Ran Bi v Yingde Investments Pty Ltd [2019] VSC 324

1 By a writ filed 22 May 2018, the plaintiffs claim that an agreement was made on or about 2 August 2017 to terminate a contract nominating the first defendant as the purchaser under certain contracts of sale of land. The plaintiffs seek a declaration to that effect.

2 The defendants deny that the contract to nominate the first defendant was terminated, and counterclaim seeking declarations, in substance, that:

(a) the first defendant is contractually entitled to be nominated by the first plaintiff as the purchaser under the contracts of sale of land; and

(b) the contract to nominate constitutes an equitable assignment of the first plaintiff's rights under the contracts of sale of land.

3 Accordingly, the question for determination in this proceeding is whether the first defendant is contractually entitled to be nominated as the purchaser under the contracts of sale of land.

(a) the plaintiff parties ('Sortop Parties'):

(i) Mr Ran Bi, being the first plaintiff and first defendant by counterclaim ('Mr Bi');

(ii) Sortop Pty Ltd being the second plaintiff and second defendant by counterclaim ('Sortop');

(iii) Mr Xiaolong Zhang, being the third defendant by counterclaim ('Mr Zhang'); and

(iv) Ms Xiaoling Shi, being the fourth defendant by counterclaim ('Ms Shi').

(b) the defendant parties ('Yingde Parties'):

(i) Yingde Investments Pty Ltd, being the first defendant and first plaintiff by counterclaim ('Yingde');

(ii) Marvelsfield Property Pty Ltd, being the second defendant and second plaintiff by counterclaim ('Marvelsfield'); and

(iii) Grangefield Property Development Pty Ltd, being the third defendant and third plaintiff by counterclaim ('Grangefield').

5 By 16 contracts of sale of land and put and call options dated between 15 March 2017 and 27 June 2017 ('the Purchase Contracts'), Mr Bi became the purchaser of certain properties in the Melton area ('the Relevant Properties'), details of which are set out in the schedule.

6 At the time of the signing of the Purchase Contracts, initial deposits totalling $725,000 were paid on behalf of Mr Bi.

7 In May 2017, there were a number of meetings between:

(i) Gang Li ('Mr Li') (the husband of Baoyu Li ('Mrs Li') who is a director of each of the Yingde Parties) and his associates; and

during which a joint venture was negotiated with respect to the Relevant Properties.

8 As a result, Maddocks Lawyers drafted a term sheet ('the First Term Sheet') in both English and Chinese which provided in substance as follows:

(a) The First Term Sheet would not be binding unless Mr Li deposited into a bank account nominated by Mr Zhang the sum of $16,574,345 by 20 June 2017.

(b) This sum would be used to pay deposits for the Relevant Properties and would be treated as a shareholder loan from Grangefield to Yingde (as the land holding entity, which was yet to be incorporated).

(c) The structure for the development of the Relevant Properties would involve Yingde, as the land holding entity; and a separate development entity.

(d) Yingde would become the registered proprietor of the Relevant Land.

(e) Mr Zhang and Mrs Li would be directors of Yingde.

(f) Sortop, as the Zhang entity, and Grangefield, as the Li entity, would each hold 50% of the shares in Yingde.

(g) ComAzor, as the Zhang entity, and Grangefield, as the Li entity, would each hold 50% of the shares in the development entity (which was yet to be incorporated).

(h) Mr Zhang and Mrs Li would be directors of the development entity with Mr Zhang as the person with day-to-day control of the development entity.

9 On 19 June 2017, Mr Zhang terminated the First Term Sheet because he believed he had alternative funding from China. He said by iMessage of that date to Mr Li:

Big brother, I have thought about our matter very carefully and thoroughly, our two sides just won't get along, let's not waste each other's time anymore, and end this in advance.[1]

10 On 20 June 2017, Mrs Li, who had been in China, returned to Australia. On 24 June 2017, Mrs Li sent an iMessage to Mr Zhang asking:

I am Bao Yu Saozi, from Li Gang's family. Please call me back when you're free. Thanks!

11 On 27 June 2017, Mr Zhang met Mrs Li and told her that there was no opportunity for her to co-operate with respect to the Relevant Land, but suggested that there could be co-operation in future projects.

