book, feature dissimilarity number 9).

143. Mr Hobden, in evidence, agreed that the hook coming from the left in the second character in the Repayment Agreement signature of Mr Niu was not seen in any of the sample signatures, but he said that he did not place significant weight on that in coming to his conclusion. The following exchange took place with Mr Hobden during the concurrent evidence (transcript p 154):

Hobden …I differ from Mr Ganas in seeing other examples amongst the specimen range where, if you were to isolate one specimen, you could say, well, there is a single individual hook from the left to the right appearing, and I do not attach undue weight to that as a feature of dissimilarity insofar that I see examples of alternations – alternations in hooking in the specimen range.

Rizk And so, is it the case that that is something you would consider falls within the realm of the natural variations that we’ve been –

Hobden Correct.

Rizk …talking about?

Hobden Yes.

144. Mr Hobden stood by the conclusion in his report, which, in summary, was that the signature in question is capable of being a genuine signature, in that it falls within the range of natural variations, but that it is also capable of being a well-executed copy.

145. Mr Ganas said (transcript p 155):

In my opinion, and it’s not just the hook … that hook I consider to be actually quite significant, because it shows the pen direction, the pen coming in is coming from a completely different direction. And its not present in any of the sample signatures. But it’s not that in isolation. It’s the fact that we have that feature. We have the – and again, I agree with Mr Hobden, if it was only the hook that was different, I would probably go inconclusive. But there are other features there, and you have to look at them all.

So, what is the likelihood that you have the hook, you have the blunt endings, you have the loop which only appears in one – in one sample signature. The relative positioning of the extending diagonal stroke on the left-hand side of the signature. The bottom of the right-hand stroke in the central character appears to be a separate stroke, a spur.

146. In further questioning, Mr Ganas acknowledged that blunt stops and blunt starts appear in some of the sample signatures and not others, at various points of the signature. He also acknowledged that other specimen signatures have a turning point (or spur), but, he thought, not at the same angle as the signature in question. Mr Ganas acknowledged, though, that, where the sample signatures had a turning point, the angle of the turn varied. Sample signature 10 in Mr Hogden’s report has a similar turning point to the signature in question.

147. Mr Hobden pointed out that some of the sample signatures display a hook starting from the right in the second of the two vertical strokes of the first character of the signature, whereas in sample signature 9 in his report, the hook appears to come from the left-hand side. Mr Hobden agreed with the proposition that the dissimilarities in the signature in question were not greater than other dissimilarities which can be observed between the specimen signatures (transcript p 159). Mr Ganas disagreed. In his opinion, the combination of dissimilarities in the signature in question is significant.

148. There is only one feature of the signature in question which does not appear in one or more of the sample signatures, and that is the hook on the top of the second vertical stroke of the second character, which appears to have come from the right and not the left. However, Mr Hobden has identified other points of some of the sample signatures which display hooks starting from the left in some and from the right in others. That characteristic, in context, is not, by itself, sufficiently probative of forgery. The signature in question does not display characteristics which take it out of the set of natural variations in the signature when written by Mr Niu. It is obvious from the sample signatures that Mr Niu draws the three characters which comprise his signature in numerous different ways, and I accept Mr Hobden’s evidence that the signature in question falls within the range of natural variations of that signature when written by Mr Niu. Where Mr Hobden’s evidence disagrees with the evidence of Mr Ganas, I prefer the evidence of Mr Hobden.

Legal principles applicable where documents are alleged to have been forged

149. The legal principles applicable to the consideration of expert evidence in relation to handwriting in the context of an allegation of forgery is set out in detail in In the application of Roderick Mackay Sutherland and Sule Arnautovic [2014] NSWSC 821 at [63] – [67]:

63 The question of the standard of proof where an allegation of forgery is made was most recently considered by Martin J in Groves v Groves [2013] QSC 277:

[122] The onus is on Dr Groves to establish that the signatures in question are not hers: Damjanovic v York Agencies Pty Ltd [2003] NSWCA 222. What, then, is the requisite standard? With respect to each of the documents relied upon by the defendants the plaintiff pleads that the signature appearing on the document, which purports to be that of Dr Groves, was not written by Dr Groves. While there is no pleading as to who, on the plaintiff's case, might have written those signatures it is obvious that Dr Groves contends that her signature on those documents was forged. As has been noted above the strong flavour of Dr Groves' evidence was that the "forger" was Mr Groves. But that was not pleaded and Mr O'Shea QC admitted that there was not a sufficient basis to plead that. Nevertheless, it is an allegation of forgery by some unidentified person or persons. As such, it engages the requirement summarised in Jeans v Cleary [2006] NSWSC 647. In that case, it was alleged that the defendant had forged the plaintiff's signature on a personal guarantee. I respectfully agree with what Johnson J said when he dealt with the appropriate standard of proof:

"[28] ... the standard of proof to be applied is the civil standard, proof on the balance of probabilities, being qualified having regard to the gravity of the questions to be determined. The test has been said to be whether the issue has been proved to the reasonable satisfaction of the Court, such satisfaction not being produced by inexact proofs, indefinite testimony or indirect inferences: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362; Helton v Allen [1940] HCA 20; (1940) 63 CLR 691 at 701; Rejfek vMcElroy [1965] HCA 46; (1965) 112 CLR 517 at 521. The Court should be comfortably satisfied on the balance of probabilities before such a finding is made: Bannister v Walton (1993) 30 NSWLR 699 at 711-712.

