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[2023] VSC 6
General information, not legal advice.
Supreme Court of Victoria
2023-01-19
DELANY J
Original judgment source is linked above.
[2023] VSC 6 (First Revision (23 January 2023): [504], [518])
CONTRACT - Loan agreements - Action for recovery of loans made to the defendant personally - Counterclaim raising a multiplicity of issues - Whether defendant was induced to enter into the agreements by representations the agreements would not be enforced against him personally and that the sole recourse would be to the security provided in connection with the loans - Whether plaintiff estopped by reason of representations - Whether plaintiff engaged in misleading and deceptive conduct - Whether plaintiff engaged in unconscionable conduct - Application of the Money Lenders Ordinance (Hong Kong) cap 163 of the Hong Kong Special Administrative Region - Construction of the loan agreements - Allegations raised by the defence and counterclaim not established - Judgment for the plaintiff.
UNCONSCIONABLE CONDUCT - Australian Securities and Investments Commissions Act 2001 (Cth), ss 12BAA(7)(k), 12BAB, 12CB, 12CC, 12GBCL, 12GM - Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 285 FCR 133; Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1, applied - Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155; (2018) 266 FCR 631; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; Smash Enterprises Pty Ltd v Euromark Ltd [2022] VSCA 267, referred to.
FOREIGN LAW - Application of the Money Lenders Ordinance (Hong Kong) cap 163 of the Hong Kong SAR, ss 18(1), 18(2), 22(1), 25(2) - Hong Kong Shanghai (Shipping) Ltd v The Owners of the Ships or Vessels "Cavalry" (Panamanian Flag) [1987] HKLR 287; China Merchants Bank v Minvest International Limited [2001] HKCFI 763, referred to.
EVIDENCE - Tender of a foreign document - Evidence Act 2008 (Vic), s 49 - Failure to call a material witness - Adequacy of explanation - Larner v George Western Foods [2014] VSCA 62 applied; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, referred to.
1 Phillip Kingston is an entrepreneur in the superannuation and technology sectors of the economy. China Insurance Group Finance Company Limited ('CIG') is a money lender based in the Hong Kong Special Administrative Region ('SAR') of the People's Republic of China ('PRC'). CIG is a subsidiary of Taiping Financial Holdings Company Limited ('Taiping') and a member of the Taiping group of companies ('China Taiping'). China Taiping is a state-owned entity of the PRC.
2 Between December 2017 and October 2018, pursuant to five separate loan agreements, CIG lent HKD653m to Mr Kingston. The loans were in connection with companies whose Australian businesses were promoted by Mr Kingston, and security was provided over shares in those companies in support of the loans. According to CIG, by September 2019, the loans were in default and, by January 2020, steps to enforce the loans commenced. In August 2020, CIG initiated this proceeding to recover the loans, together with interest and costs, from Mr Kingston.
3 Mr Kingston agrees that HKD653m was lent to him pursuant to the loan agreements. He denies any personal obligation to repay the loans, and says CIG was limited to having recourse to the shares and/or collateral provided under the loan agreements. Mr Kingston says that he entered into each of the loan agreements on the basis of representations made by Wang Zhen (Mr Wang) and others on behalf of CIG that he would not be personally liable in the event of default and that there would be no recourse beyond the security provided in support of the loans, shares in the companies.
4 Mr Kingston denies that the loans were in default at the time CIG demanded payment. He says that the loan agreements were made in breach of the Money Lenders Ordinance (Hong Kong) cap 163 of the Hong Kong SAR ('the MLO'). He alleges that, by:
(a) issuing invoices or demanding the payment of interest that was not due; and
(b) alleging that he had committed events of default and/or that it was entitled to demand the immediate repayment of principal,
CIG engaged in misleading and deceptive conduct in contravention of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) ('ASIC Act').
(a) demanding payment of principal and interest;
(b) asserting events of default; and
(c) pursuing its claim in this proceeding,
CIG engaged in unconscionable conduct in contravention of s 12CB(1) of the ASIC Act.
7 Many of the issues raised by Mr Kingston in defence of the CIG debt recovery claim against him and by his counterclaim turn on whose evidence of contested conversations and meetings, including those at which he alleges the representations on which he relied were made, is accepted. For the most part, I do not accept Mr Kingston's version of events. He was not a credible witness.
8 So far as the issues raised by Mr Kingston concern the construction of documents, specifically, clauses of the supplementary loan agreements, I do not accept the construction of those clauses for which he contends. I do not agree that demands for the payment of interest on the loans were wrongful or that the loans were not in default at the time that CIG demanded payment. I do not agree that CIG engaged in conduct in contravention of the ASIC Act.
9 For the reasons that follow, there will be judgment for CIG in the amount of the claim together with interest and, subject to further submissions, costs. The counterclaim by Mr Kingston will be dismissed.
10 The loan agreements upon which CIG relies in support of its claim are as follows:
(a) an agreement between CIG and Mr Kingston executed by Mr Kingston on 28 November 2017 for a HKD100m loan (the 'Loan Agreement');
(b) a supplementary agreement to the Loan Agreement between CIG, Mr Kingston and Trimantium International Holdings Pty Ltd ('Trimantium International Holdings') executed in December 2017 pursuant to which HKD100m was advanced ('SA1');
(c) a second supplementary agreement between CIG, Mr Kingston and others executed in January 2018 pursuant to which HKD100m was advanced ('SA2');
(d) a third supplementary agreement between CIG, Mr Kingston and others executed in April 2018 pursuant to which HKD200m was advanced ('SA3'); and
(e) a fourth supplementary agreement between CIG, Mr Kingston and others executed in September 2018 pursuant to which HKD253m was advanced ('SA4').
Each of SA1-SA4 is a 'Supplementary Agreement' and together are the 'Supplementary Agreements'.
11 Each of the loan agreements had two components. The first, CIG's standard terms and conditions ('STCs') contained in the Loan Agreement. The second, each of the Supplementary Agreements, SA1, SA2, SA3 and SA4.
12 Each of SA1-SA4 provide that the terms and conditions of those agreements prevail over the Loan Agreement to the extent of any inconsistency. Each subsequent Supplementary Agreement is also specified to prevail over any preceding Supplementary Agreement.
13 Two versions of each of SA1-SA4 were prepared, one in the English language and the other in Chinese characters. Both versions contain an express term to the following effect:
In the event there is any inconstancy [sic] between the Chinese version and English version of this Supplementary Agreement then the Chinese version shall prevail.
14 The STCs in the Loan Agreement specify that the governing law is the law of Hong Kong.
15 Clause 1 of the STCs in the Loan Agreement includes the following definitions:
Amount Owing means the total of all amounts that at any time are payable, are owing but not payable, or are contingently owing, by the Customer in connection with this Agreement (including transactions in connection with this Agreement) to the Finance Company, including any Amount of Credit advanced under a Loan and any interest payable under this Agreement.
Finance Company means China Insurance Group Finance Company Limited.
Repayment Date means the date on which repayments must be made as set out in the Loan Schedule.
2.1 The Finance Company makes the Loan available to the Customer in accordance with these Term [sic] and Conditions.
2.2 The Loan must be used for the purpose set out in the Loan Schedule.
...
Interest
4.1 The Customer agrees to pay interest to the Finance Company on the Amount of Credit owing as at the Repayment Date at the applicable Interest Rate.
4.2 Interest:
(a) accrues daily from (and including) the day the Date of the Loan; and
(b) is payable monthly in arrears on the Repayment Date or, if that date is not a Business Day, the next Business Day; and
(c) is calculated on actual days elapsed using a year of 360 or 365 days (as determined by reference to usual market practice for the relevant currency).
...
Repayment
7.1 The Customer must repay the Finance Company the Amount of Credit by making repayments during the Loan Term.
...
7.5 If an Event of Default occurs and the Finance Company requires the Customer to do so, the Customer must repay all or part of the Amount Owing within 2 Business Days' after notice is given to the Customer.
...
Set off
23.1 In addition to any other Security the Finance Company requires, the Finance Company holds the benefit [of] all the Customer's assets (including the Collateral deposited with Taiping Securities and any other assets deposited with the Finance Company for any purpose) as security for the total Amount Owing and any amount which the Customer may owe the Finance Company in the future.
17 Clause 31 titled 'Representations and warranties' includes:
31.1 The Customer represents and warrants that:
...
(j) (no reliance)
(i) it has entered into this Agreement without relying on the Finance Company (in whatever capacity) or their advisers or on any representation, warranty, statement, undertaking or conduct of any kind made by any of them or on their behalf except as expressly set out in this Agreement; ...
32.1 There is an Event of Default if:
(a) the Customer or a Guarantor fail to perform or observe any obligation under this Agreement in a material respect, including an obligation to pay an amount on time;
(b) the Customer does not pay interest, fees or other amounts due under this Agreement; ...
33.1 Where there is an Event of Default, the Finance Company may take any action it considers appropriate to enforce this Agreement or any Security including:
(a) employing any third party agent to collect any amount owing to the Finance Company;
(b) taking steps to enforce the Finance Company's rights against the Customer's assets such as by lodging caveats; and
(c) commencing legal proceedings against the Customer.
41.2 Time is of the essence in respect of the Customer's obligations to pay any money.
21 On 3 December 2017, Mr Kingston (as Party A) signed SA1 on his own behalf and on behalf of Trimantium International Holdings (as Party C) and, on 6 December 2017, CIG (as Party B) signed SA1.
22 SA1 provides for a loan of HKD100m from CIG to Mr Kingston, HKD87m of which was to be advanced and HKD13m was to be applied to cover interest, with security for the loan to be provided by Mr Kingston including HKD300m in shares in Sargon Capital Pty Ltd ('Sargon'). Clause 1 of SA1 provides:
Items i) through v) are collectively referred to as the "Collateral".
23 Mr Kingston was cross-examined about the application of the SA1 loan proceeds. Although, as recorded in clause 1(ii), the intent of the loan was for Trimantium International Holdings to apply HKD87m to subscribe for shares in Trimantium GrowthOps Limited ('GrowthOps'), as events transpired, Trimantium International Holdings only subscribed for AUD7,945,570 in GrowthOps shares.
...
Loan interest rate: The Bank of China prime rate (currently 5.0%) + 3.1%, that is, the interest rate is currently 8.1%.
Loan term and interest settlement date: The Loan provided by Party B has a term of 18 months, both parties can negotiate renewal in good faith. Interest accumulates daily, and is paid monthly, and the interest settlement date is the last business day of each month. Party A's cash deposit in Party A's Hong Kong bank account will be used to pay interest automatically. In the borrowing period, Party B has the right, with 60 days advance notice to Party A, to request an early repayment.
Repayment: Repayment of principal and outstanding interest payables and other approved payables are paid on maturity of the Loan. Party A authorizes Party B to use the Margin to pay Party B all the reasonable expenses incurred by the Margin Account, such as account service fees, and the repayment of the Loan principal due and any unpaid interest and other approved payables.
...
Recover collateral/margin requirements:
...
(4) If Party A fails to repay the Loan principal and interest on the loan maturity date, if Party A cannot repay the principal and interest of Party B within 20 working days of breach of contract, Party B shall directly obtain all collateral under this Supplementary Agreement.
25 The clauses of SA1 set out above were replicated in substance in each of the later Supplementary Agreements but with, amongst other differences, different mortgage ratios, interest rates and loan terms being specified. One notable exception is clause 7, which is dealt with separately below.
26 Clause 11(4) of SA1 refers to a period of 20 working days from breach of contract within which Mr Kingston must repay the loan. Clause 7.5 of the STCs requires repayment two business days after notice of default. To the extent of any inconsistency, clause 11(4) prevails.
27 CIG contends that, on its proper construction, clause 11(4) allowed it to obtain and to retain all collateral for the loan if a breach of contract was not remedied within 20 working days, but that the remedy in clause 11(4) was not the only remedy available to it in the event of default. That construction is not agreed to by Mr Kingston, who contends that the sole recourse available to CIG was to obtain all collateral.
28 SA2 was signed by Mr Kingston on 25 January 2018. Mr Kingston (Party A) is named as the borrower and CIG (Party B) as the lender. Additional parties to SA2 are Trimantium International Holdings (Party C) and Asia Selangor Investments Pty Ltd ('Asia Selangor') (Party D).
29 Mr Kingston signed SA2 in his own capacity and as a director of Trimantium International Holdings. Although Mr Kingston is not recorded on ASIC documents as a current or former director of Asia Selangor, he also signed SA2 for and on behalf of Asia Selangor as 'director'. While Mr Kingston denied that the reason he signed SA2 as 'director' of Asia Selangor was because he was in effective control of Asia Selangor, I do not accept the truth of that evidence.
30 The purpose of SA2 was to provide a further HKD100m loan, of which HKD87m was to be used by Asia Selangor to subscribe for shares in the GrowthOps IPO, with HKD13m to be retained in the 'Margin Account' in the name of Mr Kingston for interest payments. Clause 1 of SA2 provides:
a) HK$360 million market value of Sargon Capital Pty Ltd's common stock (the "Stock I");
b) HK$87 million Trimantium GrowthOps Ltd ("GrowthOps") shares listed on the Australian Stock Exchange (the "Stock II") held by Asia Selangor Investments Pty Ltd (i.e. Party D), and 100% of the shares in Party D ("Stock III");
c) HK$13 million cash deposited in bank account (the "Margin Account") in the name of Party A for the payment of interest; or ...
31 On 20 April 2018, Mr Kingston and CIG signed the Chinese version of SA3. Mr Kingston did so having confirmed in an email on the previous day that the document had been translated for himself and for all parties to SA3 and that each of them were fully aware of and approve its contents.
32 In addition to Mr Kingston (Party A) and CIG (Party B), the parties to SA3 are Trimantium International Holdings (Party C), Asia Selangor (Party D), Forci Alternative Strategies Pty Ltd ('Forci') (Party E) and Pattani Private Capital Pty Ltd ('Pattani') (Party F). Each of Parties C-F signed SA3 in their capacity as subscribers to shares in GrowthOps. Additional parties to execute SA3 were Louis Holbrook Company Pty Ltd ('Louis Holbrook Company') (Party G) (a shareholder in Party C), Vonny Tjhin as trustee for Selangor Trust 1 (Party H) (a shareholder in Party D), Nattiya Pothong as trustee for Pothong Family Trust (Party I) (a shareholder in Party E), Thananchanok Thaicharoen as trustee for Pattani Private Trust (Party J) (a shareholder in Party F) (Parties G-J are defined as the 'Ultimate GrowthOps Shareholders'), together with Trimantium Capital Pty Ltd ('Trimantium Capital') and Trimantium Capital Funds Management Pty Ltd ('TCFM') (Trimantium Capital and TCFM are defined as the 'Sargon Shareholders').
33 SA3 brought together the loans the subject of SA1 and SA2 (totalling HKD200m) and advanced a further HKD200m for a total loan of HKD400m. The term of the SA3 loan was 24 months with interest payable quarterly.
34 Clause 1 of SA3 was expanded, compared to SA1 and SA2, so as to bring all 'Collateral' together.
1. Borrowing Limit:
As to the date of this SA III, based on original loan agreement, SA I and SA II, Party B has lent HKD200 million to Party A (Original Loan Amount) and Party A has provided no less than HKD860 million securities under the original loan agreement, SA I and SA II, which includes a) HKD660 million ordinary shares in Sargon Capital Pty Ltd (Stock i); b) HKD174 million shares in Trimantium GrowthOps Limited (GrowthOps), (an ASX listed company) (Stock ii) and 100% shares in Party C and D (Stock iii); and c) HKD26 million cash deposited in Party A's bank account ("Guarantee Money"), which is used to pay interest.
(a)-c) all together "Original Securities")
In accordance with this SA III, Party B agrees to lend additional HKD200 million to Party B (Loan). To avoid any doubt, Party B has agreed to lend HKD400 million in total to Party A (Total Loan Amount), including:
HKD200million under SA I and SA II (i.e. Original Loan Amount) which Party B has already lent to Party A; and
HKD200 million under this SA III (i.e. Loan).
Regarding the Total Loan Amount, Parties agree Party A must provide no less than HKD1.6billion shares (Share Pledge) as security to Party B. Parties also agree that the updated security list is as follows:
(i) 1 million ordinary shares in Sargon Capital Pty Ltd (Sargon) directly or indirectly held by Party A or TCPL (which accounts for 50% of total ordinary shares issued). As to date of this SA III, the market price of the shares is around HKD915 million. (Share 1);
(ii) 475,000 preference shares in Sargon directly or indirectly held by Party A or TCFM (which accounts for 57% of total preference shares issued). As to date of this SA III, the market price of the shares is around HKD434 million. (Share 2);
(iii) 120,000 preference shares in Sargon issued to TCFM by way of call for capital (Call for Capital), and the market price is about HKD110million. (Share 3);
(iv) 58,950,000 ordinary shares in GrowthOps directly or indirectly held by Party C, D, E, F or Ultimate GrowthOps Shareholders (which accounts for 62.14% of total ordinary shares issued). As to the date of this SA III, the market price of the shares is about HKD410million (Share 4). Share 4 are directly held by Party C, D, E and F. In addition, the security also includes 100% shares in Party C, D, E and F (Share 5). Share 5 are directly held by Party G, H, I and J; or
(v) any other assets such as shares that Party B accepts as security at its absolute discretion. (Share 1,2,3,4 and 5 together "Shares" or "Collateral").
...
After the date of this SA III (not including the date of this SA III, the loan interest rate will be: The Bank of China prime rate (currently 5.0%) + 2% = 7%.
Loan term and interest payment date: The Loan provided by Party B has changed to a term of 24 months from the date of this SA III. If Party A does not provide written notice to terminate the loan agreement a month before the expiry of the loan term, the term will extend to a further 12 months automatically. Interest accumulates daily on the total loan amount, and the interest is changed to be paid quarterly. The interest payment date is the last business day of each quarter. Party A agrees that Party A will not repay the principal amount or terminate the loan agreement within 12 months from the date of this SA III. After this 12 month period, Party A can terminate the loan agreement with one month written notice to Party B and repay the principal, interests and other payables. However, during the term of the loan agreement, Party B has the right, with 60 days prior notice to Party A, to request an early repayment.
...
Recover collateral / guarantee requirements:
...
(4) if Party A, C, D, E, F, Ultimate GrowthOps Shareholders or Sargon Shareholders fails to repay the loan and interest, it constitutes a breach of contract, and if Party A, C, D, E, F, Ultimate GrowthOps Shareholders or Sargon Shareholders cannot repay the principal and interest within 20 business days from the date of the breach, Party B is entitled to take possession of Collateral immediately without further notice to Party A, C, D, E, F, Ultimate GrowthOps Shareholders or Sargon Shareholders.
37 Clause 7 of SA3 is not in the same terms as clause 7 of SA1 and SA2. Clause 7 provides that Mr Kingston will not repay the principal amount or terminate within 12 months of the date of SA3. Consistent with SA1 and SA2, it further provides that, during the term of SA3, CIG has the right, with 60 days' prior notice to Mr Kingston, to request an early repayment.
38 On around 28 September 2018, Mr Kingston signed the Chinese version of SA4, a new standalone facility for HKD253m.
39 The parties to SA4 are Mr Kingston (Party A) as the customer/borrower, CIG (Party B) as the lender and various other entities associated with Mr Kingston. Those entities and the capacities in which they executed SA4 are as follows:
(a) Trimantium International Holdings, noted to be a 'GrowthOps shareholder' (Party C). Aron D'Souza ('Dr D'Souza') signed SA4 on behalf of Trimantium International Holdings in his capacity as a director;
(b) Asia Selangor, noted to be a 'GrowthOps shareholder' (Party D). Vonny Tjhin signed SA4 on behalf of Asia Selangor in her capacity as a director;
(c) Forci, noted to be a 'GrowthOps shareholder' (Party E). Nattiya Pothong signed SA4 on behalf of Forci in her capacity as a director;
(d) Pattani, noted to be a 'GrowthOps shareholder' (Party F). Thananchanok Thaicharoen signed SA4 on behalf of Pattani in her capacity as a director;
(e) Louis Holbrook Company, noted to be a 'Party C shareholder' (Party G). Dr D'Souza signed SA4 on behalf of Louis Holbrook Company in his capacity as a director;
(f) Vonny Tjhin as trustee for Selangor Trust 1, noted to a 'Party D shareholder' (Party H);
(g) Nattiya Pothong as trustee for the Pothong Family Trust, noted to be a 'Party E shareholder' (Party I);
(h) Thananchanok Thaicharoen as trustee for Pattani Private Trust, noted to be a 'Party F shareholder' (Party J);
(i) Trimantium Capital, noted to be a 'Sargon shareholder'. Mr Kingston signed SA4 on behalf of Trimantium Capital in his capacity as a director;
(j) Trimantium Limited ('Trimantium HK'), noted to be a 'Sargon shareholder'. Mr Kingston signed SA4 on behalf of Trimantium HK in his capacity as a director;
(k) TCFM, noted to be a 'Sargon shareholder'. Mr Kingston signed SA4 on behalf of TCFM in his capacity as a director; and
(l) Trimantium Taiping Investment Management Pty Ltd ('TTIM'), noted to be a 'Dragon Shield shareholder'. Mr Kingston signed SA4 on behalf of TTIM in his capacity as a director.
40 Clauses 1.3 and 1.4 of SA4 include the following:
1.3 According to this Supplementary Agreement IV, Party B agreed to provide an additional loan of HK$253 million to Party A ("This Loan"). For the avoidance of doubt, according to the Loan Agreement, Party B agreed to provide a total of HK$653 million loan to Party A ("Total Loan"), including:
(1) Pursuant to the Supplementary Agreement I, the Supplementary Agreement II and the Supplementary Agreement III, Party B has provided a total of HK$400 million loan (being, the Original Loan) to Party A; and
(2) Pursuant to this Supplementary Agreement IV, Party B will provide HK$253 million loan (being, This Loan) to Party A.
1.4 In respective of the Total Loan, all Parties hereby agree to provide Party B not less than a total of HK$1.866 billion stock collateral ("Stock Collateral"), all Parties hereby agree that all of the Original Collateral under the Loan Agreement updated as follows:
(i) Party A or TCPL indirectly or directly holds 1 million ordinary shares of Sargon Capital Pty Ltd ("Sargon") (representing 50% of the total issued ordinary shares of Sargon), as of the date of this Supplementary Agreement IV, its market value is approximately HK$941 million ("Stock A");
(ii) Party A or TL indirectly or directly holds 140,000 ordinary shares of Sargon (representing 7% of the total issued ordinary shares of Sargon), as of the date of this Supplementary Agreement IV, its market value is approximately HK$132 million ("Stock B");
...
(vi) Party C, Party D, Party E, Party F, or GrowthOps upper shareholders directly or indirectly holds 58.95 million ordinary shares of Trimantium GrowthOps Limited（"GrowthOps"）, an Australian Stock Exchange listed company (representing 62.14% of the total issued ordinary shares of GrowthOps), as of the date of this Supplementary Agreement IV, its market value is approximately HK$436 million ("Stock F"). Stock F is directly held by Party C (being, Trimantium International Holdings Pty Ltd), Party D (being, Asia Selangor Investments Pty Ltd), Party E (being, Forci Alternative Strategies Pty Ltd), and Party F (being, Pattani Private Capital Pty Ltd) respectively, and 100% of the total issued shares of each of Party C , Party D, Party E, and Party F ("Stock G") are mortgaged to Party B. 100% of the total issued shares of each of Party C, Party D, Party E and Party F are directly held by Party G (being, Louis Holbrook Company Pty Ltd), Party H (being, Vonny Tjhin as trustee for Selangor Trust 1), Party I (being, Nattiya Pothong as trustee for Pothong Family Trust), and Party J (being, Thananchanok Thaicharoen as trustee for Pattani Private Trust) respectively;
...
6. Annual interest rate of the loan:
The interest rate of the Original Loan (being, HK$400 million) is: The Bank of China prime rate (currently 5.0%) + 2%, that is, the interest rate is currently 7%.
The interest rate of This Loan (being, HK$253 million) is: 5.5%.
42 There was a contest between the parties concerning clause 7 of SA4 because the English and Chinese versions of clause 7 are not identical. The agreed translation of the Chinese version of clause 7 of SA4, the version that binds the parties in case of inconsistency, is as follows:
7. Loan Term and Interest Settlement Date:
The loan term of the Original Loan (HK$400 million) is updated to 36 months from the date specified in Supplementary Agreement III (ending on 19 April 2021). The Original Loan shall accrue interest on a daily basis. Interest shall be paid on a quarterly basis on the interest settlement date, which is the last business day of the quarter. Party A agrees not to repay the principal of the Original Loan or terminate the Loan Agreement within twelve months from the date specified in Supplementary Agreement III. After 12 months from the date specified in Supplementary Agreement III, Party A may propose to terminate the Loan Agreement by giving a one-month notice in writing, and repay the principal and any outstanding interest of the Original Loan and any other amounts payable. However, during the term of the Original Loan, Party B has the right to require Party A to make a repayment at any time by giving Party A a 60-day notice.
The loan term of this loan (HK$253 million) is 24 months from the date of utilization request from Party A to Party B for the drawdown of this loan. This loan shall accrue interest on a daily basis. Interest shall be paid on a half-yearly basis on the interest settlement date, which is the last business day of the half-year period. Party A agrees not to repay the principal of this Loan or terminate the Loan Agreement within 12 months from the date specified in this Supplemental Agreement. After 12 months from the date specified in this Supplemental Agreement, Party A may propose to terminate the Loan Agreement by giving a one-month notice in writing, and repay the principal and any outstanding interest of this loan and any other amounts payable. However, during the term of this loan, Party B has the right to require Party A to make a repayment at any time by giving Party A a 60-day notice.
Without Party B's prior written approval and confirmation on collateral adequacy, Party A shall promise and undertake to make repayments in the following order:
(1) paying off the total principal and any outstanding interest of this loan and any other amounts payable; and
(2) paying off the total principal and any outstanding interest of the Original Loan and any other amounts payable.
Party A undertakes and warrants that it will not give priority to the repayment of the Original Loan and its outstanding interest and other amounts payable before this loan and its outstanding interest and other amounts payable are fully repaid.
43 The key inconsistency between the English language version of clause 7 of SA4 and the version in Chinese characters is that the English version does not include the word 'outstanding' where that appears in (1) and (2) of the third paragraph of the translation of the Chinese character version.
44 Clause 11(4) of SA4, under the heading '11. Recovery collateral/margin requirements' is in the following terms:
(4) If Party A, Party C, Party D, Party E, Party F, GrowthOps upper shareholders, Sargon shareholders, and Dragon Shield shareholders fail to repay the Loan principal and interest on the loan maturity date, then immediately constitute an event of default. If Party A, Party C, Party D, Party E, Party F, GrowthOps upper shareholders, Sargon shareholders, and Dragon Shield shareholders still unable to repay the principal and interest of Party B within 20 business days from the date of event of default, Party B shall directly obtain all collateral without further notice to Party A, Party C, Party D, Party E, Party F, GrowthOps upper shareholders, Sargon shareholders, and Dragon Shield shareholders.
45 CIG is a company incorporated under the laws of the Hong Kong SAR of the PRC. At relevant times, CIG's business predominantly involved large-scale financing and the provision of loan services to individual and corporate borrowers. CIG is a licensed money lender under the MLO.
46 China Taiping has a remit to implement high-level initiatives or strategies of the PRC, including the PRC's 'Belt and Road Initiative'. The companies in China Taiping include:
(a) China Taiping Insurance Holdings Company Limited ('China Taiping Holdings'), headquartered in the Hong Kong SAR;
(b) Taiping Trustees Limited ('Taiping Trustees'), a subsidiary of China Taiping Holdings;
(c) Taiping, a subsidiary of China Taiping Holdings;
(d) CIG, a subsidiary of Taiping;
(e) Taiping Assets Management (HK) Company Limited ('Taiping Assets Management'), a subsidiary of Taiping; and
(f) Taiping Financial Investment Company Limited, a subsidiary of Taiping.
47 Mr Wang, also known as Andy Wang, was an employee of Taiping between 2017 and March 2020. While Mandarin is his first language, Mr Wang is fluent in, and can write and speak, English.
48 Mr Wang has a Master's Degree in Finance from Oxford University (2007) and a Bachelor's Degree from the London School of Economics. Mr Wang joined Taiping after nine years working as an Analyst at HSBC. Approximately one year after joining Taiping as Deputy General Manager of the Markets department, Mr Wang took on the role of General Manager of Overseas Investments. He left Taiping in March 2020.
49 Mr Wang's roles and responsibilities included accompanying 'leaders' (including the CEO, CIO and CFO) to meet clients, assisting the leaders to carry out due diligence work, and working with others to prepare materials to submit to 'the committee' for assessment and approval. After a decision was reached by the committee, Mr Wang's role involved assisting others to carry out communications with clients. Mr Wang was not a member of any of China Taiping's committees and did not have any voting rights.
50 Following letters of request issued by this Court,0F[1] an order was made by the High Court of the Hong Kong SAR for the taking of evidence from Mr Wang before an examiner, pursuant to the laws and procedures of the Hong Kong SAR. Mr Wang's evidence was taken over two days prior to the commencement of the trial proper in Australia.1F[2] His evidence was videotaped and transcribed. As provided for in the Official Languages Ordinance (Hong Kong) cap 5, Mr Wang elected to give his evidence in Mandarin. The questions directed to Mr Wang were in English and were translated into Mandarin.
51 Mr Wang described the period that he spent at Taiping as 'pretty much like a rollercoaster experience', 'not simply just with respect to Sargon'. Mr Wang agreed that he did not recall much in detail about that time, and that he was quite confused about the details, especially because the project was conducted in a foreign language which is not his mother tongue.
52 Mr Wang said that while he was employed at Taiping there were 'three batches of bosses'. He said that he had a lot of change of leadership above him and received many different kinds of directive guidance. He described his recollection of the events as 'quite sporadic and chaotic'.
53 Mr Wang's first 'batch of bosses' were Xudong Li (Mr Li), who was the CEO, and Rujie Zhang, who was Mr Wang's direct boss. The second 'batch of bosses' were Xiangyang Wang, who became the CEO about one year after Mr Li, and Guanying Li, who became Mr Wang's direct boss about one year after Rujie Zhang. Mr Wang gave evidence that, around that time, a Post-Investment Management department led by Hongbo Liu (Ms Liu) was established. Ms Liu was appointed to that position in late-2018 or early-2019. The third 'batch of bosses' were Yong Ma, who became the CEO less than a year after Xiangyang Wang, and Dongxia Chen, who became Mr Wang's direct boss about six-months after Guanying Li.