12 On 28 June 2017, Mr Zhang was told that the funding he was expecting from China would not be available.

13 On 29 June 2017 at 1:49 am, Mr Zhang sent an SMS message to Mrs Li saying:

Sister-in-law, there has been a major turnaround in cooperation. The funds were not in place today. I just finished a video conference with partners, and I advocated our cooperation. Given that this is a special situation, sister-in-law, can you deal with it efficiently? Can you transfer 16.7 million to the lawyer's trust account in the fastest way tomorrow? I have something to say then. The way of cooperation will be in accordance with what we discussed. I'm not going to call for it's too late, you can contact me when you see this message! Sorry for bothering you.

14 On the morning of 29 June 2017, Mr Zhang met Mrs Li at her office at 350 Queen Street, Melbourne. In substance, Mr Zhang explained that the money was required by 30 June 2017 as deposits under the Purchase Contracts.

15 At 1:11 pm on that day, Ms Zhao (the Deputy CEO of ComAzor) sent Mr Guo (a director of Grangefield) a copy of the First Term Sheet by email.

16 During the course of 29 June 2017, a second term sheet ('the Second Term Sheet') was prepared by Maddocks Lawyers and later that day Mr Zhang, Ms Zhao and Clare Anderson (the Human Resources Manager at ComAzor) joined Mrs Li, Mr Guo and two associates at 350 Queen Street, Melbourne for the purpose of executing the agreement. The Second Term Sheet was written in Mandarin and English and was executed at 10:57 pm by Mr Zhang on his own behalf and on behalf of Sortop. Before executing the Second Term Sheet, Mr Zhang inserted, by handwriting in blank spaces, a '30' day repayment period and '0%' interest for the Replacement Loan (that was defined in the preceding paragraph in the document).

17 The Second Term Sheet provided in substance that:

(a) Grangefield, or an entity nominated by Mrs Li (which became Marvelsfield), would hold 60% and Sortop would hold 40% of the shares in Yingde (as the land holding entity).

(b) Grangefield, or an entity nominated by Mrs Li, would hold 60% and Sortop would hold 40% of the shares in the development entity.

(c) Mr Zhang and Mrs Li would be directors of Yingde and the development entity; but Mrs Li would hold the casting vote in each company.

(d) Grangefield would pay the sum of $16,574,345 ('the Deposit Amount') to Yingde or the vendors' solicitors.

(e) Forty percent of the Deposit Amount would be deemed to be a loan by Grangefield to Sortop ('Replacement Loan'). If the Replacement Loan was not repaid in 30 days, then Sortop's shareholding in Yingde could be readjusted in accordance with its actual contributions to Yingde.

(f) The Second Term Sheet was subject to Mr Zhang procuring the purchaser of the Relevant Properties (Mr Bi) to nominate Yingde. Payment of the Deposit Amount was to be made on the completion of the nomination of Yingde as purchaser of the Relevant Properties.

(g) The Second Term Sheet set out the main terms but shareholder agreements and the shareholder loan agreements were still to be signed.

(a) Yingde was incorporated with Mr Zhang and Mrs Li as directors;

(b) Marvelsfield was incorporated with Mrs Li and Chong Yew Chua as directors;

(c) Mr Zhang signed the Sale of Real Estate Nomination Forms ('the Nomination Forms') with respect to the Purchase Contracts as a director of Yingde. The Nomination Forms provided:

As the property is expressed as sold to the Purchaser "and/or Nominees" (or words to that effect) then pursuant to the conditions of the contract the Purchasers nominate the Nominees as substituted/additional purchasers to take a transfer or conveyance in lieu of the Purchasers.

From the date of this nomination, the Purchaser and the Nominee acknowledge that they will be jointly and severally liable for:

1. the due performance of the Purchaser's obligations under the Contract; and
2. payment of any expenses resulting from this nomination (including any duty).

The Nominee warrant (sic) to the Vendor that the Nominee is not obliged by the Foreign Acquisition and Takeovers Act 1975 (Cth) to furnish notice to the Treasurer of its intention to acquire an interest in the Property.