[29] The rationale for this approach was explained in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 where Mason CJ, Brennan, Deane and Gaudron JJ said at 170-171 (footnotes excluded):

'The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involved criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.'"

64 I respectfully adopt as correct the statement of principles in the preceding paragraph noting only that, for the purposes of these proceedings, the so called "Briginshaw standard" has been supplanted by s 140(2) of the Evidence Act 1995 (NSW):

140 Civil proceedings: standard of proof

(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:

(a) the nature of the cause of action or defence; and

(b) the nature of the subject-matter of the proceeding; and

(c) the gravity of the matters alleged.

65 Three other matters are relevant. First, the onus is on the party alleging a forgery to show that the signature was a forgery. The onus is not on the other party to show that the signature was not a forgery: Damjanovic v York Agencies Pty Ltd [2003] NSWCA 222 at [25] per James J; RP Meagher and Beazley JJA agreeing.

66 Second, I respectfully adopt what fell from Holland J in Sumner v Booth [1974] 2 NSWLR 174 at 178, where his Honour made reference to "... the great dangers in the field of handwriting or in the expression of opinions by handwriting experts in acting upon insufficient samples of genuine signatures, including evidence of the date at which those samples came into existence".

67 Third, I respectfully adopt what Johnson J said about the approach to expert handwriting evidence in Jeans v Cleary [2006] NSWSC 647:

155 The handwriting expert evidence forms one part of the body of evidence, both oral and documentary, upon which I must base my findings of fact. It would be erroneous to treat the expert evidence as being, in some way, decisive on its own in a case such as this: Gawne v Gawne (1979) 2 NSWLR 449 at 453A-B, 455-456. In Gawne v Gawne, Glass JA (Reynolds JA agreeing) said at 453A-B:

"I am satisfied that his Honour fell into error in his evaluation of the evidence before him. In conceding a dominant role to the expert testimony, he misapprehended the weight of the remaining evidence which, in a cogent way, established the probability that the signatures were genuine, and the improbability that they had been forged. If the opinion evidence of the handwriting experts were put to one side, the whole of the lay evidence made out a strong circumstantial case that the documents of the 9th August, 1968, had in fact been executed by F. C. Gawne."

...

157 As the tribunal of fact, I am entitled to make a comparison between handwriting that is disputed and admitted, although I should pay particular attention and regard to expert testimony on the issue: R v Doney (2001) 126 A Crim R 271 at 280 [61] (Ipp AJA, Hidden and Barr JJ agreeing).

Has the plaintiff proven that the documents were forged?

150. It has not been established on the balance of probabilities that Mr Niu’s signature on the Repayment Agreement was not written by Mr Niu. The possibility has not been excluded, but forgery has not been proven on the balance of probabilities.

151. Mr Hobden’s conclusion with respect to Mr Li’s signature was similar to his conclusion with respect to Mr Niu’s signature. In Mr Hobden’s opinion, Mr Li's signature on both the Repayment Agreement and the Shareholding Proxy Agreement both fall within the natural variation within Mr Li’s sample signature set. However, Mr Hobden said that forgery could not be ruled out because Mr Li’s signature has a low level of complexity.

152. Mr Ganas did not express a view in relation to Mr Li’s signature.

153. There is no evidence upon which it could be found, on the balance of probabilities, that Mr Li’s signature was forged on the Repayment Agreement or the Shareholding Proxy Agreement.

Consideration

154. To succeed in his claim, Mr Niu must prove on the balance of probabilities that Mr Lu entered into an oral agreement with him in mid-May 2017 to borrow $260,000. The alleged terms of the alleged agreement set out in paragraph 4 of the Statement of Claim are:

a. The loan amount was $260,000;

b. The loan term was 12 Months commencing from the date the full loan amount is advanced;

c. The loan amount and interest were due and payable on expiry of the loan terms; and

d. The rate of interest was 10% per annum.

155. Mr Niu, Mr Li and Mr Lu have each given different accounts of the arrangement which underlay the payment by Mr Niu of $160,000 on 16 May 2017 and $100,000 on 30 May 2017 into the Midas bank account.

156. It is necessary to consider the credibility of Mr Niu, Mr Li and Mr Lu.

Credibility

157. In Sheer v Jeffreys [2024] NSWSC 1161 (“Sheer v Jeffreys”), Kunc J at [46] to [47] sets out the legal principles applicable to the consideration of fact finding and credit. In assessing the credibility of Mr Niu, Mr Li and Mr Lu, I bear in mind and apply all that was said by Kunc J in relation to fact finding and credit, and note, in brief summary, the following principles which are relevant to the present case:

158. Human memory is fallible and, ordinarily, the degree of fallibility increases with the passage of time, particularly where there is a dispute or litigation so that, often subconsciously, recollection may be overlaid by perceptions of self-interest and rumination about what should or could have been said.

159. Each element of the cause of action pleaded must be proved on the balance of probabilities in accordance with s 140 of the Evidence Act 1995 which requires that the nature of the cause of action or defence, the nature of the subject-matter of the proceeding and the gravity of the matters alleged be taken into account. The Court must feel an actual persuasion of the occurrence or existence or each element of the cause of action.

160. Evidence which is inherently probable in all of the circumstances, or which is given by a witness against their interest, is to be preferred.