54 Mr Wang gave evidence about his visit to Australia and New Zealand together with Mr Li and Qiaosong Liu (Mr Liu). Although Mr Wang did not recall the exact dates, I am satisfied that Mr Wang's visit occurred between around 22 and 28 October 2017.
55 An Australian representative office was established by CIG and its affiliates in the second half of 2017. As far as Mr Wang was aware, the collaboration concerning Sargon was the only China Taiping project in Australia that was implemented.
56 Mr Wang was appointed a director of Sargon in May 2018. He continued in that role until 3 March 2020.
57 The evidence was unclear about whether Mr Wang was part of a Taiping delegation that visited Australia between 30 July and 2 August 2019. In the second half of 2019, Mr Wang handed the project relating to Sargon to Ms Liu. Later, Mr Wang was informed that he would 'not be allowed' to participate further in the project. His evidence, which I accept, was that he 'did not know anything about' the appointment of receivers to Sargon (which occurred on 29 January 2020).
58 Mr Wang was cross-examined concerning the whereabouts of Mr Li who, for most of the relevant period, was the CEO of Taiping and Mr Wang's manager. Mr Li was present at the meeting in Auckland on 25 October 2017 at which Mr Kingston alleges representations were made. Mr Li was not called as a witness. Mr Wang said he was uncertain whether Mr Li was still with Taiping. They had not been in communication recently. Mr Wang said that he had been in Hong Kong because of the COVID-19 pandemic, and Mr Li was 'always in China', but Mr Wang did not know where.
59 Other current and former employees of Taiping who feature in this dispute are:
(a) Wang Bin, the Chairman of China Taiping (not a witness), who had responsibility for the overall strategy of China Taiping;
(b) Heqian Wang, Taiping's CFO (not a witness);
(c) Qiaosong Liu, a General Manager at Taiping (not a witness). Mr Liu attended the dinner in Auckland on 25 October 2017 at which Mr Kingston alleges representations were made;
(d) Ke Guo, a Deputy General Manager at Taiping Assets Management. Mr Guo gave evidence during the trial remotely from the Hong Kong SAR with the assistance of an interpreter; and
(e) Ming Zhong, a Manager in Taiping's Finance department. Ms Zhong gave evidence during the trial remotely from the Hong Kong SAR with the assistance of an interpreter.
60 Mr Kingston holds a Bachelor of Science and a Bachelor of Commerce from the University of Melbourne (2009) (majoring in Actuarial Studies and Applied Mathematics), a Graduate Certificate in Psychoanalytic Studies from Deakin University, a Graduate Certificate in Social Entrepreneurship and Innovation from the University of Adelaide, and a Certificate in Company Directorship from the Australian Institute of Company Directors obtained in around 2010.
61 Mr Kingston has founded several businesses in the superannuation and technology sector of the economy. In October 2015, he and Dr D'Souza co-founded Sargon, an Australian company. Mr Kingston's evidence is that they established Sargon to develop and deploy software targeted to the superannuation market. He described Sargon's initial goal as being 'to provide financial institutions and entrepreneurs with the technology and infrastructure to build, grow and operate investment and pension funds at the lowest possible cost for investors'. Whatever the initial goal, by the end of 2019, as a result of a series of acquisitions of other businesses, Sargon had more than AUD50bn in assets under trusteeship.
62 Mr Kingston was the CEO of Sargon from around 2017 to 2020. In cross-examination, Mr Kingston accepted that between 2017 and 2019 he regarded himself as an experienced and diligent businessman.
63 As the CEO of Sargon, Mr Kingston was personally involved in negotiating the terms of acquisitions of businesses by Sargon. Those acquisitions included the 2018 acquisition of the Australian Executor Trustees - Corporate Trust at a cost of AUD50m, a business with over AUD30bn funds under supervision. Mr Kingston's personal involvement in acquisitions sometimes included him personally preparing terms sheets. In 2018-2019, he was involved in the preparation of the Sargon prospectus. His role in relation to the prospectus was to brief advisors and to provide instructions as to factual matters.
64 Mr Kingston is the founder of Trimantium Capital, a company incorporated in Australia on 19 January 2012 which he described as having two functions:
(a) assisting clients in identifying board members, executives and management, and potential investment partners; and
(b) establishing and managing special purpose vehicles to facilitate investment into its portfolio companies (being companies in which Trimantium Capital either invested or to which it had previously provided advisory services but which required further investment).
65 Mr Kingston has a substantial shareholding in Trimantium Capital, of which he remains a director. Trimantium Capital was an investor in GrowthOps. Trimantium Capital and its associated entities held significant investment positions in GrowthOps. In cross-examination, Mr Kingston quibbled with the meaning of 'significant', but that is his language.
66 The financing arm of Trimantium Capital invested through special purpose vehicles ('SPVs') which advanced funds by way of debt, equity, or both. Three of these entities relevant to the proceeding are:
(a) TCFM, incorporated in Australia on 14 October 2014;
(b) TTIM (subsequently renamed Trimantium Investment Management Pty Ltd), incorporated in Australia on 29 January 2018; and
(c) Trimantium HK, based in Hong Kong.
67 Mr Kingston was also a director and, indirectly through Trimantium Capital, a shareholder of GrowthOps. GrowthOps was listed on the Australian Securities Exchange between March 2018 and December 2020. In its prospectus, issued prior to its Initial Public Offering ('IPO'), GrowthOps' business is described as focusing on management consulting, technology services and advertising and creative services.
68 The Trimantium website for which Mr Kingston is responsible states that 2013 was the year when Mr Kingston founded GrowthOps 'which is now one of the largest professional services firms in all of Asia ... with over 600 staff members, and it generates approximately $80 million annually'. The website refers to Sargon having AUD50bn in assets before it was sold to private equity. It was put to Mr Kingston that that was not a correct statement because Sargon did not have AUD50bn in assets. Mr Kingston's response was illuminating. He said he did not see it as a material omission that the reference was not qualified by referring to AUD50bn in assets under trusteeship.
69 Mr Kingston also has a personal web page. On that web page he describes himself as 'entrepreneur and engineer'. The information on that website and on the Trimantium website has not been updated for some time. Mr Kingston said that it was preferable that people know of his association with profitable and prosperous companies. That evidence was consistent with Mr Kingston's confidence and self-belief when giving evidence, notwithstanding the failure of GrowthOps after it was listed.
70 A number of SPVs were incorporated during the course of Mr Kingston's dealings with CIG, including:
(a) Trimantium International Holdings, incorporated on 27 November 2017 in Australia, whose sole shareholder at that time was Trimantium HK;
(b) Asia Selangor, incorporated in Australia on 11 January 2018;
(c) Forci (subsequently renamed TGO Holdings 2 Pty Ltd), incorporated in Australia on 20 January 2018; and
(d) Pattani, incorporated in Australia on 9 January 2018.
71 Shares in GrowthOps held by Trimantium International Holdings, Asia Selangor, Forci and Pattani were provided as security for SA3 and SA4 (and, in the case of Asia Selangor, as security for SA2). Certain matters concerning directorships and share purchases by those corporations may be noted:
(a) On incorporation on 27 November 2017, Mr Kingston was the sole director of Trimantium International Holdings. On 19 January 2018, Mr Kingston was replaced as the sole director by Dr D'Souza. On 21 January 2018, Trimantium International Holdings applied for shares in GrowthOps. On 16 March 2018, 7,945,570 ordinary shares in GrowthOps were issued to Trimantium International Holdings.
(b) On incorporation on 11 January 2018, the director of Asia Selangor was Vonny Tjhin. On 19 January 2018, Asia Selangor applied for shares in GrowthOps. On 16 March 2018, 20m ordinary shares in GrowthOps were issued to Asia Selangor. In cross-examination, Mr Kingston accepted that he asked Ms Tjhin to provide the shares that Asia Selangor held in GrowthOps as collateral for the SA2 loan. He said that if Asia Selangor's GrowthOps shares were ever required to repay the loan (such shares being part of the security), Ms Tjhin would make sure the shares would be 'swept'.
(c) On incorporation on 20 January 2018, the sole director of Forci was Maria Di Vincenzo, who, at that time, was 80 years of age. Ms Di Vincenzo is Mr Kingston's wife's grandmother. She was born in Forci, Italy, after which the company was named. Mr Kingston organised for the incorporation of Forci. On the day of its incorporation, Forci applied for AUD17m of shares in the GrowthOps IPO. Mr Kingston gave evidence that the director of Forci understood that the shares held by Forci would be required if the loan from CIG was required to be repaid. On 5 February 2018, Ms Di Vincenzo ceased to be a director. She was replaced as the sole director by Akshita Lad on 5 February 2018, who was in turn replaced as the sole director on 16 February 2018 by Nattiya Pothong. On 16 March 2018, 17m ordinary shares in GrowthOps were issued to Forci.
(d) On incorporation on 9 January 2018, the sole director of Pattani was Thananchanok Thaicharoen, a person with whom Mr Kingston had some investments in property developments and other businesses. Mr Kingston arranged for Pattani to be incorporated. On 16 March 2018, 14m ordinary shares in GrowthOps were issued to Pattani.
72 Mr Kingston is a person who, both historically through his involvement in drafting terms sheets, but also in the context of contemporaneous documents relevant to this dispute, directly involved himself in drafting contractual and business documents. In cross-examination, Mr Kingston sought to walk back from the language used by him in a 24 January 2018 email to Mr Wang which began, '[b]efore I draft the promissory note...', suggesting that he was using a collective 'I', referring to what the lawyers were going to draft. I do not accept that Mr Kingston was intending to refer to the lawyers' drafting, rather than to his own, when he sent that email.
73 The first Promissory Note with Taiping Trustees ('P Note 1'), was drafted by Mr Kingston personally. On about 1 February 2018, Mr Kingston made changes in mark-up to the Promissory Note, at that stage in draft. The draft included comments by MinterEllison and comments attributed to 'SC', being a reference to Sargon Capital. When first questioned concerning those embedded comments, Mr Kingston did not agree that the references to 'SC' were to comments made by him personally. He said that he thought those comments were made by the law firm Allens. The notes include comments such as 'Andy, please discuss with Minter Ellison'. Questioned further, Mr Kingston persisted by saying he could not remember who wrote that comment. I do not accept that evidence as truthful. 'Andy' was a reference to Andy Wang. The comments on the document in mark-up attributed to 'SC' were comments made by Mr Kingston personally.
74 Statements of issues were prepared by each party pursuant to s 50 of the Civil Procedure Act 2010 (Vic) (the 'Statements'). The Statements do not displace the role of the pleadings. Whilst not entirely agreed, the Statements are of assistance in identifying the key issues for determination. They also serve by omission to identify issues within the pleadings, in particular within the Amended Defence and Counterclaim ('ADC'), that were not pressed.
75 The pleadings upon which the trial was conducted comprise the Further Amended Statement of Claim dated 23 September 2021 ('FASOC'), the ADC dated 15 February 2022 and the Reply and Defence to the ADC dated 28 February 2022 ('Reply').
76 The first group of issues in the Statements concern whether or not representations alleged in the ADC were in fact made. Mr Kingston alleges that representations were made and were relied upon by him to enter into the Loan Agreement and the Supplementary Agreements on four occasions:
(a) on 25 October 2017 at a dinner in Auckland, New Zealand;
(b) on 11 or 16 November 2017 in a conversation with Mr Wang;
(c) on 23 or 24 November 2017 in Hong Kong; and
(d) on 20 April 2018 in a telephone conversation with Mr Wang.
77 So far as the content of the representations is concerned, the ADC alleges that CIG made representations that Mr Kingston would not be personally liable to repay the money loaned by CIG. Alternatively, representations were made that CIG would not recover the money loaned to Mr Kingston or exercise its rights, duties or power to do so. Mr Kingston alleges that he relied on those representations in entering into the Loan Agreement and SA1-SA4 and that it would be inequitable or unconscionable for CIG to act inconsistently with the representations. Mr Kingston alleges that, as a result, CIG is estopped from contending that he is personally liable for the loan or from seeking to recover the moneys loaned from him. The ADC also alleges that, if there was an event of default, CIG's sole recourse was to obtain all collateral if the event of default was not remedied within 20 business days.
78 CIG denies that the representations, or any of them, were made. It denies reliance. It denies the existence of the estoppels alleged.
D2. The second group of issues: The Money Lenders Ordinance (Hong Kong)
79 The second group of issues in the Statements concern the MLO. The ADC alleges that the MLO applied to each of the loans and that, due to breaches of s 18(1) and/or s 18(2) of the MLO, each of the Loan Agreement, SA1, SA2, SA3 and SA4 are unenforceable.
80 In the Reply, CIG denies that the MLO applies to the loans, or any of them. It alleges that pursuant to a single contract for the provision of financial accommodation ('the Facility Agreement') (constituted by the Loan Agreement, SA1, SA2, SA3 and SA4), it advanced money to Mr Kingston in Victoria for use in Victoria and that, as a result, the MLO has no application to the Facility Agreement. CIG alleges that, in any case, there was substantial compliance with s 18 of the MLO and that, even if s 18 applied to the Facility Agreement, it would be inequitable for the Facility Agreement to be held not to be enforceable. It alleges that, under s 18(3) of the MLO, the Court should order that the Loan Agreement is enforceable in accordance with its full terms or, alternatively, to such extent and subject to such modifications or exceptions as the Court considers equitable.
D3. The third group of issues: Interest on SA1-SA3
81 The third group of issues in the Statements under the heading 'Interest on the 1st - 3rd tranches' are:
(a) whether, on the proper construction of clause 7 of SA4, no interest payments fell due in respect of SA1-SA3 unless and until principal and interest on SA4 had been repaid in full;
(b) whether CIG's conduct of which Mr Kingston complains constitutes conduct in trade or commerce in connection with financial services within the meaning of ss 12CB or 12DA of the ASIC Act;2F[3]
(c) whether, by making demands for the payment of interest in respect of SA1-SA3, CIG demanded payment of interest that was not due;
(d) whether, by making those demands, CIG engaged in conduct in relation to financial services that was misleading or deceptive or likely to mislead or deceive, in contravention of s 12DA(1) of the ASIC Act;
(e) whether, by reason of having made payments in response to demands, Mr Kingston is entitled to have those payments set off against payments of interest in respect of SA4 as and when that interest fell due for payment in priority to SA1-SA3; and
(f) if so, whether Mr Kingston was required to make any payment to CIG in respect of interest on SA4 for the period April 2019 to October 2019.
82 The ADC alleges that, pursuant to clause 7 of SA4, no interest was due on SA1-SA3 until principal and interest on SA4 had been repaid in full. Following entry into SA4, CIG continued to issue debit notes for interest under SA1-SA3. The ADC alleges that Mr Kingston paid amounts in response to those debit notes in the mistaken belief that the amounts were due and that, by reason of these mistaken payments, CIG was overpaid and Mr Kingston was entitled to have those amounts set off against payment of interest on SA4 as and when interest fell due. The ADC further alleges that, by issuing these invoices, CIG engaged in misleading or deceptive conduct.
83 CIG denies the construction of clause 7 of SA4 for which Mr Kingston contends, and denies that Mr Kingston was entitled to have the amounts paid towards interest on SA1-SA3 set off against interest in respect of SA4.
D4. The fourth group of issues: Demands for repayment
84 The fourth group of issues in the Statements are headed 'Demands for repayment of the CIG loans and the P Note'. The ADC includes allegations concerning two secured Promissory Notes relating to Sargon. The first Promissory Note, P Note 1, for HKD500m was entered into on 9 February 2018 by TTIM, a company Mr Kingston alleges was incorporated to be the trust vehicle for the secured loan, and Taiping Trustees. The second Promissory Note ('P Note 2') was entered into on 28 April 2018 by Sargon and TTIM for HKD190m (with the consent of Taiping Trustees as the ultimate lender).
85 Because of the level of granularity with which the fourth group of issues are identified in the Statements, it is more convenient to reproduce the relevant paragraphs rather than to seek to summarise them. Given the similarities in the Statements, CIG's Statement of Issues is reproduced below:
(a) the open and without prejudice letters sent to Mr Kingston on 19 December 2019; and/or
(b) Yi Kai Huang emailing Mr Kingston on 30 December 2019,
engage in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 12DA(1) of the ASIC Act 2001?
If the ASIC Act 2001 applies,6F[7] then in circumstances where, on 31 December 2019, the sum of HK$10,054,964.81 was transferred from CIG to the loan account maintained by Taiping Trustees in respect of P Note 1, by:
(a) Yi Kai Huang emailing Mr Kingston on 9 January 2020 and demanding payment of HK$10,286,636.22 interest on P Note 1 for the quarter October-December 2019;
(b) Taiping Trustees sending letters of demand on 20 January 2020 to each of Sargon Capital Pty Ltd, Trimantium Taiping Investment Management Pty Ltd (TTIM) and Trimantium Capital Funds Management Pty Ltd (TCFM) alleging that TTIM had committed an event of default by failing to pay interest under P Note 1 for the quarter October-December 2019,
did CIG know of or acquiescence in conduct of Taiping Trustees that was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act 2001?
If the ASIC Act 2001 applies,7F[8] by the conduct comprising:
(a) Yikai [sic] Huang emailing Mr Kingston on 9 January 2020 and demanding payment of HK$7,271,733.01 interest on the 1st-3rd tranches for the quarter October-December 2019, and outstanding interest of HK$907,6187.79 on the 4th tranche; and/or
(b) sending a letter of demand on 20 January 2020 to Mr Kingston alleging that Mr Kingston had committed an event of default by failing to pay interest alleged to be outstanding on the 1st-3rd and 4th tranches,
did CIG engage in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act 2001?
Was the appointment of receivers to Sargon, TTIM and TCFM by Taiping Trustees on 29 January 2020 made with the knowledge and acquiescence of CIG?
By a letter to Mr Kingston on 1 February 2020, did CIG:
(a) demand repayment of sums that were not due and owing under the 1st-3rd and 4th tranches;
(b) knowingly acquiesce in Taiping Trustees demanding repayment of a sum that was not due and owing under P Note 1; and/or
(c) improperly exert pressure on Mr Kingston to pay sums that were not due and owing under the 1st-3rd and 4th tranches, by specifying those payments as a condition of suspending the receiverships of Sargon, TTIM and TCFM?
If the ASIC Act 2001 applies,8F[9] has CIG by its own conduct, and by any knowledge of and acquiescence in Taiping Trustees' conduct in:
(a) demanding payments of principal and interest under the 1st-3rd and 4th tranches and P Note 1;
(b) asserting events of default in respect of the 1st-3rd and 4th tranches and under P Note 1;
(c) appointing receivers to Sargon, TTIM and TCFM;
(d) exerting improper and illegitimate pressure on Mr Kingston to pay amounts of principal and interest that were not due on any of the 1st-3rd and 4th tranches; and9F[10]
(e) commencing and continuing this proceeding,
engaged in conduct in connection with the supply of financial services which is, in all the circumstances, unconscionable, in contravention of s 12CB(1) of the ASIC Act?
(a) on 30 September 2019, interest in the sum of HKD7,183,561.64 fell due and payable in respect of SA1-SA3;
(b) Mr Kingston failed to pay HKD7,183,561.64 prior to 13 December 2019, on which date he paid HKD7,252,036.89;
(c) on 31 October 2019, interest in the sum of HKD7,014,684.93 fell due and payable in respect of SA4;
(d) Mr Kingston failed to pay HKD7,014,684.93 prior to 13 December 2019, on which date he paid HKD6,239,651.35;
(e) on 13 December 2019, Mr Kingston paid a total sum of HKD13,491,688.24. As set out in subparagraphs (b) and (d) above, HKD7,252,036.89 was applied to interest in respect of SA1-SA3, with the balance, HKD6,239,651.35, being applied to interest in respect of SA4; and
(f) after the 13 December 2019 payment, outstanding unpaid interest of HKD627,190.08 remained under SA4.
87 CIG further alleges that, on 31 December 2019, interest in the sum of HKD6,650,703.61 fell due and payable in respect of SA1-SA3 and was not paid, and that HKD627,190.08 remained due and payable in respect of the SA4 and that Mr Kingston also failed to pay that amount.
88 On 20 January 2020, CIG served a notice on Mr Kingston requiring the repayment of all outstanding principal and interest in the sum of HKD667,297,084.15. According to the FASOC, as at 20 January 2020,10F[11] the total amount owing was HKD664,900,126.57. Mr Kingston failed to pay that amount. Mr Kingston admits that he has not paid that amount, but denies that CIG was entitled to demand repayment of outstanding principal and interest on any of SA1-SA4 in the amount alleged or at all.
89 The ADC alleges that, on 11 December 2019, Mr Kingston caused a transfer of AUD4.4m to the trust account of CIG's solicitors, Ashurst ('Ashurst Trust Account'). It is alleged that AUD4.4m equated to the total interest outstanding from 1 July 2019 to 31 January 2020 (HKD23,561,643.84) referred to on the draft terms sheet for the early termination of P Note 1. The ADC alleges that, on or around 13 December 2019, the sum of HKD10,081,936.78 was remitted from the Ashurst Trust Account to Taiping Trustees in discharge of indebtedness owing by TTIM under P Note 1, and the sum of HKD13,491,628.24 was remitted from the Ashurst Trust Account to CIG and purportedly applied by CIG:
(a) firstly, in discharge of interest alleged to be due to 30 September 2019 on SA1-SA3 (as to HKD7,252,036.89). The ADC alleges that, pursuant to clause 7 of SA4, no interest was due on SA1-SA3 until principal and interest on SA4 had been repaid in full, and CIG was not permitted to apply this sum in discharge of interest on SA1-SA3 in priority to interest owing on SA4; and
(b) secondly, in discharge of interest alleged to be due on 31 October 2019 on SA4 (as to HKD6,239,591.35). The ADC alleges that Mr Kingston had mistakenly made payments of interest that was not yet due under SA1-SA3 and was entitled to have those amounts set off against interest due under SA4. The ADC alleges that, as a result, as at 31 October 2019, Mr Kingston was not required to make any further payment of interest on SA4, alternatively, that the sum remitted from the Ashurst Trust Account to CIG was more than sufficient to discharge the amount demanded by CIG in respect of SA4.
The ADC therefore alleges, in substance, that there was no default or, alternatively, that the transfer of AUD4.4m to the Ashurst Trust Account on 13 December 2019 meant that, from 13 December 2019, there was no default.
90 Separately, the ADC alleges that, on various occasions from December 2018 until February 2020 (receivers having been appointed to Sargon, TTIM and TCFM on 29 January 2020), demands for payment of interest were made of Mr Kingston, and allegations were made by CIG that Mr Kingston had committed an event or events of default and/or that it was entitled to demand immediate repayment of principal, which amounted to misleading or deceptive conduct in contravention of s 12DA(1) of the ASIC Act. The ADC further alleges that by, amongst other things, demanding payment of principal and interest, CIG engaged in unconscionable conduct in contravention of s 12CB(1) of the ASIC Act.
91 Paragraph 22.1 of the ADC raised a separate set off defence - namely, that if Mr Kingston is indebted to CIG (which he denies) he is entitled to set off any amount that CIG has realised from the enforcement of any securities provided under SA1-SA4. No evidence was adduced and no submissions were made in support of that claim. It is unnecessary to discuss it further.
92 By his counterclaim, Mr Kingston seeks an order declaring that the Loan Agreement and SA1-SA4 are void, an order refusing to enforce the Loan Agreement and SA1-SA4 and such other order(s) as the Court thinks appropriate.
93 CIG denies the allegations in the ADC and alleges in the alternative that if, for any reason, the Facility Agreement is unenforceable or void, which is denied, then Mr Kingston has been unjustly enriched by the receipt of the HKD653m advanced under the Facility Agreement.11F[12] Further, that the moneys advanced by CIG are moneys had and received by Mr Kingston to the use of CIG. Those allegations are denied by Mr Kingston.
94 Before leaving the topic of the issues for determination, it is important to refer to a proposition to which much attention was directed by Mr Kingston at trial. Namely, that the HKD653m loans and the securities taken in support of those loans were part of a strategy by China Taiping to secure a foothold; to use its security position to take ownership of or control in an established superannuation platform in Australia, and thereby, to implement its internationalisation strategy. In final submissions, it was made explicit by leading counsel for Mr Kingston that matters relating to the alleged strategy were relied upon as context only. It was accepted that the strategy alleged did not assist Mr Kingston's misrepresentation case or his case concerning construction of the agreements.
95 The dealings between the parties began in early 2017 and ended shortly after the appointment by Taiping Trustees of receivers to Sargon, TCFM and TTIM on 29 January 2020. It is helpful to consider the alleged misrepresentations upon which Mr Kingston relies, which form part of the first group of issues and which were the focal point at the trial, in the chronological context of those dealings. That is not the case with the second group of issues, which concern the MLO. Although it is convenient to refer to many of the facts and events relevant to the third and fourth groups of issues as part of the chronology, the determination of those issues is also better dealt with outside the sequence of facts and events that took place during the business relationship between the parties.
96 Beginning with what is now agreed to be relevant to context only, the ADC alleges that, between May and November 2017, discussions took place between Mr Wang and Mr Li on behalf of China Taiping and Mr Kingston about the prospect of China Taiping entering into a 'partnership and co-operation arrangement' with Sargon, to be known as 'Trimantium Taiping'.
97 Mr Kingston was introduced to Mr Wang and Mr Li in May 2017. They met in Hong Kong. At that time, Sargon was intending to purchase a New Zealand company, Complectus Ltd ('Complectus'). Sargon was seeking to finance the acquisition.
98 On 25 May 2017, Mr Kingston sent documents to Mr Wang expressing his preference 'to keep things as simple as possible and then build the relationship from there', a reference to a loan from China Taiping to be secured over Complectus. When cross-examined, Mr Kingston denied that he had a preference for this loan option. I do not accept the truth of his denial. It is contradicted by the contemporaneous document of which Mr Kingston is the author.
99 On 14 July 2017, Mr Kingston sent an email to Mr Wang titled 'Sargon - China Taiping - Collaboration Chart' attaching a chart titled 'Sargon - China Taiping - Collaborations' headed 'Sargon - Enterprise value through partnership' seeking to show the benefits to China Taiping of a business relationship with Sargon.
100 Between 20 and 24 July 2017, there was an email exchange between Mr Kingston and Mr Wang in relation to a potential loan to Sargon to fund the Complectus acquisition.
101 On 31 July 2017, Mr Kingston and Mr Wang met at a coffee shop in Lee Garden, Hong Kong. Mr Wang gave evidence that because he did not have his own office, if meeting rooms were booked up, he would go to the coffee shop to meet clients.
102 Although Mr Wang had no recollection of the meeting, I accept that the meeting took place. It was followed by an email from Mr Kingston on 1 August 2017 which began by Mr Kingston asserting his 'understanding' that it was 'desirable for Sargon to retain a division of China Taiping ... to provide Asset Advisory, Consulting and Management Services (Investment Services) to Sargon's expanding global pension and other managed fund asset base'.
103 In the second half of 2017, Mr Wang communicated regularly with Mr Kingston at in-person meetings, over the telephone, using WeChat, and by email.
104 In August 2017, Taiping prepared a document titled 'Main Terms on the Private Placement Bonds Project of Sargon Capital' concerning the proposed acquisition of Complectus by Sargon. That document outlined a proposal that Sargon issue bonds for USD79m (about AUD100m) for three years at an interest rate of 6.8%, with the bondholder being Taiping Trustees on behalf of clients of China Taiping. The collateral was to be 100% equity in Complectus. The document referred to 'Taiping Asset Management' charging an annual investment advisory fee of USD1m to provide advice to Sargon on Assets Under Management, Trust and Supervision (AUMTS), the relevant AUMTS amount in the first year to be not less than USD10bn.
105 Mr Wang and Mr Kingston negotiated a draft terms sheet for the financing of the Complectus acquisition. On 9 August 2017, Mr Kingston sent an email to Mr Wang. In response to a question which asked, 'Can you / Trimantium give personal guarantee on this?', Mr Kingston replied:
Potentially - but the economics of the transaction would need to be quite different as it drastically reduces your risk and increases mine. Other insurance partners we are speaking to are not looking for this, so this would probably exclude Taiping from the next stage.
106 In re-examination, Mr Kingston said that, after his 9 August 2017 email relating to a personal guarantee, no-one from China Taiping ever asked him to provide such a guarantee. While there was no request of Mr Kingston for the provision of a personal guarantee, the question of a guarantee of the proposed facility to fund the Complectus acquisition was explored after 9 August 2017 between China Taiping, Mr Kingston and Mr Kingston's lawyers.
107 On 22 August 2017, Mr Kingston sent a draft terms sheet prepared on behalf of Sargon by its lawyers, Linklaters, to Mr Wang. The draft said that Sargon's shareholders would not be guarantors and would 'only be a party to the finance documents purely as third party security providers on a limited recourse basis'. On 29 August 2017, Mr Wang returned the draft with some initial comments for discussion, including that, if the Borrower is a 'Bidco', a wholly owned SPV subsidiary of Sargon, Sargon will be the guarantor on the facility. On 31 August 2017, Linklaters sent an email to Mr Kingston identifying 'headline issues' with the amended draft, noting that 'even if we interpose an SPV - they have commented "Sargon to be a guarantor no matter what"'.
108 Ultimately, Sargon did not acquire Complectus, the proposed bond placement did not go ahead, and no guarantee was provided.
109 On 28 September 2017, there was a public announcement of a 'strategic partnership agreement' between Taiping and Sargon. The announcement stated that Taiping, a 'subsidiary of China Taiping Insurance Group', will be entrusted by Sargon to manage its AUD3bn assets and provide investment consulting and asset allocation support for its expansion of its investment business in Asia and that this cooperation has effectively increased the scale of Taiping's asset management and is an important breakthrough for Taiping in managing overseas assets.
110 Mr Wang gave evidence that, after the advisory agreement was signed, China Taiping was paid by Sargon for providing investment advisory services. Mr Wang could not recall whether he saw evidence that such services were actually provided. There was no issue in the proceeding that requires a determination as to whether or not that was the case.
