Plaintiffs v Defendants

The relevant persons and the substance of the dispute

2 All of the persons involved in the relevant events are Chinese or of Chinese heritage. It is useful to set out an initial overview of the evidence they gave as to their background, their roles, and their relationships with each other.

3 Mr Li is a Chinese citizen resident in Qingdao of the People's Republic of China ('PRC'). He is a businessman who has, or has had, business endeavours related to property development in China and related to products sourced from Australia. In 2014, he was investigating the possibility of investing in, and possibly migrating to, Australia. He established, through an ANZ office in Beijing, an account with the ANZ in Adelaide. He deposited a sum of $3 million into that account. His plan to invest and possibly migrate to Australia was abandoned after his mother fell ill, but he left the deposit he had made in his ANZ account. He described $3 million as 'not a big sum of money', but 'not a small sum'. Mr Li is unable to speak or read English.

4 Mr Zhang is also a Chinese citizen. He is also unable to speak or read English. He is now a resident in Australia. He was, until 2020, qualified as a lawyer in the PRC.

5 Mr Zhang came to Australia with his family in 2015 on a holiday and, while here, he investigated business opportunities. He returned in 2016 and met Mr Bi, and an estate agent named Diandian Zhao ('Ms Zhao'). With their assistance, he arranged the acquisition of a number of properties.

6 Mr Zhang had, for some years prior to 2016, acted on behalf of companies associated with Mr Li in the PRC. According to Mr Li, Mr Zhang was 'nothing more' to him than a lawyer that had acted on behalf of his companies, although he agreed that in 2016 he thought very highly of him and liked him.

7 In 2016, Mr Li had an assistant named Na Gao ('Ms Gao'). Ms Gao worked very closely with Mr Li. Her office was next to his. They met every morning if Mr Li was not travelling. He would give her directions and instructions which she was authorised to pass on to others on Mr Li's behalf. She would report the outcome of her activities to Mr Li.

8 Communications between Ms Gao and Mr Li were generally face-to-face. In 2016, Mr Li did not use email, nor did he use any messaging service such as WeChat. Mr Li relied on Ms Gao to report the substance of email communications to him.

9 Ms Gao left Mr Li's employment in 2020. She remained registered as an officeholder of some of Mr Li's companies after her departure, although she had no active involvement in Mr Li's business affairs after 2020.

10 Mr Bi was introduced to the possibility of working for Mr Zhang by a university classmate in 2016. He met Mr Zhang and another Chinese businessman at the airport upon Mr Zhang's return to Australia in 2016.

11 Mr Bi initially worked for Mr Zhang as his driver and translator. In the beginning he was paid $700 a week by Mr Zhang personally, and later he signed an employment contract with Sortop, under which he received 'around $2,200 per fortnight'.

12 Mr Bi's activities during the course of his employment with Mr Zhang, which began as a driver and translator, evolved into an extraordinary range of activities from the menial, such as typing, mowing Mr Zhang's lawn, and grocery shopping for Mr Zhang's family; to activities well beyond those expected of a normal employee, including personally entering into contracts for the acquisition of land for many millions of dollars, arranging complex banking transactions, acting as a director and shareholder of companies controlled by Mr Zhang, and guaranteeing obligations related to Mr Zhang's business affairs.

13 Mr Bi's mother, who was an Australian citizen residing in Australia, also acted as a director and shareholder of companies controlled by Mr Zhang, notwithstanding that she had no financial interest in those companies and took no active part in their management or affairs.

14 Mr Bi described his relationship with Mr Zhang as 'basically ... doing what he told me to do'. Mr Bi said that everything he did was done on Mr Zhang's instructions, and that Mr Zhang was, in relation to all relevant matters, the 'decision-maker'. Mr Zhang essentially agreed with this. When Mr Bi's description of their relationship was put to him, he said:

It can be said that's correct because we didn't have many people in the company at that time so our work [was] divided like this. I [was] in charge of the capital in China and decision making and Bi Ran [was] put in charge of or will be in charge of the [execution] of the work.

15 Mr Li's assistant, Ms Gao, and Mr Zhang's assistant, Mr Bi, were extensively involved in the transactions relevant to the current dispute.

16 Mr Bi ceased working for Mr Zhang on 14 February 2023. They have since had a significant falling out. Mr Bi was called by the plaintiffs in the trial.

17 When Mr Zhang met Ms Zhao in 2016, she was working part-time as a real estate agent with LJ Hooker. LJ Hooker was the 'referring agent' in relation to certain properties whose acquisition Mr Zhang arranged in 2016.

18 Ms Zhao described Mr Bi, upon her introduction to him, as Mr Zhang's 'assistant and driver'.

19 Ms Zhao is now a director of Crefly and is the operations manager of a company named, Comazor Pty Ltd ('Comazor'). Comazor is a company which manages the Australian property portfolio associated with Mr Zhang. Mr Zhang is the chief executive officer of Comazor. Ms Zhao said in her evidence that Sortop, Crefly and Comazor are all connected, and are all controlled by Mr Zhang.

20 As indicated, in 2016 Mr Zhang arranged for the acquisition of a number of properties in Australia. He introduced Mr Li to the opportunity to invest in Sortop, a company he established to acquire those properties. Substantial deposit payments were due on 20 December 2016. As at 20 December 2016, Mr Li's funds were crucial to Mr Zhang's ability to make those deposit payments, and, as indicated, Mr Li's funds were in fact used to meet those deposit payments.

21 Mr Li's case is that the proposed investment was never finalised and that he never agreed to the use of his funds by Mr Zhang.

22 Mr Zhang's case is that although the investment was not finalised as at 20 December 2016, Mr Li agreed to lend his funds so as to enable the deposits to be paid.

23 Mr Zhang maintains that the loan that he says was made by Mr Li is now owed by him personally. He accepts that he is liable to repay it.

24 Mr Li maintains that his funds were misappropriated and that he is entitled to trace the misappropriated funds and to obtain proprietary remedies, at his election.

Acquisition of the properties and establishment of Sortop

25 On 21 September 2016, Mr Bi as purchaser signed terms sheets for the acquisition of land at 2-32 Paynes Road, Rockbank and at 34-64 Paynes Road, Rockbank.

26 On 11 October 2016, Sortop was incorporated. Upon incorporation, Mr Bi was its sole director. He was replaced by his mother as the sole director shortly thereafter, on 7 November 2016. Initially, Mr Bi was the only shareholder, holding two fully paid shares. He was then replaced by his mother, also holding two fully paid shares. Mr Bi gave evidence that Mr Zhang told him it was necessary for Sortop to be owned by an Australian citizen.

27 On 31 October 2016, Mr Bi 'and/or nominee' executed contracts of sale for the two Paynes Road properties. The contracts of sale provided for a total purchase price in excess of $14 million. The contract of sale for 2-32 Paynes Road, Rockbank provided for a deposit of $1,419,360 payable as follows:

$45,000 on 4 November 2016 (of which $5,000 has been paid) and the balance on 20 December 2016

28 The deposit on 34-64 Paynes Road was $1,423,200 payable on the same terms.

29 Both contracts of sale were to be settled five years from the contract date.

30 The vendor's agent on both sales was Maax Real Estate and Investment Group Pty Ltd ('Maax'). As indicated, Ms Zhao was working for the 'referral agent', LJ Hooker. She introduced the purchaser and, as a result, would be entitled to a share of the commission earned by Maax.

31 The two initial deposit payments of $5,000 were made by Ms Zhao from her personal cheque account as a loan. The balance of the initial deposits (two payments of $40,000 each) was paid by Mr Bi, also as a loan. These loans were later repaid.

32 In October 2016, Mr Li and Ms Gao met Mr Zhang at a private teahouse owned by Mr Li near his offices in Qingdao.

33 Mr Li, Ms Gao and Mr Zhang all gave evidence about this meeting. They all gave evidence that the possibility of Mr Li investing in the acquisition of property in Australia was discussed. Mr Zhang's evidence was that Mr Li 'seemed to be interested' and that he had 'some money in Australia'. One point of difference between Mr Li and Ms Gao on the one hand and Mr Zhang on the other in relation to this meeting was that Mr Li said that Mr Zhang initially asked him for a loan of money, and that Mr Li declined that request firmly, requiring that any investment which he made be by way of capital in the company acquiring the land, with Mr Li having the right to approve payments to acquire land in advance. Mr Zhang denied that he made any request to Mr Li for a loan.

34 By an email dated 9 November 2016 from Mr Bi to Ms Gao, the proposed investment in Sortop, designated as the 'parent company', was introduced, and a number of documents, including the contracts of sale in relation to the Paynes Road properties were attached.

35 On 21 November 2016, Mr Bi entered into a contract of sale for land at 155 Narraburra Road, Little River for the sum of $1,600,000. The purchaser was named as 'Ran Bi & or nominees'. A deposit of $320,000 (of which $5,000 had been paid) was payable on 20 December 2016. Sortop Narraburra, a wholly owned subsidiary of Sortop, was the eventual nominee. Mr Bi's mother was a director of Sortop Narraburra from 15 March 2017 until 21 November 2019 and Mr Bi was the company secretary from 3 April 2017 until 25 August 2022.

36 At some point, probably around 2 December 2016, Mr Zhang sent Ms Gao a description of what was said to be Sortop's 'employees and cooperation teams'. It emerged in the course of Mr Zhang's cross-examination that none of the people listed, other than Mr Zhang himself and Mr Bi, were employees at that time.

37 Mr Zhang's description of the proposal in his email of 9 November 2016 foreshadowed the difficulty that was to emerge later in December in meeting the deposit payments. Mr Zhang said:

It will be very difficult for our funds in China to be transferred over before December 20, and it may only happen by mid-January. We have several payments scheduled for payment before December 20. Therefore, the secretary's funds in Australia are crucial.

38 The reference to 'the secretary' is a reference to Mr Li. The reference to the 'secretary's funds' is a reference to the funds in Mr Li's ANZ account in Australia.

39 Mr Zhang in his evidence said there was a second meeting in China with Mr Li and Ms Gao in November 2016 in which Mr Li expressed strong interest in the proposed investment. Neither Mr Li nor Ms Gao were asked about this meeting.

Negotiation of the proposed investment - Ms Gao's WeChat messages

40 Throughout the early part of December, Mr Zhang and Ms Gao dealt with each other extensively in relation to the proposed investment. Their communications were predominantly through the messaging service WeChat. There were also occasional emails from Mr Bi to Ms Gao.

41 Ms Gao was able to locate the WeChat messages between herself and Mr Zhang between 2 December 2016 and 10 December 2016. She was not able to locate the WeChat messages after 10 December because they were on a different phone to which she no longer has access. Mr Zhang, for his part, has no relevant WeChat messages. He said that all of his WeChat records were lost in 2022 as a result of changing phones.

42 The WeChat messages produced by Ms Gao were the subject of considerable attention during the trial. They are the principal reliable source for the dealings between the parties up until 10 December 2016.

43 Mr Zhang described the proposed sequencing of Mr Li's investment in a WeChat message to Ms Gao on 2 December 2016. The English translation of that message reads: 'There are four things we need to get done before 20 December: First, the Shuji [Mr Li] sets up his own company; Second, the Shuji's company becomes the controlling shareholder of Sortop; Third, the capital injection needs to be completed'.

44 In their evidence, Mr Li and Ms Gao were adamant that the proposed sequence for Mr Li's investment was never altered, and that it was always a precondition to the use of Mr Li's funds in Australia that what was usually described as a 'cooperation agreement', providing for the capital subscription in Sortop, be in place before Mr Li's funds were transferred.

45 Mr Zhang accepted that that was the proposed sequence until a conversation in which he says that Mr Li agreed to lend his funds to pay the deposits even though the sequence set out in the 2 December WeChat message had not occurred.

46 The WeChat messages produced by Ms Gao reveal that Mr Zhang was repeatedly emphasising to Ms Gao the critical importance of 20 December 2016 as the 'final payment date'. He suggested a failure to meet the payments due on 20 December 2016 would mean he would have to leave Australia in disgrace. He told Ms Gao that any investment after that date would be 'meaningless'.

47 The logistics of transferring Mr Li's funds out of his Australian ANZ account were the subject of significant consideration and discussion in Ms Gao's WeChat messages. Mr Zhang was pressing Ms Gao to provide him with the BSB and account number for Mr Li's Australian account. Ms Gao's evidence was that whilst she believed she had had this information in 2014 when the account was established, she did not have it in December 2016. Her WeChat messages confirm that position, at least until 10 December 2016.

48 The WeChat messages record that as at 8 December 2016, Ms Gao and Mr Zhang believed that the requirements of the ANZ meant that the transfer of the $3 million could not be made unless Mr Li was physically present in Australia in order to arrange the transfer. As a consequence, Mr Zhang advised Ms Gao on 9 December that there was 'nothing we can do...we can't cooperate with you and Shuji this time...I'll seek other funding'. Later, Ms Gao messaged: 'I also told Shuji that you're looking for friends or other sources of funding; Shuji said if you find suitable funds, you can make your own decision'.

49 Mr Zhang's evidence was that he was unable to raise funds from other sources beyond about $800,000. Notwithstanding what seems to have been the shared understanding of the ANZ requirements, and Mr Zhang's statement that cooperation was impossible as a result, discussions about the proposed investment continued.

50 The WeChat messages record that the commercial terms of Mr Li's proposed investment were broadly agreed between Ms Gao and Mr Zhang by 10 December 2016.

51 Ms Gao, acting on Mr Li's instructions, had insisted upon an arrangement whereby Mr Li would have a level of shareholding which was disproportionate to the level of capital which he contributed, and whereby Mr Li would also have a power of veto over use of the company's capital.

52 A WeChat message of 9 December 2016 reveals that by then Mr Zhang had agreed to these terms, which Mr Zhang described in his evidence as constituting a 'big concession'. Mr Li was to have 40% of the shares for the $3 million he would contribute, whereas other investors would contribute $18 million for the remaining 60%; and 'business decisions' would require '70% approval', thereby effectively giving Mr Li a power of veto. Mr Zhang agreed with the suggestion that Ms Gao was driving a 'very hard bargain'.

53 On 10 December 2016 Ms Gao asked if the agreement had been drafted in response to which Mr Zhang said that the agreement was being drafted by the lawyer, that in the future it would be signed between Mr Li's new company and the 'Hong Kong SPV company', and that Sortop would only have these two shareholders. The WeChat messages then record the fact that Ms Gao said that she had prepared a visa application for Mr Li and that he intended to go to Australia 'soon'.

54 Finally, it is noteworthy that in the WeChat messages, Mr Zhang referred to a 'friend' which he said he had at the ANZ Bank, and also to an Australian investor 'friend' that he had who he said might be able to provide the funds on the security of Mr Li's funds if a solution to the problem of transferring those funds could not be found. In his evidence, Mr Zhang said that his friend at ANZ was actually Mr Bi's friend, and that his Australian investor friend was a friend of a relative whose name he did not know.

55 In December 2016, Sheldon Fu was a junior solicitor at Sabelberg Morcos. He had been admitted in February of that year.