(d) Dayou Finance Pty Ltd (a company of which Mrs Li is the sole director and shareholder) paid the Deposit Amount as follows:

(i) $3,780,000 to Sabelberg Morcos Lawyers, solicitors for the Sortop parties; and

19 On 4 July 2017, Mr Bi signed the Nomination Forms.

20 On 12 July 2017, Mr Guo (then the Chief Operating Officer of Yingde and a director of Grangefield) sent an email to Mr Zhang attaching a draft Shareholders Agreement.

21 On 14 July 2017, the following WeChat messages were exchanged between Mr Zhang and Mr Guo:

(a) At 7:01 am, Mr Guo sent Mr Zhang a further draft Shareholders Agreement.

(b) At 8:10 pm, Mr Guo asked Mr Zhang whether his lawyer had any feedback on the Shareholders Agreement for Yingde and stated: 'This task should have been completed this week'.

(c) At 8:12 pm, Mr Zhang replied to Mr Guo stating: 'I've had a bit too much to drink today, let's talk tomorrow morning!'

22 On 18 July 2017, there was a meeting of Yingde attended by Mrs Li, Mr Zhang, Mr Guo, Mr Diao and Mr Bi. The minutes record with respect to legal work:

Regarding the execution of the shareholders agreement and the due diligence and nomination of land parcels already purchased, solicitors of the two parties shall complete the relevant work.

23 On 19 July 2017, Mr Aaron Tan of Lincolns Lawyers (solicitors for the Yingde Parties) sent an email at 10:20 am to Mr Sheldon Fu of Sabelbergs (solicitors for the Sortop Parties) requesting 'an update on the draft shareholders agreement that was provided to your client for comments'. Mr Fu replied at 10:23 am stating: 'In relation to the shareholders agreement, we are still in the process of reviewing it, and will revert to you as soon as possible.'

24 On 21 July 2017, there was a meeting of Yingde at 350 Queen Street, Melbourne attended by Mrs Li, Mr Zhang, Mr Guo, Mr Diao, Ms Zhao and solicitors. The minutes record that the meeting took place between 2:00 pm and 5:00 pm and the Shareholders Agreement was signed.

25 During the course of the meeting, at 4:18 pm and 4:32 pm respectively, Mr Tan sent the following two emails to Mr Fu who had returned to his office:

(a) As discussed, please see below additional clause 5.4 in relation to the proceeds of the Company.

5.4 Distribution Policy Prior to Settlement

Prior to the settlement of all Properties, the Parties agree that all proceeds in the Company arising from the Project shall be retained in the Company and shall only be used for the benefit of the Company.

Please let us know if you have any comments.

Thank you.

(b) Please also see below clause in relation to board approvals necessary for disposal of asset.

6.2 Board's resolution by unanimous approval

The Parties agree that the following decision can be made only with the Unanimous Approval of the Board of Directors:

6.2.1 Disposal of any assets by the Company, whereby the value of the asset is in excess of $50,000.

Thank you.

If you have any queries, please do not hesitate to contact us.

26 The Shareholders Agreement executed at the meeting included both of the above clauses and otherwise relevantly provided that:

(a) Marvelsfield would hold 60% of the shares in Yingde.

(c) Each of Marvelsfield and Sortop would appoint a director to the board of Yingde.

(d) Mrs Li would be the chairperson of the board and would have day to day control of Yingde as its initial managing director.

(e) Marvelsfield had contributed the Deposit Amount of $16,574,345 on 30 June 2017 as a loan to Yingde for payment of the deposits for the Relevant Properties.

(f) Forty percent of the Deposit Amount was a Replacement Loan provided by Marvelsfield to Sortop as a loan to cover the funding deficiency of Sortop.

(g) The Replacement Loan was repayable within 30 days of the payment of the Deposit Amount on 30 July 2017; and in default of payment by the due date, Marvelsfield could purchase all of Sortop's shares in Yingde for a nominal amount.

(a) Mr Bi is the purchaser named in the Purchase Contracts; and

(b) pursuant to the Second Term Sheet and the signed Nomination Forms dated 30 June 2017, Yingde is contractually entitled to be substituted as the purchaser under each of the Purchase Contracts; and

(c) unless the Nomination Forms were terminated by an agreement on or about 2 August 2017, they are binding on Ran Bi.