111 On 13 October 2017, Mr Kingston sent an email to Mr Wang enclosing a draft prospectus for the proposed GrowthOps IPO. Mr Kingston's email said he thought the IPO could be of significant strategic interest to China Taiping. A minimum of AUD80m was intended to be raised.
112 In an undated letter which Mr Kingston received on 20 October 2017, Taiping expressed its interest in participating in the GrowthOps IPO, with an expected capacity of circa HKD100m. The letter said that Taiping looked forward to receiving a prospectus and the valuation information. While the letter formally expressed interest in investing, it also stated that '[n]othing in this letter is binding on Taiping or its associates'.
113 The GrowthOps prospectus was lodged on 10 November 2017. No member of China Taiping completed an application to subscribe for shares.
114 In the meantime, between about 22 October 2017 and 28 October 2017, Mr Wang, Mr Li and Mr Liu travelled to Australia and New Zealand to conduct due diligence on behalf of China Taiping.
E3. The first representation: in Auckland on 25 October 2017: 'no recourse'
115 Whether or not the first representation as alleged was made at a dinner in Auckland on 25 October 2017 turns on whose evidence is accepted about what was discussed at that dinner. For the reasons that follow, I do not accept that the representation alleged was made.
116 On 25 October 2017, Mr Kingston met over dinner in Auckland with Mr Wang, Mr Li and Mr Liu.12F[13]
117 The ADC alleges that, during the dinner, Mr Wang told Mr Kingston that a direct equity investment by Taiping in GrowthOps was going to be protracted and would not be capable of completion before the planned GrowthOps IPO. It is alleged that Mr Wang proposed an alternative solution which would enable an equity-like investment by means of a loan to a corporate borrower that would invest in the GrowthOps IPO.
118 The ADC further alleges that, in discussions at the dinner, Mr Kingston said he did not care whether a loan or equity structure was used. That was the case provided there would be no recourse to him, Trimantium Capital or TCFM beyond the shares in GrowthOps purchased with China Taiping's funds and that interest on the loan would need to be self-funding. The ADC alleges that Mr Li said the loan would not have any recourse to Mr Kingston or to the Trimantium entities beyond the security pool.
119 The allegations in the ADC are either denied or not admitted by CIG in the Reply.
120 Mr Wang recalled having dinner in Auckland with Mr Kingston, but could not remember the number of occasions. He said both parties introduced the companies they represented, discussed future plans, and there was some discussion about Sargon and about GrowthOps. While Mr Wang could not recall the specifics, he believed matters relating to business collaboration were mentioned.
121 Mr Wang was asked whether, at dinner in Auckland, he and Mr Li said that a loan by China Taiping would not have any recourse to Mr Kingston:
Did you say that to Mr Kingston?---According to my recollection, no, I did not say that.
Did Mr Li say that to Mr Kingston?---I don't recall.
122 Of significance; during Mr Wang's evidence, the interpreter reported that Mr Wang had asked her (in Mandarin), 'What does recourse mean?'. She reported that, in answer to that question, she had explained to Mr Wang that it meant that 'the liability of paying back the loan would - the responsibility of that would lie with Mr Kingston'.
123 After that interchange with the interpreter, Mr Wang was asked whether, at the time, he had an understanding of the meaning of 'recourse'. He said he could not be certain whether he had an understanding of the word 'recourse', or whether that word was used. Mr Wang said that, according to his recollection, it was not said that Mr Kingston or the Trimantium entities would have no liability for the loan or investment. Mr Wang could not recall Mr Li telling Mr Kingston that the loan would not have any recourse to him or to the Trimantium entities beyond the security pool and that loans like that were quite common in Hong Kong. According to his recollection, he himself did not say such things.
124 Mr Kingston gave evidence that he was able to remember the dinner and the topics discussed clearly because it was a 'foundational time' for Sargon. He said the dinner lasted for many hours and he consumed three or four glasses of wine. Mr Kingston said they discussed the 'four pillars' of the Sargon partnership with China Taiping and a range of local market issues. He said that Mr Wang translated certain elements of Mr Li's statements. He said that Mr Li said it was unusual for an organisation of China Taiping's size to publicly announce partnerships with other companies, as had occurred on 28 September 2017, and that this was a significant sign they were committed to the relationship. Mr Kingston said that Mr Liu did not say a lot at the meeting, and he did not think that Mr Liu had a large English language competency.
125 Mr Kingston said that during the dinner, amongst other topics, the earlier equity commitment letter for the GrowthOps IPO was discussed. In his oral evidence, Mr Kingston said that Mr Li (not Mr Wang as alleged in the ADC) proposed that, rather than the equity investment in GrowthOps being made by China Taiping, it would be:
[V]ia a newly created special purpose vehicle, and that vehicle ... would make the equity investment ... and that the money flow from Taiping would be as a loan to that SPV and from the SPV it would be an equity investment, so the money would be recharacterised on the way through.
126 Mr Kingston said that Mr Li explained this would be a lot faster than making a direct equity investment. Further, that Mr Li said this would have the benefit of seeding a new fund together and having a track record in Australia, and that once the money was invested in GrowthOps IPO, the shares could be sold over time, with cash going back to the SPV which could then be reinvested in Sargon or other things to develop an investment track record. Mr Kingston said the speed of the investment was very important because the GrowthOps IPO timing was imminent, around a month or so away, scheduled for 8 December 2017.
127 Mr Kingston said he told Mr Li that he did not mind if the investment in GrowthOps was a loan structure. During the meeting there was no commitment about timing, but there was discussion about how the loan would be structured and documented. Mr Kingston's evidence was that he said that the ASX was an illiquid exchange compared to Hong Kong and that it would not be possible to sell the shares very quickly, and if they were put into an SPV it would take 18 to 24 months or longer to sell them. He said Mr Li responded by saying that would be fine as long as some could be sold to demonstrate the value from the perspective of supporting the loan to value ratio. Mr Kingston said he made it clear that neither he personally, nor the Trimantium entities, could support the payment of interest and that interest would need to be self-funding. He said that he told Mr Li, Mr Wang and Mr Liu that in no circumstances could the loan have recourse to him personally or to any of the Trimantium entities. Mr Kingston's evidence was that Mr Li said the loan would be enough to cover interest and would not have recourse to Mr Kingston or the Trimantium entities beyond the collateral. Mr Kingston said that some of this discussion was translated by Mr Wang. Mr Kingston said that Mr Wang said that, in Hong Kong, loans to companies who default on maturity entitled the lender to take all of the collateral, and that, because of that, lenders could take a lot more risk. Mr Kingston said that, in the course of this discussion, he used the word 'recourse', Mr Li used the word 'recourse', and Mr Wang used the word 'recourse'.
128 In closing submissions, Mr Kingston contended that it was understandable that under formal examination Mr Wang would ask for clarification of the meaning of an English word, 'recourse', but that, at the time of his dealings with Mr Kingston, Mr Wang was an experienced investment banker who had undertaken postgraduate study where classes were conducted in English. Mr Kingston submitted that it was clear from contemporaneous email correspondence that Mr Wang could express himself in clear and idiomatic English about financial topics of real complexity.
129 I do not accept as truthful Mr Kingston's evidence that Mr Wang used the word 'recourse' during a dinner in Auckland in October 2017. I also do not accept, as pleaded in the ADC and stated by Mr Kingston in his evidence, that Mr Li, who is not as proficient in English as Mr Wang and for whom Mr Wang translated, used the word 'recourse'. If Mr Kingston himself used the word 'recourse', and I do not accept his evidence that he did, I do not accept that 'recourse' is a word that would have been understood by Mr Wang or by Mr Li.
130 The circumstances in which Mr Wang asked the interpreter when giving evidence what the word 'recourse' meant together with the evidence given by Mr Wang establish in my mind that Mr Wang had no understanding of the word 'recourse' and would not have used it in the 2017 conversation in Auckland of which Mr Kingston gave evidence.
131 Mr Kingston relied on the 29 August 2017 email to submit that Mr Wang provided comments on a draft terms sheet for a secured loan facility which included a reference to third-party security providers 'on a limited recourse basis'. The reliance upon the email is misplaced. It is accurately described in Mr Kingston's witness statement where, speaking of it, Mr Kingston said that Mr Wang sent comments 'from China Taiping on the term sheet'. The comments were embedded in the draft prepared by Linklaters. The words 'on a limited recourse basis' were Linklaters' words, not Mr Wang's or China Taiping's words. There was a comment in the response concerning those words, but it is not evident that it was Mr Wang who made that comment. It was not put to Mr Wang during his examination that he was the author of the comment. Others at China Taiping were copied to the email sent by Mr Wang attaching the marked up terms sheet prepared by Linklaters.
132 When he gave evidence, Mr Kingston was quick to point out that the word 'recourse' had been in the Linklaters email and in the draft terms. The adept manner in which he identified those references in the documents when cross-examined was an attempt by him to justify and persuade the Court why his evidence, to the effect that the word 'recourse' was mentioned by Mr Wang and Mr Li during the dinner five years earlier, should be accepted. I did not find Mr Kingston's attempt to argue his own case persuasive.
133 Apart from not accepting Mr Kingston's account of what was said by Mr Wang and Mr Li at the dinner, even if the word 'recourse' was mentioned, there could have been no reliance upon such a statement by Mr Kingston. That is so because, as Mr Kingston knew to be the case, any investment or loan needed to be decided upon by a committee, who Mr Kingston described in his evidence as the 'investment committee' but who, in documents tendered at the trial, was on other occasions referred to as the 'Margin Committee'. Mr Kingston understood that Mr Li was a member of the committee but that it was not up to him individually to decide on the terms of any loan. Whatever Mr Li said at the Auckland dinner was conditional only, it could not bind CIG.
134 Further, at the time of the dinner, what was being discussed was a corporate loan, not a personal loan to Mr Kingston as was later documented. The question of a guarantee of such a loan was the subject of communications on 22, 29 and 31 August 2017. When cross-examined, Mr Kingston denied that he knew at that time that for any loan China Taiping would want a guarantor. His evidence that he did not know at that time that China Taiping would require a guarantee was false. It is contradicted by, amongst other things, the advice given to Mr Kingston on 31 August 2017 by Linklaters, 'Sargon to be a guarantor no matter what'.
E4. The proposal for a corporate loan becomes a proposal for a personal loan
135 Mr Kingston submitted that the change from a loan proposed to be made to Sargon or to an SPV (to be named Trimantium Taiping Pty Ltd ('Trimantium Taiping')) to a loan to Mr Kingston personally, why it was made and how he was persuaded to accept it are issues central to the proceeding. Section B of Mr Kingston's closing submission is headed 'Kingston accepted the change from corporate to personal loan on the faith of the no recourse representations'.
136 In those submissions, Mr Kingston contended that there is a forensic vacuum from CIG's side about how the decision to move from a corporate to a personal loan was made, and that CIG advanced no evidence concerning how and why, between 9 and 15 November 2017, it changed the character of the proposed loan from corporate to personal. During this period what, on 9 November 2017, had been documented in draft by China Taiping as a corporate loan to Trimantium Taiping changed to a personal loan to Mr Kingston for which, on 28 November 2017, he completed a handwritten application. Mr Kingston submitted that the change from a corporate to a personal loan was a crucial part of the context in which the Court must assess his evidence about what Mr Wang told him concerning the change and the 'no recourse' representations. He further submitted that the forensic vacuum undermines the 'only with the Committee's approval' contentions advanced by CIG. As will be apparent from what follows, none of those submissions are correct. They are not supported by the evidence. The evidence reveals that, contrary to the heading to section B of his submissions, it was Mr Kingston who initiated the change from a corporate to a personal loan.
137 The forensic vacuum to which Mr Kingston's submissions refer that existed during the trial proper was filled when, between completion of the evidence and oral closing submissions, contemporaneous documents relating to the period 9 to 15 November 2017 within the 15,000-plus page court book, not previously referred to by either party and not put to Mr Kingston or Mr Wang, were identified by CIG. CIG relied upon those documents to establish that it was Mr Kingston who initiated the change from a corporate to a personal loan.
138 Turning to the evidence; in late October/early November 2017, various proposals were exchanged between Mr Wang and Mr Kingston for a corporate loan.
139 On 28 October 2017, Mr Kingston sent an email to Mr Wang attaching a draft investment structure diagram. Mr Kingston said the structure sought to capture the discussions that had earlier taken place. The draft structure involved two loans:
(a) a loan of AUD15m in respect of an eventual purchase of shares in GrowthOps; and
(b) a loan of AUD85m for investment in Sargon.
140 Mr Wang was cross-examined about the structure diagram. He said he believed a discussion would have taken place about the diagram because he could not understand it 'at all', but that he could not recall the content of such a discussion.
141 Mr Kingston said the structure diagram (an extremely complex flow chart with different entities and funds flows) attempted to simplify the proposed set of transactions. He said that it identified the entities proposed to advance money, how investments were to be structured, whether each entity is a trust or a company, and where the money flows and ultimately ends up. In closing submissions, Mr Kingston contended that, not only did the 9 November 2017 documents provide for a loan to a company (Trimantium Taiping - the entity at the centre of Mr Kingston's 28 October 2017 structure diagram), they did not envisage that Mr Kingston would bear any personal liability for the proposed loan, and Mr Kingston was not asked at that time to provide a personal guarantee. That submission is correct, but the diagram was, as Mr Kingston said, one about structure and funds flow. It was not a diagram that was concerned with the provision of guarantees.
142 On 9 November 2017, corporate loan documents identifying Trimantium Taiping as the borrower were sent by Mr Wang to Mr Kingston. Mr Kingston accepted that he would not control Trimantium Taiping (a joint CIG/Kingston entity). Mr Wang could not remember who prepared the documents. He said that, for account opening forms such as those sent on 9 November 2017, approval was not needed.
143 The prospectus for the GrowthOps IPO was lodged on 10 November 2017. The retail offer followed soon after that. The prospectus described Mr Kingston as the founder and managing director. The IPO was for an initial offering of between 60m and 70m new shares, expected to be issued at a price between AUD1 and AUD1.17.
144 Between 9 and 11 November 2017, there were communications concerning who was to be the corporate borrower. In some of those communications, Trimantium Capital was identified as the proposed corporate borrower. In cross-examination, Mr Kingston agreed that he did not want Trimantium Capital to be the borrower. Mr Kingston disagreed that, because he did not control Trimantium Taiping, he did not want it to be the borrower either, but I do not accept the truth of that evidence.
145 On 11 November 2017, Mr Wang sent an email to Mr Kingston which requested 'background information on Trimantium Captial [sic] as borrower'.
146 Whether the suggestion of Trimantium Capital as the proposed corporate borrower came from Mr Wang or from Mr Kingston is not important. What is important is who initiated the change from a corporate loan to a personal loan.
147 Mr Kingston gave evidence that, on 16 November 2017, CIG (through Mr Wang) proposed that he borrow the money personally, rather than as a corporate loan. Mr Kingston's evidence was that, on 16 November 2017, he had a telephone discussion with Mr Wang in the course of which the change was discussed. Mr Wang telephoned him and said 'that the investment committee had approved the loan ... but ... the funds would have to be routed ... [through Mr Kingston] personally', and that Mr Wang had told him that 'all of the details ... [were] the same. But that ... [Mr Kingston] would be named as the borrower'. Mr Kingston's case, and his evidence about which he was cross-examined, was that during that conversation Mr Wang said there would 'still be no personal liability'. Documents concerning the Margin Committee meeting on 16 November 2017 had become available to Mr Kingston as a result of discovery in this proceeding.
148 It was put to Mr Kingston that he had suggested a personal loan, and what Mr Wang was doing was confirming that the committee had agreed. Mr Kingston denied that is what occurred. I do not accept the truth of Mr Kingston's evidence about this asserted conversation.
149 Mr Wang was examined about how it came to pass that, between 9 and 15 November 2017, what had been documented as a proposed corporate loan changed to a personal loan. He said he was aware that CIG gave Mr Kingston a personal loan, but he did not recall word for word discussions in the middle of November 2017 about the loan structure changing. He was unable to recall, but said that he would 'guess that this would be a result of the internal discussions within Taiping group of the committee as well as communications between Taiping and the client', possibly involving parties such as legal, risk, compliance and finance.
150 When the conversation alleged by Mr Kingston to have taken place on 16 November 2017 was put to Mr Wang, he could not recall the specifics but said that his recollection was that he did not discuss the topic of Mr Kingston's personal liability because that related to the legality of contracts.
151 The contemporaneous record of communications between 12 and 16 November 2017 to which attention was directed in closing addresses show that it was not CIG but Mr Kingston who proposed the change from a corporate to a personal loan. That sequence of events was as was put to Mr Kingston and denied by him. The evidence given by Mr Kingston about discussion of a change with Mr Wang on 16 November 2017 after the committee meeting was false. It was Mr Kingston who identified himself personally as the borrower. He did so, in writing, on 12 November 2017.
152 The first mention of a personal loan occurred on 12 November 2017, when Mr Kingston sent an email at 11:31am to Mr Wang13F[14] attaching a draft structure document, a very different document to his 28 October 2017 structure diagram. The 12 November 2017 diagram attached to the email expressly identified Mr Kingston as the borrower.
153 At 8:31pm on 12 November 2017, Mr Kingston sent an email to Mr Wang attaching a draft escrow agreement. The draft agreement defined 'Borrower' as Mr Kingston. The covering email said:
We'd use a very simple Escrow Agreement as we've drafted attached to sit along-side the Loan Agreement.
As stated - the permitted use of funds would be to buy shares in the Triimantium [sic] GrowthOps Ltd IPO and in Sargon Capital Pty Ltd.
We can then use the "借贷补充协议" [translated as "Supplementary Agreement"] that you sent through, with some small changes, as the Loan Agreement, thoughts?
154 At 9:08pm on 12 November 2017, Mr Wang replied to Mr Kingston's email saying:
155 On 15 November 2017, a proposal to lend HKD100m to Mr Kingston personally was provided to the members of the Margin Committee. The proposal stated:
Mr. Philip James Kingston (hereinafter referred to as "Phillip"), the founder and CEO of Sargon Capital Pty Ltd (hereinafter referred to as "Sargon"), who is our important partner in Australia, currently plans to apply for a loan from us with the equity of Sargon owned by him and the stocks of Trimantium GrowthOps Ltd (hereinafter referred to as "GrowthOps") listed on the Australian Stock Exchange as the underlying assets collateral ...
156 On 16 November 2017, the Margin Committee met and approved the proposal.
157 Even though he was the author of the two emails sent by him on 12 November 2017 mentioned above; Mr Kingston's 110 page witness statement made no reference to either of them. Nor did his evidence-in-chief refer to them. When Mr Kingston dealt with the events of 12 November 2017 in his witness statement under the heading 'Change to a personal loan', he referred to three other emails exchanged between himself and Mr Wang on 12 November 2017. Mr Wang was cross-examined about two of those emails. Mr Wang was not questioned about the two 12 November 2017 emails in which Mr Kingston identified himself personally as the borrower.
158 In closing submissions, Mr Kingston was critical of the belated reliance by CIG on the 12 November 2017 emails which had not been put to him in cross-examination. Given that he sent the emails, the criticism was not justified. There was no objection to the receipt of the additional documents into evidence. There was no submission that Mr Kingston should be recalled so that the documents could be put to him.
159 I find that it was Mr Kingston who initiated the change from a corporate to a personal loan, and that he did so on 12 November 2017.
E5. The second representation: 11 or 16 November 2017
160 The pleaded case alleges a representation on 11 November 2017. Mr Kingston's evidence asserts a representation in the course of a conversation on 16 November 2017. I find there was no representation made, whether as alleged in the ADC or as referred to by Mr Kingston in his evidence.
161 Allegations previously made by Mr Kingston in his pleadings that, in mid-November 2017, Mr Wang told him that he would not be personally liable under the loan, and that a 'supplementary agreement' would be drawn that would exclude any personal liability to repay principal and interest under the loan, were deleted as part of pleading amendments made on 26 October 2021.
162 The ADC alleges that, on about 11 November 2017, Mr Wang told Mr Kingston that, for internal reasons, including 'know your client' ('KYC') requirements within China Taiping, the loan to finance the investment in the IPO could not be through a corporate entity and would instead need to be made to Mr Kingston personally. For the reasons discussed above, that allegation is not true.
163 The ADC alleges that, in the same 11 November 2017 conversation, Mr Kingston told Mr Wang that he had no ability to service interest on a personal loan and that Mr Wang said the change to a personal loan would not change anything substantive about the loan or put liability on Mr Kingston personally.
164 The pleaded case, including following amendments made on 15 February 2022, is totally inconsistent with Mr Kingston's evidence in his witness statement dated 9 November 2021. In that statement, he made no reference to any discussion on 11 November 2017. In his 9 November 2021 witness statement and in his oral evidence-in-chief, Mr Kingston said that the conversation in question took place during a phone call on 16 November 2017. In closing submissions, Mr Kingston contended that a conversation concerning both a change from a corporate to a personal loan and one in which Mr Wang said there would be no personal liability and that would be dealt with in the supplementary agreement took place, not on the date mentioned in the pleadings, but on 16 November 2017.
165 Mr Kingston's evidence was that Mr Wang had called him on 3 November 2017 to say there had been preliminary approval of a loan and sent documents to that effect on 9 November 2017. He said that, on 16 November 2017, Mr Wang called and said the loan had been approved, but the funds would have to be routed through him personally because, given the timing of the IPO, there would be no time to get through the KYC issues of setting up a new company, who the owners would be, the directors and so on, and that Mr Kingston's role would be that of a sort of escrow agent. Mr Kingston said that 'escrow agent' was Mr Wang's language. Mr Kingston said this was a change to the structure and that Mr Wang told him that the loan size, duration, collateral and SPV involvement were all the same, but that he, Mr Kingston, would be named as the borrower. He said he asked Mr Wang if anything had changed in terms of personal liability, and that Mr Wang said there would still be no personal liability and that would be 'dealt with in the supplementary agreements'.
166 When he gave evidence, Mr Wang was asked whether he recalled Mr Kingston saying to him that the standard loan terms would need to be amended to exclude recourse to Mr Kingston. Mr Wang did not 'recall the specifics', but did recall telling Mr Kingston that changes could not be made to the master loan agreement, because he told all his clients the same thing, and that any specific changes that would need to be made would be made in the supplementary agreement. To the best of his recollection, Mr Wang did not tell Mr Kingston that the supplementary agreement would ensure that there was no personal liability on the part of Mr Kingston.
167 Asked whether he told Mr Kingston that, although the change was from a corporate loan to a personal loan, that would not change anything substantively about the loan or put liability on Mr Kingston personally, Mr Wang said he could not recall saying that.
168 I do not accept as truthful Mr Kingston's evidence that, in a telephone conversation on 16 November 2017, Mr Wang told him that there would be no personal liability on him and that the question of personal liability would be dealt with in the supplementary agreement.
169 Mr Kingston is, and in late 2017 was, a highly educated, sophisticated, experienced businessman. On his case, he was told that any exclusion of personal liability would be dealt with in a supplementary agreement. Not only did each of the Supplementary Agreements signed by him not exclude personal liability; Mr Kingston never sent an email, or made a request via WeChat or any other medium, that the exclusion of his personal liability be dealt with in any of the Supplementary Agreements. The fact that it was not dealt with in any of the Supplementary Agreements is significant when considering whether the evidence that such a matter was discussed by telephone, whether on 11 November 2017 or on 16 November 2017, is true or not.
170 I find that Mr Wang did not make a statement to the effect that there would be no personal liability in discussion with Mr Kingston, whether on 16 November 2017 as was Mr Kingston's evidence, or on 11 November 2017 as pleaded. It was Mr Wang's recollection there was no discussion about personal liability of Mr Kingston because that was a 'legal matter'. I accept the truth of that evidence.
171 There is no doubt that, on 17 November 2017, Mr Kingston understood that he was personally to be the borrower. On that day, Mr Kingston sent an email to Mr Wang with the subject line 'Re: Share pledge to do list', which said (among other things):
... you're sending the money to me, the borrower
...
Escrow Agreement:
...
a) Money is banked into Phillip Kingston account FIRST
...
172 On 21 November 2017, Mr Kingston sent Mr Wang an email attaching an updated draft escrow agreement naming himself as the borrower.
E6. The third representation: 23 or 24 November 2017
173 The date on which Mr Kingston, Mr Wang and, so Mr Kingston alleges, Mr Li met in Hong Kong is critical to whether there was a meeting at all at which the alleged third representation was made by Mr Li and Mr Wang. For the reasons that follow, I do not accept there was such a meeting or that the representation alleged was made.
174 The ADC alleges that, during a meeting on 24 November 2017 between Mr Kingston, Mr Wang and Mr Li at Lee Garden Two, Causeway Bay, Hong Kong, Mr Wang and Mr Li said the latest change from a corporate to a personal loan was only an 'internal change' to enable the loan to be approved faster because it would avoid KYC complexities. Further, that the loan would create no personal liability for Mr Kingston or affect his personal credit rating or borrowing capacity. The ADC alleges that, following that meeting, on 25 November 2017 Mr Wang sent a suite of standard form documents, including an 'Application Form (Individuals)' and a 'Loan Agreement', to Mr Kingston.
175 In his witness statement, Mr Kingston placed the conversation at Lee Garden Two as one that took place on 24 November 2017. When he adopted his witness statement in evidence-in-chief, he amended the date of his alleged meeting with Mr Li and Mr Wang to 23 November 2017. No amendment was made to the ADC to change the date of the meeting from 24 to 23 November 2017.
176 The cross-examination of Mr Wang prior to trial proceeded on the basis that 'Mr Kingston has given evidence [in his witness statement] that on 24 November 2017 he met with you and Mr Li in person at Lee Garden Two'. That is, a meeting as per the pleaded case.
177 When examined, Mr Wang said he recalled meeting Mr Kingston in the area where Lee Gardens Two is located in Causeway Bay, Hong Kong, as he did with other clients. He said he met Mr Kingston there in late November 2017 a few times. He could not recall the specifics of what was discussed but he did have a recollection of meetings taking place between Mr Li and Mr Kingston himself in Hong Kong.
178 It was put to Mr Wang that, in a conversation on 24 November 2017, Mr Li, who was also present, assured Mr Kingston that he would not have personal liability for the loan. While Mr Wang said he could not remember whether Mr Li said that to Mr Kingston or not, Mr Wang had previously given evidence that he could not recall ever speaking to Mr Kingston about personal liability.
179 To be clear, what was put to Mr Wang when he gave evidence in Hong Kong did not accord with the evidence that Mr Kingston later gave at trial as to the date of the meeting. Nor were other matters of which Mr Kingston gave oral evidence concerning the alleged meeting put to Mr Wang. For example, Mr Kingston gave oral evidence-in-chief that Mr Li told him he had changed his flight to Beijing so that he could meet with him in the company of Mr Wang. No such conversation was put to Mr Wang in cross-examination who, on Mr Kingston's case, was also present for the meeting.
180 In anticipation of issues concerning the third alleged representation arising at trial, CIG filed a witness statement from Mr Guo dated 17 December 2021. The purpose of Mr Guo's evidence was to establish that Mr Li, who, in the ADC and in Mr Kingston's witness statement, was said to have met with Mr Kingston in Hong Kong on 24 November 2017, was in Beijing on that day.
181 Documents exhibited by Mr Guo show that Mr Li had a ticket for an 8:00am flight to Beijing on 23 November 2017. Other documents exhibited include claims for reimbursement by Mr Li for the cost of that flight and documents such as taxi receipts showing that Mr Li was in Beijing on 24 November 2017.
182 Mr Guo gave evidence verifying Mr Li's travel records. He gave evidence of the usual steps taken when an officer of Taiping or its subsidiaries submitted a claim for reimbursement of expenses incurred on a work-related trip and of his search of Taiping's database for records of business trips attended by Mr Li between 20 and 30 November 2017. CIG also relied upon the evidence of Ms Zhong in relation to the travel records relating to Mr Li. From April 2015 to May 2019, Ms Zhong's responsibilities included reviewing claims for reimbursement of expenses incurred on work-related trips which were submitted by officers of Taiping or its subsidiaries. She confirmed Mr Guo's evidence as to the procedure concerning claims for reimbursement of expenses.
183 The travel records about which Ms Zhong was cross-examined include documents that showed that, on 8 December 2017, a cheque was issued to Mr Li to reimburse him for travel expenses relating to a trip to Beijing on 23 November 2017. Ms Zhong approved that reimbursement. When cross-examined, she agreed that for an employee to submit a reimbursement claim for a flight ticket it was not necessary for the employee to also enclose a copy of their boarding pass. Ms Zhong agreed, when questioned in re-examination, that it would have been a serious matter to submit a false claim for expenses. No criticism was made of Ms Zhong's evidence in closing submissions.
184 On 6 June 2022, when opening Mr Kingston's case at trial, leading counsel, for the first time, informed the Court and CIG that the meeting at which the third representation was made occurred either on 23 or 24 November 2017. Further, that Mr Kingston's evidence would be that Mr Li had told him at the meeting that he had shifted his flight so as to be able to meet with Mr Kingston that day.
185 The opening was the first occasion on which there was any suggestion that Mr Li had shifted his flight, that he had told Mr Kingston that was the case, and that the meeting might have taken place not on 24 November 2017, but on 23 November 2017.
186 Mr Kingston gave very detailed oral evidence-in-chief of a meeting which he said took place on 23 November 2017. He said he arrived in Hong Kong by air late afternoon on 23 November 2017. He got a train to Central, 26 minutes away from the airport, dropped his bags at the Four Seasons Hotel, jumped back on the train over to near the China Taiping offices. He said he there met with Mr Li and Mr Wang at about 7:30 or 8:00pm. He said he used forceful language and was 'pretty aggressive' because they had been discussing since May 2017 doing something together and he had the IPO he was trying to get to, so he was pressing Mr Li for an update. He said Mr Li apologised profusely for the delays and said he was trying to find the 'right pocket of capital', the 'right source of money within that group'. Mr Kingston said Mr Li was aware of the change where he, Mr Kingston, was to be written down as the borrower, and Mr Li thanked him for accommodating that change and gave a brief explanation that it was to be done because of KYC reasons. Mr Kingston said that Mr Li told him he was going to see the Chairman to give him an update on the transaction and that he had moved his flight to see Mr Kingston before going to see the Chairman in Beijing. Mr Kingston said that he asked Mr Li whether there would be any personal liability to him following the change, and Mr Li said no, there would not be any personal liability for the loan, it would not be registered with any credit bureaus or agencies, and it would not affect his borrowing limit, or words to that effect. Mr Kingston said the conversation was 'sort of hurried' because he had just got off the plane and he thought Mr Li was off to one, so it was a fairly short encounter.