56 Sabelberg Morcos were acting on behalf of Sortop in relation to the proposed investment by Mr Li. Mr Fu said he was working with other more senior lawyers. He took instructions from both Mr Zhang and Mr Bi. He described himself as relatively junior at the time, and said that he was involved because of his knowledge of Mandarin. Mr Fu arranged the incorporation of Sengia on 12 December 2016. Upon incorporation, the sole director was Mr Bi, and the sole shareholder was Mr Li.

57 On 13 December 2016, Mr Fu sent a draft loan agreement between Mr Li and Sengia to Mr Zhang, and, in a separate email, to Mr Bi. The email to Mr Zhang included the passage:

Please forward it to Mr Li, who will then need to give it to his own lawyer for review and interpretation before signing.

58 Mr Fu said in his evidence that his firm was not acting for Mr Li and that was why he said Mr Li should get independent legal advice. He was unable to recall if he was ever informed or instructed that the agreement had been forwarded to Mr Li.

59 On Wednesday 14 December 2016 at 6:24pm, Mr Fu sent an email to Mr Bi and Mr Zhang concerning Mr Li's proposed investment through Sengia in Sortop. The email contained an analysis of the risks involved for Sortop in the arrangement as Sabelberg Morcos then understood it. In his evidence, Mr Fu seemed to suggest that the relevant content of this email had emanated from his more senior colleagues.

60 The risks addressed in the email arose out of the fact that the equity ratio for Mr Li was not equal to that of the other proposed shareholders; and also out of the fact that if Mr Li, through Sengia, were to invest before the other shareholders, he would obtain control of Sortop and be able to replace the directors. Mr Fu agreed in his evidence that he (and presumably his more senior colleagues) were concerned as to the 'lopsidedness' of the proposed arrangement.

61 Mr Bi responded to Mr Fu's email at 7:39pm that evening (Wednesday 14 December 2016) saying: 'Mr Zhang would like to confirm with you that Sortop needs to issue 3 million acquisition shares'.

62 On 15 December 2016, a bank officer at the Chinatown branch of the ANZ Bank, Ling Huang ('Ms Huang'), made alterations to the bank's records concerning Mr Li's ANZ account, which significantly advanced the capacity of Mr Bi and Mr Zhang to access Mr Li's funds. The relevant entries in the ANZ's records for Mr Li's account on 15 December 2016 read as follows:

CRN Telecode Reset Approved.

Register For Challenge Questions Approved.

Register For Internet Banking Approved.

Register For Pay Anyone Approved.

63 Mr Bi gave evidence that he helped Mr Zhang take these steps at the Chinatown branch of the ANZ that day because Mr Zhang had difficulty doing it himself. He said that the difficulty which Mr Zhang had was that he did not know English and was not able to type. Mr Zhang has a disabled hand.

64 Mr Bi gave evidence that he and Mr Zhang had often gone to the Chinatown branch of the ANZ, and that they went to that branch because staff members there could speak Chinese. Mr Bi said that he had accompanied Mr Zhang to the Chinatown branch on other occasions, and that they 'were received' by Ms Huang. He said Mr Zhang was the person who would speak to Ms Huang.

65 Ms Huang gave evidence in the trial and Mr Zhang was in Court when she did so. Mr Zhang, in his evidence, said that he did not know Ms Huang, although he agreed that it was possible that he had spoken to her in 2016 but did not recognise her now.

66 Mr Zhang said in his evidence that he had asked Mr Bi to carry out the transactions put into effect at the ANZ Chinatown branch on 15 December 2016, but he maintained that he did not know precisely what Mr Bi was doing. He agreed that he went to the bank that day with Mr Bi, and he said that what they were doing was setting up 'online banking for Sengia'. Mr Zhang said that he was ignorant of the details of what was done that day.

67 Mr Zhang gave evidence that Mr Bi had found a solution to the problem that the ANZ required Mr Li to be physically present before the transfer of Mr Li's money could be made. He said that Mr Bi found a way to do it by 'internal transaction'. He said that he had told Ms Gao of the method which Mr Bi had devised in a call to her mobile in which Mr Bi had participated.

68 When Mr Bi was asked in cross-examination if he knew of a method of transferring Mr Li's funds as an 'internal transfer', he said: 'I didn't know'. When asked if he had 'any discussions with anyone - Mr Zhang, Ms Gao - about transferring the money in any way from Mr Li's personal account', he said he only had discussions with Mr Zhang 'but we didn't have any outcome'. When asked if it was possible he had informed Ms Gao of an 'alternative solution' to the transfer he said if it were him who told Ms Gao this, he 'will write down everything clearly and report to Zhang Xiaolong first'.

69 Ms Gao denied ever being told of any 'alternative solution'.

70 Mr Bi maintained in his evidence that the information necessary to carry out the steps taken at the bank on 15 December 2016 had been given to him by Mr Zhang.

71 The Customer Reference Number, the 'CRN', for Mr Li's account, together with the BSB and the account number, are handwritten on a card, a photograph of which is in evidence. The card itself has clearly been produced by the ANZ and is written in English. Mr Bi took the photograph of that card on 15 December 2016. He agreed with the suggestion that the photograph was of a card provided by the ANZ. He said the writing on the card was not his. Mr Bi said that the details on the card 'should be' the details that were given to him by Mr Zhang. Mr Bi also said that he completed the 'challenge questions' registered on Mr Li's account on 15 December 2016 on Mr Zhang's instructions. He took a screenshot of those questions and answers.

72 Evidence was given by Andrew Peter Savvas, the senior operational governance manager of the ANZ. He addressed the transactions recorded in 2015 in some detail. He identified Ms Huang as the bank officer who reset the CRN telecode. The substance of his evidence was that the changes made on 15 December 2016 ought not to have been made in the absence of Mr Li's physical presence and verification of his identity. To make those changes without Mr Li's physical presence and verification of his identity was in contravention of ANZ's required procedures. He said 'the only way' the transactions could be undertaken in circumstances where Mr Li was not present would be 'if someone was in the branch impersonating' him. He accepted that 'another possibility' was that a mistake had been made by ANZ staff but observed that they do train their branch staff on identifying customers and that they 'don't seem to have many problems' with branch staff performing those actions correctly. When I suggested that based upon his evidence I should proceed on the basis that either someone has impersonated Mr Li successfully, or the ANZ staff have failed to follow the requirements, he responded: 'Yes, both of those would be where I would be heading as well'.

73 As indicated, Ms Huang also gave evidence. She was unable to recall the transactions on that day, but she confirmed that her understanding of what was required in order to make those changes was that the customer needed to be physically present in the branch with verifying identification.

74 Mr Li, in his evidence, said he was unaware of what occurred in relation to his account on 15 December 2016.

75 At 11:52am on Friday 16 December 2016, Mr Fu sent Mr Bi and Mr Zhang an email addressed 'Dear Mr Bi', confirming the receipt of instructions that 'SENGIA will advance 3 million to SORTOP', and seeking confirmation. Mr Bi, in his evidence, said that the instruction had come from Mr Zhang, not from himself.

76 This email is the first documentary reference to the proposition that Mr Li's proposed investment company, Sengia, was to advance $3 million to Sortop as opposed to subscribing for $3 million in shares. The change in the arrangements, if it occurred, must have occurred between 7:39pm on the evening of 14 December 2016 when Mr Bi confirmed to Mr Fu that 'Sortop needs to issue 3 million acquisition shares' and the instruction Mr Fu records at 11:52am on Friday 16 December 2016.

77 In evidence-in-chief, Mr Zhang said that he had arranged for Mr Bi to send the instruction to Mr Fu concerning the loan by Sengia to Sortop. He was asked whether before he had arranged for Mr Bi to send Mr Fu the instruction he had spoken to Ms Gao or Mr Li about any advance or loan of the $3 million and he said he had. When asked what had occurred, he said the following:

I remember the four of us had a meeting together. I called Ms Gao Na first. Then I asked Bi Ran to join, and Ms Gao asked Mr Li to join to discuss this matter.

How did this meeting occur? Face to face?---Over the phone.

All right, what happened?---According to my memory, at that time there was legal procedures which can only finish after the 20th of December. So if we wait for the legal procedures to complete to sign the [cooperation] agreement, the deposit payment will not happen in time. So I discuss with Mr Li, [Sengia] can loan us, can loan the money to Sortop first.

All right, and what did Mr Li or Ms Gao say?---So Mr Li agreed with this method.

Do you recall when this occurred?---I can't remember the exact time but it should happen before this email was sent.

And did you have any other discussions with Ms Gao about a loan of the $3m for Mr Li, from Sengia to Sortop?---I remember at that meeting we discussed lots of content. I couldn't remember too much details. But the money from Sengia, so the loan from Sengia to Sortop was only an advance. Later on this money will be transformed into a shareholding.

All right, Mr Li says nothing was to occur until agreements had been signed, do you recall him saying that?---Mr Li is someone I respect very much but I don't agree what he said.

...

Did Ms Gao tell you that nothing was to occur until an agreement was signed?

---No.

78 Mr Zhang was challenged in cross-examination about this conversation and, in particular, he was asked whether, before giving evidence in the case, he had told his lawyers about this call. His response was as follows:

So during my conversation with the lawyers I mentioned there were a lot of telephone calls, telephone meetings. I am not sure whether my lawyers made a detailed record of this.

80 It was put to Mr Zhang that the call he described never happened, and he said that that was not true.

81 The reason that Mr Zhang was asked about what he had told his lawyers in relation to this WeChat call was because this critical conversation had not been pleaded, had not been opened, and had not been put to any of the other alleged participants in the conversation who, by then, had completed their evidence; namely, Mr Li, Ms Gao, and Mr Bi.

82 When the defendants' senior counsel opened the defendants' case, at the end of the plaintiffs' opening on 12 June 2025, he said:

What had been happening during December is continuing communications directly with Ms Gao by phone and WeChat concerning Mr Li's funds. Originally it was an investment, but by around this time it's become a loan, and both Mr Zhang and Mr Bi would communicate with the lawyers and the banks. Sometimes Mr Bi would handle matters independently.

83 When asked about the email confirming the instruction that there was to be a loan from Sengia to Sortop, senior counsel agreed with the suggestion that the defendants' case was that by the time of Mr Fu's email on Friday 16 December 2016, Mr Li had told Mr Zhang that he would lend the money. He then went on:

Now, I can't be more specific, Your Honour, with mathematical precision, but it's at some time around this time and the documents would suggest that's the first time it's recorded in the solicitor's file as an instruction.

84 On 17 June 2025, the defendants filed a further amended defence in which no specific reference was made to a conversation as described by Mr Zhang. The relevant portion of the particulars read:

The loan was discussed during conversations between Ms Gao, Mr Bi, Mr Zhang, and Mr Li in or about December 2016, and was documented in emails and attachments (including a written loan agreement prepared by Sabelberg Morcos Lawyers in or around early 2017). The emails were sent by Sheldon Fu of Sabelberg Morcos Lawyers to Mr Bi on behalf of Sengia Pty Ltd on 16 December 2016, 20 December 2016, 21 December 2016 and 14 March 2017.

85 Mr Zhang gave the evidence concerning the WeChat conversation on 23 June 2025. By that time, Mr Li, Ms Gao and Mr Bi had all completed their evidence. No application was made for their recall.

86 In the course of Mr Li's cross-examination, relevantly what had been put to him was the following:

Do you recall whether Mr Zhang made a request through Ms Gao that you give him permission to allow his funds to be used to pay for the deposits on the properties in December 2016, before 20 December?---Yes.

Yes. And did you agree to lend the 3 million around this time because Mr Zhang had asked you to lend the moneys?---No.

Did Ms Gao tell you prior to 20 December 2016 that Mr Zhang had asked to use your funds in paying the deposits?---Yes.

...

It was agreeable to you that he use your funds to pay the deposits on 20 December?---We have a condition for using the fund[s].

88 The condition to which Mr Li referred was that the 'cooperation' agreement be in place and that the funds be used to subscribe for the shares. Nothing was put to Mr Li to the effect that he participated in a WeChat call with Ms Gao, Mr Zhang and Mr Bi prior to the morning of 16 December 2016, and presumably between the evening of Wednesday 14 December 2016 and the morning of Friday 16 December 2016, in which a loan from Sengia to Sortop was specifically discussed and agreed.

89 When Ms Gao was cross-examined, the following was put to her:

Do you recall either speaking with Mr Zhang or, in a WeChat discussion at this time, where he asked you to pass on a request to Mr Li to use his funds to pay for the deposits?---No, what we discussed was signing the agreement first and then invest.

...

Do you recall telling Mr Zhang that Mr Li agreed to lend the $3m to pay the deposits at that time?---I never said that.

90 A little later, Ms Gao was being cross-examined about the events on 20 December 2016 when I sought clarification as to what was being put during a period when Ms Gao asked if she could stop to have a drink of water. The interchange was as follows:

[JUDGE]: Sorry, just while that's happening, can I just be clear about what you're putting to her. The authorisation to lend the money wasn't on the 19th, it was before then.

[SENIOR COUNSEL]: Yes.

[JUDGE]: All right, but you give no particular date, is that right?

[SENIOR COUNSEL]: Well I give it in the weeks leading up to 20 December, that's what I put. I can't be more specific than that, Your Honour.

[JUDGE]: And it's Ms Gao who's said to have done it?

[SENIOR COUNSEL]: Yes, he asked Ms Gao for her permission, to ask Mr Li for his permission, she reported back he agreed.

[JUDGE]: All right. And this is in a phone call is it, or what?

[SENIOR COUNSEL]: Yes. A phone call. Well, Your Honour, this is the difficulty with doing a case about something that happened eight years ago. It's either in a phone call or WeChat.

91 Mr Bi was cross-examined about Mr Fu's email confirming the loan instruction on 16 December 2016, but was asked nothing about a phone call in which he had participated with Mr Zhang, Ms Gao, and Mr Li in which that agreement had been made.

92 It is impossible to escape the conclusion that the reason the defendants pleaded the case as they did, the reason senior counsel opened the case and explained it as he did, and the reason that Mr Li, Ms Gao and Mr Bi were cross-examined on this issue in the manner in which they were, was because at the time those steps were taken, the defendants' lawyers had not been instructed that the WeChat conversation described by Mr Zhang had occurred.

93 Mr Fu had sought confirmation of the instruction that Sengia was to advance a loan of $3m to Sortop in his email at 11:52am on 16 December. At 12:53pm Mr Bi sent a confirming response. At 12:56pm Mr Fu replied asking Mr Bi to 'inform Mr Shenghai Li, the shareholder of Sengia, and obtain his written consent'. There is no evidence that any such written consent was sought.

94 By emails of 17 December 2016, Mr Bi forwarded to Ms Gao information concerning the other proposed investors in Sortop as well as information regarding Sortop itself.