28 The issue to be determined is whether Mr Zhang (on behalf of Mr Bi and Sortop) and Mrs Li (on behalf of Yingde) entered into the July 2017 oral agreement as pleaded by the plaintiffs in paragraph 28 of the Further Amended Statement of Claim ('the Termination of Nominations and Loan Agreement'), as follows:

By an agreement made on or about 2 August 2017 between Yingde, Marvelsfield, Grangefield and Sortop (Termination Agreement), it was agreed that:

(a) all previous agreements between them including the Second Term Sheet, the Nomination Forms and the Shareholders Agreement would be terminated;

(b) Yingde and Sortop would make the following payments to each other:

(i) Sortop would pay to Yingde the instalments paid for the purchases that did not proceed relating to 2199 Melton Highway, Melton and 1294 Beattys Road, Grangefield (Instalment Amount);

(ii) Yingde would pay to Sortop an accounting adjustment that had been agreed in principle between the parties but not yet calculated (Accounting Adjustment);

(c) that the Deposit Amount plus the Accounting Adjustment, less the Instalment Amount and interest of 15% per annum would be paid by Sortop to Yingde in 12 months after the date of termination.

PARTICULARS

The Termination Agreement is partly written, partly oral and partly to be implied. Insofar as it is written, it is contained in a Deed of Termination executed by Yingde, Marvelsfield and Sortop in early August 2017, a copy of which is in the possession of the plaintiffs' solicitors (Deed of Termination), and a WeChat message from Mr Guo to Mr Zhang on 2 August 2017 at about 9.06 am, a copy of which is in the possession of the plaintiffs' solicitors. Insofar as it is oral, it is constituted by conversations in or about late July 2017 between Mr Zhang (for and on behalf of Sortop) and Mrs Li (for and on behalf of Yingde, Marvelsfield and Grangefield) at Mrs Li's offices at 350 Queen Street, Melbourne and on a later date at Crown in Melbourne, the substance of which was to the effect that Sortop would pay to Yingde the Deposit Amount plus the Accounting Adjustment (which was still to be calculated) less the Instalment Amount and interest at the rate of 15% per year 12 months after the date of termination, that Mr Bi would be the purchaser of the properties set out at Schedule 1 and that Yingde, Marvelsfield and Grangefield would cease to be involved in the Melton Development. Insofar as it is implied, it is to be implied from the said Deed of Termination, the said conversations and in order to give business efficacy to the dealings between the parties.[2]

Mr Zhang's evidence about the disputed conversations

29 On or about 26 July 2017, Mr Zhang said that he went to his lawyer Mr Fu's office to talk about issues arising from the Shareholders Agreement because '[he] didn't consult with [his] lawyers before [he] signed the agreement ... [and] on that day it was the first time for [him] to learn that this replacement terms actually appeared in the agreement'. He said that:

[The term sheet] is different from what we agreed upon. And then Mrs Li had once again said to me that - promised to me that if the loan could not be repaid within 30 days and then it can be extended. And now the term sheet actually appeared in the shareholder's agreement and then it goes on to say that if the loan cannot be repaid within 30 days, that means I lose all my shares, and then I was outraged about that when I read it. That's why I went to 350 [Queen Street] to meet with Ms Li. And then before I went to her office, I didn't call her because usually she's always in her office.

30 In summary, Mr Zhang gave evidence that he had the following conversation with Mrs Li at her office at 350 Queen Street on or about 26 July 2017 ('the 26 July meeting'):

(a) Mr Zhang asked Mrs Li why she included the 30 day loan repayment period in the Shareholders Agreement when she had said that, if he could not repay the loan within 30 days, she would extend the time for him to do so.

(b) Mr Zhang said that because the Shareholders Agreement states that 'if I cannot repay the [loan] within 30 days that means I'll lose all my interests ... So this article will have to be deleted - removed from the shareholder's agreement'.

(c) Mrs Li said that the Shareholders Agreement could not be amended, so it was up to him to get all the funds ready, otherwise the agreement would be enforced.

(d) Mr Zhang said to Mrs Li that he wanted to cancel all 'the joint venture legal document' but Mrs Li said that this was not possible.