187 I find that all of the evidence-in-chief given by Mr Kingston concerning what he said occurred on 23 November 2017 was fabricated.
188 Mr Kingston said he corrected the date to 23 November 2017 after he saw the second witness statement of Mr Guo dated 17 December 2021. He said that, after he saw the statement, he had a look at his calendar and flight records. He said he thought he gave instructions to his solicitors about the date and that it should have been 23 November 2017. I do not accept the truth of his evidence about giving instructions to his solicitors.
189 I find that the change of the date of the meeting in Mr Kingston's evidence-in-chief and the reference to Mr Li changing his flight were invented by Mr Kingston in an attempt to overcome a perceived difficulty in his witness statement arising from Mr Li's travel documents that had been produced and from evidence given by Mr Guo and Ms Zhong that establish that Mr Li flew on 23 November 2017 from Hong Kong to Beijing.
190 Mr Kingston's ADC was amended on 15 February 2022. The date of the meeting was known to be critical to the alleged third representation. The date was in contest at the time of that amendment, but the ADC was not amended to change the date. The revised date, a meeting on 23 rather than on 24 November 2017, of which Mr Kingston gave detailed evidence-in-chief, is inconsistent with the earlier cross-examination of Mr Wang by Mr Kingston's counsel.
191 While Mr Kingston denied that he was just 'making it up' concerning the meeting that he now said was on 23 November 2017, I do not believe his evidence. It is a reconstruction intended to improve his case, and so that his evidence can be retrofitted around documents. It fails even on that score.
192 Mr Kingston's oral evidence is directly contradicted by a copy of Mr Li's boarding pass, which shows Mr Li boarded the flight to Beijing at 7:20am on 23 November 2017. Mr Li was not in Hong Kong twelve hours later, at 7:30pm or 8:00pm on 23 November 2017.
193 On 8 June 2022, CIG sought to tender a photograph of a Cathay Dragon boarding pass in the name of Mr Li for a flight from Hong Kong to Beijing, boarding at 7:20am on 23 November 2017. Mr Kingston objected to the tender. I admitted the boarding pass into evidence over objection, directing under s 49(b) of the Evidence Act 2008 (Vic) ('Evidence Act') that s 48(1) of the Evidence Act is to apply to the tender of the boarding pass, a foreign document to which s 49 applies. I gave Mr Kingston leave to adduce such further evidence as he may be advised relating to the boarding pass. Pursuant to the grant of leave, Mr Kingston tendered two webpages relating to the availability of in-town check-in facilities in Hong Kong. The availability of those facilities does not displace the evidence of the boarding pass itself which establishes that Mr Li boarded the flight at 7:20am that morning. The case for Mr Kingston requires a finding that, having already checked in for a flight with a 7:20am boarding time, Mr Li delayed his flight for at least 12 hours in order to meet with Mr Kingston. I do not accept that occurred.
194 I do not accept that the meeting of which Mr Kingston gave evidence, which included meeting with Mr Li, took place on either 23 or 24 November 2017. I do not accept that, on either of the dates alleged, Mr Kingston asked Mr Li whether there would be any personal liability to him following the change in investment structure and that Mr Li said there would be no personal liability and that the loan would not be registered with any credit agency. There was no such discussion with Mr Li. He left Hong Kong at around 8:00am on 23 November 2017.
195 I do not accept that the third representation as alleged or as described by Mr Kingston in his evidence ever occurred.
E7. The personal loan application: 28 November 2017
196 The ADC pleads that Mr Kingston signed the Loan Agreement on or around 28 November 2017, and, on 3 December 2017, he signed SA1 (separate copies in Chinese characters and in the English language). Mr Kingston alleges that he signed those documents relying on the earlier communications alleged.
197 I have found that the earlier communications, being the first to third representations alleged, did not occur. They were not made. When Mr Kingston signed the Loan Agreement and SA1, there was no reliance by Mr Kingston upon representations that were never made.
198 The ADC pleads that, on or around 28 November 2017, CIG provided Mr Kingston with a copy of the Loan Agreement, in English, signed on behalf of CIG, and a summary of the provisions of Parts III and IV of the MLO.
199 On 25 November 2017, Mr Wang sent an email to Mr Kingston attaching documents including a loan agreement application form for a personal borrower entitled 'Loan Agreement - Application Form (Individuals)' ('Application Form') and a document entitled 'Loan Agreement - Loan Schedule' ('Loan Agreement'). Later that day, Mr Wang sent a draft supplementary agreement in Chinese characters with the subject 'Loan supplementary agreement for translation asap'.
200 Mr Wang was asked about the 'Minutes regarding explanation of loan terms', the MLO notice and the PIC statement which were attached to his first 25 November 2017 email. He could recall explaining some of the details of the loan to Mr Kingston, such as the interest rate. He could not recall whether that discussion occurred in the context of the Minutes, the MLO notice and the PIC statement. While he did not remember the specifics, it was his evidence that he would explain forms to clients and facilitate feedback from administrative, legal and risk to clients regarding proper completion of those forms.
201 Mr Kingston said that, on 28 November 2017, he telephoned Mr Wang to ask for his help to complete the paperwork Mr Wang had sent by email on 25 November 2017. Mr Wang recalled that he and a colleague explained 'the application forms' to Mr Kingston. Mr Wang recalled that he told Mr Kingston that the commercial substance of the investment would be captured in the supplementary agreement. In cross-examination, Mr Kingston accepted that Mr Wang went through the Loan Agreement with him.
202 Mr Kingston completed the Application Form on 28 November 2017. He disclosed personal income of AUD16,666 per month, together with other income of AUD300,000 per year. Mr Kingston completed the form by handwriting the required information, including naming himself as the customer. He provided details of his home address in Australia, his education and residential status, and his employment and his income from employment. He ticked the box describing the identity of the ultimate beneficial owner as 'the customer'. He identified himself as an 'authorised person', being a person authorised to provide instructions. Mr Kingston completed the details of the 'customer account' as an account in his own name, account number specified, at the Industrial and Commercial Bank of China ('ICBC') in Hong Kong ('ICBC Account').
203 Mr Kingston completed the Loan Agreement, signing that document in two capacities. First, as the customer, and secondly, as 'guarantor'. There is no dispute that Mr Kingston read, understood and signed the Loan Agreement.
204 Mr Kingston gave evidence that, in discussion with Mr Wang, he (Mr Kingston) noted that the supplementary agreement would deal with the repayment mechanism. He said he raised this issue with Mr Wang and said words to the effect that 'I'm not repaying anything as we discussed yesterday. Has that changed?'. When the making of such a statement by Mr Kingston was put to Mr Wang, he said he had no recollection of such a statement. Mr Kingston gave evidence that Mr Wang replied 'No, it hasn't changed but we just need to fill this out to keep the admin people happy'. CIG submitted that it is unlikely any such thing to the effect that Mr Kingston had no personal obligation to repay was said by Mr Wang, and I agree. In cross-examination, Mr Kingston acknowledged that the Loan Agreement he completed contained a term that stated that the customer had to repay the loan. Mr Kingston agreed that Mr Wang never said the loan did not have to be repaid.
205 I do not accept that a discussion occurred in late November 2017, or on any other date, where Mr Wang told Mr Kingston that he was not obliged to repay the loan or that the purpose of Mr Kingston being required to sign the loan was just to 'keep the admin people happy'.
206 SA1, the details and relevant terms of which are discussed in section B2.1 above, was signed by Mr Kingston on 3 December 2017. The ADC alleges that Mr Kingston signed SA1 relying on representations made to him by Mr Li in Auckland on 25 October 2017, by Mr Wang on 11 November 2017 and by Mr Wang and Mr Li at Lee Garden Two on 24 November 2017.
207 In his witness statement, Mr Kingston said that he would not have signed the Loan Agreement or SA1 if Mr Wang had told him he would have personal liability if the loan was not repaid. As I have found that none of the first three alleged representations were made, I do not accept the truth of that evidence. If Mr Kingston considered that he was not to be personally liable, he could and would have asked for and insisted upon an express term of SA1 to that effect. That did not happen.
208 Mr Kingston gave evidence that, on 3 December 2017, Mr Wang walked through SA1 and explained key terms, including the collateral, and the default consequences. Mr Kingston agreed that he understood the terms of SA1.
209 Mr Wang gave evidence that he discussed methods of repayment with Mr Kingston and that methods of repayment could take a number of forms. Mr Kingston said that Mr Wang told him that, in the event of default, all that CIG would do was take all of the collateral. I do not accept the truth of that evidence. There is no point having a supplementary agreement with terms that override the STCs without including the very term that matters, if such a term was in fact agreed.
210 On 6 December 2017, pursuant to SA1, CIG deposited the SA1 loan proceeds, approximately HKD100m, into Mr Kingston's ICBC account.
211 On 25 January 2018, SA2 was signed by all parties other than CIG.
212 The ADC alleges that Mr Kingston signed SA2 relying on representations made to him by Mr Li in Auckland on 25 October 2017, by Mr Wang on 11 November 2017 and by Mr Wang and Mr Li at Lee Garden Two on 24 November 2017. No fresh representations are alleged by the ADC to have been made after SA1 and prior to SA2. In closing submissions, Mr Kingston submitted that, when signing SA2, he relied on the assurances from Mr Wang on 16 and 23 November 2017 that there would be no personal liability or personal recourse to him if the loan was not repaid. As I have found that none of the alleged representations relied on either in the ADC or in closing submissions were made, there was no reliance as alleged.
213 On 1 February 2018, pursuant to SA2, CIG deposited approximately HKD100m into Mr Kingston's ICBC Account.
214 On 6 February 2018, HKD79m was transferred from Mr Kingston's ICBC Account to TCFM's bank account with the Australia and New Zealand ('ANZ') Bank.
215 On 7 February 2018, Mr Kingston obtained a bank statement for the ICBC Account which showed an account balance of HKD26,820,459.56, which he signed. Mr Kingston delivered a copy of the bank statement to Mr Wang together with 'Confirmation of Application' receipts for subscriptions by Asia Selangor and Trimantium International Holdings in the GrowthOps IPO.
216 Mr Kingston admitted during cross-examination that he delivered the statement to Mr Wang to show that he complied with SA1 and SA2 by setting aside HKD26m to make interest payments. Whilst that was true as at 7 February 2018, on 12 February 2018, HKD20m was transferred out of the ICBC Account.
E10. The Sargon Promissory Notes: P Note 1: 9 February 2018
217 On 9 February 2018, TTIM, in its own capacity and as trustee of the Trimantium Taiping Investment Fund I, Sargon ('the Obligor') and Taiping Trustees ('the Holder'), signed P Note 1, a HKD500m Promissory Note.
218 The funds from P Note 1 were applied by TTIM as to AUD50m to purchase 333,334 seed preference shares in Sargon, and as to AUD31m for TTIM to on-lend to Sargon for future acquisitions.
219 On 16 March 2018, GrowthOps commenced trading on the ASX. It did so having raised AUD70m at a price of AUD1 per share. By reference to their shareholdings in GrowthOps; Asia Selangor, Forci, Pattani and Trimantium International Holdings, all companies associated with, if not controlled by, Mr Kingston, collectively funded AUD58,945,570 of the AUD70m raised in the GrowthOps IPO.
(a) Asia Selangor held 20m shares in GrowthOps (21.08%);
(b) Forci held 17m shares in GrowthOps (17.92%);
(c) Pattani held 14m shares in GrowthOps (14.76%); and
(d) Trimantium International Holdings held 7,945,570 shares in GrowthOps (8.38%).
221 A 'Notice of initial substantial holder' lodged with ASIC on 16 March 2018 states that, at that time, Mr Kingston held a relevant interest in 24,846,256 shares in GrowthOps (26.2%) through Trimantium Capital and trusts of which he was a beneficiary.
222 In late March and early April 2018, Mr Kingston and Mr Wang discussed a further supplementary agreement which became SA3.
223 Mr Kingston's evidence is that, at a dinner on 23 March 2018, Mr Wang said that SA3 would effectively be the same as SA1 and SA2, with HKD175m going into GrowthOps to repay TCFM for the GrowthOps IPO subscription shortfall, which TCFM paid from its own funds (including funds from the sale of the seed preference shares), and that the rest was to be used to fund interest.
224 On 18 April 2018, prior to the signing of SA3, Sonia Chan of China Taiping sent an email to Mr Kingston, copied to Mr Wang, enclosing a revised draft of SA3. The email noted that 'all the pledged shares have been updated in order to reflect our understanding as discussed earlier today'. Mr Kingston gave evidence that the discussion earlier that day was to the effect that all pledged shares would become collateral under SA3.
225 When asked about the 18 April 2018 email, Mr Kingston said that he was not sure if Ms Chan was referring to a discussion with Mr Wang. There is no doubt the email referred to a discussion between Mr Kingston and Ms Chan, and not a conversation involving Mr Wang. Mr Kingston's response was an example of him not wanting to accept the obvious in a document because its contents either were, or were considered by him to be, inconvenient.
226 The fourth representation is alleged to have occurred in a telephone conversation on or around 20 April 2018. The ADC alleges that, in the course of that conversation, Mr Wang told Mr Kingston that CIG would have no recourse to him in relation to the Supplementary Agreements.
227 In his witness statement, Mr Kingston refers to a conversation that he says occurred between he and Mr Wang on 19 or 20 April 2018. The paragraphs concerning the conversation do not contain evidence which is consistent with or in support of the alleged fourth representation.
228 There is no evidence in support of the fourth representation alleged. As a result, I find that the fourth alleged representation was not made.
229 On 20 April 2018, SA3 was signed by all parties to the agreement, other than Trimantium Capital and TCFM whose signatures are undated. The ADC alleges that Mr Kingston signed SA3 relying on representations made by Mr Li in Auckland on 25 October 2017, by Mr Wang on 11 November 2017, by Mr Wang and Mr Li at Lee Garden Two on 24 November 2017, by Mr Wang on 20 April 2018 and in an email sent by Mr Wang on 20 April 2018.
230 On 20 April 2018 at 11:17am, Mr Wang sent an email to Mr Kingston relied on by Mr Kingston in the ADC as one of the matters on which he relied in entering into SA3. The email stated, in part:
However, during the term of the Loan Agreements, we shall only request an early repayment by giving you 60 days prior notice pursuant to clause 7 of SA3.
231 Although in the ADC Mr Kingston alleged he relied on this email, the email is not the subject of a misrepresentation plea and nor is it relied on in support of the estoppel plea.
232 As none of the representations alleged to have been relied on by Mr Kingston in entering into SA3 were made, no issue of reliance arises.
233 On 20 April 2018, CIG deposited approximately HKD200m into the ICBC Account under SA3.
E14. The Sargon Promissory Notes: P Note 2: 28 April 2018
234 On 27 April 2018, Sargon executed a General Security Deed and Guarantee in connection with P Note 2.
235 On 28 April 2018, TTIM as trustee for the Trimantium Taiping Investment Fund 1 (the Holder) entered into P Note 2, a HKD190m Promissory Note with Sargon, with the consent of Taiping Trustees (the Ultimate Lender). The purpose of P Note 2 was to support the on-lending to Sargon of the funds remaining under P Note 1.
236 P Note 2 was signed by Mr Li as director of Taiping Trustees. The maturity date of P Note 2 was 31 January 2021. The governing law is the law of Victoria.
237 Mr Kingston alleges that, in early July 2018, he and Mr Wang met to plan SA4. Mr Kingston's evidence in his witness statement is that they discussed the amounts that would be required to cover the interest shortfall under SA3, and that Mr Wang said that China Taiping would make interest on SA1-SA3 'payment in kind' ('PIK'), meaning that interest would be capitalised.
238 On 24 September 2018, the Lending Committee (formerly the Margin Committee) considered a further loan of HKD253m to Mr Kingston. The proposed loan at a lower rate of interest than the earlier loan, namely, 5%, was approved.
239 The parties agree that the effective date of SA4 is 28 September 2018. The ADC alleges that Mr Kingston signed SA4 in reliance on the same representations made to him and upon which he relied when signing SA3. As none of those representations have been established, Mr Kingston's misrepresentation case concerning SA4 fails.
240 On 18 October 2018, pursuant to SA4, CIG advanced approximately HKD253m to Mr Kingston's ICBC Account.
E16. Interest payments, alleged defaults and terms sheets: April to November 2019
241 From the inception of each of the loans, SA1-SA4, Mr Kingston received various interest invoices. Although when the SA1 and SA2 loans were established a margin call account was also established, there was no automatic interest payment regime put in place. Mr Kingston made his own arrangements for the payment of interest. He said that, if the invoices were paid from an Australian bank account, then he would engage with Bonnie Tran, an employee of TCFM, regarding payment of interest. If interest was paid from a Hong Kong bank account, Mr Kingston did not engage with Ms Tran regarding payment.
242 Defaults in relation to the loans began at the end of April 2019. From mid-May 2019, Mr Kingston began advancing excuses for late or non-payment of interest. CIG made no secret of its desire to have interest on the loans paid on time.
243 On 24 April 2019, an invoice for interest on SA4 (the HKD253m loan) for the six-month period October 2018 to April 2019 was forwarded to Mr Kingston. In cross-examination, Mr Kingston accepted that the interest payment the subject of the 24 April 2019 invoice was not made by the due date of 30 April 2019.
244 On 10 May 2019, Jane Zhou of China Taiping emailed Mr Kingston in relation to that unpaid interest payment.
245 On 13 May 2019, for the first time, Mr Kingston raised an issue about the capitalisation of interest on SA4. Mr Kingston replied to the email from Ms Zhou:
Hi Jane,
Wasn't this loan [SA4] supposed to be a PIK interest instrument? I assumed that's why you hadn't sent any invoices through since October.
Can you send me the executed documents so I can confirm?.
246 Mr Kingston gave evidence that the reference to PIK was a reference to 'payment in kind' interest, which he agreed was the equivalent to capitalised interest; with no interest to be paid until the maturity of the loan.
247 Mr Kingston's evidence (in his witness statement) was that Mr Wang had told him that China Taiping would make interest on SA1-SA3 (not SA4) PIK. Mr Kingston accepted during cross-examination that he had made an error in his 13 May 2019 email to Ms Zhou. The reason no invoices had been issued since October 2018 relating to SA4 was because interest on SA4 was payable half yearly.
248 Objectively it was the case that, up until May 2019, interest was paid on the HKD400m loan (SA1-SA3), initially monthly and then quarterly. It was put to Mr Kingston that, if he really believed that interest on SA1-SA3 was PIK and therefore not due until loan maturity, he would have taken steps immediately to put a stop on interest payments relating to SA1-SA3. Mr Kingston accepted that this would have been a reasonable thing to do, but that he did not do so. Mr Kingston continued to pay interest on SA1-SA3 until after May 2019, and then not under protest.
249 No question or complaint was ever raised by Mr Kingston about interest on SA1-SA3 being capitalised until his defence was filed in the proceeding. Mr Kingston suggested in cross-examination that it was raised shortly after the appointment of receivers, but the Court was not directed to any documents to this effect. Similarly, at no time before his defence was filed did Mr Kingston ask for a credit in respect of interest on any of SA1-SA3 that had previously been paid, interest that, in the ADC, Mr Kingston contends was paid under a mistake.
250 The only issue of PIK ever raised at the time concerned SA4 as referred to in the 13 May 2019 email. However, Mr Kingston does not now contend that SA4 was a PIK loan.
251 On 20 May 2019, Mr Kingston sent a further email to Ms Zhou saying that because he thought 'this [SA4] was a PIK instrument we haven't been prepared for the interest payment - it wasn't in our cash flow model or banking system. Can you give me two weeks please to arrange the wire out of HK?'. The amount of the interest unpaid and overdue on SA4 at that time was approximately HKD7.5m.
252 After 20 May 2019, Mr Kingston informed CIG that he was having 'technical issues' making payment of interest.
253 On 21 May 2019, Ms Zhou emailed Mr Kingston saying that the interest should be paid as soon as possible so the loan status can be switched back to 'normal' from 'suspicious loan'.
254 On 24 May 2019, Mr Kingston sent an email to Ms Zhou and Mr Wang saying that all of the loans were going to be repaid in 60 to 90 days at the Sargon IPO which, at that time, was intended to occur in June 2019. As at 24 May 2019, interest due on 30 April 2019 on SA4, the HKD253m loan, had still not been paid.
255 On 29 May 2019, Ms Zhou forwarded an email from the risk management and legal department to Mr Kingston. That email referred to Mr Kingston's failure to pay interest on the HKD253m loan. It noted that there was an event of default entitling CIG to require repayment of all or part of the amount owing within two business days pursuant to clause 7(5) of the Loan Agreement.
256 Mr Kingston did not respond by saying that the interest was not due or that there had not been a default. Instead, later that day, he responded by email to Ms Zhou and Mr Wang, saying, '[t]his interest payment will 100% be in your account by the end of the month'.
257 On 30 May 2019, the outstanding interest on SA4 for the period October 2018 to April 2019 was paid.
258 On 21 June 2019, CIG sent a loan interest invoice and schedule relating to SA1-SA3 for the quarter April to June 2019 to Mr Kingston in the amount of HKD7,209,227.06. On 3 July 2019, the interest invoice on SA1-SA3 for the quarter April to June 2019 was paid without protest.
259 As at 30 June 2019, GrowthOps and its subsidiaries ('GrowthOps Group') reported a AUD65m net loss. From mid-2019, the GrowthOps share price deteriorated. The audit report issued by GrowthOps' auditors dated 27 September 2019 which accompanied the GrowthOps Group's Annual Report was qualified by a statement that 'a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern'.
260 On 19 September 2019, Ms Chan sent an email to Mr Kingston attaching the loan interest invoice and schedule for the quarter July to September 2019 for interest on SA1-SA3. The email asked for payment on or before 30 September 2019. Interest on SA1-SA3 (the HKD400m facility) for the previous three quarters, which in the ADC Mr Kingston alleges were paid under a mistake, had by that time been paid.
261 On 19 September 2019, Mr Kingston sent an email to Mr Wang, Ms Zhou and others in which he said Sargon was 'on track to become the largest pension trustee in the world, so it makes sense to have a stronger relationship between Taiping and Sargon'. He said, 'it would be good to have Taiping as an equity holder, sooner rather than later'. That email was sent not long before Mr Kingston again defaulted on the loans from CIG.
262 On 23 September 2019, Ms Zhou sent an email to Mr Kingston advising that interest on the HKD500m secured P Note 1 in the sum of HKD10,082,191.78 was due to be paid on 30 September 2019. The same email said:
Also for 400 million HKD personal loan, according to the email which Emily has sent to you last Thursday, the total interest amount is HKD7,252,036.89. Please help to arrange the payment before 30th of September.
263 As at 30 September 2019, interest was due on P Note 1. Interest was also due on the HKD400m personal loan (SA1-SA3). Interest was not paid in relation to either facility by the end of October 2019. Those amounts remained unpaid when, on 16 October 2019, CIG issued a separate loan interest invoice and calculation schedule to Mr Kingston in respect of SA4, the HKD253m loan where interest is payable at six monthly intervals. The invoice was for HKD7,147,270.14. Payment was due in accordance with that invoice on 31 October 2019. That payment was not made on or before the due date.
264 On 4 October 2019, Mr Kingston sent an email to Ms Zhou and Yi Kai Huang of China Taiping which said:
Please see the receipts for the payments on 30 September 2019 attached that have been stopped by the bank's compliance department due to KYC/AML reasons. I've had a few discussions with the bank given my relationship (as a ANZ Private Bank customer) and unfortunately, they require the information below in order to process the payments. They will be sending the money back to me shortly, I am working on using another bank as a back-up if you cannot provide this information below. This is quite embarrassing for me and I'm in the middle of a public roadshow for Sargon, so its [sic] a busy time. I apologise for delayed communication.
265 Mr Kingston's email contained information for 'our KYC and AML requirements'. It also attached two payment advice receipts on the letterhead of the ANZ Bank for payments on 30 September 2019. The first receipt in the amount of HKD10,082,191.78 corresponded to interest on P Note 1 as per the 23 September 2019 email from Ms Zhou, with the payment message, 'Sargon'. The second payment advice of the same date was in the amount of HKD7,252,036.89 with the payment message, 'Phillip Kingston'. The amount of the second payment advice corresponded to the interest that, on 23 September 2019, Ms Zhou had advised was required to be paid on 30 September 2019 on the HKD400m personal loan (being SA1-SA3).
266 Mr Kingston's evidence was that the list of the KYC requirements enclosed in his 4 October 2019 email came from the ANZ Bank. When cross-examined, for the first time; and contrary to the thrust of his 4 October 2019 email; Mr Kingston said that the ANZ Bank stopped payment on these two amounts 'at my request'. Mr Kingston accepted that at the time he was 'partially' stalling for time. He said that he did 'not know' why he did not say in the 4 October 2019 email that payment had been stopped at his request. It seems that, by this time, the GrowthOps share price had not recovered and there had still been no Sargon float which, in May 2019, Mr Kingston had expected would take place within about a month.
267 On 21 October 2019, the provision of a draft terms sheet for early repayment of P Note 1 and SA1-SA3 were discussed in an email from Mr Huang to Mr Kingston. The email and the draft terms sheets later sent are important to the question of the application of AUD4.4m later paid into the Ashurst Trust Account:
As discussed between you and our senior management team, ...
8. The outstanding interests are HKD7252036.89 for 400m personal loan and HKD10082191.78 for Sargon's 500m HKD secured P note.
We are starting the issue of Termination of the loan agreement and P note, and we'll send the draft of TS to you ASAP.
In addition, kindly remind you that another interest due of HKD7147270.14 for 253m personal loan is required to pay before Oct. 31st.
268 On 5 November 2019, Mr Huang emailed three separate draft terms sheets to Mr Kingston for the proposed early termination of each of SA1-SA3, SA4 and P Note 1, each with a proposed early repayment date of 31 January 2020. So far as relevant, the covering email simply stated, '[e]nclosed please find the Term Sheet of early termination agreement for your reference'. It is to be noted that clause 7 of each of SA1-SA4 provide that CIG was entitled to request early repayment on 60 days' notice.
269 Each draft terms sheet included a section titled 'Outstanding Interest'. In the case of SA4 (the HKD253m loan):
Total Outstanding Interest: HKD$10,778,533.71 (Form [sic] 2019.5.1 to 2020.1.31)
Breakdown as shown below:
HKD$ 7,147,270.14 (From 2019.5.1 to 2019.10.31)
HKD$ 3,631,263.57 (From 2019.11.1 to 2020.1.31) (indicative on actual)
270 Each of the draft SA1-SA3 terms sheet and the draft SA4 terms sheet also included a section titled 'Repayment Order'. In both documents, the following appeared against that topic:
Fully repaid the principal and interest of 253 million Loan and other payables (like premium); and
Fully repaid the principal and interest of 400 million Loan.
271 Mr Kingston did not reply to the 5 November 2019 email.
272 On 14 November 2019, Mr Huang sent an email to Mr Kingston in the following terms:
Hi Phillip
It has been a long time since we've been in touch.As [sic] the outstanding interest is still outstanding,we [sic] may downgrade this project. It may lead to serious consequences.
Could you please advise the process of interest payment for the loan of 653m HKD and 500m HKD Sargon's secured P note? Look forward to hear from you.
273 On 15 November 2019, Mr Huang sent a further email, this time following an article in the Australian Financial Review reporting on a proposal by Sargon to raise a convertible note. The email included the following:
Lastly, kindly note that the interests of HKD653m loan and the HKD 500m secured P note are still outstanding. Our team is under very high pressure. Please make the interest payment ASAP, or we can not get approvals to do anything of your requirements. Moreover, our legal may send you a formal EOD letter.
274 The emails of 14 and 15 November 2019 did not result in outstanding interest on the loans being paid. Instead, on 16 November 2019, Mr Kingston sent an email to Mr Huang stating:
To confirm our position:
Sargon is not raising a convertible note at all any more. Please disregard the media speculation in the AFR and The Australian newspapers
It is illegal for me to pay you until I have your KYC/AML information and I need an update on this please when you have time.
I cannot raise any capital to refinance our arrangements until the security over TCFM is released (which you shouldn't have - it was only there for a short time in 2018)
E17. Demands and the AUD4.4m payment: December 2019
275 On 2 December 2019, Ashurst sent four letters of demand attached to a single email. One letter of demand was addressed to Mr Kingston sent on behalf of CIG in relation to the SA1-SA3 and SA4 personal loans, in total HKD653m, together with default interest due on SA1-SA3 and SA4. The interest demanded was as follows:
(a) on SA1-SA3: HKD7,252,036.89, being the sum of the invoice that Ms Chan had sent to Mr Kingston on 19 September 2019, being interest due on 30 September 2019; together with default interest until 30 November 2019, a total as per the demand of HKD12,091,813.72; and
(b) on SA4: HKD7,147,270.14, being the sum of the invoice that Ms Chan had sent to Mr Kingston on 16 October 2019, being interest due on 30 October 2019; together with default interest until 30 November 2019, a total as per the demand of HKD8,325,851.46.
276 The other three letters of demand were sent to Mr Kingston by Ashurst on behalf of Taiping Trustees. Those demands related to P Note 1 and, as stated in the email, were addressed to each of TTIM, Sargon and TCFM (the latter two as guarantors). They demanded payment based on an event of default in the payment of interest by TTIM of HKD10,082,191.78, being the sum set out in Ms Zhou's email to Mr Kingston of 23 September 2019, being interest due on 30 September 2019. Together with default interest until 30 November 2019, the total amount due as per the three separate letters of demand addressed to each of Sargon, TCFM and TTIM was HKD16,767,123.29.
277 The ADC admits that demands were made on 2 December 2019 for payment of HKD7,252,036.89 in respect of SA1-SA3 and for payment of HKD7,147,120.14 in respect of SA4. It alleges that CIG was not entitled to make the demands in respect of SA1-SA3, or in respect of SA4, as no amount was then due and outstanding under either loan. The ADC further pleads that the Taiping Trustee letters of demand were also sent under cover of the same email.