95 Phone records in Mr Bi's name are in evidence. They include a phone that Mr Zhang says was used by him. The phone records record a phone call from that phone on 19 December 2016 to Ms Gao at 7:11pm of 1 minute and 40 seconds duration. The records also show that Mr Bi called the ANZ Qingdao Branch twice that day; such calls being of 10 minutes 19 seconds and 3 minutes 4 seconds duration.

96 Mr Zhang gave evidence that in his call on 19 December 2016, he told Ms Gao 'about the arrangement for making payment and transactions on 20 December'. It was put to Ms Gao in her cross-examination that Mr Zhang rang her the night before 20 December 'to talk about how he was going to arrange for the transfer of funds from Mr Li's personal account'. She responded: 'I don't think that's correct'.

97 Mr Bi was not asked about the calls he made to ANZ Qingdao Branch on 19 December 2016, although the defendants submit that evidence he gave about WeChat messages between Mr Li and himself in 2024, to which subsequent reference will be made, should be interpreted as being referable to these 19 December calls.

98 Mr Bi successfully arranged for Mr Li's funds to be transferred from his personal account to Sengia's account, and then to Sortop's account on 20 December 2016. On the same day, those funds were used to meet the deposit payments due on the properties in Paynes Road and Narraburra Road.

99 In their evidence, Mr Li and Ms Gao said that they were ignorant of what occurred on 20 December 2016. They said that they considered that the investment proposal was over because the 20 December deadline had been reached and the cooperation agreement had not been finalised and signed.

100 Mr Li agreed in his evidence that during December the parties had been investigating possible solutions for the transfer of his funds from his personal account to Sengia. Mr Li and Ms Gao said that they believed, based upon advice from the ANZ, that Mr Li would need to be physically present in Australia in order to arrange the transfer. Mr Savvas confirmed in his evidence that that ought to have been the case.

101 In cross-examination, Mr Li was asked whether he was ever told by Ms Gao of an 'alternative solution' involving Mr Li's appointment as a director and account signatory for Sengia. Mr Li responded that Ms Gao had not told him that. He said: 'she told me Mr Zhang has his method, but Gao Na didn't tell me the details'.

102 It seems that the so-called 'internal transfer' solution required Mr Li's appointment as a director of Sengia because his appointment as a director was arranged urgently on the morning of 20 December 2016. This appointment was arranged by Ms Zhao using the services of an ASIC registered agent and accountant named Stephen Chiu. Mr Chiu was a friend of hers.

103 Ms Zhao contacted Mr Chiu very early on the morning of 20 December 2016. At her request, he arranged for himself to be appointed as the registered agent for Sengia and to add Mr Li as a director. He had the consent of the existing director, Mr Bi. He did not have the consent of Mr Li.

104 Mr Chiu gave evidence. He frankly admitted that he had made a mistake in registering Mr Li as a director of Sengia without his written consent.[1]

105 An ASIC company search of Sengia conducted at 10:41am on 20 December 2016 listed Mr Li as a director. The extract of this search was returned on subpoena by ANZ. The defendants accepted that it could be assumed the search was conducted by ANZ. The existence of the search suggests that it had been necessary to add Mr Li as a director of Sengia as a consequence of some requirement by the ANZ.

106 Initially in his evidence Mr Bi maintained that whilst he had performed the transfer from the Sengia account to the Sortop account, he did not know who had transferred the $3 million from Mr Li's account to Sengia's account. When cross-examined, it was put to him that he was the person who effected the transfer from Mr Li's account to Sengia's account, and his response was that Mr Zhang had asked him.

107 The next morning, Mr Bi, at the outset, asked to clarify something. He said he had looked at the documents he had produced under a subpoena, and they had helped him remember something. He was concerned to emphasise that he was not a 'decision-maker' and that he was only an employee, doing what Mr Zhang told him to do. Referring then to the ANZ card which he had photographed on 15 December 2016, upon which there was the handwritten CRN, BSB and account number of Mr Li's account, Mr Bi then said:

So I took a photo of this card was to help the company and Mr Zhang Xiaolong to keep a record. I didn't save this in my personal computer. So, after this so like a few years after this Mr Zhang Xiaolong often said to me Didi Zhao made [an] important contribution to this matter. If she didn't cry at the ANZ branch it's not, so they would not let the money being transferred out of Mr Li's account. So I remember in the morning of the 20th of December, Zhang Xiaolong told me that I need to keep my phone connected and waiting for Didi Zhao to notify me. So at about 11 am that morning, I received a notice from Didi that I can make the transfer now. So after I received that notification I made the transfer of $3 million from Mr Li's account to Sengia's account to Sortop's account.

108 Mr Zhang, in his evidence, said that he arranged for Mr Bi to make the transfer and that he also asked Ms Zhao to assist him. He said that on the day, it 'went smoothly'.

109 Ms Zhao, in her evidence, said she arranged for Mr Chiu to add Mr Li as a director of Sengia after Mr Bi had requested urgent help. She said that Mr Chiu was a friend of hers. She provided the relevant information to Mr Chiu which enabled him to add Mr Li as a director.

110 Ms Zhao said that she went to the bank on 20 December with Mr Bi. The account she gave in evidence-in-chief was as follows:

So we went to the, I went to the bank with Bi Ran, and we need to make a transfer. I remember at that time we cannot make the transfer directly. I remember the bank said the account, the account holder has to be the director of the business. And then the bank had some communications with Bi Ran.

I remember the bank needs to make lots of phone calls. I remember during that time the banker asked Bi Ran to come over and then asked us to wait, continue to wait. ... And then after well we waited for a while and then Bi Ran suddenly said it's done.

112 Ms Zhao said the deposits were paid later that day.

113 Ms Zhao agreed that her involvement in the transactions so far described went well beyond what would normally be expected of a real estate agent. She agreed that she had never lent money to a purchaser before to pay part of the deposit, that she had never before gone to a bank with a purchaser to help them arrange their affairs, and that she had never before helped a purchaser to add a director to a company. She explained that it was the first time that she had met a customer like Mr Zhang, who had come from overseas and who needed such help.

114 On the morning of 20 December 2016, Mr Bi forwarded to Ms Gao an ANZ document entitled 'Company/Formal Trust Account Authority' partially completed in the name of Sengia. The blank form had been forwarded to him a number of times the previous day by Ms Huang. Mr Bi asked Ms Gao to arrange for it to be signed by Mr Li, and to be scanned and returned. It was not returned.

115 In cross-examination it was put to Ms Gao that it would've been a simple matter for her to call Mr Zhang or Mr Bi and ask what was going on. Her response was that the 'most important thing is to sign the cooperation agreement' and that without that being signed, she would not give any authorisation. When she was asked: 'Didn't you think it important?' She responded: 'No, I don't think'.

116 On the evening of 20 December 2016, Mr Fu sent an email to Mr Bi, and to an email address which it seems was an erroneous typing of Mr Zhang's email address. Mr Fu's email begins, 'Hello Mr. Zhang'.

117 Mr Fu's email of 20 December 2016 attached a number of draft agreements, including an agreement described as 'Loan Agreement Share Allotment - Sengia and Sortop', a constitution for Sortop; and two draft shareholder agreements.

118 Identification of the attachments to the 20 December email was not certain, but the parties advised the Court that it was agreed that the attachments were 'similar' to the corresponding attachments in an email of 6 March 2017 from Mr Fu.

119 The attachments to Mr Fu's email of 6 March 2017 included a 'Deed of Loan, Share Allotment' agreement; a 'Shareholder Deed' between Sortop, Sengia and Mr Bi's mother; a 'Shareholder Deed' between Sortop, Sengia, and Yin Shan Investments (HK) Ltd ('YSI'); a 'Subscription Agreement' between Sortop, Sengia and Mr Bi's mother; a 'Subscription and Purchase Agreement' between Sortop, Sengia, Mr Bi's mother, and YSI; and a 'Memorandum of Understanding' between Sortop, YSI, Sengia, and Mr Bi's mother.

120 Mr Fu's covering email of 20 December 2016 referred to what must be the attached 'Loan Agreement Share Allotment' as the 'Loan and Debt-to-Equity Contract'. The email asked Mr Zhang to note that the attachments were only drafts 'intended to disclose the main contents to Mr Li in advance'. The email continued that after 'Mr. Li signs the Loan and Debt-to-Equity Contract', final contracts for the share subscription and shareholders agreements would be provided 'for Mr. Li to review and finally sign'.

121 For present purposes, the significant draft agreement is the one described as 'Loan Agreement Share Allotment' in the attachment to the 20 December 2016 email, as the 'Loan and Debt-to-Equity Contract' in the text of that email, and as the 'Deed of Loan, Share Allotment' attached to the email of 6 March 2017. It is potentially significant because it provides for the making of a loan by Sengia of $3 million from a 'Commencement Date' of 20 December 2016 or such other date as may be agreed, with a 'Repayment Date' of 1 March 2017 or such other date as may be agreed. It provides that repayment is to be made by the issue of 3 million fully paid shares in Sortop.

122 On Wednesday 21 December 2016, Mr Fu sent an email to Mr Zhang, attaching a 'Memorandum of Understanding' between Sortop, YSI and Sengia.

123 At 5:28pm on 24 December 2016, Mr Bi sent an email to Ms Gao with two attachments. The email was in Chinese. The English translation reads:

This is the memorandum and shareholders agreement prepared by our lawyer, please check.

124 The attachments were described as follows: Memorandum.pdf; Shareholders Agreement Translation.pdf.

125 The documents attached to Mr Fu's email of 20 December 2016, and in particular the draft 'Loan Agreement Share Allotment', were not attached to Mr Bi's 24 December email to Ms Gao. There is no evidence that it or any of the other attachments were sent to Ms Gao, or Mr Li, then, or later.

126 The memorandum which was attached to the email to Ms Gao was a Chinese translation of the memorandum of understanding Mr Fu had drafted in English. The other document attached was a draft Shareholders Agreement between Sortop, Sengia, and Mr Bi's mother regulating shareholder rights premised on Sengia holding 3,000,000 shares and Mr Bi's mother holding 2 shares.

127 Recital C.1 of the memorandum of understanding, as drafted by Mr Fu, relevantly read: 'Sengia has ... provided a loan facility to Sortop'. The translation of recital C.1 in the Chinese version that was forwarded to Ms Gao could be read in two possible ways, as: 'Sengia is to provide loan to Sortop' or 'Sengia is providing loan to Sortop'.

128 Ms Gao gave evidence that she could recall seeing the email and memorandum of understanding on 24 December 2016. She then said:

I didn't do a deep investigation on this email because the deadline for the land transaction [had] passed. So I believe that at that time any discussion about the shareholders agreement at that time should not exist. ...

Did you discuss this email and these attachments with Mr Li?---No.

And why was that?---Because the transaction day, 20 December 2016, has passed, is meaningless, it's meaningless to discuss this matter further.

129 When taken specifically to recital C.1, she said:

It doesn't exist, this term. This is not consistent to what I discussed with Mr Zhang.

130 Mr Zhang was asked about Mr Fu's email of 20 December 2016 and the draft documents attached. He pointed out that the email address for him was wrong, and said: 'I didn't receive this email in my email box'. But he agreed that on 20 December 2016 Mr Fu had provided to him 'a loan agreement, share allotment', a draft shareholders agreement and a draft subscription agreement.

131 When taken to the recitals in the memorandum of understanding in cross-examination, it was put to Mr Zhang that the purpose of the loan was solely to subscribe for shares and that the recitals reflected that, in response to which he said: 'Ah, no, the purpose of the loan was to pay the deposit for the land'. As to the meaning of Recital C.1 he agreed that the Chinese could be understood as 'Sengia is to provide loans to Sortop'.

132 There is no evidence of any written communications between the parties after 24 December 2016.

133 The defendants admit in paragraph 57(a) of their further amended defence that Mr Zhang 'did not inform Mr Li that ... a deposit had been paid on the Paynes Road properties, or the source of funds for that deposit', and they say in paragraph 57(b) that Mr Li was aware that the funds lent by Sengia to Sortop 'were being used for deposit payments for property purchases in Australia'.

134 On Monday 9 January 2017, Mr Fu sent an email to Mr Zhang and to Mr Bi, attaching the final draft of a share subscription contract between Sengia and Sortop, a shareholders' agreement between Sengia and Sortop, and a memorandum of understanding between Sengia and YSI. The email also attached invoices for the work done thus far, including an invoice to Sengia for the sum of $2,585. Sortop paid the Sengia invoice on 30 January 2017. There is no evidence that any of these documents were forwarded to Mr Li or Ms Gao in China.

135 Mr Zhang gave evidence that there was a meeting between him, Mr Li and Ms Gao in January 2017. Mr Li said that he did not recall this meeting. Both Mr Li and Ms Gao recalled there was a meeting later in 2017, which was subsequently established to have occurred in August.

136 Mr Zhang's evidence was that the January meeting was in China and was between him, Mr Li and Ms Gao. He said it was in the 'latter half of January'. Mr Zhang said an administrative ruling in a proceeding concerning Mr Li was discussed. That ruling is dated 23 January 2017.

137 Mr Zhang's evidence was that, in this meeting, he thanked Mr Li for the loan of his money for the deposit of the land acquisition and asked him to speed up the process of signing the cooperation agreement. Mr Zhang said that Mr Li did not reveal his attitude to investment at this meeting, but that he was contacted by Ms Gao later who told him that Mr Li was 'a bit hesitant about continuing investment'.

138 Mr Zhang's evidence was that there was a second meeting which occurred around March 2017 on the same trip as the January meeting and before he returned to Australia. Mr Zhang says that Mr Li said to him at this meeting that his investment plan was 'too aggressive' and that he did not want to invest. Mr Zhang's evidence was that Mr Li also said to him that although he would not invest anymore, he would support him. Mr Zhang quoted Mr Li as saying:

As your brother I will support you as much as I can. I have money putting in the bank, if you need the money you can use it.

139 Mr Zhang gave evidence that he asked about interest and Mr Li replied that there was no need to discuss interest.

140 In Mr Li's cross-examination, it was put to him that in a meeting in January 2017, Mr Zhang had expressed his sincere appreciation for the loan of $3 million. Mr Li responded that he did not recall that. It was then put to Mr Li that in March of 2017, there had been a further meeting with Mr Zhang at which Mr Li had said that he would support him, even though he would not invest. Mr Li responded:

So I didn't know any of that. As a businessman, if I knew my money was moved from my account at a later time, at least I will try to complete a formal loan agreement with the other party.

All right. Well Mr Zhang is going to say that you told him at this meeting, "If you need the money, just use it"?---I will not say that.

And he said that he shouldn't, that Mr Zhang shouldn't worry about interest, "If you need it, just use it"?---I won't say that.

So, after December 2016 Mr Zhang didn't mention anything about using my money, so how could [he] - how could he thank me for that.

142 By an email dated 6 March 2017, Mr Fu sent to Mr Bi and to 'Nancy' (an employee of Mr Zhang's who translated English documents for him) the draft documents to which previous reference has been made.

143 Mr Fu's email of 6 March 2017 and the documents attached reveal that at that time he continued to believe that Sengia was to be an equity investor in Sortop. Again, there is no evidence that any of these documents were sent to Mr Li or Ms Gao in China.