161. Evidence from independent, non-partisan witnesses may be decisive in resolving the conflicting evidence of interested parties.

162. Where a witness is found to have been lying about one thing, that does not automatically mean that they are to be disbelieved about everything else. The court is not bound to accept or reject a witness’s evidence in its entirety.

163. Global findings about the credibility of a witness can be risky. An approach which focuses upon the integrity of the evidence rather than the witness is likely to be more useful. Where a witness has been untruthful about one piece of evidence, the reasons for that untruthfulness, where possible, should be assessed to ascertain whether other pieces of the witness’s evidence may be untruthful for the same reason. Evidence may be rejected on the basis that it is untruthful or for other reasons, including that it is mistaken or for other reasons which may be incapable of clear delineation.

164. The fact that a witness’s version of an event has been disbelieved does not mean that the opposite of what that witness asserted has been proven. It may simply mean that there is no credible evidence on the subject.

165. Memory is malleable and fallible. Contemporaneous documents and uncontroversial facts are often a useful staring point when considering events alleged to have happened a considerable time in the past.

166. An appeal against the decision in Sheer v Jeffreys was dismissed in the Court of Appeal in Jeffreys v Sheer [2025] NSWCA 31. Adamson JA, with whom Mitchelmore JA and Basten AJA agreed, approved the approach to fact finding in the decision at [35] – [38].

167. In assessing the credibility of Mr Niu, Mr Li and Mr Lu, I bear in mind that they all gave evidence in Mandarin, which the court interpreters interpreted into English.

Mr Niu’s credibility

160. I have set out above, at [45], Mr Niu’s account, in his first affidavit, of the meeting “in or around early May 2017” at which, he says, he entered into an oral loan agreement with Mr Lu in the presence of Mr Li.

161. There are some difficulties with the account of the meeting in Mr Niu’s affidavit. Mr Niu says that the meeting took place “at the offices of Floraison Legal (5/591 George Street in Sydney)”. However, Mr Lu, who worked at Floraison Legal, says that its offices were at Suite 65, Level 6, 650 George Street, Sydney, until October 2017, when it moved to Suite 22, Level 5, 591 George Street, Sydney. Mr Lu was not cross-examined on this point. A further issue with Mr Niu’s evidence is that Floraison Legal did not come into existence until 5 June 2017, and yet, Mr Niu says that Mr Lu told him, in the meeting in May 2017 (which must have been prior to 16 May 2017 when the $160,000 was paid to Midas), that “Our new firm Floraison is operating well” (see [45], above). In cross-examination, Mr Niu changed his story, to say, among other things, that Mr Lu said that “there is a lot of things being prepared” and that “everything has gone smoothly” in relation to Floraison Legal, which is quite different from the conversation recounted in his first affidavit.

162. In his account of the May 2017 meeting in his first affidavit (see [45], above), Mr Niu gives an account, in direct speech described as “words to the following effect”, of the conversation he says that he had with Mr Lu leading up to the formation of the oral loan agreement. He says that Mr Lu asked for a loan of $260,000 and Mr Niu agreed to a loan of $260,000. Mr Niu, in his first affidavit, then goes on to say that Mr Lu provided him with details of a Midas bank account in a WeChat message which Mr Niu no longer has access to, and that Mr Niu then paid $160,000 into the account nominated on 16 May 2017 and paid a further $100,000 into that account on 30 May 2017. In his second affidavit, however, Mr Niu says, for the first time, that he had “conversations in person” with Mr Lu after the meeting and before he paid the money, in which he told Mr Lu he had “cash flow issues” and could only lend him $160,000 (see [59], above). Mr Niu says, however, that Mr Lu explained why he “desperately needed” $260,000 and Mr Niu agreed to advance “an additional $100,000”. These “conversations in person” were not mentioned in Mr Niu’s first affidavit. As set out above, at [62] to [64], the bank account statement from May 2017 for the account from which Mr Niu paid the two tranches to Midas show that he was by no means experiencing a cash flow issues, and, on the evidence, there seems to have been no objective reason for the provision of the funds in two tranches.

163. In cross-examination, the following exchange took place (transcript p 19):

Q. Did you agree to lend 260,000 before 16 May? That’s option 1. Or did you agree to lend 160,000 and then subsequently agree to lend another 100,000. That’s option 2.

A. INTERPRETER: Mr Lu requested 260,000 at the time. At that time, I was only able to give him 160,000 and later on he said 160,000 is not sufficient. He asked me to lend him another 100,000.

…

Q. You said Ricky requested 260,000.

A. INTERPRETER: Yeah.

Q. Then you agreed to give him 160,000?

A. INTERPRETER: Yeah.

Q. Is it the case that you then transferred the 160,000?

A. INTERPRETER: I think so.

Q. And then Ricky came back to you and said, “160,000 is not enough. Please give me another 100,000.”

A. INTERPRETER: We lent him 100,000, yes.

Q. You agreed to give that $100,000 after you had already transferred that 160,000?

A. INTERPRETER: Yes.

Q. And that’s why you transferred 100,000 on 30 May?

A. INTERPRETER: Yep.

164. This version is at odds with both Mr Niu’s first affidavit and the statement of claim, which alleges a single loan agreement. It is also inconsistent with the terms of the letter of demand sent by Summer Lawyers on Mr Niu’s instructions, which refers to a single loan of $260,000. It is further inconsistent with Mr Li’s account of the May 2017 meeting, evidence of which was adduced in Mr Niu’s case.