278 Mr Kingston gave evidence that, immediately after receiving the letters, he called Mr Wang.
279 On 3 December 2019, Mr Huang sent an email to Mr Kingston saying that, as Ashurst is acting on behalf of 'Taiping', Mr Kingston should contact Ashurst. On 3 December 2019, David Greenberg of Ashurst also sent an email to Mr Kingston to that effect.
280 On 6 December 2019, Mr Kingston sent an email to Minna Zhang of Ashurst that began by saying that he had been 'reconfirming our legal position'. The email asserted, raising an issue about 'know your client' (KYC) compliance:
As we have advised your client on numerous occasions, when we learnt that the underlying beneficiaries have changed and presumably the controlling influences, we asked to be informed of our new counterparties. Your client has refused to provide this information despite numerous follow-ups over a period of months.
We have been advised that under the sanctions laws, it is a strict liability offence to not take reasonable precautions and conduct due diligence on our counterparties.
...
We remain ready and able to pay the interest payments once we have received the requested information.
281 Responding later that day, Ms Zhang told Mr Kingston that Ashurst was not aware of any sanctions law in Australia relevant to the lending of money which would prevent Mr Kingston from paying Taiping Trustees and CIG. The email said that, even so, Taiping Trustees and CIG would be happy to receive the interest demanded in the letters of 2 December 2019 to the Ashurst Trust Account. The email reminded Mr Kingston that, as stated in Ashurst's letters dated 2 December 2019, the payments must be made by 10 December 2019.
282 On 9 December 2019, Mr Kingston responded to Ms Zhang saying, '[i]t seems that this ought to be a matter for your compliance team. We will make that payment to your trust account if I don't hear from you by 6pm today'.
283 On 9 December 2019, Mr Greenberg responded to Mr Kingston:
Can you please provide us with a copy of your remittance advice once when [sic] these payments have been made so we can ask our accounts payable team to look out for these payments.
In accordance with our letters dated 2 December 2019 the payments must be completed by on or before 10 December 2019. Our clients reserve their rights to take further action in the event that these remittances are not provided before this deadline.
284 On 9 and 10 December 2019, Mr Kingston and Mr Greenberg exchanged emails concerning the currency in which payment could be made, and the exchange rate.
285 The ADC alleges that on, 11 December 2019, Mr Kingston caused a transfer of AUD4.4m to be made from TCFM to the trust account of Ashurst, CIG's solicitors. It is common ground that the transfer took place.
286 The AUD4.4m was transferred by Mr Kingston's father on his behalf. Following the transfer, Mr Kingston sent an email (dated 10 December 2019) to Mr Greenberg concerning the transfer:
OK David. I didn't hear from you in time (by 3pm) and the transfer has already gone in AUD.
...
I haven't authorised any wires for the claimed charges over and above the interest invoices as this is in dispute and subject to ongoing discussions with Taiping, only the three invoices as they were sent to me by Taiping which is approx A$4.4 million.
287 The ADC alleges that the payment of AUD4.4m was the total outstanding interest shown on the draft terms sheet for early termination of P Note 1. CIG alleges the AUD4.4m was paid in partial discharge of the demands made on 2 December 2019. The sequence and content of the communications between 2 December 2019 and 11 December 2019 outlined above is only consistent with the position for which CIG contends, but Mr Kingston persisted at trial with his allegation that the AUD4.4m was paid for the early termination of P Note 1.
288 Mr Kingston gave evidence that the money to cover the payment was sourced from Sargon. He said it was paid with the intention it would be applied to interest on P Note 1 for the period to 31 January 2020. That is, in accordance with the earlier draft terms sheet for the payment out of P Note 1, being one of three terms sheets sent by Mr Huang to Mr Kingston on 5 November 2019; the other two relating to the potential payment out of SA1-SA3 and SA4.
289 In cross-examination, Mr Kingston denied that he arranged for the payment in response to the two invoices for interest on the personal loans and the 23 September 2019 email which referred to interest on P Note 1, all of which, as at 11 December 2019, remained unpaid. I do not accept the truth of Mr Kingston's evidence when he denied that the payment of AUD4.4m was in respect of those unpaid but outstanding amounts.
290 Mr Kingston's evidence concerning the AUD4.4m proceeds on the premise that he made a voluntary payment of an amount not yet due in respect of P Note 1 in circumstances where, a few days earlier on 2 December 2019, demands had been made for the payment of outstanding interest on SA1-SA3, SA4 and on P Note 1. Under the draft terms sheets, there was no obligation for Mr Kingston to pay out P Note 1, or any of the other loans, until 31 January 2020. Mr Kingston did not write to Ashurst or to CIG and say that the AUD4.4m payment of interest was in relation to P Note 1. He did not send a letter or an email to say that interest on SA1-SA3 and on SA4 was not owing as is his pleaded case. He did not ask for a credit for past interest mistakenly paid, as is also his pleaded case. He did not refer to what are now his construction arguments concerning clause 7 of SA4. The explanation of his intention concerning the AUD4.4m payment is not credible.
291 On 11 December 2019, Mr Huang sent an email to Mr Greenberg at Ashurst asking him to 'transfer the interest to our account'. Instructions were given for a further letter to be sent to Mr Kingston asking him to make interest payments due by 31 December on his HKD400m loan (SA1-SA3) and on P Note 1. The amounts specified were interest on Mr Kingston's loan of HKD7,296,808.28 and interest on P Note 1 of HKD10,082,191.78 for the period 1 October - 31 December 2019.
292 On around 13 December 2019, Ashurst transferred:
(a) AUD1,876,494.05 (HKD10,082,191.78) to Taiping Trustees; and
(b) AUD2,523,505.97 (HKD13,491,688.24) to CIG.
293 Mr Guo gave evidence that, of the sum received by CIG:
(a) HKD7,252,036.89 of the amount received was applied towards interest that accrued on the HKD400m loan (SA1-SA3) from July to September 2019; and
(b) HKD6,239,651.35 of the amount received was applied towards interest that accrued on the HKD253m loan (SA4) for May to October 2019.
294 After applying the payment in the manner described, there remained an interest shortfall. Not only was there a shortfall in relation to amounts earlier demanded, in the meantime additional interest had accrued.
(a) in respect of SA1-SA3, by reason of clause 7 of SA4, interest on SA1-SA3 was not due until principal and interest on SA4 had been fully repaid. Further, that CIG was not permitted to apply HKD7,252,036.89 in discharge of interest owing on SA1-SA3 in priority to interest owing on SA4; and
(b) in respect of SA4, as a result of Mr Kingston having previously made payments in the mistaken belief that those amounts of interest on SA1-SA3 were due for payment, as at 31 October 2019, CIG had been overpaid at least HKD21,605,971.91 plus interest. It alleges that Mr Kingston was entitled to have that amount set off against interest on SA4 as and when it became due in priority to interest due on SA1-SA3. Further, as the draft terms sheet stated, that principal interest and other payables for SA4 were to be repaid before repayment of principal and interest for SA1-SA3.
E18. Further demands and letters stated to be 'without prejudice': 19 - 30 December 2019
296 On 19 December 2019, Ashurst sent two letters to Mr Kingston, an open letter of demand and a without prejudice letter.
297 The 19 December 2019 open letter referred to the 2 December 2019 letters of demand. It alleged a failure to pay interest payments which were due in full and that amounts remain outstanding after credit is given for the payment made on 11 December 2019.
298 The 19 December 2019 letter stated to be 'without prejudice' identified interest payments which Ashurst asserted would need to be paid on each of the HKD653m loan (SA1-SA4) and on P Note 1, in total HKD18,465,988.02. It invited a proposal from Mr Kingston as to how those obligations would be discharged.
299 The ADC alleges that, by directing or initiating the 19 December 2019 letters, CIG demanded payment of sums that were not then due and owing under SA1-SA3 and SA4 and which would not become due and owing under SA1-SA3 on 31 December 2019. There was no response from Mr Kingston to Ashurst or to CIG to that effect at the time.
300 On 30 December 2019, Mr Huang sent an email to Mr Kingston:
Please arrange the following interest payment:
The accrued interest for Sargon's 500 million HKD secured P note. The total amount is HKD 10,286,636.22.
The accrued interest for HKD 400 million Phillip's personal loan. The total amount is HKD 7,271,733.01.
The outstanding interest for last interest payment. The total amount is HKD 907,618.79.
Please transfer the interest to ASHURST's trust account before December 31st, 2019.
301 The ADC further alleges that when, on 30 December 2019, Mr Huang asked for payment by 31 December 2019 of interest on SA1-SA3 accrued to 31 December 2019, interest on P Note 1 accrued to 31 December 2019 and outstanding interest from the last interest payment, he demanded payment of sums that were not then due and owing under SA1-SA3 and SA4 and which would not become due and owing under SA1-SA3 on 31 December 2019.
302 On 30 December 2019, Mr Kingston sent a letter to Ashurst, stated to be 'without prejudice' and to be sent on behalf of TTIM only, in which, amongst other things, concerning P Note 1, he said:
As your Client would be aware, since our meeting on Thursday 17th October in Sydney, Australia, significant work has been undertaken to refinance the Facilities in full, well ahead of their repayment date under the relevant Facilities, in accordance with the wishes expressed by your client on that day.
...
While your client may have certain entitlements under the Facilities to take enforcement action, in my view, any such action will severely prejudice the ability for your client to recover some or any of the amounts owing or which will be owing under the Facilities, and be counterproductive to my progressed endeavours to refinance the Facilities in full.
On the other hand, a negotiated outcome in relation to the amounts which may become payable in the short term, as well as an agreed hiatus or waiver in relation to any enforcement action, will enable me to continue to progress the refinancing of the Facilities which will enable the relevant Obligors to repay the full amounts of the Facilities in the short term, and in any case well ahead of their maturity date in 2021.
As a result, I therefore request you outline your clients' intentions in relation to any amounts which are or which may become owing under the Facilities as set out in your Letter, and their willingness to engage on the items outlined above.
303 On 31 December 2019, CIG transferred HKD10,054,964.81, from the HKD13,491,688.24 that had been remitted from the Ashurst Trust Account, to Taiping Trustees.
304 On 2 January 2020, Hui Xu of China Taiping notified her colleagues at China Taiping as follows:
Taiping Securities Fund accounts under Taiping Trust received the fourth quarter interest of Sargon Australian Superannuation project, totalling HK$10,054,644.81 (receivable HK$10,082,191.78, the interest is for the period from 01 October 2019 to 31 December 2019). Could everyone please take note.
305 On 6 January 2020, HKD27,546.97 of the AUD4.4m interest payment was transferred to the loan account of Sargon with Taiping Trustees. Mr Guo gave evidence that this transfer and the transfer on 31 December 2019 were made for internal group accounting purposes and were not treated by CIG as increasing or otherwise affecting CIG's claim against Mr Kingston.
306 In closing submissions, Mr Kingston placed considerable store on what were described as the 'secret' internal transfers of funds within China Taiping. He submitted:
The question of how the China Taiping entities applied the A$4.4m payment that Kingston made on 11 December 2019 has been obscured by CIG's gymnastic attempts to deflect attention from the implications of its transfers of HK$10.082m to Taiping Trustees on 31 December 2019 and 6 January 2020.
E19. Demands and the appointment of receivers: January 2020
307 On 6 January 2020, Mr Huang sent an email to Ms Liu attaching 'the application for signoff of the Sargon project disposal plan'. The attachment included the following table:
II. Project default
The interest payment of the previous period of the Sargon Projects was overdue, and the details are as follows:
Phillip Kinston [sic] Mortgage Financing Loan Phase I
Phillip Kinston [sic] Mortgage Financing Loan Phase II
On 13 December 2019, Taiping Financial Holding and Taiping Trust received interest of 4.4 million Australian dollars from Phillip through ASHURST law firm, and the total unpaid interest was 907,618.79 Hong Kong dollars.
As of 7 January 2020, the interest payment of the current period of the Sargon project is overdue, and the Sargon Projects owe a total interest of 18,465,988.02 Hong Kong dollars. The details are shown in the following table:
Phillip Kinston [sic] Mortgage Financing Loan Phase I
308 Mr Kingston was critical in closing submissions of this table for its failure to mention the payment of HKD10.082m and the internal transfer for the fourth-quarter interest in relation to P Note 1.
309 On 9 January 2020, Mr Huang sent an email to Mr Kingston:
Please pay the outstanding interest before Jan.14th,2020. The details of the outstanding interest are as follows:
- The accrued interest for Sargon's 500 million HKD secured P note. The total amount is HKD10,286,636.22.
- The accrued interest for HKD 400 million Phillip's personal loan. The total amount is HKD 7,271,733.01.
- The outstanding interest for last interest payment. The total amount is HKD 907,618.79.
310 Mr Kingston submitted concerning P Note 1 that the email from Mr Huang on 9 January 2020 was a false demand for money that was not owing under P Note 1. It was submitted that Mr Huang was acting otherwise than in good faith, was acting on behalf of both CIG and Taiping Trustees, and was acting dishonestly in making the demand.
311 Two responses to Mr Huang followed from Mr Kingston. The first, on 10 January 2020: 'I'll come back to you on this shortly'. The second on 14 January 2020: 'Just need a few more days given the EOY and Christmas period, staff are still on leave'.
312 On 20 January 2020, Ashurst sent an email to Mr Kingston attaching four letters of demand. The first, a further letter of demand on behalf of CIG to Mr Kingston in relation to the payment of the personal loan. The letter of demand addressed to Mr Kingston personally specified default:
(a) on 31 December 2019, failure to pay CIG HKD7,271,733.01, interest then due and payable under SA1-SA3; and
(b) on 31 December 2019, failure to pay CIG HKD907,618.79, interest then due and payable to CIG under SA4,
and demanded repayment of all outstanding principal and interest in the sum of HKD667,297,084.15.
313 The 20 January 2020 demand is relied on in the FASOC. In the ADC, Mr Kingston admits he did not pay the amounts demanded, but says CIG had no entitlement to make the demands for payment.
314 Mr Kingston did not respond to the 20 January 2020 demand in relation to the personal loans by saying that no moneys were owing, that interest on SA1-SA3 was not payable and that he wanted a credit for interest previously paid in respect of SA1-SA3. He did not write back and say that nothing was owing on SA4 as is now his defence. He did not say that there should be a set-off of interest from SA1-SA3 against SA4 as alleged in the ADC. He did not assert that he had no personal liability on the loans. Nor did he say that CIG's rights were limited to the security pool as is now his case based on the representations alleged in the ADC.
315 The other three attachments to the Ashurst 20 January 2020 email were separate letters of demand on behalf of Taiping Trustees by which Ashurst demanded payment of P Note 1 by TTIM and by the guarantors of P Note 1, being Sargon and TCFM. In closing submissions, Mr Kingston described 'each of those demands' as having been 'sent jointly on behalf of CIG and Taiping Trustees'. That is not accurate. While attachments to the same email, the demand by CIG was separate from the demands by Taiping Trustees.
316 The demands for repayment relating to P Note 1 sent to each of TTIM, Sargon and TCFM as attachments to the 20 January 2020 email from Ashurst specified default:
(a) on 4 October 2019, failure by TTIM to pay interest for the quarter ending 30 September 2019 in full; and
(b) on 31 December 2019, failure by TTIM to pay HKD10,286,636.22, being interest then payable under P Note 1 for the quarter ending 31 December 2019 and the default interest then payable for late payment of interest accrued for the quarter ending 30 September 2019.
317 The demands stated that, if payment was not made, Taiping Trustees may exercise its rights immediately and without further notice.
318 The ADC alleges the Taiping Trustees letters of demand were false, alternatively misleading or deceptive, in that they failed to take account of the transfer of HKD10,054,964.81 in satisfaction of interest payable under P Note 1 for the quarter ending 31 December 2019.
319 Mr Kingston submitted that, based on internal China Taiping documents, an amount corresponding to interest on the P Note 1 as at 31 December 2019 had already been transferred to Taiping Trustees, a matter not disclosed to Ashurst who sent the 20 January 2020 letters of demand.
320 On 20 January 2020, Mr Huang sent an email enclosing two proposed standstill letters. One was from CIG addressed to Mr Kingston and concerned the personal loans. The other was from Taiping Trustees addressed to TTIM, Sargon, TCFM and Mr Kingston and concerned P Note 1. The letters requested that they be returned signed by 23 January 2020. That did not occur.
321 On 29 January 2020, Taiping Trustees appointed receivers to each of Sargon, TTIM and TCFM. It is important to note that there is no challenge in this proceeding to the appointment of the receivers. There is also no pleaded allegation that the appointment was invalid. The appointment was by Taiping Trustees. That company is not a party to the proceeding.
322 On 1 February 2020, Ashurst sent a letter to Gilbert + Tobin, the solicitors acting on behalf of Sargon, TTIM and TCFM following the appointment of the receivers. The letter offered to suspend the receivership for a period of ten business days on terms that included the payment by 3 February 2020 of HKD10,268,636.22, being interest on P Note 1 specified in Ashurst's 20 January 2020 letter to Sargon, and upon payment of HKD7,272,733.91 and HKD907,618.79, being interest outstanding on the two personal loans set out in Ashurst's 20 January 2020 letter to Mr Kingston.
323 On 2 February 2020, Gilbert + Tobin responded to that letter on behalf of the companies in receivership advising that the companies were unable to agree to making the payments requested, but proposing alternative terms.
324 The ADC alleges that, by instructing the 1 February 2020 Ashurst letter to be sent, CIG and Taiping Trustees improperly and illegitimately attempted to exert pressure on Mr Kingston to pay sums that were not owing under SA1-SA3 and SA4.
325 The offer to suspend the receiverships on 1 February 2020 followed the earlier 20 January 2020 standstill proposal to which there had been no response. As noted above, the 1 February 2020 offer was conditional upon the payment of HKD10,286,636.22, being interest specified in Ashurst's letter to Sargon dated 20 January 2020 with respect to P Note 1, and also upon payment of the sums of HKD7,272,733.91 and HKD907,618.79, being interest specified in Ashurst's letter to Mr Kingston on 20 January 2020.
326 When responding on 2 February 2020 to the offer to suspend the receiverships, Gilbert + Tobin did not say that there was a dispute about either of the amounts referrable to SA1-SA3 and to SA4 being due and payable and remaining unpaid. They did not assert that there had been no event of default in relation to P Note 1, as is Mr Kingston's contention in this proceeding. Gilbert + Tobin did not say that, because there had been no event of default, there were grounds to set aside the appointment of the receivers.
327 Mr Kingston was cross-examined about the Gilbert + Tobin 2 February 2020 response to the proposal that there be a suspension of the receiverships. He said that he was personally involved in giving instructions to Gilbert + Tobin concerning the proposal to suspend the receiverships. He said that he spent 'all weekend in Gilbert + Tobin's offices'.
328 Although there was no mention in the 2 February 2020 Gilbert + Tobin letter of there having been no default, Mr Kingston gave evidence that he told Gilbert + Tobin over the weekend that interest on P Note 1 was not outstanding. I do not accept the truth of that evidence.
329 The fact that Mr Kingston did not dispute, on 2 February 2020, that he owed money which remained unpaid on personal loans and did not dispute or question that there was a default on obligations to pay interest on P Note 1 is consistent with an acknowledgment by Mr Kingston in a 'without prejudice' email sent by him on 13 February 2020, using Chinese characters, to various persons at China Taiping, including Mr Wang and Ms Zhou. In his witness statement, Mr Kingston translated the email. His translation, which he said he did himself, did not include the following critical sentence: 'Nevertheless, I am very sorry for some matters that have occurred recently...'.
330 The reason Mr Kingston deliberately left out that sentence in his witness statement from the translation of the email he had sent is because it constituted a truthful acknowledgment of the default for which he had been responsible in the payment of interest on the personal loans SA1-SA3 and SA4.
F. The First Group of Issues: Mr Kingston's Estoppel Defence
331 The key paragraph in the ADC to which the first group of issues relate alleges, in effect:
(a) by the representations, CIG conveyed a clear and unequivocal promise or assurance to Mr Kingston that:
(i) he would not be personally liable to repay the money loaned by CIG;
(ii) alternatively, CIG would not recover from him the money loaned, or exercise its rights, duties or powers to do so;
(b) Mr Kingston reasonably relied on that promise and was induced to alter his position on the faith of it;
(c) as a consequence of (b), it would be inequitable or unconscionable for CIG to act inconsistently with the promise; and
(d) accordingly, CIG is estopped from contending that Mr Kingston is personally liable or from seeking to recover from him the moneys CIG lent.
332 There is no provision in any of SA1-SA4 that states that Mr Kingston will not be personally liable in the event of a default. There is no provision that states that CIG will not recover from Mr Kingston money lent or that it not exercise its rights, duties or power to do so. None of SA1-SA4 state that CIG will have no recourse to Mr Kingston. None of SA1-SA4 provide that CIG agrees to have no recourse beyond the security pool.
333 In cross-examination, Mr Kingston accepted that he understood that SA1 was going to deal with repayment and recourse, and whether or not he was personally liable. He accepted that at no time did he ask Mr Wang or Mr Li to confirm in writing that CIG would have no recourse to him and that he would have no personal liability. At no time did Mr Kingston send an email or a message to Mr Wang or to Mr Li even mentioning the possibility of the matters alleged to have been represented to him and which are relied on for his estoppel plea. The representations alleged are inconsistent with the personal loan nature of each of SA1-SA4 and with the express terms of each of those agreements.
334 Mr Kingston gave evidence that when he was aware of something that was 'not right', he 'usually' raised it with the other party. It is inconceivable that, if Mr Kingston considered that any of the agreements were 'not right' because, contrary to the representations alleged, each of SA1-SA4, which incorporate the STCs, including clauses 7, 32, 33 and 41 of the STCs, clearly and unequivocally impose an obligation upon him personally to repay the loans, and none of them restrict enforcement by CIG in the event of default to the recovery of shares given as security, that he would not have expressly raised those matters with CIG.
335 The representations alleged and upon which Mr Kingston, for the purpose of his estoppel defence, alleges he relied are all alleged to have been made orally either by Mr Wang or by Mr Li in Mr Wang's presence.
336 For the reasons discussion in section E3, I do not accept that the representations alleged to have been made at the 25 October 2017 dinner in Auckland, including the 'no recourse' representations, were made.
337 I do not accept that Mr Wang, or Mr Li for whom Mr Wang translated at the dinner, used the word 'recourse'. I agree with CIG that in a discussion where, according to Mr Kingston, it was proposed that a SPV be used to borrow funds to invest in GrowthOps shares, with the principal to be grossed up to enable interest to be paid, it is most unlikely that questions of Mr Kingston's personal liability would have arisen.
338 For the reasons discussed in section E5, I do not accept that representations alleged in the ADC to have been made on 11 November 2017, or those said by Mr Kingston in his evidence to have been made on 16 November 2017, were made.
339 For the reasons discussed in section E6, I reject the proposition that Mr Li attended a meeting with Mr Wang and with Mr Kingston at Lee Garden Two, Causeway Bay Hong Kong on 24 November 2017 as alleged in the ADC, or on 23 November 2017 as was the date of the meeting of which Mr Kingston gave oral evidence. I do not accept that the representations alleged to have been made at such a meeting were made.
340 I also reject the allegation in the ADC that any oral representations were made by Mr Wang on 20 April 2018. As noted in section E12, there was simply no evidence to support a finding that the oral representations alleged were made.
341 In his written closing submissions, Mr Kingston identified the central question in relation to his claim that CIG is estopped from suing him for repayment of the CIG loans is whether Mr Wang and/or Mr Li made the 'no recourse' representations on 16 or 23 November 2017 in reliance on which Mr Kingston entered into the Loan Agreement and each of the Supplementary Agreements. The import of the 'no recourse' representations was said to be that, in default of repayment, CIG would not sue Mr Kingston personally for repayment because it would have the right to seize all of the pledged collateral - as clause 11(4) of each Supplementary Agreement specifically provided.
342 As none of the representations alleged or about which Mr Kingston gave evidence were made, the estoppel claim falls at the first hurdle. The answer to the 'central question' identified by Mr Kingston is that, no representations having been made, no estoppel arises. Mr Kingston's estoppel case fails.
343 Before leaving the topic of the alleged representations, something should be said of the failure by CIG to call Mr Li, a witness who attended the dinner in Auckland on 25 October 2017 and who featured in Mr Kingston's evidence about what he asserts took place in Hong Kong on 23 or 24 November 2017.
344 Mr Kingston submitted that Mr Li was an important witness and that a Jones v Dunkel inference should be drawn in relation to CIG's failure to call him to give evidence. Mr Kingston submitted that Mr Li was the CEO of Taiping and the chair of the Margin Committee, the champion of China Taiping's relationship with Sargon in furtherance of its internationalisation strategy and that it is likely that Mr Li would have echoed the 'no recourse' reassurance that Mr Wang had earlier given when he and Mr Wang met with Mr Kingston at Lee Garden Two in November 2017. Mr Kingston submitted that Mr Li's evidence would have been of great assistance in determining the issues at trial, yet CIG did not call him.
345 Mr Li remains an employee of China Taiping; Mr Li has tendered his resignation but has not been released from his employment contract. Mr Li attended conferences with CIG's solicitors on at least 19 August 2021 and 11 November 2021. After 11 November 2021, Mr Li declined to provide further assistance to CIG. Mr Kingston submitted that CIG provided no explanation why it had not obtained or taken all practicable steps to obtain Mr Li's evidence. He submitted that CIG had taken no steps to compel Mr Li to give evidence and had provided no explanation why it was unable to require him to do so.
346 Mr Kingston submitted that the PRC is a signatory to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, that CIG could have applied to have his evidence to be taken in mainland China pursuant to letters of request. It was submitted that CIG accepted the forensic risk of not calling Mr Li to give evidence and that the Court should infer that evidence from Mr Li would not have advanced CIG's case.
These [adverse] inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some other hypothesis a more natural one than the party's fear of exposure.
Adequate alternative explanations for a failure to call a witness have been recognised as including an inability to subpoena a witness, or hostility and lack of co-operation from a witness. As Kirby P observed in Ghazal v GIO:
The rule in Jones v Dunkel is one of commonsense reasoning. It provides that an unexplained failure by a party to call a witness may, in appropriate circumstances, lead to an inference that the uncalled evidence would not have assisted the case of the party who might be expected to call the witness. It is important to note that this is a facility. It is not an obligation in the reasoning of the decision-maker ... The rule has no application if the failure to call the witness is satisfactorily explained or readily understood. The usual explanations are the absence of a witness from court and a reasonable explanation for not compelling the witness' attendance by subpoena.16F[17]
348 In anticipation of a Jones v Dunkel submission, an affidavit from a solicitor, Wen-Ts'ai Lim of Ashurst, acting on behalf of CIG, made 14 February 2022, explained the position concerning Mr Li. It was the evidence of Mr Lim that Mr Li was in Beijing in February 2022, but that his address was not known.
349 Mr Lim gave evidence concerning two video conferences with Mr Li on 19 August 2021 and 11 November 2021 which she attended. At that time, Mr Li was separately represented by a firm of Hong Kong solicitors. On 18 November 2021, a further video conference was scheduled. It did not proceed. Mr Li communicated that he was only prepared to give evidence if certain conditions were agreed to by CIG and Taiping. Those conditions were the provision of a release in his favour by Taiping and CIG; the termination of an internal inquiry into his role in transactions between China Taiping and Mr Kingston and companies associated with him; and a release in his favour from his employment contract so he could take up a position with another employer. In December 2021, those conditions were reiterated in communications on behalf of Mr Li.
350 Mr Lim gave evidence that China Taiping did not have power to stop the internal inquiry concerning Mr Li, one of the conditions of cooperation demanded by Mr Li. That is because it is a process in relation to senior executives mandated by the government of the PRC. Mr Lim was not cross-examined on his affidavit.
351 Applying the decision in Larner, I accept that Mr Lim's evidence provides a satisfactory explanation for the failure to call Mr Li as a witness. When Mr Li was cooperating with the solicitors for CIG in late 2021, he was independently represented. In return for continued cooperation, he required the satisfaction of three conditions, one of which was not in the power of CIG to meet - the cessation of the internal inquiry. While it was submitted by Mr Kingston that application should have been made under the Hague Convention for the taking of Mr Li's evidence in the PRC, Mr Li's address in Beijing was unknown and no precedent for a Chinese mainland court responding to a request for evidence in accordance with the Hague Convention was identified. In those circumstances, the assertion that Mr Li's evidence may have been procured relying on the Hague Convention was speculation.
352 Because I consider that no Jones v Dunkel inference is properly drawn in respect of the failure to call Mr Li, that is the end of that issue. However, if it were otherwise proper to draw such an inference concerning the alleged events of 23 or 24 November 2017, in light of the documentary evidence and the evidence of Mr Wang, I do not consider Mr Li to be a relevant witness. That is because the evidence does not establish that there was a meeting in Hong Kong on either of those dates at which Mr Li and Mr Kingston were both present.
353 The position is different concerning the events in Auckland on 25 October 2017. Mr Wang was required to translate for Mr Li at that dinner. If it were otherwise appropriate to draw a Jones v Dunkel inference concerning the attendance of Mr Li at that dinner, and it is not, the requirement to draw the inference would have made no difference to my factual findings about what was said at the dinner. Simply put, I do not believe Mr Kingston's evidence about what was said at that meeting.
354 There is one final matter concerning the estoppel plea. I agree with CIG's submission that, even if there had been the representations alleged and if reliance on them by Mr Kingston had been established, reliance on them by Mr Kingston would not have been reasonable. That is so because Mr Kingston was aware at all times that Mr Wang and Mr Li lacked personal authority to bind CIG. That role was reserved to the Margin Committee, upon whose meetings and record of deliberations much emphasis and time was spent by Mr Kingston at trial.
355 The ADC alleges breaches of the MLO ss 22(1) and 18(1) and (2). The breaches alleged are denied by CIG, as is the application of the MLO itself. The ADC further alleges that each of SA1-SA4 is an extortionate transaction within the meaning of s 25(2) of the MLO, and may be reopened pursuant to s 25(1) of the MLO. CIG denies this allegation.
356 Expert evidence concerning the MLO was filed by both parties. CIG relied upon an expert report by Charles Manzoni KC. Mr Kingston relied upon an expert report by Laurence Li SC. On 20 May 2022, Mr Manzoni and Mr Li provided their Joint Expert Report ('Joint Expert Report').17F[18] Neither expert was required for cross-examination.