144 On 14 March 2017, Mr Fu sent a further email to Mr Bi and Nancy enclosing a draft loan agreement between Sengia and Sortop.

145 The draft loan agreement sent by Mr Fu on 14 March 2017 provided for an advance of $3 million by Sengia to Sortop. Both the commencement date and the principal repayment date were blank. There was provision for the payment of a fixed amount of interest of $2,585 'as agreed between the Borrower and the Lender'.

146 Mr Fu's covering email requested that Brian (Mr Bi) and Nancy 'arrange the execution of this loan agreement, and return us a copy of the executed document at your earliest convenient time'.

147 Mr Zhang was asked about the provision in relation to interest in this draft loan agreement. He said:

So the situation was Mr Li didn't want interest. Our company made some, so paid for Mr Li's legal cost[s] earlier so this $2,585 was for that purpose. So he didn't need to pay us for the legal cost[s] we paid for him, instead we paid this amount of interest to him.

148 When asked whether Mr Li was involved in this interest arrangement, Mr Zhang said:

So in, when I had the meeting with Mr Li in March 2017 we discussed the loan face to face, but Mr Li wasn't aware of this $2,585. After the meeting with Mr Li I asked Bi Ran to deal with this matter.

149 Mr Zhang said he did not know whether Mr Bi reported this to Ms Gao and whether Mr Li knew about this arrangement.

150 Mr Bi gave evidence that the impetus for the loan agreement which Mr Fu forwarded to him and Nancy on 14 March 2017 was a request from the company accountant. Mr Bi said:

Because at that time the accountant of the company has been chasing all these loan agreement so that the accountant can get all the documents ready for tax purpose. Yes, the accountant want [to] get all [these] matters dealt with and then we can get the tax ready for 2017. So, many documents and agreements were signed in this period of 2017.

151 The file of Sabelberg Morcos was subpoenaed by the plaintiffs, and the documents were produced to the Prothonotary. Amongst the documents so produced was a copy of the loan agreement which Mr Fu forwarded to Mr Bi and Nancy on 14 March 2017, apparently executed by Mr Bi and by Mr Li on behalf of Sengia, and by Mr Bi's mother on behalf of Sortop, with Mr Fu witnessing the signature of Mr Bi's mother.

152 The signature which purports to be that of Mr Li is a forgery. Specimen signatures of Mr Li were compared to the signature on the copy loan agreement by a forensic document examiner named Trevor Joyce. His report was tendered by consent. In substance, he was of the opinion that significant differences between the specimen signatures and the signature on the copy document could be explained only by disguise, that is, deliberate modification by the signatory in order to appear dissimilar; or, because the signature on the document was not written by Mr Li. He expressed the view that the most likely hypothesis was that the signature was not that of Mr Li, but he said a determination of a preference for the 'Disguise' or 'Different Writer' hypotheses should be made by the Court. In this case, the 'Disguise' hypothesis can be rejected. No submission was made to the contrary.

153 Mr Bi was asked whether he had seen Mr Li sign this document, and he said he had not. When asked to tell the Court how the document was signed, he said the following:

So on the day, I can't recall exactly which day, Zhang Xiaolong, my mum and myself went to Mr Fu's law firm, and Zhang Xiaolong discussed the details of this agreement with Mr Fu because Zhang Xiaolong could not read English. And after Mr Fu explained the terms and information of this agreement, he said this needs to be signed by both parties. And then Mr Fu stepped out of the room. ... So because I was the director of Sengia, so I signed as the director of the company, I signed my name. And then I asked Zhang Xiaolong, "How do we deal with Li Shenghai's signature"? And Zhang Xiaolong told me, "You can sign it". I said, "I don't know Li Shenghai, I don't know how to sign". Because it's quite urgent, so Zhang Xiaolong signed.

154 When asked to go through the sequence of steps as he remembered them, Mr Bi said:

So Mr Fu explained all the terms for Mr Zhang. So after that, Zhang Xiaolong asked Mr Fu to leave the room for some time so that we can discuss. And then he asked me to sign my name, so I signed my name. Then he asked me to sign Li Shenghai's name, Li Shenghai's signature. I refused, and then Zhang Xiaolong signed at that place. So after some time Mr Fu returned and asking is everything okay, and if it's fine my mum can sign. And then my mum signed and Mr Fu signed.

155 It was put to Mr Bi in cross-examination that the account he had given was 'fanciful' as Mr Fu would have known that Mr Li was not present. It was put to Mr Bi that Mr Zhang had not asked him to sign Mr Li's signature and he responded: 'He asked'.

156 Mr Zhang, in his evidence-in-chief, said that he did not sign Mr Li's signature and that he did not know who did. He said the first time he had seen this document was when it was 'submitted to the court' quite recently when the successor firm to Sabelberg Morcos was asked to produce documents.

157 In cross-examination, Mr Zhang was taken to the unsigned version of the loan agreement and asked whether he had seen that in March 2017. He responded:

This matter I ask Bi Ran to handle this. I didn't care much.

158 He was asked about a loan agreement between Sengia and himself, apparently dated 20 December 2016, and he responded:

This should be a wrong date. The reason was based on the requirement of the accountant we need to supplement all these documents to meet requirement.

160 In cross-examination, Mr Zhang repeated that the first time he had seen the version of the loan agreement purportedly signed by Mr Li was when the law firm submitted documents to the Court. He said that in his company's internal files there was an unsigned version of this document, but that he had never seen the signed version before the law firm submitted the documents to the Court. He said he did not know how the document came to be signed.

161 Mr Fu was called to give evidence by the defendants. He described what he could remember about the circumstances in which the loan agreement was signed.

162 Mr Fu said he could not remember the exact date, but that he believed there was a meeting in the office with Mr Zhang, Mr Bi and Mr Bi's mother. He said he was only required to witness Mr Bi's mother's signature and that after that he considered that his 'job was finished'. He said that he did not know what happened afterwards in relation to the signing on behalf of Sengia. He said that when he witnessed Mr Bi's mother's signature, the document was blank.

163 He was asked when was the first time he had seen the document with Mr Bi and what was purported to be Mr Li's signature, and he said that he could not remember. He said he had been provided with the signed document before the hearing, but he could not remember receiving a fully signed copy at the time.

164 When asked again to repeat what occurred, he said there was a meeting with the four of them, and that he was asked to witness Mr Bi's mother's signature in front of everyone and that he did that. He said that 'from memory', he did not go back into the room. When asked how the signed version came to be on the firm's file, he said:

I can't remember but if it's in our file I believe it must be subsequently sent to us, so we just saved a copy in [the] file.

165 Mr Fu said he could not recall if the document had been left with the firm on the day he had witnessed Mr Bi's mother's signature.

166 An executed copy of the document must have been either left at the firm after being signed or returned to Sabelberg Morcos at a later date. The covering email of 14 March 2016 had requested the return to the firm of a signed copy. The purportedly signed copy was one of the documents produced on subpoena.

168 On 15 May 2017, Sortop paid a sum of $3 million into Sengia's bank account. Very soon after, the funds were withdrawn again. The payments out were as follows:

(a) On 18 May 2017, $2.1 million is transferred in three tranches to an account belonging to Mr Zhang;

(b) On 19 May 2017, $300,000 is transferred to an account belonging to Sortop;

(c) On 6 June 2017, $250,000 is transferred to an account belonging to Sortop;

(d) On 27 June 2017, $350,000 is transferred to an account belonging to Sortop.

169 Mr Zhang, in his evidence, said that the money was paid back and was then 'used again'. When asked who owed the money now, Mr Zhang said that it was his 'personal loan' owed to Sengia. He said no-one owed money to Mr Li. Presumably the document bearing the 'wrong date' (20 December 2016) recording a loan from Sengia to him, as referred to earlier, was intended to record this obligation.

170 When asked whether Mr Li knew about the loan re-arrangement in May 2017, Mr Zhang said:

So before the money was returned, Bi Ran asked me whether to return the money to Sengia's account or to Mr Li's personal account, so I had a discussion with Ms Gao and she told me the money can be returned to Sengia's account.

171 When asked about the re-use of the money, Mr Zhang said:

Before I used the money again I contacted Ms Gao and told her the situation, and asked her to report to Mr Li, and Mr Li's response was, "No problem, you can continue using it".

172 In Ms Gao's cross-examination, it was put to her that Mr Zhang had contacted her by WeChat concerning the re-use of the funds from Mr Li. Ms Gao's response was as follows:

I want to say two points for this question. The first point is I don't remember such a thing happened. And the second point is from the very beginning to the end we've never agreed that Mr Zhang can use this money, so such thing didn't happen, didn't exist.

173 In August 2017, a meeting was held at Mr Li's teahouse in China, attended by Mr Li and Ms Gao, and by Mr Zhang, Ms Zhao, and Mr Bi. All of the participants in that meeting gave evidence and all had some recollection of it.

174 There was uncertainty as to the date of the meeting until Mr Bi was called to give evidence and produced a photo which he took at the meeting. The metadata indicates the meeting was held on 28 August 2017.

175 When recounting this meeting, Mr Zhang said that he 'asked the general manager of our company', being Ms Zhao, to introduce to Mr Li the Australian property project.

176 Mr Li had a limited recollection of the meeting. He remembered that Mr Zhang was there and that he brought others with him. Mr Zhang was, according to Mr Li, 'still representing a case for our company'. Mr Li said nothing was said about the money that he had in Australia. He denied that he said to Mr Zhang words to the effect that if he needed Mr Li's money, he could just use it.

177 Ms Gao gave evidence that Mr Li had not stayed long at the meeting. She said that Mr Zhang introduced Ms Zhao and that they outlined their plans for land acquisition in Australia. She said Mr Li did not agree to any proposed future investment. When asked if anything was said about Mr Li's money in Australia, she said that 'no one mentioned that'. Ms Gao said that was the last meeting she attended with Mr Zhang.

178 In cross-examination, Ms Gao denied that Mr Zhang had expressed his deep gratitude for the use of Mr Li's funds. She said it was never mentioned.

179 Mr Bi, in his evidence, produced the photo which he had taken at the meeting. He said that this was the first time he had met Mr Li. He said he did not have any conversation with him at the meeting and that, as could be seen from the photo, he was sitting a distance away from the other people. He was not asked in cross-examination what, if anything, he had heard Mr Zhang or Mr Li say. Mr Bi did agree that the 'impression' he gained from the meeting was that Mr Zhang and Mr Li did have the relationship Mr Zhang had described, including the loan.

180 Mr Bi in a WeChat message to Mr Li on 22 February 2024 stated that '[his] impression was that [Mr Li was] aware of [the loan] and willing to lend the money as [Mr Zhang] said'. In cross-examination, Mr Bi was asked whether this 'impression' derived in part from the meeting held in Qingdao in August 2017, and Mr Bi agreed.

181 Mr Zhang gave evidence that this was another occasion upon which he expressed his gratitude to Mr Li for the use of the funds and upon which Mr Li said that he could continue to use them.

182 Ms Zhao gave evidence essentially supporting Mr Zhang's account of what occurred in August 2017. She said that Mr Zhang thanked Mr Li for lending the money to pay for the land deposits at a crucial time. She said that she introduced to Mr Li the land acquisitions in Australia and the plans for the future. She said she also remembered Mr Zhang mentioning whether he could continue borrowing the money and that Mr Li had said: 'No problem'.

183 Mr Zhang in his evidence said there were further meetings between he, Mr Li and Ms Gao in 2018 and 2019. At these meeting he said he reiterated his thanks for the money lent to him. Mr Li and Ms Gao denied that there were further meetings after August 2017.

184 In July 2020, Sortop's accountant, referred to as 'Jing' or 'Zheng', was seeking details about Mr Li from Mr Bi. In response to this request, Mr Bi sought this information from Mr Zhang. The WeChat message he received in response was:

185 Mr Bi was asked what Mr Zhang told him about his contact with Mr Li between 2017 and 2023. Mr Bi said that, in addition to the inquiry from the accountant, he had also asked Mr Zhang about what should be done about the $3 million and when did it need to be paid back. Mr Bi said:

And Zhang Xiaolong told me Li Shenghai has been controlled by the Chinese government under corruption investigation, so he, he's not able to come overseas anymore and this money is corrupt money.

186 Mr Zhang repeated the assertion that Mr Li was under some kind of government control in China in his evidence. This suggestion had not been put to Mr Li when he gave evidence.

187 In February 2023, Mr Bi stopped working for Mr Zhang. When asked why, he responded, in substance, that Mr Zhang had misled him, and that he had been put at the 'very front of the businesses' and 'signed a lot of debt' and 'was put as the guarantee' when Mr Zhang was the actual person who benefited. Mr Bi was cross-examined about incidents and events which it was said revealed his animosity towards Mr Zhang and a desire to damage him economically.

188 In the middle of 2023, Mr Bi began making attempts to contact Mr Li. Mr Li said that at first he thought the person trying to contact him was a 'scammer', but after he learnt that his money in Australia had gone, he realised that he ought to contact Mr Bi, and he did so. In 2024 they exchanged a number of WeChat messages which are in evidence concerning what had occurred in 2016.

189 There were many WeChat messages exchanged between Mr Li and Mr Bi in 2024. Certain of those messages, with agreed English translations, are in evidence. They are particularly relied upon by the defendants.

190 Two general observations are pertinent before addressing the particular passages upon which the defendants rely. First, Mr Bi is very concerned in the messages to absolve himself of responsibility, and to emphasise that he had been deceived by Mr Zhang and that he had gained no benefit from the transactions. Second, Mr Li persistently maintains that he had no knowledge that the $3 million had been used by Mr Zhang until contacted by Mr Bi in 2023.

191 On 22 February 2024, the following exchange occurred.

Mr Li: Before you come to Qingdao this time, try to recall the relevant information about Xiaolong Zhang's unauthorised use of my 3 million Australian dollars, especially the fund transfer path designed by Xiaolong Zhang secretly, because I was completely unaware of it. Therefore, when you contacted my assistant last summer, I thought that the 3 million Australian dollars could not be lost. The more detailed the information you provide, the better it is for you and me

Mr Bi: Mr. Li, your words made me sweat. Because Xiaolong Zhang had been deceiving me and making me take on debts while he made profits. After I found out later that he was dishonest and had no moral integrity, I had a falling out with him. I need to make it clear to you about your money, because I am afraid that he will entrap me again in the future.

At that time, he told me that you lent him the money for his investment, and I believed what he said that you agreed to lend the money, because I went to Qingdao to meet you and thought that you two had the relationship he claimed to have, and later you provided your passport and bank account information, and I contacted you directly and confirmed the loan matter. My impression was that you were aware of it and willing to lend the money as he said.

But now you say you were completely unaware of it, what does that mean? Didn't you agree to the loan at that time?