165. Mr Niu instructed Summer Lawyers to write a letter of demand to Mr Lu which was dated 11 December 2019. In cross-examination, Mr Niu confirmed that he read the letter before it was sent. The letter refers to the making of a loan agreement for the loan of $260,000 to Mr Lu in May of 2018, not 2017. It refers to payments advanced between May and August 2018. Mr Niu was taken to the content of the letter in cross-examination, and he agreed with its content.

166. Mr Niu’s affidavit and oral evidence is not internally consistent in relation to the circumstances in which the oral loan agreement alleged was made. Some of the inconsistencies identified with Mr Niu’s evidence on the topic, such as the mistake as to the venue of the May 2017 meeting, considered by itself, could be attributed to the fallibility of human memory. Mr Niu’s statement that Mr Lu told him at the May 2017 meeting that Floraison Legal was “doing well” is more difficult to overlook, given that Floraison Legal was not then in existence. Getting the year of the making of the loan agreement wrong in his instructions to Summer Lawyers is not an unusual mistake but failing to recognise the mistake when checking the letter before it was sent in December 2019, and then failing to recognise it again when being cross-examined in Court about it, with the letter in front of him, raises some concerns about the veracity of Mr Niu’s account. Mr Niu gave instructions to Summer Lawyers in 2019, at which time he should have been able to remember whether the oral loan agreement was made one or two years beforehand.

167. Most damaging to Mr Niu’s credibility are the changes to his story in the course of the proceedings. In Niu’s first affidavit, Mr Niu told the story of a single meeting with Mr Lu and Mr Li in May 2017 resulting in an agreement to lend Mr Lu $260,000 for a year at 10% interest. The second affidavit changed that story, so that, after the May 2017 meeting at which the agreement to lend $260,000 was made, there was an unstated number of “conversations in person” between Mr Niu and Mr Lu varying the agreement to a loan of $160,000, which was paid to Midas and then subsequently agreeing to advance a second amount of $100,000 which was paid to Midas. In cross-examination, the story became a request, at the early May 2017 meeting, for a loan of $260,000, which was countered by Mr Niu with an agreement to lend $160,000, which was then advanced to Midas on 16 May 2017, followed by a subsequent agreement to advance $100,000, which was paid to Midas on 30 May 2017. The third story contradicts the account of Mr Li, who recalls an oral loan agreement being made between Mr Niu and Mr Li for $260,000 in a meeting in May 2017. The third story has some similarities with the account Mr Lu says that Mr Li gave him of Mr Li’s arrangement to borrow first $160,000 and then a further $100,000 from Mr Niu.

168. There are no records of voice messages, texts or emails between Mr Niu and Mr Lu. Mr Niu said that he lost his WeChat messages with Mr Lu when he “switched mobile devices”.

169. For the first time, in cross-examination, Mr Niu said that, at the meeting in May 2017, before the agreement was made, Mr Lu told him that he had a property in Box Hill “which was going to be on sale” and that “he would use this money to pay [Mr Niu] back within one year” (transcript p 14). Mr Niu was taken through his understanding of the worth of the property and the extent to which it was mortgaged and it emerged that Mr Niu’s understanding was that Mr Lu and his wife together had equity of $150,000 to $200,000 in the property, which would not be adequate to pay back $260,000 plus 10% interest. The introduction of this evidence for the first time in cross-examination raises further questions about Mr Niu’s credibility. There was an account, in Niu’s first affidavit, about an alleged conversation in mid-2018, with Mr Li and Mr Lu in which Mr Lu is said to have referred to a plan to sell a Baulkham Hills property. No other witness makes any reference to that alleged meeting. The progressive changes to Mr Niu’s account of the events he relies upon to prove that he had a loan agreement with Mr Lu, gave Mr Niu’s account the character of a story which is periodically being adapted to accommodate external input, such as the receipt of the affidavits of other witnesses and the raising of issues in cross-examination. The impression created is that the story is evolving without reference to memories of the facts.

170. In his second affidavit, Mr Niu said that he became aware, in conversations with Mr Li, that Mr Li and Mr Lu planned to set up a new law firm in about April 2017. Mr Niu said that, in around September 2017, he entered into an agreement with Mr Li to hold 15% of the shares in ICO, which was trading as Floraison Legal, “on trust for Joshua”. The share allocation was registered on 18 September 2017. Mr Niu said that he was aware that Mr Lu was registered as a director and shareholder of Floraison Legal at the same time. Mr Niu did not say, in his affidavit, why he agreed to this arrangement. He did say that he received no financial benefit from the arrangement. In cross-examination, Mr Niu said that he agreed to hold the shares because Mr Li is his friend and it helped Mr Li. Mr Niu could not remember whether the arrangement was made in one or more discussions with Mr Li, and he did not have a clear recollection of the discussions. Mr Niu said that he did not sign any documents on behalf of Floraison Legal. When it was put to him that, if Mr Li were to say that Mr Niu did sign documents, Mr Li would be lying, Mr Niu said “I have no idea”.

171. Mr Niu’s explanation of the transfer of shares to him did not ring true. The more plausible explanation for the allocation by Mr Li of shares in Floraison Legal to Mr Niu is that he was to hold the shares as security for a loan to Mr Li.