357 In the Joint Expert Report, the experts agreed that there was no violation of s 22(1) of the MLO. As a result, pleaded issues concerning s 22(1) of the MLO ceased to be relevant.
358 Section 25 of the MLO, relied on by Mr Kingston in the ADC, enables a court to re-open an extortionate transaction so as to do justice between the parties and, for that purpose, may make such orders and give such directions in respect of the terms of the transaction or the rights of the parties thereunder as the court may think fit. Section 25(2) provides that a transaction is extortionate if it requires the making of payments by the debtor or a relative which are 'grossly exorbitant', or if it 'otherwise grossly contravenes ordinary principles of fair-dealing'. Section 25(3) provides that an agreement for payment of interest that exceeds 48% per annum shall be presumed to be extortionate.
359 In his original report, Mr Manzoni noted that, apart from egregious conduct, unless the effective rate of interest exceeds 48% per annum, a Hong Kong court is 'very unlikely to reopen the loan transaction'. In his original report, Mr Li listed what he described as 'clear factors which suggest the Agreements are not extortionate'.
360 In light of the expert evidence, Mr Kingston's pleaded claims under ss 22(1) and 25(2) of the MLO were not pressed.
361 The ADC pleads that the Loan Agreement as varied by SA1-SA4, alternatively that the Loan Agreement and each of SA1-SA4 are unenforceable by operation of s 18(1) of the MLO because:
(a) each such agreement did not contain information they were required to contain under ss 18(1) and (2) of the MLO; and
(b) Mr Kingston was not provided with an English-language copy of, or other English-language note or memorandum containing the terms of, SA3 or SA4, signed personally by CIG.
362 The allegation that the Loan Agreement and each of SA1-SA4 were made in breach of ss 18(1) and (2) of the MLO was pressed. As earlier noted, CIG pleads substantial compliance with the MLO and relying on s 18(3) contends that the Court should order that the Loan Agreement is enforceable in accordance with its terms.
G2. Does the MLO apply to the Agreements: The requirements that must be met
(a) the lender was carrying on or holding itself out as carrying on business as a money lender in Hong Kong; and
(b) the proper law of the loan agreement is Hong Kong law.
364 It is common ground that CIG is a 'money lender', being a person who carries on the business in Hong Kong of making loans. It is also the case that the Loan Agreement and each of SA1-SA4 are, according to their terms, governed by the law of Hong Kong. That is evidence that supports, but is not determinative of, the proposition that the proper law of the agreements is the law of Hong Kong.
365 The experts disagreed as to whether a third condition must also be satisfied in order for the MLO to have application. CIG and their expert, Mr Manzoni, contend that a third condition must be satisfied in order to enliven the MLO: namely, that the borrower should either be an individual in Hong Kong, or have a 'sufficient connection' to Hong Kong. Mr Manzoni accepts that there is 'no case authority specifically addressing this issue'.
366 Mr Manzoni's view that such a connection is required is said to be underpinned by the decision of Hunter J in Hong Kong Shanghai (Shipping) Ltd v The Owners of the Ships or Vessels "Cavalry" (Panamanian Flag) ('Cavalry'),18F[19] in which his Honour opined that the Money Lenders Ordinance 1911 ('1911 MLO') (the predecessor to the MLO):
[I]s plainly directed primarily to domestic transactions. Its apparent social purpose is to prevent the exploitation of Hong Kong citizens by Hong Kong loan sharks.19F[20]
367 Mr Manzoni expressed his opinion that the third condition is a 'logical requirement' arising from Hunter J's view that the 1911 MLO was directed at the protection of Hong Kong citizens.
368 In China Merchants Bank v Minvest International Limited ('Minvest'),20F[21] to which Mr Manzoni also refers, Chu J cited Cavalry and said, about the MLO:
In my view, the new Money Lenders Ordinance retains the same objective. There is nothing in its provisions which suggests that the new Ordinance intends to supervise and regulate money lending activities outside Hong Kong.21F[22]
369 As Mr Manzoni correctly notes, neither case discusses whether the MLO would apply if the borrower had no connection with Hong Kong. Mr Manzoni accepts that the choice of law clause may itself provide a sufficient basis for applying the MLO, but concludes that, arguably, a Hong Kong court would in addition require a 'sufficient connection'.
370 Mr Li disagrees with Mr Manzoni. In the Joint Expert Report, Mr Li opines that:
(a) if the statutory purpose of the MLO is protecting Hong Kong citizens from exploitation by loan sharks, this could be achieved 'by curbing oppressive lending practices in Hong Kong in general';
(b) the criminalisation by s 24 of the MLO of loans imposing interest rates which exceed 60% evinces an intention to apply to all loans that take place in Hong Kong; and
(c) the term 'substantial connection to Hong Kong' (noting that Mr Manzoni referred to a 'sufficient connection') is not really practicable.
371 In Cavalry, the Court considered whether the 1911 MLO applied to a loan contract between the lender, a company incorporated in the Bahamas with a registered office in Nassau, and the borrower, a company incorporated in Panama with a registered office in Panama City. The choice of law clause specified 'the laws of England'. In Cavalry, Hunter J imposed the two conditions only for the application of the MLO. The first, that the lender must be carrying on business or holding itself out as carrying on business as a money lender in Hong Kong.22F[23] The second, that, objectively assessed, the proper law of the loan agreement is Hong Kong law.23F[24] There was no finding of a third condition, whether one of a 'substantial' or of a 'sufficient' connection with Hong Kong.
372 In Minvest, finding that the MLO did not apply, Chu J applied the same two conditions stipulated in Cavalry.24F[25] There was no discussion of any required connection between the borrower and Hong Kong.
373 While the decisions in Cavalry and Minvest support the two conditions upon which the experts agree, I am not satisfied that the purpose identified by Hunter J in Cavalry requires any third condition to be imposed. I am not satisfied that the third condition contended for by CIG, in support of which there is no authority cited by the experts, but which Mr Manzoni considers to be 'arguably' consistent with the purpose of the MLO, must be made out in order for the MLO to have application.
374 The experts agree that the first requirement is satisfied.
375 As to the second requirement, Mr Kingston argued in closing submissions that 'the analysis stops at the point at which the parties have expressly applied [the law of] Hong Kong to this agreement'. CIG's written submissions state that:
When the totality of the circumstances are considered, it is clear that, but for the choice of law clause, the jurisdiction with the most natural connection with the contract of loan is not Hong Kong but Victoria.
376 In Cavalry, where the express law of the contract was the law of England, the 1911 MLO was alleged to apply. Hunter J stated:
If the contract contains a choice of law clause which is challenged, the next task is to ascertain the proper law of the contract by objective standards, by asking "what is the system of law with which the transaction has its closest and most real connection"...25F[26]
377 In relation to this inquiry, Hunter J observed:
[T]wo of the factors crucial to any objective determination of the proper law are the place of the lender's business and the place where the money is lent and repayable...26F[27]
378 In Cavalry, the contract provided for advances and repayments in New York. Hunter J found that:
Upon no objective consideration in my judgment can the proper law of this contract be said to be the law of Hong Kong. It was that of New York or possibly the Bahamas, it matters not.27F[28]
379 It is common ground that the proceeds of the loans in this case were intended to be used in Victoria in connection with Mr Kingston or his nominees acquiring securities to be issued in an IPO in Victoria to be listed for quotation on the Australian Securities Exchange.
380 Applying the two factors identified by Hunter J in Cavalry to the facts of this case, CIG's place of business was Hong Kong. The money lent by CIG to Mr Kingston was paid to Mr Kingston's Hong Kong bank account. The invoices issued to Mr Kingston by CIG required payment into a Hong Kong bank account. Based on those facts, I am satisfied that the proper law of the Loan Agreement and each of SA1-SA4 is the law of Hong Kong. That is the case even though the ultimate destination of the loan funds was Australia and the purpose of the loan was for the purchase of shares in Australia.
381 It follows that I am satisfied that the two conditions for the application of the MLO are met. I find that the MLO applies to the Loan Agreement, and to each of SA1-SA4.
G4. What if it is also necessary to prove a sufficient connection?
382 If I am wrong and, in addition to the two agreed criteria, a 'sufficient connection' is required between the borrower and Hong Kong in order for the MLO to apply, I am not satisfied that Mr Kingston had a sufficient connection with Hong Kong.
383 Mr Li was instructed that he was to assume, amongst other things, that Mr Kingston:
(a) was a British and Australian citizen who maintained residences in Australia and Hong Kong;
(b) was a director of at least one Hong Kong company;
(c) had a Hong Kong mobile phone;
(d) had a Hong Kong bank account;
and, for the majority of the period,
(e) was a Hong Kong tax payer;
(f) was primarily employed in Hong Kong; and
(g) held a Hong Kong residency and Hong Kong ID card linked to his employment.
384 CIG's expert, Mr Manzoni, accepted that the third condition will likely be met if the instructed assumptions identified in the Joint Expert Report are established. However, CIG submitted that the factual bases for the instructed assumptions have not been made out and that, on the evidence, Mr Kingston did not have the requisite degree of connection.
(a) At the time Mr Kingston completed the Loan Application, he resided in Australia. In the Loan Application, he provided an address in Carlton. He tendered certified copies of his Australian passport and Victorian Driver Licence in support of the application. He disclosed that he was employed by an Australian company and was remunerated in Australian dollars.
(b) Although the evidence included a residential tenancy agreement for a Hong Kong residence for the period 13 February 2017 to 13 February 2019, there is no evidence that Mr Kingston actually resided in that residence. When he visited Hong Kong in November 2017, Mr Kingston stayed at the Four Seasons Hotel.
(c) Although the loan funds advanced by CIG were paid into Mr Kingston's Hong Kong bank account, they were used for business purposes in Australia.
(d) Mr Kingston was a director of Hong Kong companies The Hong Kong Trust Company Limited ('Hong Kong Trust Company') (from September 2017) and Trimantium HK. However, Mr Kingston's address recorded in company searches for those companies was in Melbourne, Australia.
(e) Mr Kingston's evidence was that, in August 2017, he closed his personal bank accounts in Australia and opened an account at the Central, Hong Kong branch of the ICBC, and that, in July 2018, he moved from an Australian mobile phone to a Hong Kong one.
(f) Mr Kingston filed a tax return in Hong Kong for the financial year 1 April 2018 to 31 March 2019. While the tax return was not part of the evidence, Mr Kingston did tender a letter from the Inland Revenue Department in Hong Kong requesting that he file a tax return for that financial year. The evidence does not establish that Mr Kingston was employed, or earning an income, in Hong Kong prior to 1 April 2018. I proceed on the basis that Mr Kingston's employment in Hong Kong occurred on or after 1 April 2018, being the financial year in which he was requested to, and on his evidence did, file a tax return in Hong Kong. Any income earned by Mr Kingston in Hong Kong after 1 April 2018 when his employment was transferred from Sargon to Hong Kong Trust Company was income earned after SA1 and SA2.
(g) While Mr Kingston held a Hong Kong ID card, this was not issued to him until 23 January 2019, after his entry into the Loan Agreement and each of SA1-SA4.
386 I consider that it is clear that, at the time of entry into the Loan Agreement, SA1 and SA2, Mr Kingston did not have the requisite connection with Hong Kong. The position is less clear concerning SA3 and SA4, entered into in April 2018 and September 2018 respectively. However, when the evidence is evaluated against the instructed assumptions, I am not persuaded that the third requirement, assuming that it exists, and on the basis of which the experts expressed their opinions, has been established.
387 Evaluating the evidence against the instructed assumptions:
(a) Mr Kingston is a British and an Australian citizen. The evidence falls short of establishing that he 'maintained' a Hong Kong residence. There is no evidence he actually lived at the Hong Kong residence to which the tenancy agreement relates;
(b) from September 2017, Mr Kingston was the director of at least two Hong Kong companies, but with a Melbourne address;
(c) from the date of entry into the Loan Agreement and SA1, Mr Kingston had a bank account in Hong Kong and, from July 2018, he had a Hong Kong mobile phone;
(d) Mr Kingston filed a tax return for 1 April 2018 - 31 March 2019 in Hong Kong;
(e) commencing on or after 1 April 2018, Mr Kingston entered into an agreement with Hong Kong Trust Company. That agreement was the vehicle for payment of a salary to him. However, I do not accept that he was 'primarily employed in Hong Kong', whether by reason of that arrangement, or otherwise. Taking the evidence as a whole, Mr Kingston was primarily employed in Australia, his place of actual residence; and
(f) although from 23 January 2019 Mr Kingston held a Hong Kong identity card, that was after entry into each of SA1-SA4. Given the timing, that fact is irrelevant to the sufficiency of any connection with Hong Kong at the date of those agreements, or any of them.
388 The experts considered the issue and expressed their opinions concerning a 'sufficient connection' and a 'substantial connection' on the basis of the instructed assumptions. If there is such a third requirement, and I do not consider that there is, because the instructed assumptions are not proved, I am not satisfied that the third condition is satisfied. In that alternative circumstance, the MLO has no application to the Loan Agreement or to any of SA1-SA4.
389 It is agreed by the experts that, if the MLO applies, then ss 18(1) and (2) of the MLO were contravened in relation to the Loan Agreement and each of SA1-SA4. As stated by Mr Manzoni, the terms of s 18 must be strictly complied with.28F[29] Loan agreements that do not comply will be in contravention of s 18 no matter how trivial the omission.
390 In order for a loan to be enforceable against the borrower, s 18(1) requires that, within 7 days after the making of the agreement, a note or memorandum of the agreement is made which contains the details set out in s 18(2) and which is signed personally by the borrower. A copy must be given to the borrower at the time of signing, and must include a summary of such provisions of Part III and Part IV of the MLO as may be prescribed.29F[30]
391 A summary of provisions of Part III and Part IV of the MLO was signed by Mr Kingston on 28 November 2017 but, as is agreed, each of the Supplementary Agreements fell short of the requirements of ss 18(1) and (2) in the following ways:
(a) none of SA1-SA4 set out the amount of principal in words and figures. SA1-SA4 set out the principal either in words or in figures but not both; and
(b) SA4 does not set out the rate of interest charged on the loan expressed as a rate per cent per annum. While the interest rate is stated, SA4 also identifies a 'Premium', alleged at paragraph 3.35 of the ADC to constitute 'interest' for the purposes of the MLO. The experts agree the 'Premium' would be treated by a Hong Kong court as forming part of the interest rate. As stated by Mr Manzoni in the Joint Expert Report, 'given that the Premium and other payables constituted interest within the meaning of the MLO but were not quantified, the interest chargeable under the Loan Agreements (as amended by SA4) were not expressed in a rate per cent per annum or the rate represented by the interest charged as calculated in accordance with Schedule 2 of the MLO'.
392 As a result of the contraventions of s 18 of the MLO identified above, each of the Loan Agreement and SA1-SA4 are not enforceable, unless s 18(3) applies.
393 Under s 18(3) of the MLO, if a court is satisfied that, in all the circumstances, it would be inequitable that an agreement which does not comply with s 18 should be held not to be enforceable, it may order that the agreement is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.
394 The burden rests on CIG to satisfy the Court that, in all the circumstances, it would be inequitable to refuse enforcement notwithstanding CIG's non-compliance.30F[31]
395 The experts agree that the Court is given a wide discretion under s 18(3) to enforce a loan agreement despite that the agreement would otherwise contravene the MLO. Section 18(3) empowers the Court to look at all the circumstances of the case in arriving at an equitable result between the lender and borrower. The circumstances and criteria that may be taken into account cannot be set out exhaustively, but the experts agree, and I accept, that the following factors identified by Mr Manzoni and for which he cited supporting authority are relevant considerations to the exercise of the s 18(3) discretion:
(a) relative status of the parties;31F[32]
(b) knowledge and experience of the borrower;32F[33]
(c) the attitude of the lender;33F[34]
(d) prejudice to the parties34F[35] / consequences of the breach for the parties to the transaction;35F[36]
(e) the way in which the breach arose;36F[37]
(f) nature and seriousness of the breach;37F[38]
(g) operation of the loan;38F[39]
(h) the general appearance of the contract throughout;39F[40] and
(i) any other circumstances which may make it inequitable to hold the agreements unenforceable.40F[41]
396 As Mr Manzoni noted in the Joint Expert Report, the policy of s 18 is to 'ensure that potentially unsophisticated borrowers are not exploited by money lenders'. As such, 'the particular circumstances of the borrower are highly important'. Along with the sophistication of the borrower, a 'key consideration is whether any prejudice flows from the statutory breaches established'.41F[42] If the non-compliance would not have led the borrower to be mistaken as to the terms of the loan agreement, the Court would be more ready to enforce it, in whole or in part.
397 Turning to the facts here, as stated by Mr Li, Mr Kingston is a sophisticated businessman, able to look after his own financial interests, a person who should have been aware of the terms of the bargain that he was getting into. Mr Kingston accepted during cross-examination that, during the period 2017 to 2019, he regarded himself as an experienced businessman and that, when it came to business matters, he was a diligent person. Mr Kingston's experience included drafting documents. There is no evidence that Mr Kingston did not understand how much principal he had been lent or the interest (including the Premium) which would be charged. Despite the plethora of issues raised in the ADC, no complaint is made about the Premium, what it meant, what it comprised or otherwise.
398 Mr Kingston does not allege that he suffered any prejudice arising from the agreed breaches of s 18. He does not assert that, but for the breaches, he would not have entered into the Loan Agreement or SA1-SA4. The breaches here are not serious. The first breach, the failure to set out the amount of the principal in words and figures is certainly in that category. The second breach, the failure to set out the effective rate of interest, including the Premium, may be regarded as a more serious breach, but it was not part of Mr Kingston's case to say he did not understand the Premium or the effective rate of interest. Mr Li identified the nature of the Premium arrangement as akin to a profit sharing mechanism.
399 I am not satisfied that the failure by CIG to include the required information in the documented agreements had any impact on Mr Kingston. I consider that Mr Kingston is a borrower of the type described by Ribeiro PJ in Strong Offer Investment Ltd v Nyeu Ting Chuang:42F[43]
A person who has chosen with eyes wide open to take the risks of highly leveraged trading on credit, [who] may suffer no prejudice at all from deficiencies in the original documentation.43F[44]
400 Mr Li identified a number of circumstances that are present that 'would tend heavily in favour of enforcement of the Agreements'. I consider that Mr Kingston's sophistication and the lack of prejudice flowing from the breaches of s 18, together with the other factors identified by Mr Li, weigh heavily in favour of enforcement of the Loan Agreement and SA1-SA4 without modification or exceptions.
401 It is necessary to refer to a broader issue raised by Mr Kingston concerning s 18 to which the experts also referred. Mr Kingston submitted that Mr Li opines, and Mr Manzoni agrees, that hardship, in the form of Mr Kingston's personal inability to repay the loan, may be a relevant aspect of inequity - if the lender has somehow exploited the hardship. Mr Kingston submitted that the relevant exploitation by CIG occurred through its knowing inducement of Mr Kingston to accept the proposed loan as a personal loan, by making the no recourse representations, and later by its acquiescence in Taiping Trustees' wrongful appointment of receivers to Sargon.
402 Mr Li states, and Mr Manzoni agrees, that 'hardship may be an aspect of inequity', but 'it is significant only if the lender has somehow exploited the hardship'. Mr Li concludes that:
The fact that Mr Kingston made clear to CIGF he would be unable to repay is not, strictly speaking, hardship. I am also unaware of how CIGF may be said to have exploited Mr Kingston's situation. It may be that Mr Kingston overextended himself; it may even be that CIGF knew or should [have] suspected so. But for the Court to take this into account as a factor against enforcement, some fault on the part of CIGF would have to be articulated.
403 Mr Li opines that, if it is established that the true agreement between CIG and Mr Kingston was that CIG would not have recourse to Mr Kingston personally, then the Loan Agreement and SA1-SA4 do not accurately reflect the true agreement between the parties. In this circumstance:
A Hong Kong Court considering the matter would have to decide whether to enforce the Agreements which in the stated terms breach the MLO and which are in fact untrue.
The answer must be that the Court would not allow enforcement. I am not aware of any case authority showing the above. But this is probably because the proposition is too self-evident.
404 I accept that hardship may be a relevant aspect of inequity, and Mr Kingston's personal inability to pay the loan may amount to hardship. However, the question of personal hardship only arises where CIG has exploited that hardship. I accept that CIG's knowing inducement of Mr Kingston to accept the proposed loan as a personal loan by making the 'no recourse' representations would, if established, amount to relevant exploitation by CIG of Mr Kingston's hardship. However, the facts relied on for the alleged non-recourse representations have not been established. Counsel for Mr Kingston properly accepted during closing submissions that, if the non-recourse representations are not established, 'that does take away what, I think, would be the most powerful argument for the exercise of the discretion'.
405 Mr Kingston submits that CIG's acquiescence in Taiping Trustees' wrongful appointment of receivers to Sargon also amounts to exploitation of his hardship. The appointment of receivers is not a matter upon which the experts were instructed. There is no evidence that such conduct, if established, would amount to exploitation of hardship for purposes relevant to s 18(3). In any case, for the reasons set out in section I6, I have found that the question of the alleged wrongful appointment of receivers to Sargon is not a question that falls for consideration in this proceeding to which Taiping Trustees is not a party. I have also found no 'acquiescence' on the part of CIG, even assuming the wrongful appointment of receivers to Sargon. In the circumstances, there has been no relevant exploitation of Mr Kingston's hardship.
406 I am satisfied that, notwithstanding the breaches of ss 18(1) and (2) of the MLO, it is equitable to enforce the Loan Agreement and each of SA1-SA4 in their entirety pursuant to the discretion in s 18(3) of the MLO. As expressly contemplated by s 18(3) of the MLO and as canvassed by the experts, it is appropriate to order that each of the Loan Agreement and SA1-SA4 is enforceable without modifications or exceptions.
H. The Third Group of Issues: 'Interest on the 1st-3rd Tranches'
407 The Statements identify as one question for determination whether, on the proper construction of clause 7 of SA4, no interest payments fell due in respect of SA1-SA3 unless and until principal and interest on SA4 had been repaid in full. The ADC makes that allegation.
408 Although the proper construction of clause 7 is the only construction issue identified in the Statements, in the course of closing submissions the proper construction of clause 11(4), an issue also raised by the ADC, was also addressed. It is convenient to deal with the construction issues at this point.
409 CIG contends that, 'at every stage', the Facility Agreement, being all of the agreements read together, impose a clear personal obligation on Mr Kingston to pay periodic interest, and to repay the principal and outstanding interest at the end of the term of each loan. Clause 7 of SA4 provides that interest on SA1-SA3 is payable quarterly and that interest on SA4 is payable at six monthly intervals. Each of SA1-SA4 confer an express right in favour of CIG to call on early repayment of the loan on 60 days' notice. That right is provided under clause 7. Clause 41.2 of the STCs provides that time is of the essence in respect of Mr Kingston's obligations to pay any money.
410 Mr Kingston submitted that, on the proper construction of clause 7, interest on SA1-SA3 was suspended and did not fall due for payment until after SA4 was repaid in full, and that therefore each of CIG's debit notes issued on or around 31 December 2018, 31 March 2019, 30 June 2019 and 30 September 2019 and the demands for payment of interest on SA1-SA3, including those on 23 September 2019, 2 December 2019, 19 December 2019, 30 December 2019, 9 January 2020 and again 20 January 2020, were wrongly issued or made. Mr Kingston submitted that statements that the amounts set out were owing constituted misleading or deceptive conduct in connection with financial services.
411 Mr Kingston submitted that he was entitled to have any amounts that he paid in response to those debit notes and demands applied towards interest on SA4 as and when it fell due, rather than towards interest on SA1-SA3, which was not then due and would not become due until October 2020. Based on his construction of clause 7, interest paid in response to the debit notes was paid by mistake and Mr Kingston was entitled to have those amounts set off against payments of interest under SA4.
412 CIG disputes the construction of clause 7 for which Mr Kingston contends. It does not admit the allegations of mistake and denies an entitlement to set off.
413 In closing submissions concerning clause 7 of SA4, Mr Kingston placed reliance on evidence in his witness statement that, in July 2018 when he and Mr Wang met in Shanghai to discuss the key terms of SA4, they discussed how much would be required under SA4 to cover the shortfall on SA3. He also placed reliance on his evidence that Mr Wang told him that China Taiping could try to lower the interest rate or make the interest on SA1-SA3 PIK (capitalised interest) as an alternative to providing additional interest to cover the extended loan term of SA1-SA3. Further, that Mr Kingston understood this to mean that interest on SA1-SA3 would continue to accrue, but would be capitalised. Mr Kingston's evidence was that, in the same discussion, Mr Wang said that, in order for interest on SA1-SA3 to be PIK and to reduce the interest rate on SA4, China Taiping would want to take a 'premium' on the growth in value of the 36 units to be acquired by Dragon Shield.44F[45] Mr Kingston said that he replied that 'in principle, it's totally fine', and recalled that, prior to SA1, the parties had intended there to be a premium on pledged stocks.
414 CIG submitted that Mr Kingston's evidence that Mr Wang told him in July 2018 that interest on SA1-SA3 would be PIK should be rejected. It submitted that Mr Kingston's actions at that time were inconsistent with such a statement having been made by Mr Wang. I agree. Interest on SA1-SA3 continued to be paid after the entry into SA4 without complaint and without any reference to PIK until May 2019. Even then, the references by Mr Kingston to PIK in May 2019 were to PIK on SA4, not to PIK concerning SA1-SA3.
415 When the first interest payment due under SA4 for the period October 2018 to April 2019 was missed and Mr Kingston was asked again for payment, Mr Kingston sent an email on 13 May 2019 saying, 'wasn't this loan [SA4] supposed to be a PIK interest instrument?'. His email suggested that SA4, not SA1-SA3 as was his evidence about what Mr Wang told him, was to be PIK. In a second email, one sent on 20 May 2019, Mr Kingston referred to PIK on SA4. I do not accept as credible Mr Kingston's evidence of his asserted conversation with Mr Wang in July 2018. I do not accept as truthful Mr Kingston's explanation for the May 2019 emails, that he was 'confused'.
416 The agreed translation of the Chinese version of clause 7 of SA4 is reproduced at paragraph 42 above.
417 The subject matter of the first paragraph of clause 7 is SA1-SA3, referred to in clause 7 as the 'Original Loan'. That paragraph provides for interest to be paid quarterly on SA1-SA3, the HKD400m loan with a 36 month term from the date of SA3. The subject matter of the second paragraph is SA4, a loan for HKD253m with a 24 month term and interest payable half yearly.
418 The third paragraph of clause 7 required Party A, Mr Kingston, to promise and undertake to make repayments in a specified order. The first, 'paying off the total principal and any outstanding interest of this loan [SA4] and any other amounts payable', and then, under sub-paragraph (2), 'paying off the total principal and any outstanding interest of the Original Loan [SA1-SA3] and any other amounts payable'.
419 Mr Kingston submitted that the effect of the third paragraph is to suspend the payment of interest under SA1-SA3 until SA4 has been repaid.
420 By the fourth paragraph of clause 7, Mr Kingston undertook and warranted 'not [to] give priority to the repayment of the Original Loan [SA1-SA3] and its outstanding interest and other amounts payable before this loan [SA4] and its outstanding interest and other amounts payable are fully repaid'.
421 Mr Kingston submitted the construction for which he contends is supported by this paragraph, which he submits prohibited him from making any payments for principal or interest on SA1-SA3 until SA4 had been repaid in full.
The effect of the last two paragraphs is that, unless CIG gave prior approval and confirmation of collateral adequacy in writing, no interest fell due for payment on SA 1-3 until all of the principal, any outstanding interest and any other amounts payable on SA 4 had been paid in full: indeed, clause 7 prohibited Kingston from making any payments for principal or interest on SA 1-3 until SA 4 had been repaid in full.
423 CIG submitted that the first and second parts of clause 7 deal with the Original Loan, SA1-SA3, and the new loan, SA4, respectively, and are in substantially similar terms. Both parts require interest to be paid, whether on a quarterly or half-yearly basis. Nothing in clause 7 says that Mr Kingston was entitled to a holiday from paying interest or that the obligation to pay interest on SA1-SA3 is suspended. The clause does not contain language to the effect that interest on SA1-SA3 is to be capitalised or compounded.
424 CIG submitted that the way clause 7 was intended to work was that interest was to accrue and to be paid quarterly (on the HKD400m loan) or half yearly (on the HKD253m loan) as the case may be, but, when it came to repayment of the loans, SA1-SA3 were not to be repaid until SA4 had been repaid in full, being the loan principal, any outstanding interest and 'any other amounts payable'. It submitted that the subject matter of the first two paragraphs of clause 7 is different to the subject matter of the last two. The first two paragraphs deal with the payment of interest; the last two paragraphs deal with repayment of the loans and what occurs at the time of repayment. The first two paragraphs have to be read subject to the last two paragraphs, which deal with the order of repayment of the loans, but do not otherwise interfere with the operation of the first two paragraphs.
425 CIG submitted that reference to the word 'outstanding' interest in the last two paragraphs (a word omitted from the English version of SA4) must be given work to do on the proper construction of clause 7. It submitted that the word 'outstanding' would not appear if, on a proper construction, there was no obligation to pay interest in the meantime.
426 As to commercial context, CIG agreed that, because SA4 was at a lower rate of interest than SA1-SA3, it made sense for CIG to want to have SA4 paid off in priority to SA1-SA3.
427 Having considered the construction arguments, I am not persuaded that clause 7 of SA4 has the effect that Mr Kingston was not required to pay interest on the HKD400m facility the subject of SA1-SA3, or that his obligation to pay interest on that loan was suspended, until the HKD253m loan the subject of SA4 was repaid. I do not accept the construction of clause 7 for which Mr Kingston contends.
(a) the first paragraph includes an express obligation that the HKD400m loan (SA1-SA3) is to accrue interest on a daily basis and that such interest 'shall be paid on a quarterly basis';
(b) the second paragraph includes an express obligation that the HKD253m loan (SA4) shall accrue interest on a daily basis and that such interest 'shall be paid on a half-yearly basis';
(c) the third paragraph requires the 'total principal and any outstanding interest of this loan [SA4] and any other amounts payable' to be repaid prior to repayment of the 'total principal and any outstanding interest of the Original Loan [SA1-SA3] and any other amounts payable'; and
(d) the fourth paragraph records an undertaking by Mr Kingston 'not [to] give priority to the repayment of the Original Loan [SA1-SA3] and its outstanding interest and other amounts payable before this loan [SA4] and its outstanding interest and other amounts payable are fully repaid'.