192 After some further exchanges, Mr Li messaged: 'I absolutely didn't know that the 3 million had been used by him'.

193 It is necessary to observe at this point that Mr Bi's sequence of events is confused. The reference to having gone to Qingdao and having met Mr Li must be a reference to August 2017. Mr Li did not provide his passport 'later'. That had been provided before 12 December 2016, when Mr Bi sent a photo of it to Mr Fu. The reference to the provision of bank account information 'later' is also out of sequence as Mr Bi certainly had that information when he took the photograph of the ANZ card on 15 December 2016.

194 On 29 February 2024, in the course of a further exchange of WeChat messages, Mr Bi said:

Zhang said that you had agreed to lend the money. I also understood that it was the case when talking on the phone at the time.

195 On 12 March 2024, Mr Bi sent Mr Li the following message:

Mr. Li, I don't know what the consequences will be for my involvement in it, and how he will frame me. But I was indeed deceived by him. I always thought that you had agreed to lend the money until I met you. I was really shocked by what he did. When I transferred the money at the bank under his instruction, I did have a phone call with someone who claimed to be your guy for authorisation. I don't know if that person was someone he arranged but fictitious.

196 Then, in response to a query as to which bank employee had helped open the account, Mr Bi sent a message saying:

And at the bank, he also asked me to talk to you and Ms. Na Gao.

I did talk to a man and a woman.

197 A little later, Mr Bi sent the following message:

At the bank, I called and talked to the person he claimed to be you, and was indeed authorised to incorporate a company and make payment for the land

and I did it after that

I thought you agreed to loan the money, it was just that you couldn't come over, so you authorised Zhang to do these things.

198 The juxtaposition of the authorisation to incorporate the company and the payment for the land is another instance of a problem with Mr Bi's sequencing in the messages. Mr Li's authorisation for the incorporation of the company was contained in an email from Ms Gao to Mr Zhang on 12 December 2016, which Mr Zhang then forwarded to Mr Bi the same day. The payment for the land was on 20 December 2016.

199 When asked in cross-examination about the phone call or calls to which he refers in the WeChat messages, Mr Bi said:

So previously when Zhang Xiaolong and myself visited the ANZ branch, Zhang Xiaolong told the ANZ employee, the teller, that he has the authorisation from Mr Li Shenghai, he also has Mr Li's account information and he wanted to transfer the money out for investment. And the ANZ employee told him that Mr Li has to be present in person, and the authorisation cannot be used. So at that time Zhang Xiaolong called Ms Gao. He wanted Mr Li to give the authorisation over the phone but the bank didn't accept, and later on he called Gao Na again and [asked] Gao Na to take Mr Li to the ANZ branch in Qingdao. So, at that time, there [was] a man and like a man's voice and [woman]'s voice in this call and they said they were Li Shenghai and Gao Na. That was at the ANZ branch in Qingdao and the female voice supposed to be Ms Gao. She told us that the Qingdao ANZ branch only dealt with domestic business in China, not Australian business. That's when I said I had [a] call with a man and that man could be Li Shenghai. But I cannot prove whether he is [Li] Shenghai or not.

200 When referred to the WeChat message between Mr Zhang and Ms Gao on 9 December 2016 concerning the ANZ requirement that Mr Li be physically present and how that accorded with the conversation he was talking about, Mr Bi said:

I believe it's around that time. So, the bank needs the passport and also the authorisation.

201 When asked later in his cross-examination about the WeChat message on 22 February 2024, when he had said that he had contacted Mr Li directly and 'confirmed the loan matter', Mr Bi said:

So that's referring to what I told His Honour earlier, that when we, when Zhang Xiaolong and I visited the ANZ branch we couldn't transfer the money out and we ask, we contact the ANZ branch in Qingdao in China and - and when we couldn't get the, transfer the money out I contacted Gao Na, and Gao Na and Li Shenghai went to the ANZ branch in Qingdao. When they were in ANZ branch in Qingdao we had that phone conversation.

202 Mr Li's evidence was that between 2017 and 2023, he was unable to access his account because he and his employees 'couldn't pass through the ID process'. He said his account was blocked in 2023. He said in January 2024 his mother died and so he decided to come to Melbourne himself. His evidence was that it was not until early 2024 that he realised 'the money was gone'.

203 In cross-examination it was put to him that he obtained access to his bank account in February 2024 with the help of a Mr Wang at a law firm in Qingdao, but he responded that Mr Wang did not help him access the account, he helped him to get the statement of the account. It was put to him that he could've asked someone like Mr Wang or Mr Wang himself to help him once he found out that he couldn't access his account and he agreed.

204 The plaintiffs in their further amended statement of claim plead that the transfers of $3 million from Mr Li's account to Sengia's account, and from Sengia's account to Sortop's account, were not authorised by Mr Li and that he did not know of them. In their further amended defence the defendants deny these allegations, allege the transfers had been undertaken by or on behalf of Mr Li with his consent and authorisation, and allege that Sengia lent the sum of $3 million to Sortop.

205 These are the fundamental allegations made by the respective parties.

206 There were aspects of the pleadings concerning these fundamental allegations which, on each side, did not accord with the evidence given by that party in the trial. On the defendants' side, reference has already been made to the defendants' pleading of the alleged agreement to lend the $3 million which did not refer to Mr Zhang's evidence that that agreement was reached in a single WeChat call which he said occurred between himself and Mr Bi on the one hand and Mr Li and Ms Gao on the other. On the plaintiffs' side, they pleaded that Mr Li learnt in mid-December 2016 from the ANZ that he would have to attend an Australian bank branch in person to transfer the $3 million, that Mr Li did not travel to Australia, that he did not take any further steps to complete the proposed investment, and that he treated Mr Zhang's investment proposal as being at an end. That was not the account of events given by Mr Li and Ms Gao in their evidence.

207 The plaintiffs allege that the funds transferred were received subject to a constructive trust for the benefit of Mr Li. Mr Li claims a proprietary interest in the Paynes Road properties and an account of profits from Mr Zhang, Crefly and Sortop. Alternative claims are made on behalf of Sengia.

208 The plaintiffs allege that Sortop Narraburra settled the purchase of the Narraburra Road property on 31 March 2017 in part using a remaining balance from the allegedly unauthorised transfers. A proprietary claim and a claim for an account is made against Sortop Narraburra on behalf of Mr Li, alternatively Sengia.

209 It is neither necessary nor desirable to closely analyse the pleaded proprietary claims at this stage because the parties consented to an order confining the trial to issues of liability. The consent order agreed by the parties and made by the court on 23 June 2025 is as follows:

The trial of the proceeding commenced 11 June 2025 is to determine liability, including, for the avoidance of doubt, whether either plaintiff (a) is entitled to elect to receive an account of any profits, or (b) to trace any trust monies into either of the Paynes Road Properties or the Narraburra Road Property (as defined in the statement of claim), including the basis and parameters of any such tracing.

210 The plaintiffs claim, in the alternative, equitable compensation; the sum of $3 million; interest, including compound interest; and costs.

211 Shortly prior to the final submissions in the trial the Court received a letter from the solicitors firm Best Hooper Lawyers. Best Hooper Lawyers act on behalf of Yale Asset Development 2 Pty Ltd, a company which has entered into contracts of sale for the Paynes Road properties. The letter pointed out that their client had not been joined as a party to the proceeding and had only recently become aware of it. The letter referred to the High Court decision in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd[2] and observed that the plaintiffs sought proprietary relief in relation to the Paynes Road properties. The letter indicated that if any such relief was to be sought, their client should be given the opportunity to make enquiries of the parties to determine whether their client's rights might be affected. After advising Best Hooper Lawyers, the letter was forwarded to the parties.

212 Immediately prior to the final submissions a solicitor from Best Hooper Lawyers appeared and advised the Court that they had requested advice from the plaintiffs as to whether there was any intention to disturb the contracts of sale for the Paynes Road properties and had received an 'unequivocal no'. The solicitor said that the plaintiffs had advised that they would seek no relief which affected their client's interest.

213 Senior counsel for the defendants informed the Court that there were also mortgagees who would be potentially interested in any proprietary relief.

214 I accept that the determination of the issues of liability, to which this trial is confined by consent, should not involve the granting of any relief which could affect the proprietary interests of non-parties.

215 In their further amended defence, the defendants plead that Crefly's title to the Paynes Road properties is indefeasible under ss 41-43 of the Transfer of Land Act 1958, and that Sortop Narraburra's title to the Narraburra Road property is indefeasible under the same provisions. The defendants also plead that all the plaintiffs' claims in the proceeding are statute barred by reason of s 5 of the Limitation of Actions Act 1958.

216 In their amended reply the plaintiffs allege that the conduct of Crefly and Sortop Narraburra was fraudulent within the meaning of ss 42 and 43 of the Transfer of Land Act. The plaintiffs also rely on s 27 of the Limitation of Actions Act contending that the action is based upon fraud and was concealed by fraud.

217 In the course of final submissions senior counsel for the defendants, when asked whether there had been an acknowledgement of the loan, on Mr Zhang's evidence, in 2019, advised that no limitation defence was taken in relation to liability for a $3 million loan.

218 The parties had previously filed a document entitled 'Draft List of Issues'. Consequent upon the consent order limiting the trial to liability, the parties were requested to reformulate the issues to be decided. The plaintiffs and the defendants then submitted separate reformulations of the issues.

219 The plaintiffs' reformulation of the issues did not, in my opinion, sufficiently reflect the pleaded claims. But, more significantly, it sought the determination of issues concerning proprietary interests in the Paynes Road properties and the Narraburra Road property.

220 The defendants' reformulation of the issues more accurately reflected the pleaded claims and defences, and the consent order, in my opinion. Consequent upon senior counsel for the defendants' acceptance in the course of submissions that one issue on the list as formulated was surplusage and that one issue should be added, the defendants' list of issues would read:

1. Did Mr Zhang obtain the permission of Mr Li to effect or arrange the transfers on 20 December 2016 of $3 million from:

(i) Mr Li's ANZ account to Sengia Pty Ltd; and

(ii) Sengia Pty Ltd's ANZ account to Sortop Pty Ltd?

2. [deleted]

3. [If question 1 is answered] "No", was Mr Zhang's conduct dishonest?

1. Did Sortop Pty Ltd, Mr Bi or Mr Zhang receive the benefit of $3 million transferred from Mr Li's ANZ account to Sengia Pty Ltd's ANZ account such that those monies were at all times received by them on a constructive trust for the benefit of Mr Li and Sengia?
2. Did Sengia Pty Ltd agree to loan the sum of $3 million to Sortop Pty Ltd?
3. Did Sengia Pty Ltd provide an ongoing permission to Sortop Pty Ltd to use the $3 million at any point after March 2017?
4. Are the plaintiffs' causes of action barred by s 5 of the Limitation of Actions Act 1958 (Vic)?
5. Are the plaintiffs' or either of them entitled to elect to receive an account of any profit or to trace any trust monies?

221 Whilst not entirely comprehensive, in my view that list does encapsulate the essential issues the Court must decide at this stage.

222 The defendants' written submissions began by submitting that there were three factual possibilities in relation to the transfer of funds on 20 December 2016. The first was that Mr Li had agreed to lend the money and that the appropriation of the funds by Mr Zhang was authorised. The second was that there was a misunderstanding and that the appropriation of the funds by Mr Zhang was unauthorised but not dishonest. The third was that Mr Li had not agreed to lend the money and that the appropriation of his funds by Mr Zhang was unauthorised and dishonest.

223 The defendants submitted that the first possibility should be accepted. If that was not accepted, the second possibility should be accepted. The defendants submitted that the third possibility should be rejected.

224 The defendants' written submissions made a general observation that the relevant events had occurred eight and a half years ago and that it was unsurprising that no witness had a complete or reliable memory of those events. The defendants said that many relevant documents had been lost. No witness had taken handwritten notes of relevant meetings.

225 The defendants submitted that Mr Li's recollection of events was 'especially poor'. The defendants relied on what was said to be divergences between the plaintiffs' case as pleaded and Mr Li's evidence. The most significant divergence relied upon was that referred to earlier; namely, that the plaintiffs' case as pleaded was that Mr Li had determined that the proposal had come to an end after being told in mid-December 2016 that he would have to travel to Australia to effect the transfer.

226 The defendants' written submissions reviewed the events from October 2016 until 24 December 2016 in detail. In the course of that review, the submission was made that Ms Gao was a witness whose evidence could not be accepted. It was submitted that she had clearly been mistaken in evidence she gave that Mr Bi was at the meeting with her and Mr Li in October 2016. It was submitted that her evidence denying that she had been exploring means of transferring the funds out of Mr Li's account during December had to be rejected. It was also submitted that her evidence ought to be rejected when she said that she did not have Mr Li's bank account details in December 2016, when she denied telling Mr Li that Mr Zhang had a 'method' for transferring the funds, when she said that she did not recall what was said in the phone call of 19 December 2016, and when she said that she 'ignored' the email of 24 December 2016.

227 The defendants submitted that Mr Li was 'mistaken' in his evidence that Mr Zhang had asked him for a loan at the meeting in October 2016. The defendants submitted more generally that Mr Li's recollection of relevant events had been poor. It was submitted that Mr Li had forgotten relevant events and meetings. A number of what were said to be instances of such a lack of recollection were referred to under the heading: 'Mr Li forgot that he had granted Mr Zhang permission to use his money'.

228 In relation to the circumstances which it was said meant a conclusion of dishonesty could not be drawn, the defendants' submission relied upon the email to Ms Gao attaching the bank authority on 20 December 2016 and the email of 24 December 2016 attaching the memorandum of understanding. The defendants also particularly relied upon Ms Zhao's evidence that Mr Li acknowledged the existence of the loan at the meeting in August 2017.

229 Nine factors were set out in the defendants' written submissions which, it was submitted, could not be reconciled with a finding of fraud. Those factors were:

(1) Mr Zhang instructing his lawyer that Sengia would loan the $3 million to Sortop;

(2) Mr Bi calling ANZ Qingdao and speaking to Mr Li and Ms Gao;

(3) Mr Zhang contacting Ms Gao on 19 December and speaking with her for 1 minute 40 seconds;

(4) Mr Zhang instructing Mr Bi to send an email to Ms Gao on 20 December 2016, requesting Mr Li's signature on a document that would be used to execute the 'very method' Mr Li had been informed about for the transfer of funds;

(5) Mr Zhang instructing his lawyer to prepare a draft memorandum of understanding that effected a debt-to-equity swap;

(6) Mr Zhang instructing Mr Bi to send a draft memorandum of understanding to Ms Gao on 24 December 2016, which referred to a loan and debt-to-equity swap as the basis for the proposed investment in Sortop;

(7) Mr Zhang contacting Mr Li and Ms Gao in early 2017 about the ongoing conduct of litigation involving Mr Li's companies;

(8) Mr Zhang contacting Mr Li and Ms Gao in about August 2017 and setting up a meeting to discuss further potential property investments; and

(9) Mr Zhang arranging further meetings in 2018 and 2019.