Mr Li’s credibility

172. In Mr Li’s first affidavit, after giving his version of a meeting between him, Mr Niu and Mr Lu in May 2017, Mr Li says:

I cannot be sure about which office we met. It might be at the office of Floraison Legal of at 650 George Street, or 309 Castlereagh Street, Sydney, which was the office of Sam’s other company. [sic]

173. As I have said, above, Floraison Legal did not come into existence until 7 June 2017, and did not have an office at 650 George Street, Sydney until October 2017. At no time has Mr Niu suggested that the meeting could have been at 309 Castlereagh Street, Sydney.

174. Mr Li’s account of what happened at the meeting between him, Mr Niu and Mr Lu “in or around early May 2017” is that Mr Niu agreed to lend Mr Lu $260,000 for one year at 10% interest. Mr Li did not deviate from this account in cross-examination. Mr Li’s account is the same as the version of events given by Mr Niu in Niu’s first affidavit, but at odds with Mr Niu’s account of the meeting in cross-examination.

175. In Mr Li’s first affidavit, he gives an account of introducing Mr Lu to Mr Chen of SHS Law and says that it is his understanding that Mr Lu and Mr Chen made an arrangement for Mr Lu to introduce his clients to SHS Law. Mr Li said that he had no involvement in this arrangement and did not profit from it. It is not until Mr Li’s third affidavit that he makes the bare assertion that Mr Lu was employed in SHS Law as a marketing manager. This assertion sits oddly with Mr Li’s first affidavit, and I do not believe it. As I have said, I do not accept that the photograph which purports to be of a business card of Mr Lu’s is genuine.

176. Mr Li alleges, in his first affidavit, that Mr Lu borrowed money from him in November 2015 and in July 2017. Mr Li says that he paid four tranches of money comprising the November 2015 loan; one to an account of Guan Tang, a friend of Mr Lu, two to Mr Lu’s account and a fourth tranche for which Mr Li has no written record and cannot recall the bank account he used (Lu’s first affidavit). Mr Li says that he paid $50,000 to Mr Lu’s wife’s sister on 18 July 2017, which represented a loan by Mr Li to Mr Lu of that amount. Mr Li indicated, in his affidavit, that Mr Lu’s failure to repay these two loans led to the two men falling out in 2019. As I have indicated above, Mr Li relied upon a series of voice messages which he had caused to be translated from Chinese into English and which, he asserts, in Li’s first affidavit, contain express or implied admissions by Mr Lu of indebtedness to Mr Li. The voice messages in question do not, however, on a plain reading, contain express or implied admissions and are capable of numerous interpretations. Mr Li agreed, in cross-examination, that he has never sought to enforce the loans he said that he made to Mr Lu.

177. One of the voice messages from his records, which Mr Li did not have translated, but which was disclosed under subpoena, showed that a draft Repayment Agreement between Mr Li, Mr Niu and Mr Lu was sent electronically from Mr Lu to Mr Li on 17 August 2017. Mr Li did not mention that draft document in his affidavits. The document names Mr Li as the borrower of $260,000 from Mr Niu “between March and June 2017” and provides for Mr Niu to hold 15% of the shares of “Floraison Legal Firm”. In cross-examination, Mr Li agreed that he did not deny that the draft document was sent to him. When asked what he did with the draft agreement, Mr Li said “I didn’t think it was reasonable. I didn’t do anything”. He said that he could not remember why he did not go back to Mr Lu and say “What is this?”. The reaction Mr Li says that he had to the draft Repayment Agreement is curious, given that the document named him as the borrower. In the event that he was not the borrower, it could reasonably be anticipated that this would be something he would be quick to protest about.

178. It was put to Mr Li in cross-examination that he holds 85% of the shares in Floraison Legal. He agreed. It was put to him that he caused the shares that were held by Mr Lu and Mr Niu to be transferred to him. He denied this. He was asked if he transferred the shares which were in Mr Lu’s name without Mr Lu’s permission. Mr Li said “I have no idea”. He agreed that Floraison Legal was always going to be his firm, but when it was put to him that the shares formerly held by Mr Niu and Mr Lu were held as security, he said, again “I have no idea”. This, again, was a curious response.

179. Mr Li’s affidavit evidence was selective and omitted highly relevant information which he had in his possession, such as the receipt by him of the draft Repayment Agreement from Mr Lu on 17 August 2017. His confident assertions that various voice messages said or meant something different from what was said in those messages casts doubt upon his credibility. His response to receiving the draft Repayment Agreement is not consistent with his stated belief that Mr Lu borrowed the sum of $260,000 from Mr Niu. Where Mr Li’s evidence differs from Mr Lu’s, I prefer Mr Lu’s evidence.

180. In Mr Li’s first affidavit, he denies preparing the Repayment Agreement and the Shareholding Proxy Agreement which bear signatures, and says that Mr Lu prepared them, and, further, says:

56. I do not recall signing the “Repayment Agreement” and “Shareholding Proxy”. As outlined in paragraphs 17-35 above, Lu owed me money and, as such, I would not have entered into such an agreement with Lu. I deny entering into any repayment agreement with Lu because I did not owe him any money. It was he who owed me money. In addition, as of August 2017, only Ng had shares in ICO. As such, the shareholding arrangement stated in the two documents were incorrect and I would never sign this incorrect document.