429 The construction for which Mr Kingston contends depends upon the obligation to regularly pay interest as provided for in the first paragraph of clause 7 to be modified. That is, modified so far as the interest obligation in respect of SA1-SA3 is concerned by the third paragraph of the clause, but not modified so far as the interest obligation in respect of SA4 dealt with in the second paragraph of clause 7 is concerned. I do not consider that the third paragraph of clause 7, whether on its own or read in conjunction with the fourth paragraph, has that effect.
430 The third paragraph of clause 7 does not say that what must be 'paid' in the first paragraph by way of interest on SA1-SA3 on a quarterly basis is not required to be paid, is deferred or is suspended - the reading of the third paragraph of the clause advocated for by Mr Kingston.
431 As well as stating that interest shall be paid, and thereby addressing interest as part of their subject matter, both the first and the second paragraphs of clause 7 also address two additional but separate subject matters. First, the subject matter of when Party A to the agreement, Mr Kingston, is entitled to repay the principal of the loan or to terminate the agreement. Taking the HKD400m loan (SA1-SA3) dealt with in the first paragraph of the clause as an example, Mr Kingston agrees not to repay the principal of that loan or to terminate the Loan Agreement within 12 months from the date specified in SA3. After 12 months from the date specified in SA3, he may propose to terminate the Loan Agreement by giving one month's notice in writing. At that time, he may repay the principal and any outstanding interest of the Original Loan and any other amounts payable. The second additional subject matter of the first paragraph, separate to the payment of interest and the delay in any right to repay, concerns the right that Party B, CIG, has to require Mr Kingston to make repayment. Namely, at any time by giving him 60 days' notice.
432 The third paragraph of clause 7 is not concerned with the payment of interest. It is directed to a different subject matter. Its subject matter is 'repayments', being repayment of the loans. That is, in the case of (1) paying off the total principal and any outstanding interest of 'this loan' (SA4); and in the case of (2) paying off the total principal and any outstanding interest of the Original Loan (SA1-SA3). In each case, the repayment of all outstanding amounts in respect of that particular loan. For that reason, in each of parts (1) and (2) of the third paragraph of clause 7, what Mr Kingston is promising and undertaking to make repayment of is 'the total principal and any outstanding interest... and any other amounts payable'. That is, in order to completely discharge the particular loan and any and all obligations concerning it.
433 There would be no need to refer to 'outstanding interest' in (2) of the third paragraph of clause 7 if the interest payment obligation on SA1-SA3 had been suspended or not required to be paid as is the construction for which Mr Kingston contends. If interest has been suspended or is not required to be paid, such interest is not 'outstanding'.
434 I accept the submission on behalf of CIG that both the third and fourth paragraphs of clause 7 are dealing with the order of payment out of the loans but that they do not otherwise interfere with the operation of the first two paragraphs of clause 7. If Mr Kingston was going to pay out the loans, the effect of the third paragraph of the clause is that he must repay SA4 first.
435 In the fourth and final paragraph of the clause, Mr Kingston undertakes and warrants that he will not give priority to the repayment of the Original Loan (SA1-SA3) and its outstanding interest and other amounts payable before 'this loan' (SA4) and its outstanding interest and other amounts payable are fully repaid. Although this part of the clause contains a prohibition on priorities, there is nothing about it that displaces the obligation to pay periodic interest in respect of the Original Loan (SA1-SA3).
436 For those reasons, I do not accept the construction of clause 7 of SA4 for which Mr Kingston contends.
437 Paragraph 3.43(f) of the ADC alleges that each of SA1-SA4 'included terms that expressly provided for the plaintiff [CIG] to have recourse to the collateral in the event of non-payment of interest or principal, and which overrode the event of default provisions of the Loan Agreement'. The particulars in support of that allegation rely on clause 11(4) of each of SA1-SA4. Paragraph 3.45 of the ADC alleges that, 'on a proper construction of the Loan Agreement, the plaintiff's [CIG's] sole recourse for any failure by the defendant [Mr Kingston] to pay principal and interest under the Loan Agreement was against the shares and/or collateral provided under the Loan Agreement, and not against the defendant [Mr Kingston] personally'. Although not particularised at paragraph 3.45, clause 11(4) appears to also be the basis of that plea.
438 Clause 11(4) of SA4 is reproduced at paragraph 44 above.
439 CIG disputed Mr Kingston's construction of clause 11(4) relied on in the ADC.
440 The problem for paragraphs 3.43(f) and 3.45 of the ADC for Mr Kingston is that clause 11(4) simply does not say that recourse to the collateral constitutes the only remedy available to CIG should there be a failure to pay. Nothing about the language of the clause either says or implies that obtaining 'all collateral' is CIG's sole remedy. There is nothing in any of the other clauses of SA1-SA4 that support a construction of the Supplementary Agreements that prevents recourse to Mr Kingston personally. The same is the case for the STCs. Clause 33.1 of the STCs is clear in its terms. Where there is an event of default, CIG may take any action it considers appropriate to enforce the agreement or any security 'including ... (c) commencing legal proceedings against the Customer'.
441 It is also the case that, contrary to paragraph 3.43(f) of the ADC, clause 11(4) does not 'override' the STCs. That is so because there is nothing inconsistent between clause 11(4) of SA4 and clause 33.1 of the STCs.
442 In submissions, Mr Kingston referred to the 20 April 2018 email sent before SA4 was signed. It was submitted that the email set out 'basically how the collateral operates under the Loan Agreements'. However, the email cannot be, and was not, relied on by Mr Kingston in support of a construction argument relating to clause 11(4). Clause 31.1(j)(i) of the STCs provides that the Customer represents and warrants that it has entered into the agreement without relying on any representation, warranty or conduct of any kind. Even if it were possible to rely on the 20 April 2018 email, as accepted by Mr Kingston in his closing submissions, the email: 'did not contain an express "no recourse" representation'. At its highest, the 20 April 2018 email was 'consistent with the "no recourse" representations' that Mr Kingston said were made to him prior to SA1 but which I have found were not made.
443 There is no substance to the clause 11(4) construction argument.
H2. Contentions based on Mr Kingston's contention that no interest was required to be paid on SA1-SA3 after SA4
444 Mr Kingston's ADC builds on the construction of clause 7 of SA4 for which he contends in support of the proposition that, when he paid interest in response to debit notes issued by CIG relating to SA1-SA3, he did so under a mistake. The invoices in question are the invoices under SA1-SA3 for October to December 2018 (invoice issued on 19 December 2018, resent on 24 January 2019 and paid on 29 January 2019), January to March 2019 (invoice sent on 22 March 2019 and paid on 29 April 2019) and April to June 2019 (invoice sent on 21 June 2019 and paid on 3 July 2019) after the entry by him into SA4.
(a) he mistakenly paid amounts by way of interest in response to invoices issued under SA1-SA3;
(b) those payments should have been towards interest under SA4;
(c) if that had occurred, SA1-SA3 would not have been in default because that interest was not due, and, because interest obligations under SA4 were less (being interest accruing at 5.5% on HKD253m) than on SA1-SA3 (being interest accruing at 7% on HKD400m), there would have been no breach of SA4 to which the payments should have been applied; and
(d) he is entitled to have the amounts paid towards interest under SA1-SA3 set off against payments of interest on SA4.
446 As stated by leading counsel for Mr Kingston in closing submissions, the availability of the set off is premised on the Court accepting Mr Kingston's construction argument concerning clause 7 of SA4. As I have rejected that construction argument:
(a) the mistaken payment of interest allegations in paragraphs 12.3 and 12.4 of the ADC fail;
(b) the set off allegations in paragraph 12.4 of the ADC are not made out; and
(c) it is not the case that, when CIG demanded payment of interest on SA1-SA3, it demanded the payment of interest that was not due.
447 The third group of issues in the Statements includes questions as to whether CIG's conduct in making demands for the payment of interest on SA1-SA3 (after entry into SA4) constituted misleading and deceptive conduct in contravention of s 12DA(1) of the ASIC Act. For these purposes, the application of the ASIC Act, which CIG contends is not the case, may be assumed. On that assumption, because the allegations of contravention relating to debit notes and demands for payment are premised on the acceptance of Mr Kingston's construction arguments relating to clause 7 of SA4, with the rejection of those construction arguments, the allegations of breach of the ASIC Act are not made out.
I. The Fourth Group of Issues: Demands for repayment of the CIG loans and the P Note
448 The focus of the fourth group of issues is upon alleged unconscionable conduct and misleading or deceptive conduct engaged in by CIG in contravention of ss 12CB(1) and 12DA(1) of the ASIC Act. The alleged conduct comprises making demands for the payment of principal and interest, asserting events of default, appointing receivers and pursuing this proceeding (as alleged at paragraphs 21.1 to 21.4 of the ADC).
449 It is convenient to consider the fourth group of issues on the assumption the ASIC Act has application to the matters relied on by Mr Kingston, notwithstanding that CIG says that is not the case.
450 The first item in the fourth group of issues, item 18,45F[46] enquires, on the assumption that the ASIC Act applies, whether CIG, by its demands on 2 December 2019 for the payment of interest on SA1-SA3 and on SA4, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act.
451 Paragraph 15(c) of the ADC alleges that CIG was not entitled to make the 2 December 2019 demands because no amount was then due and owing under either loan. CIG denies that allegation in the Reply. It alleges that, on its proper construction, clause 7 of SA4 required Mr Kingston to pay interest on SA1-SA3 quarterly and did not prohibit him from paying, and nor did it override or in any way affect his obligation to pay, interest on SA1-SA3 as and when such interest fell due. As the resolution of item 18 depends on the proper construction of clause 7 and I have rejected Mr Kingston's construction arguments, the item 18 issues are resolved in favour of CIG.
452 Item 18 is, however, more narrowly framed than the issues raised by the ADC. Paragraphs 21.1, 21.2 and 21.3 of the ADC allege that between 31 December 2018 and 1 February 2020 by issuing invoices, by making demands and by asserting events of default and/or that CIG was entitled to demand repayment of principal, CIG engaged in conduct in contravention of s 12DA(1) of the ASIC Act. CIG denies those allegations in the Reply. Many of the allegations in paragraphs 21.1 to 21.3 of the ADC are captured in the remaining issues set out in the Statements. So far as they are not, and so far as the invoices and demands issued by CIG concern SA1-SA3 and SA4, the resolution of those allegations depends, like item 18, on the proper construction of clause 7. Because the construction arguments advanced on behalf Mr Kingston concerning clause 7 fail, the allegations in paragraphs 21.1 to 21.3 of the ADC premised on construction arguments concerning clause 7 also fail.
453 The ADC also alleges that Taiping Trustees demanded repayment of sums not due and owing under P Note 1 on 9 January 2020 and 1 February 2020. The ADC alleges that a letter sent by Taiping Trustees on 20 January 2020 alleging that TTIM had committed an event of default under P Note 1 by failing to pay interest was false or misleading or deceptive. As Taiping Trustees is not a party to the proceeding, no issue concerning Taiping Trustees' conduct properly falls for determination. So far as the alleged involvement of CIG in the conduct of Taiping Trustees is concerned, that topic is addressed below as part of the discussion of the misleading or deceptive conduct and unconscionable conduct allegations.
454 Items 19 to 22 and 24 in the fourth group of issues, which largely overlap with paragraphs 21.1 to 21.3 of the ADC, also depend for their resolution in favour of Mr Kingston either on the adoption of his contended for construction of clause 7 of SA4 and/or on the acceptance of his contentions concerning the application of the AUD4.4m. As I have found against Mr Kingston in relation to the construction of clause 7 and as, for the reasons stated below, I have determined to reject his contentions concerning the application of the AUD4.4m, each of items 19 to 22 and 24 are resolved in favour of CIG.
455 Concerning items 19 to 22 and 24 in the fourth group of issues, in summary the position is as follows:
(a) question 19; CIG was not required to apply the sum of HKD13,491,628.24 remitted to it by Ashurst towards interest outstanding on SA4 in priority to interest on SA1-SA3;
(b) question 20; there was nothing misleading or deceptive, or likely to mislead or deceive, about the two letters of 19 December 2019 or the email sent on 30 December 2019;
(c) question 21; internal transfers of funds on 31 December 2019 within China Taiping are irrelevant to issues between CIG and Mr Kingston. If it were appropriate to make any finding in this proceeding concerning the conduct of a non-party, which it is not, the evidence does not establish misleading or deceptive conduct or conduct that is likely to mislead or deceive on the part of Taiping Trustees, whether by the sending of letters of demand on 20 January 2020 or otherwise, and nor does it establish knowledge of or acquiescence in such conduct by CIG. The same conduct is relied on as part of the unconscionable conduct claim and is not conduct which is in any respect unconscionable;
(d) question 22; the sending of the communications on 9 and 20 January 2020 referred to in this question does not constitute CIG engaging in contravening conduct as alleged; and
(e) question 24; I do not accept that the demands made in the 1 February 2020 letter concerning SA1-SA3, SA4 and P Note 1 were demands made of sums not due and owing. I reject the contention that, by specifying payment of money in relation to SA1-SA3 and SA4 as a condition of suspending the receiverships, CIG exerted improper or illegitimate pressure on Mr Kingston.
456 Before turning to the AUD4.4m transfer, one other topic should be mentioned. The ADC alleges that interest was overpaid on SA1-SA3 and on SA4 because interest was calculated on a compound, rather than a simple, basis. The Reply admits that interest was calculated on a compound basis rather than a simple basis as described in the witness statement of Mr Guo dated 10 September 2021, and otherwise denies the allegations. Mr Guo's evidence accepts that there were calculation errors, including the calculation of interest on a compound instead of a simple interest basis. Mr Guo verified the calculation of interest on a simple basis. He gave evidence of amounts due and unpaid in relation to SA1-SA3 as at 31 December 2019 and in relation to SA4 as at 31 October 2019 based on simple interest. No submissions were advanced in closing address on behalf of Mr Kingston that any consequence flowed from the calculation errors referred to by Mr Guo and no relief was contended for by reason of interest having been calculated on a compound basis. In those circumstances, it is unnecessary to deal further with the compound interest issue.
457 The ADC alleges that the transfer of AUD4.4m to the Ashurst Trust Account on 11 December 2019 was the Australian dollar equivalent of total outstanding interest from 1 July 2019 to 31 January 2020 (HKD23,561,643.84) shown on the draft terms sheet for the early termination of P Note 1. CIG agrees the transfer occurred, but otherwise denies the allegation. CIG says that the AUD4.4m was paid in partial discharge of the sums set out in letters of demand dated 2 December 2019.
458 In the ADC, Mr Kingston admits that the sum of AUD4.4m transferred to the Ashurst Trust Account on 11 December 2019 was less than the aggregate of the amounts demanded by CIG and Taiping Trustees on 2 December 2019, details of which appear at paragraphs 275 and 276. The evidence of Mr Guo establishes that, after the receipt of AUD4.4m, funds remained outstanding in relation to interest on SA4 in respect of the period May to October 2019.
459 CIG identified the following principles, the accuracy of which I accept, relevant to issues concerning the contested application of the AUD4.4m:
(a) in the first instance, it is the right of the debtor to declare upon what or in respect of what he or she pays money;46F[47]
(b) to be effective the debtor's intention to appropriate the payment to a particular debt must be disclosed. An undisclosed intention is ineffective;47F[48]
(c) if the debtor does so, the destination of the payment cannot be changed;48F[49]
(d) the debtor cannot so appropriate after payment;49F[50] and
(e) if the debtor does not make a disclosed appropriation at the time of payment, the creditor may do so, and may do so at any time before an account is settled between them.50F[51]
460 Relying on those principles, CIG submitted that, in making the AUD4.4m payment, Mr Kingston appropriated it to the payment of interest on SA1-SA3 as set out in CIG's invoice sent to him on 19 September 2019, interest on P Note 1 as set out in Ms Zhou's email of 23 September 2019 and interest on SA4 as set out in CIG's invoice sent on 16 October 2019. It submitted that the appropriation by Mr Kingston as described is the end of the inquiry: later internal transfers of money between China Taiping entities, never disclosed to Mr Kingston, cannot affect the contractual rights and liabilities of the parties and are irrelevant.
461 I agree that it is the right of the debtor, in this case either Mr Kingston or the company of which he was a director, to declare upon what debt or in respect of what obligation a payment is made. The contest is a factual one. Did Mr Kingston specify or communicate to Ashurst or to CIG or to Taiping Trustees that the AUD4.4m was to be applied in payment of the interest on P Note 1 to 31 January 2020?
462 The focus at trial concerning Mr Kingston's asserted intention to appropriate the AUD4.4m to the terms sheet relating to P Note 1 was upon his email dated 10 December 2019 to Mr Greenberg. That email did not disclose an intention that the AUD4.4m was in respect of and was to be applied to interest on P Note 1 in accordance with the draft terms sheet. The reasons why that is the case are as follows. First, the draft terms sheet sent by Mr Huang to Mr Kingston on 5 November 2019 was merely that, a draft. Second, there is no evidence that Mr Kingston ever responded to Mr Huang's email, much less communicated his acceptance of the draft terms. Third, at no time on or prior to the transfer on 11 December 2019 did Mr Kingston even mention in his communications to Ashurst or to CIG that he intended that the payment of AUD4.4m related to, or was in satisfaction of, the draft P Note 1 terms sheet to which, on the evidence, he had not responded for over one month. Fourth, there was no reason for Sargon to pay any amount pursuant to the draft terms sheet relating to P Note 1 at any time prior to settlement which, in accordance with the draft terms sheet, was scheduled to occur on 31 January 2020 - the date to which interest was calculated. Fifth, the draft terms sheet for P Note 1 was one of three terms sheets, each for the payment out of liabilities of or associated with Mr Kingston. No explanation accompanied the payment that identified which of the three terms sheets was intended to be paid out. Sixth, on no view of its contents could the draft terms sheet be regarded as an 'invoice', let alone 'three invoices' as expressly referenced in Mr Kingston's 10 December 2019 email. Seventh, there were no 'claimed charges over and above the interest invoices' to which the email referred on the P Note 1 terms sheet. The only charges over and above interest were those referred to in Ashurst's 2 December 2019 letters of demand.
463 The email dated 10 December 2019 and the payment to which it referred followed shortly after Mr Kingston's 9 December 2019 email to Ms Zhang in which Mr Kingston wrote '[w]e will make that payment to your trust account if I don't hear from you by 6pm today'. That email responded to Ms Zhang's 6 December 2019 email in which, amongst other things, Ms Zhang wrote: 'our clients would be happy to receive the outstanding interest demanded in our letters to you on 2 December 2019 to a trust account held by Ashurst'. The transfer of funds was to the Ashurst Trust Account, the details of which were provided in the 6 December 2019 email. The payment was in response to that email.
464 There can be no doubt, viewed objectively, that Mr Kingston's disclosed intention concerning the AUD4.4m payment was to address the payment of interest which was overdue and had been the subject of the demands made on 2 December 2019. I find that what Mr Kingston did, as communicated in his emails dated 9 and 10 December 2019, was to appropriate the AUD4.4m in payment of interest on SA1-SA3 as set out in CIG's invoice sent to him on 19 September 2019, in payment of interest on P Note 1 as set out in the email to him of 23 September 2019 and in payment of interest on SA4 as set out in the invoice sent him on 16 October 2019. At no time did he give notice of or advise of his intention to pay AUD4.4m pursuant to the draft but never accepted terms sheet relating to P Note 1.
465 The emails of 6 and 9 December 2019 had nothing to do with the payment out of P Note 1 as per the draft terms sheet, and nor did the payment of AUD4.4m to the Ashurst Trust Account. The destination of the payment having been disclosed by the debtor, Mr Kingston, that destination cannot be changed.
466 Turning to Mr Kingston's subjective intention, if it be relevant, as earlier stated, I do not accept that Mr Kingston intended to refer in his email dated 10 December 2019 to the draft terms sheet for the payment out of P Note 1. Interest was overdue on Mr Kingston's personal loans. Payment out of P Note 1 under the draft terms sheet was six weeks away.
467 In support of a submission that Mr Kingston was 'unshaken in his evidence' concerning payment out of P Note 1, reliance was placed by Mr Kingston upon his cross-examination, particularly concerning the 10 December 2019 email to Ashurst in which he said he had not 'authorised any wires for the claimed charges over and above the interest invoices'. The reference to not authorising any payment beyond the interest invoices does not assist Mr Kingston's contention that the AUD4.4m was intended by him to be applied to P Note 1.
468 As submitted on behalf of CIG, Mr Kingston's conduct after 11 December 2019 was inconsistent with the case that he now seeks to advance. Ashurst's without prejudice letter of 19 December 2019 referred to the short payment of interest and identified the interest payable by 31 December 2019 for the quarter ending 31 December 2019 on P Note 1. On 30 December 2019, Mr Huang's email sought payment of interest on Mr Kingston's personal loans as well as on P Note 1. Mr Huang followed up earlier requests for payment of outstanding interest on the personal loans and on P Note 1 on 9 January 2020. At no time did Mr Kingston respond to those communications to say that they were in error and that P Note 1 had been paid out on 11 December 2019. The same is the case when letters of demand were sent on 20 January 2020 to TTIM, TCFM and Sargon which included amongst events of default TTIM's failure to pay interest on P Note 1 which had fallen due for payment on 31 December 2019. Once again, Mr Kingston did not respond to those letters of demand.
469 The communication by Mr Kingston of his intention that the AUD4.4m be applied in payment of 'the three invoices' is the end of the matter concerning the AUD4.4m payment. In accordance with Re Mangan; Ex parte Andrew,51F[52] Mr Kingston having 'so declared, the destination of the payment cannot be changed'.52F[53]
470 Paragraph 21.4 of the ADC alleges that, by demanding payment of principal and interest, by alleging events of default and by pursuing this proceeding, in respect of SA1-SA3 and/or SA4, that CIG engaged and is continuing to engage in conduct that is 'in all the circumstances' unconscionable in contravention of s 12CB(1) of the ASIC Act. CIG denies those allegations.
471 The particulars to paragraph 21.4 rely on a wide variety of matters that fall into two broad categories. The first category concerns CIG's own alleged conduct. The second category concerns alleged conduct by Taiping Trustees relating to P Note 1.
472 Turning to the particulars that relate to CIG; first; it is alleged that CIG has sued Mr Kingston personally for payment of principal and interest contrary to the representations alleged. There is no substance to that allegation. I have found there were no such representations. Second, it is alleged that CIG demanded and received payments of interest that were not due under SA1-SA3. Third, it is alleged that CIG failed to credit those amounts towards payment of interest on SA4. Fourth, it is alleged that CIG demanded and received payments of interest not due under SA4. Those allegations are premised on the acceptance of Mr Kingston's construction arguments concerning clause 7 of SA4. As those arguments fail, there was nothing unconscionable about the making of demands by CIG, the receipt of payments by it, crediting those payments to SA1-SA3 or demanding and receiving interest under SA4. The allegations provide no support for an unconscionable conduct allegation against CIG.
473 The fifth allegation in the particulars turns on the proper construction of clause 7 of SA4, as well as the application of the AUD4.4m payment. It is alleged that CIG made further demands for payment of interest that was not due or would not become due on the date alleged, both under SA1-SA3 and SA4 and in respect of P Note 1. The demands referred to include those made by the open and without prejudice letters from Ashurst on 19 December 2019, the 30 December 2019 email from Mr Huang, the 20 January 2020 letter from Ashurst and the 1 February 2020 letter from Ashurst. So far as the demands relate to:
(a) interest due under SA1-SA3 and SA4, the allegation turns on the proper construction of clause 7 of SA4. So far as the fifth allegation depends on the construction of clause 7, it fails;
(b) interest due under P Note 1, the allegation turns on the application of the AUD4.4m payment. So far as it is based on Mr Kingston having paid the AUD4.4m towards the early termination of P Note 1, it fails. Mr Kingston elected to have the AUD4.4m payment applied in partial discharge of the sums set out in letters of demand dated 2 December 2019 (being interest due under SA1-SA3, SA4 and P Note 1). He did not elect to have the AUD4.4m payment applied towards the early termination of P Note 1. It also fails because it was Taiping Trustees, not CIG, who made those demands for payment.
There is nothing unconscionable about the conduct relied on in the fifth allegation.
474 The seventh to ninth matters particularised concern Taiping Trustees.53F[54] The seventh matter particularised is that, on 9 January 2020 and 20 January 2020, Taiping Trustees, with the knowledge or acquiescence of CIG, demanded payment of interest of HKD10,286,636.22 on P Note 1 to 31 December 2019, which amount had already been received by Taiping Trustees as a result of HKD10,054,964.48 having been transferred from CIG to the loan account maintained by Taiping Trustees in respect of P Note 1 on 31 December 2019. The eighth matter referred to in the particulars is that, in reliance on those false, misleading or deceptive assertions of outstanding indebtedness under P Note 1, Taiping Trustees, with CIG's knowledge or acquiescence, appointed receivers to Sargon, TTIM and TCFM prior to 31 January 2020. The ninth matter particularised is that, shortly thereafter, CIG and Taiping Trustees improperly and illegitimately attempted to exert pressure on Mr Kingston to pay sums that were not due and owing under SA1-SA3 or SA4 by specifying the receipt of those payments as a condition of suspending the receiverships of Sargon, TTIM and TCFM.
475 The tenth matter particularised is that CIG engaged in all of the conduct described above to terminate the Loan Agreement, SA1-SA4 and P Note 1 including in a manner that wrongfully impaired the value of securities from which SA1-SA4 were intended to be repaid.
476 Section 12CB of the ASIC Act is relevantly in the following terms:
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of financial services to a person; or
(b) the acquisition or possible acquisition of financial services from a person;
engage in conduct that is, in all the circumstances, unconscionable.
(2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(4) It is the intention of the Parliament that:
(a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and
(b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii) the manner in which and the extent to which the contract is carried out;
And is not limited to consideration of the circumstances relating to formation of the contract.
477 Section 12CC of the ASIC Act provides a non-exhaustive list of the matters to which the court may have regard for the purpose of determining whether a person has contravened s 12CB in connection with the supply or acquisition of financial services.54F[55] In the case of the supply of such services relevant to the present dispute, those matters include:
(a) the relative strengths of the bargaining positions of the supplier and the service recipient; and
(b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and
...
(j) if there is a contract between the supplier and the service recipient for the supply of the financial services:
(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the service recipient; and
(ii) the terms and conditions of the contract; and
(iii) the conduct of the supplier and the service recipient in complying with the terms and conditions of the contract; and
(iv) any conduct that the supplier or the service recipient engaged in, in connection with their commercial relationship, after they entered into the contract; and
...
(l) the extent to which the supplier and the service recipient acted in good faith.
478 Section 12GBCL of the ASIC Act is relevant to CIG's alleged acquiescence in and knowledge of actions said to have been engaged in by Taiping Trustees. That section relevantly provides:
A person who:
...
(b) is involved in a contravention of a civil penalty provision;
is taken to have contravened the provision.
479 Section 5(2)(b) of the ASIC Act provides that, unless the contrary intention appears, an expression that is used but not defined in the ASIC Act has the same meaning as in the Corporations Act 2001 (Cth) ('Corporations Act'). Section 5(2)(b) has the effect that the expression 'involved in a contravention' used in s 79 of the Corporations Act has the same meaning for the purposes of the ASIC Act.55F[56] In this case, the 'involvement' of CIG is relevantly framed in the ADC as acquiescing or knowingly being involved in the contravening conduct of Taiping Trustees.
480 Section 12GM of the ASIC Act is relevant to the relief claimed by Mr Kingston. It is unnecessary to reproduce its terms.
I4. The submissions concerning unconscionable conduct
481 Mr Kingston provided written and oral submissions in support of the statutory unconscionability allegation. He submitted that the CIG loans are 'financial products', defined in s 12BAA(7)(k) of the ASIC Act to include credit facilities, and 'financial services' as defined in s 12BAB of the ASIC Act.
482 Mr Kingston's submissions include that, in determining whether as a supplier of financial services CIG has engaged in unconscionable conduct, the Court must consider the impugned conduct 'in all the circumstances' and must undertake a close consideration of the facts.56F[57] He submitted that the Court must exercise an evaluative judgment whether CIG has conformed to the normative values and standards of conduct in the supply of financial services in Australia that s 12CB enacts.57F[58] Further, that the Court is not confined by the equitable limits of unconscionable conduct, such as the requirement that the claimant be afflicted by a special disadvantage.58F[59] The Court may consider both the terms of the contract and the manner in which it is carried out, in addition to the circumstances relating to formation of the contract.59F[60]
483 Mr Kingston submitted that a mortgagee who acts otherwise than in good faith in relation to the security, and in so doing prevents the primary obligor from discharging its secured obligation, may be held to have acted unconscionably in contravention of s 12CB of the ASIC Act.60F[61] A security-holder who misconducts itself in relation to the security should fall foul of the statutory prohibition in s 12CB of the ASIC Act because, in equity, a mortgagee's duty with respect to the security is to act 'conscionably'.61F[62]
484 It was submitted that the effect of Taiping Trustees' appointment of receivers to Sargon (and TCFM and TTIM) had on Mr Kingston personally, and on any realistic possibility of the CIG loans being repaid, was that Mr Kingston had 'no real chance whatever to save a plank from the wreck'.62F[63]
485 Mr Kingston submitted that the unconscionable character of CIG's conduct falls to be assessed in circumstances which include that:
(c) CIG's and China Taiping's true purpose in advancing the CIG loans and the Promissory Notes was to realise substantial and strategic equity holdings in Sargon and/or GrowthOps, upon the expiry or termination of those facilities:
...
(e) from around October 2019, once they learned of the delay to Sargon's planned IPO, CIG and Taiping Trustees together resolved to terminate the CIG loans and the Promissory Notes ...
(f) on 31 December 2019 and 6 January 2020, at the direction of China Taiping's Risk Management and Compliance Department, CIG transferred HK$10.082m to Taiping Trustees, which Taiping Trustees applied in discharge of interest owing on the P Note to 31 December 2019...