230 The cornerstone of Mr Zhang's evidence in relation to Mr Li's alleged agreement to the making of a loan, as opposed to a subscription for shares, was the WeChat call which he swore he had with Mr Bi in Australia and with Mr Li and Ms Gao in China. The defendants' written submissions approached this evidence with diffidence. The relevant transcript was cited in the context of a submission that Mr Zhang had made a 'request' for a loan. It was cited in the context of a submission that an 'inference' should be drawn that by 20 December 2016 Mr Li had approved the request for a loan. It was cited in the context of a submission that 'around' 15 December 2016 the parties were 'likely to have discussed and agreed' that Sengia would lend the money to Sortop. Finally, it was cited in the context of submissions made about what was said to be events on 19 December 2016. That submission concluded with the observation: 'In that sense, all four witnesses did speak with each other on the same day, likely 19 December'.

231 Detailed submissions were made in relation to events on 19 December 2016. The submissions were founded upon the WeChat messages between Mr Bi and Mr Li in 2024 and the phone records indicating Mr Bi had telephoned the ANZ branch in Qingdao on Monday 19 December 2016.

232 At the conclusion of a section of the written submissions headed, 'Ms Gao was instrumental in the granting of permission to Mr Zhang', the defendants' written submissions appeared to return to the case as opened and as put in cross-examination to Mr Li and Ms Gao. The submission made was:

At some point between 10 and 20 December, amidst the emails and phone calls she had with Mr Zhang and the WeChat messages they must have exchanged, Ms Gao gave Mr Zhang permission to transfer Mr Li's funds out on 20 December 2016.

233 The defendants' written submissions contended that regardless of the factual findings the plaintiffs were barred from any relief by s 5 of the Limitation of Actions Act. It was submitted that s 27 of that Act was not available to the plaintiffs even if fraud was established as they were unable to prove that Mr Li could not have discovered any fraud perpetrated by Mr Zhang with 'reasonable diligence' at a date early enough to commence proceedings.

234 In oral submissions, senior counsel for the defendants confronted the obvious problems with Mr Zhang's account of the WeChat conversation in which the agreement for a loan was allegedly made frankly and forthrightly.

235 Senior counsel submitted that he was not asking the Court to draw a conclusion that a conversation as described by Mr Zhang had occurred. He accepted that Mr Zhang's evidence on that matter could not be accepted. He submitted, however, that that did not lead to a conclusion that those matters had not been discussed at all. He submitted that the proper basis for relevant conclusions was what the documentary evidence revealed, as the oral evidence of all of the witnesses was very likely to be reconstruction.

236 In that context, senior counsel for the defendants particularly emphasised the WeChat messages between Mr Li and Mr Bi in 2024, and what he submitted to be the correlation between what was said by Mr Bi in those WeChat messages and the record of Mr Bi's call to the ANZ Qingdao branch on 19 December 2016. Recognising that that conversation on 19 December could not constitute agreement by Mr Li to the loan, Mr Zhang's solicitors having been instructed on 16 December 2016 that the agreement had been made, it was submitted that the discussion on 19 December was properly to be seen as confirmation of the arrangement for a loan of the funds in order to meet the deposit payments due the next day.

237 Senior counsel for the defendants accepted that Mr Zhang, at all times, had control of all the relevant companies. He accepted that there were no relevant issues of attribution to be determined.

238 Counsel for the defendants emphasised the importance of the Briginshaw principle[3] in this proceeding.

239 The defendants submitted Mr Zhang's conduct, if he had indeed misappropriated Mr Li's funds was so brazen as to be incapable of belief. He had continued to be in contact with Mr Li and had attempted to persuade him to invest in other projects. In response to the suggestion that it was hard to accept the apparent generosity of Mr Li's interest free, open ended loan, particularly after the 'hard bargain' Ms Gao had driven, counsel submitted that it was not difficult to accept because Mr Li's funds would otherwise have been left in the ANZ bank earning no interest, and because to Mr Li the amount involved was not a lot of money.

240 In relation to the forgery of Mr Li's signature, counsel submitted that the Court could not make a finding against Mr Zhang. It was submitted that Mr Bi's evidence on this issue could not be accepted. Mr Fu would not have left the room and then returned in the manner that Mr Bi described. Counsel emphasised that it would be a grave matter to find that Mr Zhang had committed a forgery.

241 Counsel for the defendants submitted that if it were found that a loan had been made, or that the money had been appropriated without authority but not dishonestly, then the appropriate order was an order for repayment of the $3 million. On the other hand, if the Court found there had been a dishonest appropriation, the appropriate order was declarations answering the questions in the defendants' list of issues.

242 In final submissions when it was suggested that none of the documents drafted by Sabelberg Morcos which might have put the position beyond doubt had been forwarded to Mr Li or Ms Gao in China, counsel agreed that that was odd but said that odd doesn't mean dishonest.

243 The plaintiffs' written submissions also addressed in detail the events in October, November and December 2016. It was submitted that the defendants had not pleaded a defence of 'informed consent', but that that was the defence they had run at trial.

244 It was submitted that 'informed consent' was 'factually improbable' for 'at least' the following reasons:

(a) There is no contemporaneous record of any communication between Mr Zhang and Mr Li regarding the purported loan.

(b) There is no contemporaneous record showing Mr Li or Ms Gao being informed of or consenting to any loan arrangement.

(c) Mr Zhang's explanation of the relevant circumstances has been inconsistent.

(d) Mr Zhang, as an experienced lawyer, would have understood the importance of documenting a loan of this magnitude.

(e) Having obtained Mr Li's bank account details and having created 'internet log-in details', there is no evidence Mr Zhang provided that information to Mr Li.

(f) Mr Li was made a director of Sengia without his consent. Mr Zhang had not gone to his solicitors, Sabelberg Morcos, to have Mr Li appointed, instead, Ms Zhao had approached her friend, Mr Chiu, who arranged the appointment without the written consent required by law.

(g) If the company authority forwarded to Ms Gao on 20 December 2016 was a part of the agreed 'method', as the defendants contended, and was a communication Ms Gao was 'expecting', as the defendants also contended, then it was impossible to accept that Ms Gao would have just ignored it, as she did.

(h) There was no evidence that Mr Li had ever been informed that he had been made a director of Sengia.

(i) Mr Zhang never confirmed, after 20 December 2016, that the deposits had been successfully paid. Indeed, Mr Zhang expressly pleads in the further amended defence that he never informed Mr Li that the deposits had been paid.

(j) The draft unsigned loan agreement relied upon in the defendants' further amended defence which Sabelberg Morcos drafted in March 2017 was never forwarded to Mr Li, instead, Mr Li's signature was forged.

245 Under the heading, 'Fraudulently signed 2017 loan document', the following was submitted:

Mr Bi's evidence about the signing of the agreement was largely consistent [with] Mr Fu's evidence. In particular, they each corroborate the other's evidence that Mr Zhang was present at the signing of the document in Sabelberg [Morcos'] offices.

Mr Zhang's repeated oral evidence that he had never seen the executed document has now been contradicted by the evidence in chief of his very own witness and his former solicitor. It is significant that the solicitor's recollection was not in any way challenged: [transcript reference].

Mr Zhang plainly had it in mind in early 2017 that it would be significant to have a document that would support his version of events and excuse his appropriation of $3M from Mr Li and Sengia Pty Ltd. Mr Zhang has ultimately been - whether or not he was himself the moving hand of the signature - [at least] actively aware of a fraud to create a false document for the benefit of Sortop Pty Ltd.

246 In oral submissions, counsel for the plaintiffs submitted that Mr Zhang had obtained 'possession' of Mr Li's account on 15 December 2016 and that Mr Zhang became a fiduciary from that point.

247 Senior counsel for the plaintiffs began the plaintiffs' oral submissions referring to a number of authorities concerning the character of property represented by a bank deposit; the capacity to trace misappropriated funds; the position of recipients, particularly volunteers, of misappropriated funds or of the proceeds of an offence; and the requirement upon a fiduciary to establish fully informed consent to the disposition of property of the person to whom the fiduciary duty is owed.[4]

248 It was difficult to understand the relevance of the authorities in the context of this proceeding. What is alleged here is that Mr Zhang took Mr Li's money without his authority and that that money was used to enable companies he controlled to acquire properties. No issue of receipt of misappropriate funds by an otherwise innocent party arises here. The trial is on issues of liability only, no tracing exercise is to be undertaken at this stage. Only Mr Li, or Sengia's, entitlement to elect to obtain an account of profits or to trace is in issue.

249 Insofar as proprietary claims are made against Crefly and Sortop Narraburra, their otherwise indefeasible title under the Transfer of Land Act 1958 cannot be defeated in the absence of a finding of fraud within the meaning of s 42(1) of that Act, and fraud in that context means actual fraud, personal dishonesty or moral turpitude.[5] In this case, there are no issues of attribution or aggregation of knowledge. It is accepted that Mr Zhang was the controller and the 'decision maker' for all the defendant companies. His knowledge is also the knowledge of Sortop, Sortop Narraburra and Crefly. If fraud in the requisite sense is established against him, it is established against the companies as well.

250 In response to a query as to whether the authorities relied upon were said to be relevant in the event that the payment out of Mr Li's funds was found to be unauthorised but not dishonest as a result of 'crossed wires' or a misunderstanding, senior counsel for the plaintiffs said that he wished to make it 'perfectly clear' that Mr Zhang 'could not have been mistaken' and that there 'can be no crossed wires'.

251 In relation to the submissions made by the defendants concerning the events on 19 December 2016, it was submitted that there is no evidence for the reconstruction contended for by the defendants. The call Mr Bi made to the ANZ that day could well have been about what was required for an internal transfer.

252 Counsel for the plaintiffs accepted that Mr Chiu, in adding Mr Li as a director without his written consent, had made an honest mistake. They emphasised, however, that it was a mistake which had been made at the urgent behest of Ms Zhao.

253 In relation to the loan agreement in March 2017, counsel for the plaintiffs submitted that Mr Zhang had signed the agreement fraudulently, or had procured it to be signed fraudulently.

254 Counsel for the plaintiffs submitted that Mr Zhang's account of a conversation involving the four participants could not be accepted. It was submitted that the attempt to characterise that conversation as having occurred on 19 December 2016 was something which had not been pleaded, opened, or put to any witness.

255 It was submitted that many of the factual submissions made on behalf of the defendants had misquoted the relevant evidence and an aide memoire setting out a number of what were said to be such instances was handed up.

256 The plaintiffs emphasised that insofar as Mr Zhang contended he had the fully informed consent of Mr Li to the use of his fund, the onus of proof was on him as a fiduciary.

257 In relation to the defendants' submissions that if Mr Zhang had indeed acted dishonestly he was extraordinarily brazen in continuing to have contact with Mr Li after 20 December 2016, the plaintiffs submitted that it was 'very apparent' to Mr Zhang that Mr Li and Ms Gao had very limited capacity to access the ANZ account in December 2016, and he knew that their ability to access the account after 15 December 2016 was further impaired by the changes made that day.

258 It was submitted that it was not surprising that Mr Li and Ms Gao proceeded on the basis that the matter had simply come to an end after 20 December 2016. They had been told that that was the absolute deadline. Mr Li had demonstrated earlier, on 9 December 2016, that he was prepared to walk away from the investment if it became impractical. They were both busy at the time.

259 Returning again to the loan agreement in March 2017, counsel for the plaintiffs addressed the terms of that agreement, observing that it contained terms which, even according to Mr Zhang, had never been discussed with Mr Li, being, in particular, the term as to interest. It was also pointed out that earlier in March, Sabelberg Morcos had drafted a suite of agreements which still provided for an equity investment by Sengia.

260 Finally, senior counsel for the plaintiffs emphasised that the really significant events occurred on 15 December 2016. That was when Mr Zhang effectively got control of Mr Li's account. It was submitted that that took the pressure off Mr Zhang's need to have a cooperation agreement signed by 20 December. It was submitted that there was no evidence that after 15 December Mr Zhang was pressing for finalisation of the cooperation agreement.

261 In reply, senior counsel for the defendants submitted there was no evidence of any instruction to Mr Fu to delay preparation of the relevant agreements, and that the documents were in fact drafted quickly. It was submitted that no claim had been pleaded which was founded on the events of 15 December 2016. Finally, it was submitted that if Mr Li had given permission for the loan, that permission must have encompassed the method used to obtain the funds, including the steps taken on 15 December 2016.

262 I found Mr Li to be a credible witness. Little or nothing was put to him, or emerged from the evidence, which led me to doubt his credibility. In his evidence, he was, however, recounting events which are now some years ago, and about which he kept no written record. There are inevitable concerns as to the reliability of his recollections in that context. Mr Li was prepared to admit that his recollections could be unreliable, whilst maintaining that he remembered the important things. The defendants submit that he has forgotten that he gave Mr Zhang permission to use his funds. In my opinion, that is a matter which was important, and that it is unlikely that a person such as Mr Li would have forgotten such a thing.

263 Generally, I found Ms Gao to be a credible witness. It is true, as the defendants submitted, that she was very reluctant to accept that she had been aware that Mr Zhang was exploring means of transferring Mr Li's funds without him having to travel to Australia. It seemed to me that she was motivated by a strong desire to emphasise that there was never to be any transfer unless the cooperation agreement was finalised first, and that at times the cross-examiner and Ms Gao were at cross-purposes; the cross-examiner being concerned to emphasise the fact that means for transferring the funds were being explored, and Ms Gao being concerned to emphasise that no transfer could occur before the cooperation agreement was finalised. I had some concerns as to the credibility of the evidence she gave as to her response, or lack of response, to the emails of 20 December 2016 and 24 December 2016. I will consider that issue further in the context of dealing more specifically with the defendants' submissions.

264 It is clear from the evidence that Mr Bi had, in 2023 and 2024, anger, and antipathy towards Mr Zhang, and a desire to harm him economically. He did not overtly display those feelings in giving his evidence. He was calm and controlled throughout. Whilst his anger may have abated, there is no reason to think that his attitude to Mr Zhang has otherwise changed, and his evidence does need to be viewed in that light. Having said that, Mr Bi's account of events, with one exception, was consistent with the evidence of Mr Fu, Ms Zhao, and with Mr Zhang himself. Mr Zhang agreed that Mr Bi essentially did as he was told, and that Mr Zhang was the decision-maker. Mr Bi accepted that most of the relevant activities were undertaken by him, on Mr Zhang's instructions.

265 As I have already observed, the activities required of Mr Bi by Mr Zhang were quite extraordinary, given that Mr Bi was an employee, and one initially engaged as a driver and translator. Not only did he undertake menial tasks, but he entered into contracts exposing himself to liability for many millions of dollars, he guaranteed obligations, and he allowed himself and his mother to be appointed as office bearers in companies as what can only be described as a 'front' for Mr Zhang.

266 The exception where the evidence of Mr Bi and Mr Zhang did conflict concerned the circumstances in which the forged signature of Mr Li came to be on the loan agreement in March 2017.