181. Mr Li does not address the fact that the Repayment Agreement records a loan from Mr Niu to him. In so far as the agreements may not be strictly accurate as to the shareholding arrangements, that does not mean that they could not have been drafted by Mr Li. Beneficial ownership of 15 shares by Mr Niu and 20 shares by Mr Lu is contemplated in the agreements, and that is what is recorded as their respective historical shareholding in the ASIC record tendered, so a version of the arrangement set out in the Shareholding Proxy Agreement came to pass, albeit not precisely as indicated in that document, especially as to timing.

182. Mr Li’s explanation for the transfer of shares in ICO to Mr Niu, and the appointment of Mr Niu as a director (“on my behalf” Li’s first affidavit paragraph 25) was that he did not wish his “previous involvement in SHS [to] cause any reputational concerns for the new legal practice’s customers”. Mr Li went on to say:

Sam did not participate in the management of the company except for signing some paperwork under my direction. It was mostly Lu, Ng and myself managing the company, operating the business and receiving payments from the company.

183. As Mr Li was to be one of three people managing and operating the business, it is difficult to see why he would be concerned, on the basis of his reputation, about being a director and shareholder. Everyone dealing with Floraison Legal would soon become aware of his involvement. It is also difficult to see why Mr Niu would agree to be a director of ICO, with the attendant risks of directorship, purely out of friendship. A more plausible explanation is that Mr Niu agreed to hold 15% of the shares in ICO and to be a director of ICO so that he could have some security for his loan, and potentially exercise some control over ICO, if necessary, consistent with the arrangement set out in the Shareholding Proxy Agreement.

184. There is no evidence that Mr Li’s signature on either the Repayment Agreement or the Shareholding Proxy Agreement is a forgery. As I have said above, at [132] – [135], Mr Hobden said, in his report:

9(b) There are sufficient consistent identifying features found in the Li specimen signatures to support the proposition that they have all been written by one person. These features include letter design, spacing, height ratios, slope and gradient of various strokes.

…

(d) There are no significant dissimilarities between the questioned and specimen Li signatures. I observe no evidence of waver, tremor or any indication to support the proposition that the questioned signature is non-genuine. As with the previous Shichao Niu signature comparison, the difficulty in forming a conclusion in this matter is the assessment of whether the questioned Li signatures are copies written by a writer other than the specimen writer to the point that their status as forgeries is undetectable. In making this assessment I make the observation that the specimen signature design is made up of very few design features and there is a sufficiently large variation between the specimen signatures to provide an advantage to a skilled copy being made of them. In other words, the range of variation in the simple design of the specimen signatures allows a copier to more easily accidentally stray from the model they are copying but not exceed the variation found in other specimen signatures. I conclude that this signature is very vulnerable to a copier recreating the specimen signatures with little or no evidence of copying. Given this assessment I err on the side of caution and form an inconclusive opinion as to whether this signature is written by the specimen writer.

(e) If the two questioned signatures are forgeries, I observe that they show similar variations between each other as are found between specimen examples and this would be evidence of a skilled copier as opposed to an unskilled copier.

185. There is no basis to think that Mr Lu is a skilled copier of signatures.

Mr Lu’s credibility

186. In his evidence, Mr Lu clearly sought to minimise the extent of his contact with Mr Niu prior to 2017. His evidence in relation to the extent of their contact in that period of time omitted to mention an overseas trip to China and a number of functions that both men had attended in Sydney. The extent of their contact when Mr Lu was employed at ACFM was deliberately understated by Mr Lu. These aspects of Mr Lu’s evidence undermine his credibility to some extent.

187. However, as to the alleged meeting in or around May 2017, Mr Lu’s evidence was clear and consistent. He says that no such meeting occurred.

188. Mr Lu’s interpretation of the voicemail messages relied upon by Mr Li is a plausible interpretation of the words of the messages, unlike Mr Li’s interpretation. I prefer Mr Lu’s interpretation, which is consistent with his account of the events before and after Midas’ receipt of $160,000 and then $100,000 from Mr Niu in May 2017.

189. There is objective evidence that Mr Lu sent a draft of the Repayment Agreement to Mr Li by WeChat voice message on 17 August 2017. It is improbable that Mr Lu would have sent a draft agreement to Mr Li naming Mr Li as the borrower of $260,000 from Mr Niu unless Mr Lu believed that Mr Li was the borrower, and Mr Li knew that Mr Lu believed that Mr Li was the borrower.

190. The sending of the draft agreement on 17 August 2017 fits logically with the holding of a meeting on 24 August 2017 to settle the agreements.

191. Except as to the question of the extent of the contact between Mr Niu and Mr Lu prior to May 2017, where Mr Lu’s evidence is in conflict with the evidence of Mr Niu and Mr Li, I prefer Mr Lu’s evidence.

Loan Agreement

192. Mr Niu alleges that an express oral loan agreement came into existence between him and Mr Lu in May 2017. However, it was argued in Mr Niu’s case that an oral agreement could be found by inference. Reference was made to the principles set out in OLI 1 Pty Ltd (in liq*) v OLG 1 Pty Ltd (No 2)* [2022] NSWSC 1199 at [49]–[53] where Chen J said:

49. First, the legal onus of establishing the existence of the agreement, and the intention to create legal relations, remains upon the party asserting it – here, the defendants: Toyota Motor Corp Aust Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 177 (Tadgell J); Pirt Biotechnologies Pty Limited v Pirtferm Ltd [2001] WASCA 96 at [21] (Murray J, Ipp and Owen JJ agreeing); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [26] (Gaudron, McHugh, Hayne and Callinan JJ).