486 Mr Kingston submitted that the misconduct of Taiping Trustees, in which CIG acquiesced, comprises the following acts - none of which is denied by CIG:
(a) after the HK$10.082m was transferred to and applied by Taiping Trustees, Taiping Trustees wrongfully made repeated further demands that interest for the quarter to December 2019 remained outstanding on P Note 1...;
(b) by proceeding then to appoint receivers to Sargon, Taiping Trustees wrongly impaired both Kingston's financial and professional investments in Sargon and CIG's security interests in the shares of Sargon, which made up the overwhelming majority of the valuable collateral from which the parties had always intended that CIG loans would be repaid; and
(c) CIG and Taiping Trustees jointly attempted to use the wrongful appointment of receivers to Sargon to exert improper and illegitimate pressure on Kingston to pay amounts of interest that were not due on the P Note and, on the proper construction of SA 4, were not due on either of the CIG loans...
487 Mr Kingston submitted that it is clear - including from the instruction that originated from China Taiping's Risk Management and Compliance Department about the transfer and application of the HKD10.082m, but also as early as the structure chart that Mr Kingston prepared following his discussions with Mr Li and Mr Wang in October 2017 - that China Taiping regarded the personal loans and P Note 1 as part of a single overall investment in Sargon. CIG and Taiping Trustees had taken overlapping security over multiple parcels of Sargon shares.63F[64] That fact had become apparent to China Taiping by late 2019. CIG took security over shares in Sargon that were beneficially owned by Taiping Trustees, through the Trimantium Taiping Investment Fund. From August 2019, China Taiping was aware that the prospects of both facilities being repaid 'mostly depended' on whether Sargon's IPO could be achieved. Thereafter, China Taiping sought to mitigate its risk by attempting to syndicate P Note 1, and by attempting to reach terms with Mr Kingston and Sargon for early repayment of both facilities.
488 Mr Kingston submitted that, as late as 3 December 2019, China Taiping's group leadership instructed the Risk Management Department that it should 'continue to promote the listing of Sargon Company with Mr Kingston'. When Mr Kingston called Mr Wang on 2 December 2019 immediately after receiving the letters of demand from Ashurst, Mr Wang told Mr Kingston to focus on paying P Note 1. At that time, and through January 2020, Sargon remained in discussion with other potential investors to carry out a pre-IPO refinance in order to facilitate early repayment of P Note 1 - and continued to update China Taiping about those discussions. However, at some point between 3 December 2019 and 29 January 2020, a decision was made within China Taiping no longer to promote Sargon's IPO, but instead to appoint receivers.
489 Mr Kingston submitted that CIG's only witness of fact, Mr Wang, was not involved in or aware of the decision by Taiping Trustees to appoint receivers. He submitted that CIG proffered no evidence or explanation how the appointment of receivers was justified or in good faith, with respect to the shareholdings in Sargon that had been pledged as security for the personal loans and/or P Note 1.
490 Mr Kingston submitted the only available inference is that Mr Huang made the demand of 9 January 2020, and that CIG and Taiping Trustees instructed Ashurst to send the demands of 20 January 2020, knowing that interest had in fact been paid on P Note 1 for the 4th quarter. In the circumstances, the Court should conclude that that conduct, and the consequential appointment of receivers on 29 January 2020, was unconscionable within the meaning of s 12CB of the ASIC Act.
491 In addition to the demands of 9 and 20 January 2020 having been sent jointly on behalf of CIG and Taiping Trustees, CIG's knowledge of and acquiescence in the appointment of receivers is said to have been underscored by Ashurst's letter of 1 February 2020, sent on behalf of Taiping Trustees and CIG, which offered to suspend the receivership for a period of 10 days, on condition that Mr Kingston pay amounts allegedly outstanding under the personal loans, in addition to TTIM paying HKD10,286,636.22 on account of interest on P Note 1 for the 4th quarter of 2019.
492 Mr Kingston submitted that CIG cannot dissociate itself from Taiping Trustees' wrongful appointment of receivers to Sargon, merely because the appointment was made 'pursuant to a power conferred in the P Notes'. CIG's participation in the making of the wrongful demands of 9 and 20 January and the further letter of 1 February 2020, together with its acquiescence in the receivers' appointment, is conduct that CIG engaged in 'in connection with' the financial services it supplied to Mr Kingston, namely the personal loans. He submitted that connection exists, not least, by reason of the fact that the Sargon shares comprised the lion's share of the securities against which the personal loans were advanced. Alternatively, by having been involved64F[65] in Taiping Trustees' unconscionable conduct in contravention of s 12CB(1), CIG is itself taken to have contravened s 12CB(1): s 12GBCL. By either route, CIG is liable to relief under s 12GM of the ASIC Act.
493 Mr Kingston submitted that, given the seriousness of the unconscionable conduct, and the severity of the harm that CIG's conduct has visited upon Mr Kingston, the appropriate remedy under s 12GM(1) of the ASIC Act is for the Court to declare the Loan Agreement and each Supplementary Agreement to be void or, alternatively, to make an order refusing to enforce them.
494 In response, CIG made the following submissions in writing concerning the unconscionability claim:
(a) They each concern enforcement actions by a mortgagee, whereas this case concerns a claim for debt by CIG, which did not appoint any receivers;
(b) They each concern the manner in which security was enforced, rather than the fact that enforcement action was taken. None of them addressed the question of whether an appointment of receivers by a secured creditor was a breach of a mortgagee's duty of good faith.
495 CIG and Mr Kingston also made oral submissions concerning the unconscionability claim.
I5. Statutory unconscionable conduct: The principles to be applied
496 As expressly stated in s 12CB(4)(a) of the ASIC Act, the intention of the Parliament is that the prohibition against unconscionable conduct in s 12CB(1) is not limited by the unwritten law relating to unconscionable conduct.
497 In Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd ('Quantum Housing Group'),65F[66] Allsop CJ, Besanko and McKerracher JJ undertook a detailed analysis of the various judgments of the members of the High Court in Australian Securities and Investments Commission v Kobelt ('Kobelt').66F[67] Having done so, their Honours rejected the proposition that the ratio or seriously considered dicta in Kobelt (other than Keane J) 'requires in any case that for conduct to be unconscionable by reference to ss 12CB and 12CC of the ASIC Act (or ss 21 and 22 of the ACL) there must be found some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken'.67F[68] In considering the unconscionability allegations in the ADC, I proceed on that basis.
498 In Kobelt, Gageler J identified the function of a court exercising jurisdiction under s 12CB:
The correct perspective is that s 12CB operates to prescribe a normative standard of conduct which the section itself marks out and makes applicable in connection with the supply or possible supply of financial services. The function of a court exercising jurisdiction in a matter arising under the section is to recognise and administer that normative standard of conduct. The court needs to administer that standard in the totality of the circumstances taking account of each of the considerations identified in s 12CC if and to the extent that those considerations are applicable in the circumstances.68F[69]
499 In Quantum Housing Group, the Full Federal Court described the judicial task as follows:
[A]n evaluation of the impugned conduct to assess whether it is to be characterised as a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable.69F[70]
In ACCC v Quantum Housing, the joint judgment of Allsop CJ, Besanko and McKerracher JJ speaks of 'the language of business morality' underlying the statutory prohibition on unconscionable conduct in these terms:
Predation on vulnerability, taking advantage of disability or disadvantage and victimisation may be found in business, as in other fields of human life. Such behaviour does not, however, exhaust the meaning of against conscience. The kinds of consideration in s 22 and the kinds of circumstance to which the Chief Justice referred in Paciocco 236 FCR 199 at [296]-[298] are apt to inform evaluations about business standards that the courts are required by Parliament to make. They may be contestable judgments; they may be by reference to a standard that is not definable; but they are evaluative judgments that Parliament commands be made. That they are the subject of a civil penalty requires that the boundary of impugned conduct be reasonably known to the subject. This last factor reinforces the proposition that it is no light matter, indeed it is a serious matter, to have one's conduct impugned as against or as offending conscience. Business people understand such things, as do ordinary people. They need no definition to assist them. 'Unconscionable' is the language of business morality and unconscionable conduct is referable to considerations expressed and recognised by the statute. The word is not limited to one kind of conduct that is against or offends conscience. Surely to predate on vulnerable consumers or small business people is unconscionable. But why is it not also unconscionable to act in a way that is systematically dishonest, entirely in bad faith in undermining a bargain, involving misrepresentation, commercial bullying or pressure and sharp practice, using a superior bargaining position, behaving contrary to an industry code, using significant market power in a way to extract an undisclosed benefit that will harm others who are commercially related to the counterparty? The proposition that such conduct (not all of which might be seen to be present here) is not unconscionable by an Australian statutory business standard of conscience because the counterparty to the business transaction suffered from no relevant pre-existing disadvantage, disability or vulnerability (other than, perhaps, having a decent degree of trust and faith in its business counterparty's honesty and good faith) is difficult to accept, unless one posits a narrow defined meaning of 'unconscionable' that remains hinged in some way to the structural form of the equitable doctrine as expressed in cases such as Kakavas [2013] HCA 25; 250 CLR 392 at [161]. The history, text and structure of the Act is contrary to such a conclusion. It is not to be derived from the meaning of the word 'unconscionable'.
501 In Paciocco v Australia and New Zealand Banking Group Ltd ('Paciocco'),72F[73] Allsop CJ said:
The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; ...73F[74]
502 An allegation of unconscionability is a serious allegation. It is sufficient to warrant censure for the purpose of deference of a civil penalty. As stated by the Full Federal Court in Unique International College Pty Ltd v Australian Competition and Consumer Commission:74F[75]
To behave unconscionably should be seen, as part of its essential conception, as serious ... irreconcilable with what is right or reasonable ... . It is a serious conclusion to be drawn about the conduct of a businessperson or enterprise. It is a conclusion that does the subject of the evaluation no credit. This is because he, she or it has, in a human sense, acted against conscience.75F[76]
503 For the reasons earlier stated, CIG did not engage in unconscionable conduct as particularised in paragraphs one to five inclusive of paragraph 21.4 of the ADC.
504 The starting point concerning the allegedly unconscionable conduct claim particularised in paragraphs seven to ten inclusive of paragraph 21.4 of the ADC is that the allegations each concern conduct allegedly engaged in by Taiping Trustees of which CIG is alleged to have had knowledge or to have acquiesced in. Taiping Trustees is not a party to the proceeding. The Court cannot make any findings about unconscionable conduct on the part of Taiping Trustees because it is a separate entity and is not a party to the proceeding.
505 The claim against CIG is for 'involvement' in the unconscionable conduct of Taiping Trustees. As there can be no finding made concerning the primary conduct alleged, it is not open to make a finding of involvement on the part of CIG. The unconscionable conduct claim fails in its entirety.
506 In any case, assuming it were open and appropriate to make findings concerning alleged contraventions on the part of Taiping Trustees, which is not the case, the evidence does not support the making of such a finding. A necessary factual plank is that, at the time Taiping Trustees appointed receivers to Sargon, TTIM and TCFM, there was no default in relation to P Note 1. The first potential factual premise for that assertion is that the AUD4.4m transferred to the Ashurst Trust Account was to be applied to P Note 1. I have found that is not the case. The alternate argument is that, by reason of the later transfer of money to Taiping Trustees, there was no default under P Note 1. The fact that transfers as admitted by CIG on the pleadings occurred within China Taiping does not establish that there was no default in relation to P Note 1 at the time the receivers were appointed.
507 Mr Kingston's alternative argument relied on the following transfers of money:
(a) on 13 December 2019, HKD10,082,191.78 was transferred from Ashurst to Taiping Trustees and HKD13,491,628.24 was transferred by Ashurst to CIG;
(b) on 31 December 2019, HKD10,054,644.81 was transferred from CIG to Taiping Trustees. That amount was part of the HKD13,491,628.24 transferred by Ashurst to CIG on 13 December 2019, most of the balance of which (HKD3,409,496.46), was applied on the same day, 31 December 2019, towards outstanding interest on SA4 for May, June and July 2019 largely corresponding to the monthly interest amounts shown on the interest invoice for SA4; and
(c) in addition to the first two matters which are pleaded, Mr Kingston submitted there was a further transfer on 6 January 2020 of HKD27,546.97 to Taiping Trustees.
508 There does not appear to be a factual contest concerning the pleaded transfers. The Reply admits that, on 31 December 2019, CIG caused or permitted HKD10,054,964.81 that had been remitted from the Ashurst Trust Account to CIG to be transferred to the loan account maintained by Taiping Trustees in respect of P Note 1. It admits that, on 4 January 2020, Connie Lau of China Taiping notified Mr Wang and Mr Liu that HKD10,082,191.78 would be applied towards interest on P Note 1 for the quarter ending 31 December 2019 and that the balance of HKD3,409,496.46 would be applied to pay interest on SA4.
509 Mr Kingston submitted that the internal transfers, both pleaded and otherwise, had the effect that there was no default meriting the appointment of receivers to Sargon, TTIM and TCFM on 29 January 2020. It is at this point that the argument breaks down. The evidence does not make good the submission.
510 For Mr Kingston to establish there had been wrongful appointment of receivers, it was necessary for him to show that there was no default in relation to P Note 1 on 29 January 2020 at the time the receivers were appointed. That was not established. Mr Kingston's submissions did not address the question of how much interest (or other amounts) was actually required to be paid to Taiping Trustees under P Note 1 as at 29 January 2020. The evidence did not enable a comparison and no comparison was undertaken in submissions between the amount of interest and any other charges necessary to be paid to discharge obligations under P Note 1 and the amounts that were transferred on 13 and 31 December 2019 and on 6 January 2020. Mr Kingston did not prove that there was no event of default in relation to P Note 1 at the date of appointment of the receivers. He did not prove that the appointment of the receivers was wrongful.
511 Mr Kingston also makes a complaint that the 1 February 2020 letter, which offered to suspend the receiverships if interest on SA1-SA3 and SA4 was paid, was unconscionable because the interest on SA1-SA3 and SA4 was not due and owing. There is no substance to that allegation of unconscionable conduct in view of the findings earlier made.
512 Considered against the normative standard of business conscience described in Quantum Housing Group and in Paciocco, the evidence falls short of proving unconscionable conduct contrary to the statute on the part of Taiping Trustees. There is simply insufficient evidence about what Taiping Trustees did and why to establish that its actions referred to in the particulars were irreconcilable with what is 'right or reasonable'.
513 There is a further independent reason why the allegations of unconscionable conduct fail against CIG. Mr Kingston submitted that there was an intertwined involvement of CIG and Taiping Trustees and that the unconscionable conduct consisted both of making unlawful demands and appointing receivers on the basis of those demands. It was submitted that this constituted a course of conduct that CIG was engaged in or was involved so as to bring it within the ambit of s 12GM of the ASIC Act and so as to enliven the Court's powers to make orders declining to enforce the CIG loans against Mr Kingston.
514 Assuming it were open for findings to be made concerning Taiping Trustees' conduct and assuming the evidence was sufficient to establish unconscionable conduct contrary to s 12CB on the part of Taiping Trustees, the evidence falls short of establishing 'knowledge' or 'acquiescence' on the part of CIG in the actions of Taiping Trustees of which Mr Kingston complains. There is no evidence that anyone from CIG knew or should have known, assuming it to be the case, that P Note 1 was not in default at the date the receivers were appointed. Mr Kingston's own submissions accept that Mr Wang did not know anything about the appointment of the receivers. The Court was not directed to any evidence to support a finding that anyone else at CIG knew or ought to have known about the appointment of receivers by Taiping Trustees. Although many issues were canvassed at length during the trial, the circumstances of the appointment of the receivers was not one of them.
515 Concerning acquiescence; CIG submitted and Mr Kingston did not contest that, in order to establish acquiescence in the acts of another, not only knowledge but also a right to object or prevent that act and a standing by or failure to exercise that right must be established.76F[77] There is no evidence and no basis to suggest that CIG had any right to interfere in any actions that Taiping Trustees might choose to take to exercise its rights in relation to P Note 1. There is no basis to support a finding of acquiescence by CIG.
516 As a separate but substantive matter, how can it be that a person who knows of the (assumed) unconscionable conduct of another, in this case the wrongful appointment of a receiver, but has no right to object to or prevent such conduct, could be said to have themselves engaged in unconscionable conduct contrary to the normative standard of business conscience?
517 Knowledge of a wrongful appointment, whilst powerless to prevent it, does not readily meet the description of 'trickery or sharp practice'. This is not a case in which a mortgagee is alleged to have failed to act in good faith when appointing a receiver or exercising its rights in relation to security held. The ADC does not allege that Taiping Trustees had no right to appoint a receiver to Sargon, TTIM or TCFM. In this case, what is in issue is a claim for debt by CIG which did not appoint a receiver.
518 The behaviour on the part of CIG identified in paragraphs seven to ten of the particulars to paragraph 21.4 of the ADC, even if established, is not behaviour that could properly be characterised as sufficient departure from the norms of acceptable commercial behaviour so as to be against conscience or to offend conscience so as to be characterised as unconscionable.
520 Concerning issues 23 and 25 in the fourth group of issues, the position is as follows:
(a) question 23; the evidence does not establish whether the appointment of receivers to Sargon, TTIM and TCFM by Taiping Trustees on 29 January 2020 was made with the knowledge and acquiescence of CIG; and
(b) question 25; I reject the proposition that CIG has engaged in conduct that is, in all the circumstances, unconscionable in contravention of s 12CB of the ASIC Act.
521 Given my findings in relation to issues 18 to 25, it is unnecessary to deal with the question of the application of the ASIC Act. That is so because, assuming the ASIC Act has application, I have not found any contraventions of its provisions.
522 As I have rejected arguments on behalf of Mr Kingston that the Loan Agreement and SA1-SA4 or any of them are unenforceable or void, no occasion arises to consider the alternative claim by CIG that Mr Kingston has been unjustly enriched by the receipt of HKD653m advanced pursuant to those loan agreements. Similarly, there is no need to deal with the alternative claim by CIG that the moneys advanced by Mr Kingston were moneys had and received by him to the use of CIG.
523 When CIG demanded repayment of all outstanding principal and interest on SA1-SA4, it was entitled to do so. Mr Kingston admits he failed to pay the amount of HKD664,900,126.57 owing as at 20 January 2020. He has no defence to CIG's claim for repayment of debt, interest and costs.
524 For the reasons previously stated, there will be judgment in favour of CIG. The counterclaim is dismissed. Orders or declarations may be made dealing with s 18(3) of the MLO.
525 CIG is directed to prepare a draft form of order reflecting these reasons, including dealing with questions of interest, and to provide it to the Court and to Mr Kingston by 4:00pm on 10 February 2023. If the parties are able to agree as to appropriate orders concerning costs, the draft order should incorporate orders dealing with costs. If the parties are unable to agree upon orders as to interest and costs, then, by 4:00pm on 17 February 2023, CIG is to file and serve a draft form of order, together with submissions and any evidence sought to be relied on. By 4:00pm on 24 February 2023, Mr Kingston is to file and serve a draft form of order and any submissions and evidence upon which he wishes to rely as to those matters. Unless the parties are advised otherwise, any outstanding questions of interest and costs will be determined on the papers.
[1] Pursuant to an order dated 5 April 2022; see reasons in China Insurance Group Finance Company Ltd v Kingston (No 2) (Unreported, Supreme Court of Victoria, Delany J, 5 April 2022).
[4] The words 'If the ASIC Act 2001 applies,' are contended for by CIG only and do not appear in Mr Kingston's Statement of Issues.
[5] Question 17 is summarised in paragraph 81(f) above.
[6] The words 'If the ASIC Act 2001 applies,' are contended for by CIG only and do not appear in Mr Kingston's Statement of Issues.
[7] The words 'If the ASIC Act 2001 applies,' are contended for by CIG only and do not appear in Mr Kingston's Statement of Issues.
[8] The words 'If the ASIC Act 2001 applies,' are contended for by CIG only and do not appear in Mr Kingston's Statement of Issues.
[9] The words 'If the ASIC Act 2001 applies,' are contended for by CIG only and do not appear in Mr Kingston's Statement of Issues.
[10] Item 25(d) is contended for by Mr Kingston only and does not appear in CIG's Statement of Issues.
[11] The FASOC refers to the amount outstanding as at 20 January 2021, but this appears to be in error.
[12] The FASOC alleges in the alternative that the net enrichment, after taking into account interest payments, is HKD593,032,222.46.
[13] The ADC refers to Hongbo Liu, but the report prepared by Taiping following the trip refers to Qiaosong Liu, as does Mr Kingston's witness statement. I proceed on the basis that Qiaosong Liu was the third China Taiping representative who was in attendance.
[14] In closing submissions, counsel for CIG describe this email as being sent at '2:31pm AEDT on 12 November 2017'. However, the versions of this, and subsequent, emails reproduced in the court book bear different time stamps. For consistency, I will refer to the time displayed on the versions of the emails contained in the court book. Where there are multiple versions of the same email, I will refer to the version produced by CIG.
[17] Larner v George Weston Foods Ltd [2014] VSCA 62, [96]-[97] (citations omitted).
[18] Paragraph 4 of the Orders dated 5 April 2022 provide that the joint experts as to the law of the Hong Kong Special Administrative Region confer and provide a joint report addressing the questions in Annexure B to those Orders. See also: China Insurance Group Finance Company Ltd v Kingston (No 2) (Unreported, Supreme Court of Victoria, Delany J, 5 April 2022).
[20] Hong Kong Shanghai (Shipping) Ltd v The Owners of the Ships or Vessels "Cavalry" (Panamanian Flag) [1987] HKLR 287, 294.
[22] China Merchants Bank v Minvest International Limited [2001] HKCFI 763, [23].
[23] Hong Kong Shanghai (Shipping) Ltd v The Owners of the Ships or Vessels "Cavalry" (Panamanian Flag) [1987] HKLR 287, 296.
[25] China Merchants Bank v Minvest International Limited [2001] HKCFI 763, [24].
[26] Hong Kong Shanghai (Shipping) Ltd v The Owners of the Ships or Vessels "Cavalry" (Panamanian Flag) [1987] HKLR 287, 296.
[29] Wealth Lee Finance Ltd v Ng Fun Lung [2019] HKDC 68, [85].
[31] Strong Offer Investment Ltd v Nyeu Ting Chuang [2007] HKCFA 26; (2007) 10 HKCFAR 529, [61] (Chan PJ, Bokhary PJ agreeing at [2], Ribeiro PJ agreeing at [56], Mortimer NPJ agreeing at [66] and Scott NPJ agreeing at [67]).
[32] Brother's Company v Ah Puk Transportation [1986] HKLR 821, 825E.
[33] CA Pacific Finance Ltd v Tsui Yun Bun Barry [2009] HKCFI 579, [29]; Swiss Finance Mortgage Services Ltd v Wong Kam Fan [2016] HKCFI 2178, [59(iii)]-[59(vi)].
[34] Brother's Company v Ah Puk Transportation [1986] HKLR 821, 825E.
[35] Strong Offer Investment Ltd v Nyeu Ting Chuang [2007] HKCFA 26; (2007) 10 HKCFAR 529, [62] (Ribeiro PJ, Bokhary PJ agreeing at [2], Mortimer NPJ agreeing at [66] and Scott NPJ agreeing at [67]); Hao Tian Finance Co Ltd v Hung Yuk Ming [2020] HKCFI 465, [112]-[113].
[36] Emperor Finance Ltd v La Belle Fashions Ltd (2003) 6 HKCFAR 402, 442 [119] (Ribeiro PJ, Bokhary PJ agreeing at [1], Chan PJ agreeing at [2], Litton NPJ agreeing at [125] and Millett NPJ agreeing at [131]).
[37] Brother's Company v Ah Puk Transportation [1986] HKLR 821, 825E.
[38] Hao Tian Finance Co Ltd v Hung Yuk Ming [2020] HKCFI 465, [114]; Easy Fortune Property Ltd v Yung Chun Him [2016] HKCFI 1501, [47(3)].
[39] Hao Tian Finance Co Ltd v Hung Yuk Ming [2020] HKCFI 465, [111].
[40] Brother's Company v Ah Puk Transportation [1986] HKLR 821, 825E.
[41] Emperor Finance Ltd v La Belle Fashions Ltd (2003) 6 HKCFAR 402, 442 [119] (Ribeiro PJ, Bokhary PJ agreeing at [1], Chan PJ agreeing at [2], Litton NPJ agreeing at [125] and Millett NPJ agreeing at [131]).
[42] Strong Offer Investment Ltd v Nyeu Ting Chuang [2007] HKCFA 26; (2007) 10 HKCFAR 529, [62] (Ribeiro PJ, Bokhary PJ agreeing at [2], Mortimer NPJ agreeing at [66] and Scott NPJ agreeing at [67]).
[44] Ibid, [62] (Bokhary PJ agreeing at [2], Mortimer NPJ agreeing at [66] and Scott NPJ agreeing at [67]).
[45] As was provided for in clause 8 of SA4.
[46] Using the paragraph numbering adopted in CIG's Statement of Issues.
[47] Wilkinson v Sterne (1744) 9 Mod 427; 88 ER 551, 552; Mills v Fowkes [1839] EngR 659; (1839) 5 Bing NC 454; 132 ER 1174, 1176-1178; Re Walsh; Ex parte Deputy Federal Commissioner of Taxation [1982] FCA 92; (1982) 42 ALR 727, 728-729; Re Mangan; Ex parte Andrew [1983] FCA 135; (1983) 123 ALR 633, 640.
[48] Leeson v Leeson [1936] 2 KB 156, 162-163; Re Walsh; Ex parte Deputy Federal Commissioner of Taxation [1982] FCA 92; (1982) 42 ALR 727, 729.
[49] Re Mangan; Ex parte Andrew [1983] FCA 135; (1983) 123 ALR 633, 640.
[50] Wilkinson v Sterne (1744) 9 Mod 427; 88 ER 551, 552; Mills v Fowkes [1839] EngR 659; (1839) 5 Bing NC 454; 132 ER 1174; Re Walsh; Ex parte Deputy Federal Commissioner of Taxation [1982] FCA 92; (1982) 42 ALR 727; Re Mangan; Ex parte Andrew [1983] FCA 135; (1983) 123 ALR 633.
[51] Wilkinson v Sterne (1744) 9 Mod 427; 88 ER 551, 552; Blackburn Building Society v Cunliffe, Brooks & Co [1882] UKLawRpCh 220; (1882) 22 Ch D 61, affirmed Cunliffe, Brooks & Co v The Blackburn & District Benefit Building Society (1884) p App Cas 857; Re Walsh; Ex parte Deputy Federal Commissioner of Taxation [1982] FCA 92; (1982) 42 ALR 727, 728-729.
[54] Paragraph (vi) of the Particulars to paragraph 21.4 of the ADC was struck out and not used.
[55] Section 12CC(1) is concerned with the supply of financial services; s 12CC(2) is concerned with the acquisition of financial services. The submissions on behalf of Mr Kingston were directed to the supply of financial services.
[56] Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3) [2021] FCA 354; (2021) 153 ACSR 230, [391] (overturned on appeal on unrelated grounds, Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159; (2022) 405 ALR 292).
[57] Relying on ASIC Act, s 12CB(1); Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 399 ALR 409, [57] (Gordon J); Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57, [362] (Beach J).
[58] Relying on Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57, [364]-[369] (Beach J).
[59] Relying on ASIC Act, s 12CB(4)(a); Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1, [295]; (Edelman J); Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57, [365], [377], [458] (Beach J); Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 285 FCR 133, [78] (Allsop CJ, Besanko and McKerracher JJ).
[60] Relying on ASIC Act, s 12CB(4)(c).
[61] Relying on Saafin Constructions Pty Ltd (in liq) v MAG Financial and Investment Ventures Pty Ltd [2021] VSC 489, [428]-[445] (Riordan J).
[62] Relying on Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676, 702-703, (Isaacs J). See, e.g., MBF Investments Pty Ltd v Nolan [2011] VSCA 114; (2011) 37 VR 116, [82]-[84] (Neave, Redlich and Weinberg JJA); Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646, [38] (Young CJ in Eq). See also Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925, 943 (Griffith CJ, Barton and O'Connor JJ).
[63] Quoting Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676, 702 (Isaacs J).
[64] Mr Kingston submits that, in particular:
(i) the 475,000 preference shares owned by TCFM, which were pledged to CIG as "Share 2" under SA 3, and over which Taiping Trustees took security, pursuant to the TCFM General Security Deed, cl 2.1(a); and
(ii) the 171,000 preference shares owned by Dragon Shield Holdings Pty Ltd, all of the shares in which were pledged to CIG as "Stock E" and "Stock H" under SA 4, and which Taiping Trustees both beneficially owned (by reason of its ownership of 100 class A units in the Trimantium Taiping Investment Fund: admitted at Reply, [3.21.4]) and took security over, pursuant to the TTIM General Security Deed, cl 2.1(a).
[65] Mr Kingston submitted that a person is involved in a contravention, inter alia, if it has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention: Corporations Act, s 79(c), as applied by ASIC Act, s 5(2)(b): see, eg, Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3) [2021] FCA 354; (2021) 153 ACSR 230, 320 [391].
[67] [2019] HCA 18; (2019) 267 CLR 1.
[68] Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 285 FCR 133, 152 [78].
[69] Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1, 38 [87].
[70] Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 285 FCR 133, 156 [92] (Allsop CJ, Besanko and McKerracher JJ).
[71] [2022] VSCA 267 (Niall, Sifris and Macaulay JJA).
[72] Smash Enterprises Pty Ltd v Euromark Ltd [2022] VSCA 267, [158] (Niall, Sifris and Macaulay JJA) (citations omitted).
[74] Ibid, 274-75 [296] (Besanko J agreeing at 289 [371], Middleton J agreeing at 295 [398]. This passage was cited with approval by Kiefel CJ and Bell J in Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1, 17 [14].
[76] Ibid, 667 [155] (Allsop CJ, Middleton and Mortimer JJ).
[77] Relying on Duke of Leeds v Earl of Amherst (1846) 2 Ph 117; (1846) 41 ER 886, 888 (Lord Cottenham LC); Orr v Ford [1989] HCA 4; (1989) 167 CLR 316, 337-338 (Deane J).
China Insurance Group Finance Company Limited
Kingston
(2021) 285 FCR 133
(2019) 267 CLR 1
(2018) 266 FCR 631
(2015) 236 FCR 199
(1959) 101 CLR 298
(1982) 42 ALR 727
(1983) 123 ALR 633
(2022) 405 ALR 292
(2022) 399 ALR 409
(2020) 275 FCR 57
(1912) 13 CLR 676
(2011) 37 VR 116
(2004) 60 NSWLR 646
(1906) 3 CLR 925
(1989) 167 CLR 316