267 Ms Zhao, Mr Fu, Mr Chiu, and Ms Huang all gave evidence which was largely unchallenged.

268 Ms Zhao's evidence about the meeting in August 2017 was challenged, but not with great effect. It has to be said that Ms Zhao, like Mr Bi, undertook activities to advance Mr Zhang's interests, which do seem extraordinary, given her position at the relevant time. When she was working part time for LJ Hooker, the referring agent in relation to the acquisition of the Paynes Road properties, she paid the initial deposits out of her own bank account as a loan to Mr Zhang. Then, while still only an employee of the referring agent, on the morning of 20 December 2016 she arranged, through her friend, Mr Chiu, to have Mr Li added as a director of Sengia. She says that she and Mr Bi went to the bank together on 20 December and arranged the transfers of the $3 million that took place on that day. Ms Zhao now holds a senior position in Mr Zhang's organisation and, it seems, she held a senior position in August 2017 when she met with Mr Li and Ms Gao. She was introduced at that meeting by Mr Zhang as the organisation's 'general manager'.

269 I did not find Mr Zhang to be a witness who was either credible or reliable.

270 It seems to me to be clear that his account of a WeChat conversation between himself and Mr Bi on the one hand, and Mr Li and Ms Gao on the other, which led to the instruction that there was to be the loan that Mr Fu recorded in his email on the morning of Friday 16 December 2016, was a recent invention. As explained, the evidence he gave on that matter was inconsistent with the way in which his case had been pleaded and opened, and was an account which had not only not been put to any of the other alleged participants in the WeChat call that Mr Zhang swore had occurred, but which was inconsistent with what had been put to them. Mr Zhang's evidence on this issue was so lacking in credibility that the defendants' counsel, in final oral submissions, effectively abandoned it.

271 I also found Mr Zhang's evidence concerning the loan agreement in March 2017 to be not credible.

272 When asked about the unsigned version of the loan agreement, Mr Zhang's evidence was that he asked Mr Bi to 'handle' it and that he 'didn't care much'. In relation to the signed version, his evidence was that he had never seen a signed version of the loan agreement before it was produced by the solicitors in answer to a subpoena. He said that he did not sign Mr Li's signature and he did not know who did.

273 I cannot accept that Mr Zhang was being truthful about his knowledge of the agreement. This agreement is the document which came closest to setting out the arrangement as Mr Zhang contended it to be. I do not accept that Mr Zhang didn't care much about it, and that he left it all to Mr Bi. I accept Mr Fu's evidence that Mr Zhang was at the meeting where the document was signed by at least three of the signatories.

274 Mr Bi says that it was Mr Zhang himself who signed Mr Li's signature. The issue of who forged the signature is one to which I will return.

275 There were other aspects of Mr Zhang's account of events which caused me to conclude that he was not a witness upon whose evidence I could rely.

276 According to his account of events, Ms Gao and Mr Li, having driven a 'very hard bargain' in terms of what they wanted to receive for the $3 million in Mr Li's Australian bank account, then virtually gave the money away to him by means of a loan which was interest-free and entirely indeterminate as to time. I do not find this to be credible.

277 All of the relevant transactions advanced the financial interests of Mr Zhang. Many of them involved unusual conduct and irregularities. I have already referred to the extraordinary activities of Mr Bi and Ms Zhao, and of Mr Bi's mother, given their roles at the relevant times. To those might be added the activities of Ms Huang at the ANZ and of Mr Chiu. As to Ms Huang, the only conclusion I can reach is that Ms Huang did not follow ANZ procedures in making the changes to Mr Li's account on 15 December 2016, in the presence and, I conclude, at the urging of Mr Zhang, both personally and via Mr Bi. I accept that Mr Chiu made an honest mistake in adding Mr Li as a director without his written consent, but he did so under pressure from Ms Zhao who must have been acting on Mr Zhang's instructions, even if those instructions came via Mr Bi.

278 Mr Zhang in his evidence certainly put himself at the centre of the dealings in person and via WeChat with Ms Gao and Mr Li. But when it came to the activities of those acting as his agents he often professed ignorance of the detail. In particular, he professed to not have a detailed knowledge of the arrangements that enabled the changes made by the ANZ on 15 December 2016 and that enabled the transfers on 20 December 2016. According to Mr Zhang, the process was devised and implemented by Mr Bi. Likewise, the loan agreement in March 2017 was something Mr Zhang said he 'left' to Mr Bi. It seemed to me that he was attempting to distance himself from those matters and to characterise himself as, at times at least, little more than an interested observer. I cannot accept that that is accurate. In my view, he must have been the driving force behind them.

279 The material in evidence also reveals that Mr Zhang was prepared to say things that might be charitably described as 'gilding the lily' in his WeChat messages to Ms Gao. He described his 'employees and cooperation teams' in such a way as to suggest a large organisation when the only employees were himself and Mr Bi. He told her he had a 'friend' at the ANZ when, in his evidence, he said that it was not his 'friend' but someone Mr Bi knew. He told her that he had a 'friend' who was a potential investor, yet, in his evidence, he said that this person was a friend of a relative and that he did not know the friend's name.

280 In July 2020 when Mr Bi was seeking contact details for Mr Li at the request of the accountant, Mr Zhang sent him a message saying that he could not 'even find him'. There can be little doubt that that was untrue. In his evidence he sought to justify what he said on the basis that he had been told that Mr Li was under some sort of investigation in China. That is a proposition which had not been put to Mr Li. The obvious effect of his message was to divert possible direct contact with Mr Li.

281 I have set out all of the factors which have led me to conclude that I am unable to accept Mr Zhang's evidence unless it is corroborated by other evidence. Of those set out, the ones that I consider to be most significant are his evidence about the loan agreement in March 2017, his evidence about the WeChat call which led to the instruction that Mr Fu recorded on 16 December 2016, and the implausibility of the change from a 'very hard bargain' to an interest free loan of indeterminate duration.

Did Mr Li agree to lend the $3 million - Relevant factors

282 There are factors which support a conclusion that Mr Li agreed to lend the $3 million. It seems to me that they are:

(a) It was known that the deposits had to be paid on 20 December 2016 or the properties would be lost.

(b) Ms Gao was aware that Mr Zhang was exploring means whereby the funds might be transferred without Mr Li having to come to Australia.

(c) Whilst there were initial plans for Mr Li to attend Australia early in December, there was no apparent intention for him to do so as 20 December 2016 approached.

(d) Mr Li gave evidence that Ms Gao had told him that Mr Zhang had a 'method' for transferring the funds.

(e) The phone records record a call of 1 minute 40 seconds between Mr Zhang and Ms Gao on 19 December 2016.

(f) Ms Gao received emails on 20 December and 24 December 2016 which suggested that the investment proposal was still alive, and which she essentially ignored.

(g) One of the documents sent to Ms Gao on 24 December 2016 was a memorandum of understanding which did make reference to a loan.

(h) According to Mr Li, it was not until 2023 that he became aware that his funds in Australia may have gone.

(i) Ms Zhao supports Mr Zhang's evidence that, at the meeting in August 2017, Mr Li confirmed the existence of the loan.

283 On the other hand, there are factors supporting a conclusion that Mr Li never agreed to lend the $3 million. They are:

(a) It is not credible that, after driving a 'very hard bargain', Mr Li then effectively gave up the $3 million for nothing more than a promise to repay it at some indeterminate future time, interest free.

(b) There is no credible evidence of a conversation in which Mr Li agreed to the loan. Mr Zhang's evidence on that issue cannot be accepted.

(c) There is no written confirmation of the loan which was sent to, or which emanated from, Mr Li or Ms Gao. The Chinese version of the memorandum of understanding which was sent to Ms Gao refers to a loan but not to a loan which had already been made. There is no evidence that the agreement variously described as the 'Loan Agreement Share Allotment' and 'Deed of Loan, Share Allotment' which provided for a debt to equity arrangement, as Mr Zhang contends was initially agreed, was ever sent to Mr Li or Ms Gao.

(d) The only document which comes close to recording the arrangement as Mr Zhang contends it to have become after he says Mr Li told him he had decided not to invest is the loan agreement in March 2017. There is no evidence it was sent to Mr Li or Ms Gao. Mr Li's signature on the document was forged.

(e) Mr Zhang's position in relation to the 20 December 2016 deadline was desperate. On the other hand, the position was much less so from the point of view of Mr Li and Ms Gao. They might lose an investment opportunity. Mr Zhang, on the other hand, would lose properties worth many millions of dollars. This explains why they each acted as they did. For Mr Li and Ms Gao, the passing of the deadline was no more than an opportunity lost. For Mr Zhang it was imperative that the deposits be paid.

(f) The circumstances in which the changes were made to Mr Li's account on 15 December 2016 were irregular. The changes were made in contravention of ANZ procedures. Mr Li was right to believe that his funds should not have been able to be accessed.

(g) There was also irregularity in the circumstances which led to the transfer of the funds on 20 December 2016. Mr Li was made a director of Sengia without his written consent.

284 It seems to me that the issue of whether Mr Li agreed to the $3 million loan, and the issue of whether Mr Zhang used Mr Li's funds dishonestly if he did not, are inextricably intertwined.

285 My conclusions are that Mr Li did not agree to lend Mr Zhang the $3 million; and, mindful of the Briginshaw principle in this context, that Mr Zhang used Mr Li's funds dishonestly. My reasons are as follows.

286 First and foremost, there is the forgery of Mr Li's signature on the loan agreement of March 2017. I do not accept Mr Zhang's evidence concerning that agreement. I accept Mr Fu's evidence that the agreement was signed by three of the people whose true signatures appear on it at a meeting in the solicitor's office at which Mr Zhang was present.

287 As I have said, the loan agreement in front of those four people that day is the only agreement which comes close to documenting the arrangement as Mr Zhang contends it to have become. The unsigned agreement had not been, and was not, sent to Mr Li or Ms Gao.

288 The solicitors had requested that the agreement be executed and that a copy be returned to them. A copy, purportedly executed, was returned to them, or was left at the office after the meeting, because there is a purportedly executed copy which was on their file.

289 Mindful of the rigor of the principle in Briginshaw, I have nevertheless reached the conclusion that the forged signature of Mr Li must have been made by Mr Zhang himself, as Mr Bi said in his evidence, or by Mr Bi acting on Mr Zhang's instruction. In my opinion, there is simply no other rational explanation.

290 Of almost equal significance with the fact of the forgery itself, is the fact that the document was not sent to Mr Li or Ms Gao in China. No explanation was given for that circumstance, other than Mr Zhang's assertion, which I do not accept, that he didn't care about it and he left it to Mr Bi.

291 The second factor that leads me to the conclusion that Mr Li did not agree to lend the $3 million and that Mr Zhang's use of the money was dishonest is the fact that the only evidence by any witness in the trial of a conversation in which Mr Li or Ms Gao agreed to make the loan was Mr Zhang's evidence of the WeChat call, which then led to the instruction to Mr Fu which is recorded in Mr Fu's email of 16 December 2016. My conclusion is that that evidence was a recent invention.

292 In final submissions, the defendants did not rely upon Mr Zhang's evidence of this conversation and instead relied on the course of dealings throughout December, and upon a reconstruction of a possible conversation on 19 December 2016 by reference to Mr Bi's phone records and his WeChat messages with Mr Li in 2024. I will return to deal specifically with that submission below.

293 If there were an agreement to lend, it would have had to have been made between the instruction to Mr Fu confirming that Sortop 'needs to issue 3 million acquisition shares' at 7:39pm on Wednesday 14 December 2016 and the instruction to Mr Fu that 'Sengia will advance a loan of 3 million' of which Mr Fu sought confirmation at 11:52am on Friday 16 December. There is no credible evidence of an agreement during that period. There is evidence that during that period Mr Zhang effectively gained control of Mr Li's account.

294 The next factor which leads me to the conclusion that Mr Li did not agree to lend the funds and that Mr Zhang used them dishonestly is what I consider to be the inherent improbability of the account given by Mr Zhang. I simply cannot accept that Mr Li and Ms Gao, who drove a 'very hard bargain' for the use of the $3 million, then made the extraordinarily generous arrangement which Mr Zhang describes.

295 A further matter of significance in this context is the absence of any written confirmation of Mr Zhang's version of events.

296 After receiving confirmation of the instruction that Sengia had agreed to a loan on 16 December 2016, Mr Fu sent an email to Mr Bi, asking him to obtain Mr Li's 'written consent'. There is no evidence that that written consent was ever sought.

297 On the evening of 20 December 2016, Mr Fu sent an email to Mr Bi and to what appears to have been an erroneous typing of Mr Zhang's email address, which begins, 'Hello Mr Zhang', and which enclosed a suite of agreements. One of those agreements was the agreement variously referred to as the draft 'Deed of Loan, Share Allotment', the 'Loan Agreement Share Allotment' and the 'Loan and Debt-to-Equity Contract', as previously explained. This draft reflected what Mr Zhang says was the agreement, being what the defendants' counsel characterised as a debt-to-equity swap, until Mr Li agreed to an indeterminate interest free loan. Mr Fu's email of 20 December 2016 expressly stated that the attached documents were 'intended to disclose the main contents to Mr Li in advance'. There is no evidence that the 'Deed of Loan, Share Allotment' or any of the other attachments were forwarded to Mr Li or Ms Gao.

298 On 24 December 2016, Mr Bi did send to Ms Gao a Chinese translation of a memorandum of understanding that Mr Fu had drafted and sent to Mr Zhang on 21 December 2016. It is true, as the defendants submit, that the memorandum of understanding does refer to a loan, but the Chinese version sent to Ms Gao did not refer to a loan which had been made, but rather, to one which was to be made, and the purpose of the loan expressed in the memorandum of understanding was for the subscription for shares, a purpose that Mr Zhang was not prepared to accept as correct. He said the purpose was to pay the deposits.

299 On 9 January 2017, Mr Fu sent Mr Zhang and Mr Bi an email attaching further draft agreements governing the subscription for shares in Sortop by Sengia. Again, there is no evidence that any of these documents were forwarded to Mr Li or Ms Gao in China.

300 On 6 March 2017, Mr Fu sent Mr Bi and Nancy an email with attachments including the draft 'Deed of Loan, Share Allotment'. Again, there is no evidence these documents were sent to Mr Li or Ms Gao in China. Mr Fu's email and the documents he drafted reveal that at that time he continued to believe that Sengia was to be an equity investor in Sortop.

301 Next, there is the draft loan agreement between Sengia and Sortop which Mr Fu sent to Mr Bi and Nancy on 14 March 2017, which reflects the arrangement as Mr Zhang contends it to have become by that time. Not only is there no evidence that this document was sent to Mr Li or Ms Gao in China, but Mr Li's signature on the document was forged.

302 Counsel for the defendants accepted that the failure to send the documents Mr Fu drafted (other than the Chinese translation of the memorandum of understanding) to Mr Li or Ms Gao in China was 'odd' but submitted that 'odd' didn't mean dishonest. In isolation, that may be accepted. But, in the context of the other matters to which I have referred, in my view it is a factor supporting a conclusion that the loan agreement was not made and that the use of the funds was dishonest.