50. Secondly, the parties’ conduct can be a basis for inferring the existence of a contract: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; [1907] HCA 38 (Griffiths CJ); confirmed by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]. A contract can be inferred notwithstanding the absence of clear offer and acceptance, but what must be established is “a manifestation of mutual assent…implied from the circumstances”: Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 81 (Ormiston J); Técnicas Reunidas SA v Andrew [2018] NSWCA 192 at [50] (Leeming JA); Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) (2022) 398 ALR 658; [2022] NSWCA 12 at [166] (Leeming JA).

51. Thirdly, post-contractual conduct can also be a basis for inferring not only the existence of a contract, but what the terms actually were: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[27] and [45] (Spigelman CJ); Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [325] (Campbell JA); Lawrence v Ciantar [2020] NSWCA 89 at [114] (Bathurst CJ, Meagher and Gleeson JJA agreeing).

52. Fourthly, the parties’ conduct can also be a basis for inferring the identities to that agreement: Filadelfia Projects Pty Ltd v Entirity Business Services Pty Ltd [2011] NSWSC 116 at [38] (Ball J); Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 at [84] (Osborn, Santamaria and Kaye JJA); BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086 at [80]-[81] (Leeming JA).

53. These principles acknowledge that finding a contract in these circumstances will be rare: they give “limited recognition to the possibility of finding that contracts exist even though it is not easy to locate an offer or acceptance”: Brambles Holdings Ltd v Bathurst City Council at [74] (Heydon JA).

193. It has not been established, on the balance of probabilities, that an oral loan agreement for the sum of $260,000 was entered into with Mr Niu as the lender and Mr Lu as the borrower in early May 2017 or at all. Mr Niu’s account of the meeting in early May 2017 at which the loan agreement was allegedly made has changed several times. The location of the meeting cannot have been the location Mr Niu identifies, and the conversation Mr Niu relates in his affidavit refers to the operation of Floraison Legal which was not then in existence. Under cross-examination, Mr Niu’s account changed into an account of two successive loan agreements, rather than one loan agreement. Mr Li’s account does not corroborate the account Mr Niu gave under cross-examination. I have set out, above, the reasons why I find Mr Lu’s evidence more credible on the issue of whether there was an oral loan agreement between Mr Niu and Mr Lu.

194. The sending of the draft Repayment Agreement by Mr Lu to Mr Li and Mr Li’s response to receiving that draft is consistent with there being no loan agreement between Mr Lu and Mr Niu. The existence of the signed Repayment Agreement and Shareholding Proxy Agreement further supports Mr Lu’s case. The Repayment Agreement and the Shareholding Proxy Agreement are consistent with the money sent to Midas’ bank account by Mr Niu in May 2017 having been sent as a result of the agreement set out in those documents, and not as the result of any oral loan agreement between Mr Niu and Mr Lu. It has not been established on the balance of probabilities that Mr Niu’s signature was forged on the Repayment Agreement, and there is no evidence upon which it could be found that Mr Li’s signature was forged on either document. The evidence of Mr Hobden, which I have accepted, is that the signatures of Mr Niu and Mr Li on the Repayment Agreement and the signature of Mr Li on the Shareholding Proxy Agreement fall within the range of natural variation in the manner in which Mr Niu and Mr Li write their signature. The existence of the signed Repayment Agreement and Shareholding Proxy Agreement is consistent with the sending of the draft Repayment Agreement from Mr Lu to Mr Li on 17 August 2017 and with the holding of shares in ICO by Mr Niu and Mr Lu.

195. The content of the voice messages between Mr Li and Mr Lu are capable of bearing several interpretations and do not clearly support the plaintiff’s case or Mr Li’s version of events.

196. On the basis of the evidence before me, I feel no actual persuasion that there was an express oral loan agreement of any kind between Mr Niu and Mr Lu in 2017. I further find that the evidence does not give rise to an inference that a loan agreement came into existence between Mr Niu and Mr Lu.

197. It follows that it has not been established on the balance of probabilities that a loan agreement existed between Mr Lu and Mr Nu and the claim that Mr Lu has breached a contract with Mr Niu fails.

Money had and received/Unjust enrichment

198. Following the decision in Pavey & Matthew**s Pty Ltd v Paul [1987] HCA 5, the High Court in ANZ Banking Group Limited v Westpac Banking Corporation (1988) 164 CLR 662 at [11] – [12] set out the nature and characteristics of an action in restitution or unjust enrichment:

11. ANZ's submission about the nature of its claim can be readily accepted. The basis of the common law action of money had and received for recovery of an amount paid under fundamental mistake of fact should now be recognized as lying not in implied contract but in restitution or unjust enrichment (see, generally, Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour, Ltd. [1942] UKHL 4; (1943) AC 32, at pp 61-64; Goff and Jones, The Law of Restitution, 3rd ed. (1986), pp.5ff; Birks, "English and Roman Learning in Moses v. Macferlan" (1984) 37 Current Legal Problems 1). In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment (cf. Pavey & Matthews Pty. Ltd. v. Paul [1987] HCA 5; (1987) 162 CLR 221, at pp 227, 254-257, 267). The common law right of action may arise in circumstances which also give rise to a resulting trust of specific property or funds or which would lead a modern court to grant relief by way of constructive trust. However, notwithstanding that the grounds of the action for recovery are framed in the traditional words of trust or use and that contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience, the action itself is not for the enforcement of a trust or for tracing or the recovery of specific money or property. It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g. that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust.