303 Finally, when what might be characterised as a rearrangement of the loan obligations occurred in May 2017, there is no written record of any advice about those arrangements being given to Mr Li or Ms Gao. The only evidence that they were told about that rearrangement comes from Mr Zhang, whose uncorroborated evidence I cannot accept. Mr Li's funds were 'repaid' but very soon after were drawn out again. A substantial portion of the re-drawn funds were paid into Mr Zhang's personal account.

304 In final submissions, the defendants placed considerable emphasis upon Mr Bi's WeChat messages in 2024, where he suggested that there had been a phone conversation in which he had spoken to a man and a woman who he believed to be Mr Li and Ms Gao. The defendants sought to correlate what was said in those messages with the phone records of Mr Bi which indicate that he rang the ANZ branch in Qingdao twice on 19 December 2016.

305 The defendants' submissions in relation to this issue were careful and superficially cogent. The conversation postulated could not, of course, be the conversation in which an agreement to make a loan had been reached. That is because Mr Fu had been instructed that that agreement had been reached on the morning of 16 December 2016. What was put was that the conversation that Mr Bi was describing in the WeChat messages, and which was said to be the phone calls to ANZ Qingdao on 19 December 2016, was 'confirmation' of the loan arrangement.

306 There are two reasons why I am unable to accept this submission.

307 The first reason is that no witness in the trial gave evidence about the calls which appear in Mr Bi's phone records on 19 December 2016 to the ANZ branch in Qingdao. Mr Bi gave evidence about what he had said in the WeChat messages in 2024, but he was not asked about the calls to the Qingdao branch of the ANZ on 19 December 2016. In the absence of evidence specifically addressing the phone calls, it is very difficult to reach any conclusion as to what they might have been about. But one possibility must be that they were calls in which Mr Bi learned that it would be necessary to add Mr Li as a director of Sengia, as that was a task urgently undertaken by Ms Zhao the next morning.

308 The second reason is that the WeChat messages and the evidence Mr Bi gave about those messages do not enable me to draw a conclusion that he was saying that there had been a confirmation of the loan in the calls he was describing. The reasons why I say this are as follows.

309 First, in the WeChat messages to Mr Li, Mr Bi was obviously very concerned to justify his own conduct and to condemn that of Mr Zhang. His suggestion that he spoke to a man and a woman includes the suggestion that there had possibly been some form of impersonation, which seems far-fetched, but such assertions both justify his conduct and condemn that of Mr Zhang.

310 Secondly, as indicated earlier, Mr Bi's sequencing of events in the WeChat messages is confused. This is perhaps unsurprising, given the nature of such messaging, but it is a significant obstacle in relating what he was saying to something that happened on 19 December 2016.

311 Thirdly, the evidence which Mr Bi did give about the content of the phone calls he was referring to in the WeChat messages seemed to suggest that what was being discussed was the fact that the ANZ required Mr Li's attendance in Australia. Mr Bi, in his evidence, associated that subject matter with the WeChat messages between Ms Gao and Mr Zhang on 9 December 2016.

312 Turning then to other matters upon which the defendants relied in support of a conclusion that Mr Li had agreed to lend the $3 million, my conclusions are as follows.

313 I accept that Ms Gao was aware that Mr Zhang was exploring means by which the funds might be transferred without Mr Li having to come to Australia. It is also true that Ms Gao was resistant to questions directed to having her confirm that that was the position. As already indicated, it seemed to me that the cross-examiner and Ms Gao were at cross-purposes, at times at least. The cross-examiner was concerned to emphasise that the means for the transfer were being considered. In itself, that proposition was consistent with both Mr Zhang's contention that there was eventually a loan and also with Ms Gao's contention that the funds were to be transferred only after the cooperation agreement had been finalised. Ms Gao's denials seemed to me to be often denials of what she apprehended to be a suggestion that she was aware of arrangements for the transfer of Mr Li's funds in circumstances where the cooperation agreement had not been finalised.

314 I do accept, in this context, Mr Li's evidence that in discussion with Ms Gao she had referred to Mr Zhang having a 'method' for transferring the funds.[6]

315 Mr Bi's phone records record a call from Mr Zhang to Ms Gao on 19 December 2016. The defendants rely on Mr Zhang's evidence that he told Ms Gao in that call what would occur the following day. Ms Gao gave no account of the call, and when Mr Zhang's version was put to her she said she didn't think that was correct. I cannot accept Mr Zhang's uncorroborated evidence. I am unable to conclude what was said. The call was short, less than 2 minutes. I do not accept that Ms Gao was told what would happen the next day.

316 Ms Gao's evidence that she effectively 'ignored' the email of 20 December 2016 (attaching the ANZ authority relating to the Sengia account), and the email of 24 December 2016 (attaching the memorandum of understanding), does raise concerns. But, in my view, those concerns can be overstated. It was, as the defendants submitted, a shared understanding that 20 December 2016 was an absolute deadline. Mr Zhang's position in relation to that deadline can properly be described as desperate. On the other hand, there was no such desperation as far as Mr Li and Ms Gao were concerned. As counsel for the plaintiffs pointed out, Mr Li had been prepared to let the investment lapse earlier in December. From the point of view of Mr Li and Ms Gao, the passing of the deadline meant no more than that they had lost an opportunity for an investment. Significantly, Mr Zhang never told Ms Gao that the deposits had been paid.

317 The defendants rely upon the fact that the memorandum of understanding which was sent in Chinese to Ms Gao on 24 December 2016 did make reference to a loan. That is true, but it does not make reference to a loan which had been made. In any event, Ms Gao's evidence was, in effect, that she ignored the email and the attachments.

318 The potential significance of the email and the memorandum of understanding does not really reside so much in Ms Gao's reaction or non-reaction to it, but rather, in the fact that it suggests, as the defendants submitted, that Mr Zhang alerted Ms Gao to the existence of a loan or a possible loan and that that militates against the conclusion that there was dishonesty on Mr Zhang's part. Whilst I accept that, the other factors to which I have referred are, in my view, far more cogent in persuading me that, notwithstanding what the memorandum of understanding said, Mr Zhang did use the funds without authority, and that he did so dishonestly.

319 It is an odd circumstance that so many years went by without Mr Li realising that his funds had been used without his authority. However, he gave an account of his attempts to access his account during that period, which I did find to be credible. His belief that it ought to have been impossible for his funds to have been transferred ought to have been well-founded, as Mr Savvas confirmed.

320 The defendants submitted that I ought to conclude that the 'account details' in relation to Mr Li's ANZ account were given to Mr Zhang by Ms Gao, and that I should reject Ms Gao's evidence that she did not have those details in December 2016. I am not prepared to reject Ms Gao's evidence on that issue. Her evidence was that she believed that she had had the details in 2014, but that she did not have them in 2016. Her WeChat messages confirmed that she did not have the details in 2016, at least until 10 December 2016. It seems to me to be more likely that Ms Huang provided the account details to Mr Zhang and Mr Bi on 15 December 2016. The details are in handwriting on an ANZ card printed in English, which Mr Bi photographed on 15 December 2016. It is unnecessary to make any definite finding on this issue, other than that I accept Ms Gao's evidence that she did not give the account details to Mr Zhang because she did not have them.

321 Finally, Ms Zhao does support Mr Zhang's evidence that Mr Li confirmed the existence of the loan in August 2017. Mr Li and Ms Gao deny that that occurred. I discount Mr Zhang's evidence on this issue, so what must be determined is who is to be preferred between Mr Li and Ms Gao on the one hand, and Ms Zhao on the other.

322 I prefer the evidence of Mr Li and Ms Gao. In that regard, I consider it to be inherently most unlikely that the arrangement Ms Zhao says was confirmed was one which Mr Li had in fact made. I have concluded that it was not made. I am also influenced by what seems to me to have been Ms Zhao's extraordinary willingness to assist Mr Zhang and to follow his instructions whilst she was an estate agent, and to the fact that by August 2017 she held a senior position in Mr Zhang's organisation. I do not mean to suggest that Ms Zhao was not saying what she believed to be true, but I do consider that her recollection could be affected by her loyalty to Mr Zhang.

323 Mr Zhang's evidence of other occasions upon which the existence of the loan was confirmed by Mr Li was not corroborated by other evidence and I do not accept it. In any event, I accept Mr Li's evidence that he never agreed to make a loan, so I do not accept that he ever confirmed doing so.

Limitation of Actions Act

324 The defendants submitted that more than six years had passed since the relevant transfers and that, unless s 27 of the Limitations of Actions Act applied so as to extend the time for issuing proceedings in the case of fraud or fraudulent concealment, the plaintiffs' claims (with the exception of claims founded upon a loan) were statute barred.

325 The defendants submitted that the plaintiffs had the onus of proving that they could not have discovered the fraud with reasonable diligence at a date early enough to commence proceedings. In that regard, they relied upon the statement of principle by Wigney J in Clurname Pty Ltd v McGraw-Hill Financial, Inc:[7]

What reasonable diligence would require must be evaluated by reference to the particular facts and circumstances of the case. Ordinarily, before a person could reasonably be expected to pursue an inquiry with a view to ascertaining whether a fraud has been perpetrated, something must have put the person on notice, or raised a suspicion, in respect of that matter. Even then, the person might not reasonably be expected to do everything possible using all means at their disposal. The type of enquiry that might be expected must be assessed having regard to how a person carrying on a business of the relevant kind would act if they had "adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency". And the enquiry that might be expected must be one that, if made, would have led to the discovery of the facts revealing the fraud.

326 I accept the evidence of Mr Li that he unsuccessfully tried to obtain access to his account in and between 2017 and 2023. Especially after the changes made on 15 December 2016, I have no difficulty accepting his evidence that both he, and those acting on his behalf, were told by the ANZ that information could not be provided as they were unable to verify Mr Li's identity.

327 I accept that, until contacted by Mr Bi in 2023, Mr Li believed that his funds were still held in the ANZ account in Adelaide. As I have observed earlier, Mr Savvas' evidence reveals that that belief ought to have been well-founded. The WeChat messages between Mr Li and Mr Bi in 2024 reveal Mr Li's surprise and anger at discovering his funds were no longer in his account and had been used by Mr Zhang to pay the deposits in 2016.

328 Mr Li also gave evidence that he never received statements of account from the ANZ prior to 2024. This does seem odd. Something was said as to the unreliability of postal services into the PRC in the course of submissions but there was no evidence about it. Although the circumstance does seem odd, I am not prepared to reject Mr Li's evidence that he never received account statements during the relevant period. I note that according to the record of Mr Li's account produced by the ANZ, the mailing address for the account was changed twice during the relevant period, once in December 2018, and again in December 2019. No evidence was led about this, but it does suggest that Mr Li's non-receipt of statements may not be as odd as it might otherwise seem.

329 The plaintiffs issued proceedings on 27 May 2024, within months of Mr Li's discovery of the fact that his money was no longer in his Australian bank account. I do not consider that Mr Li was put on notice of a possible fraud before 27 May 2018 and I do not consider that with reasonable diligence he could have discovered it earlier than that. In all the circumstances, my conclusion is that s 27 of the Limitation of Actions Act is applicable and that the plaintiffs' claims are not statute-barred.

330 Given that I have found that Mr Li's funds were fraudulently misappropriated, Mr Li is entitled to elect to obtain an account of profits from Mr Zhang, Sortop, Sortop Narraburra, and Crefly,[8] or to trace the proceeds of his misappropriated funds.[9]

331 I am loath to reach any definitive conclusion as to the existence or imposition of a constructive trust. I am concerned about the position of others who may claim relevant proprietary interests. It may be that their interests will not be affected, but I am presently of the view that they should be given the opportunity to be heard on this issue.

332 By reference to the defendants' list of issues, my conclusions are as follows:

1. Mr Zhang did not obtain the permission of Mr Li to effect or arrange the transfers on 20 December 2016 of $3 million from Mr Li's ANZ account to Sengia's account and from Sengia's account to Sortop's account.

2. [deleted]

3. Mr Zhang's conduct was dishonest.

4. I am presently disposed to defer the question of the existence or imposition of a constructive trust to the trial concerning relief.

5. Neither Mr Li nor Sengia agreed to loan the sum of $3 million to Sortop.

6. Neither Mr Li nor Sengia provided ongoing permission to Sortop to use the $3 million at any point after March 2017.

7. The plaintiffs' causes of action are not barred by s 5 of the Limitation of Actions Act.

8. Mr Li is entitled to elect to receive an account of profits or to trace his $3 million.

333 I will hear the parties on the appropriate orders to be made.

SORTOP (NARRABURRA ROAD) DEVELOPMENT PTY LTD (ACN 617 973 681)

[1] See s 201D of the Corporations Act 2001 (Cth).

[2] [2010] HCA 19; (2010) 241 CLR 1.

[3] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336.

[4] The authorities referred to and the passages cited were as follows: Lordianto v Commissioner of the Australian Federal Police [2019] HCA 39; (2019) 266 CLR 273, at [5], [74]-[76], [104], [109]; Toksoz v Westpac Banking Corporation [2012] NSWCA 199; (2012) 289 ALR 577, at [7]-[9]; Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 at [86], [88], [92], [128]-[152]; Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732, at [29]-[30], [36]-[37], [44]-[45], [47], [71], [79], [81]; Trustees of the Property of F C Jones & Sons v Jones [1997] Ch 159, at 163G, 164A, 164F, 164G, 166H, 166-167; Katsoulas v Kritikakis; Katsoulas v Apostolatos [2024] NSWSC 67, at [115]; Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361, at [74]; Smalley v Bracken Partners Limited & Anor [2003] EWCA Civ 1875 at [13]- [15].

[5] Macquarie Bank Ltd. v Sixty-Fourth Throne Pty. Ltd. [1998] 3 VR 133.

[6] Ms Gao was cross-examined about a paragraph in an outline of her evidence - paragraph 16 - which had been filed by the plaintiffs' solicitors, which included a statement that she had received a message from Mr Zhang telling her that he had linked Mr Li's bank account to the company's bank account. Ms Gao gave evidence that that sentence was not correct, asking at one point: 'Who prepared this content, this, the paragraph 16'?. It has been observed that outlines of evidence may prove to be an incomplete or inaccurate account of the evidence that the witness gives at the hearing: Australian Securities and Investment Commission v Vines [2002] NSWSC 1223; (2003) 21 ACLC 159 at [14]. The inherent uncertainty associated with 'outlines' is exacerbated in this case by the language issue. This was especially apparent in relation to paragraph 16 where it was necessary to stand down whilst the interpreter wrote out a translation of the relevant paragraph into Chinese so that Ms Gao could properly understand it. As matters transpired, I have accepted Mr Li's evidence that Ms Gao told him Mr Zhang had a 'method'. In the circumstances, it is unnecessary for me to further consider what significance, if any, paragraph 16 of Ms Gao's outline might have.

[7] [2017] FCA 1319 at [79], citing CE Heath Underwriting & Insurance (Australia) Pty Ltd v Daraway Constructions Pty Ltd (unreported, Supreme Court of Victoria, Batt J, 3 August 1995) at 121-2 (other citations omitted).

[8] See Halsbury's Laws of Australia at [240-4880].

[9] See Halsbury's Laws of Australia at [185-1700], [185-1715], and [370-480].