12. The prima facie liability to make restitution is imposed by the law on the person who has been unjustly enriched. In the ordinary case of a payment of money, that person will be the payee. However, when the person to whom the payment is directly made receives it as an intermediary (e.g. as agent for a designated principal), there may be uncertainty about the identity of the actual recipient of the benefit at the moment of payment. If the circumstances are such that the intermediary is to be seen as being himself the initial recipient of the benefit, his prima facie liability will ordinarily be displaced when he has handed the money received on to the person for whom he received it. In such a case he has, in the event, not retained "the benefit of the windfall" but been "a mere conduit-pipe" (see per Collins M.R., Continental Caoutchouc and Gutta Percha Co. v. Kleinwort, Sons, and Co. (1904) 9 Com Cas 240, at p 248) and "the only remedy is to go against the principal" (per Greene M.R., Gowers v. Lloyds and National Provincial Foreign Bank, Ltd. (1938) 1 All ER 766, at p 773). A more difficult case arises where the intermediary has not made a physical payment of money to, or on behalf of, the person for whom the payment was received but has made a credit entry in his books in favour of that person. In such cases, the question will arise whether the benefit of the payment made under fundamental mistake has been wholly or partly retained by the intermediary or effectively passed on to the third person (Continental Caoutchouc, at pp 248-249). In answering that question, the courts will pay regard to the substance rather than to the form of what has occurred. Thus, the cases indicate that a mere book entry which has not been communicated to the third party or which can be reversed without affecting the substance of transactions or relationships will ordinarily not suffice (see, e.g., Buller v. Harrison [1777] EngR 25; (1777) 2 Cowp 565; (98 ER 1243); Cox v. Prentice [1815] EngR 458; (1815) 3 M & S 344; (105 ER 641); The Colonial Bank v. The Exchange Bank of Yarmouth, Nova Scotia (1886) 11 App Cas 84). It must appear that the third party has effectively received the benefit of the payment with the consequence that the prima facie liability to make restitution has become his. …

199. The plaintiff pleads, in his statement of claim:

16. In the alternative, by reason of the matters referred to in paragraphs 5 and 6 above [ie the payment of $160,000 and $100,000 into Midas’ bank account by Mr Niu in May 2017], the defendant received a benefit, or alternatively has been enriched, at the expense of the plaintiff.

Particulars

The benefit/enrichment is the total loan amount advanced to the defendant.

17. It would be unjust for the defendant to retain the benefit of the loan amount at the expense of the plaintiff.

18. In the premises, the defendant is liable:

a. To account to the plaintiff for the loan amounts advanced to him; or

b. Alternatively, to the plaintiff for damages and/or equitable compensation in the amount of the benefit/enrichment.

200. There is no evidence that Mr Niu made the payments to Midas under a fundamental mistake.

201. I accept Mr Lu’s evidence that the money paid to Midas by Mr Niu never passed through his hands. It remained with Midas until it was paid out to Midas’ clients who had been victims of the disappearance of their money from the trust account of SHS Law (see [75] to [77] above). As I have said, at the time, Midas was a proprietary limited company registered in Australia (see [20] and [23], above). Midas was a discrete legal entity. The plaintiff’s case in relation to restitution conflated the legal personhood of Midas and Mr Lu in an impermissible way. Mr Lu cannot be liable to repay the money to Mr Niu. Mr Lu has never had possession of the money.

202. In any event, it has not been proven that either Midas or Mr Lu was unjustly enriched by Mr Niu’s payments to Midas. On Mr Lu’s case, those payments were made pursuant to an arrangement between Mr Niu and Mr Li, evidenced by conversations between Mr Li and Mr Lu, the events concerning the draft Repayment Agreement and the Repayment Agreement. Mr Niu received consideration for the payments he made in the form of a promise by Mr Li to repay the loan.

203. The issue of who was liable to the clients of Midas and SHS Law who lost their money when SHS Law’s trust account funds were withdrawn has not been the subject of evidence which could clarify who (if anyone) bears the legal liability to refund that money to those clients. It is clear, though, that Mr Li and Mr Lu both believed that they had either a legal or a moral obligation to make an effort to repay certain of those clients, or, alternatively, they believed that repayment was a necessary course to take in order to save their reputation. It can be inferred from some of the voice messages in evidence that the obligation felt by Mr Li and Mr Lu to repay was felt by each of them in relation to a different, though perhaps overlapping, set of clients. It may be that, in receiving the funds from Mr Niu and sending the funds to the three clients in China (see [75] – [77] above), Midas was a mere conduit of the funds. Both Mr Niu and Mr Lu may well have been intermediaries of funds acquired by Mr Li by means of a loan from Mr Niu and paid to the three clients in China whose money was taken from the SHS Law trust account. The plaintiff has not proven unjust enrichment.

Conclusion

204. For the reasons set out above, the plaintiff has failed to make out his claim in breach of contract or in restitution/unjust enrichment.

205. The following orders will issue:

206. The plaintiff’s claims are dismissed.

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