(i) 'I said to you repeatedly in the past ... that [the] nomination is invalid ... You didn't respect what I said';

(ii) '[Mr] Bi is the true purchaser of those contracts'; and

(iii) 'We just need to make a phone call to cancel all the contracts ... And then Sortop might incur $1 million loss, but you will incur $16 million [loss]'.

(f) Mrs Li left the room for a while and then returned saying that she would delete the term from the Shareholders Agreement, but Mr Zhang said:

Sister-in-law, when our companies' interests are at stake, and then I ask you to amend the terms, and then you said that nothing can be amended. And when your company's interests are at stake, and then you can just - you know - you can - then you can amend the terms at your will. So, as chairman of the company, what you're doing is not fair.

(g) Mr Zhang said to Mrs Li that, because she had earlier refused to amend the Shareholders Agreement, he did not want to work with her on the project and 'we have to cancel everything'. He also said that she had damaged Sortop's reputation by:

(i) meeting with the real estate agent without letting him know;

(ii) wanting him to lease her offices at a high price; and

(iii) not really doing anything to speed up the planning permit;

(h) Mr Zhang demanded an answer that day, otherwise he said he would cancel all the contracts. Mrs Li said:

Can you not to do those things? I don't want you to jeopardise the interests of Chinese people, ... and then to let farmers, you know, have the gain ... If I remove that article - that term, then how are you going to repay me this $16 million?

(i) Mr Zhang said he could not repay her at the moment but he could repay with interest in one year's time. He said, 'You have no other options, because either you will lose your $16 million or you will get your $16 million back with interest.' Mrs Li then said, 'All right'.

31 Mr Zhang gave evidence of a further conversation with Mrs Li on 31 July 2017 at the Crown Casino. The substance of his evidence about the conversation was as follows:

Actually, I had already told ... Mr Li, about what had happened, and then Mr Li wanted me to apologise to you. And also, he wants to know whether we can still work together ... [Mr Li] actually - speaks highly of both yourself and your project ... It is such a shame that we didn't have this opportunity, we lost this opportunity to work together.

(b) Mr Zhang said he had already told the investors in China about the cancellation of the 'cooperation'. He said he might be able to work with Mrs Li on the next project.

(c) It was agreed that Mr Zhang would be responsible for drafting the cancellation agreement and Mrs Li would be responsible for drafting his withdrawal from Yingde, his resignation as a director and the terms of the loan payment.

(d) Mrs Li said that $16 million is not a small figure and asked '[i]f [Mr Zhang] can provide a little bit guarantee for that'. Mr Zhang replied 'I will try to be cooperative with you, as long as we can cancel this agreement'.

(e) Mrs Li said that her husband wanted to pay him $1 million, which had been incurred by Mr Zhang with respect to the Relevant Properties 'to show his support [for Mr Zhang's] company'. She said, 'You can just repay this amount of money when you repay the loan and then you repay the interest'.

32 Mr Zhang gave evidence of a further conversation at a place he could not recall between 2 August and 9 August 2017. The substance of Mr Zhang's evidence about this conversation was that Mrs Li asked about a guarantee for the $16,574,345 Deposit Amount. Mr Zhang said he was willing to sign any legal document providing a guarantee. Mrs Li said she would get a lawyer to draft the documents.

Mrs Li's evidence about the disputed conversations

33 Mrs Li denied there was any meeting on or about 26 July 2017 at her offices. She gave, in substance, the following evidence of the meeting at Crown Casino on 31 July 2017 at 2:30 pm:

(a) On 31 July 2017, Mr Zhang telephoned her and asked her for a meeting. It was agreed to meet at the Crown Casino at 2:30 pm.

(b) At the meeting, Mr Zhang said that there were issues with the transfer of funds from China to Australia; and that he wanted to withdraw from Yingde.

(c) Mrs Li suggested that he should stay in for a smaller percentage but Mr Zhang said that he could not do that and he had decided to totally withdraw from the project.

(d) Mrs Li said she would get Mr Guo to prepare the documents for his withdrawal.

(e) Mr Zhang said that he had expended funds for which he would like to be paid. Mrs Li said she would speak to the shareholders of Marvelsfield about that.

The undisputed facts surrounding the disputed conversations

34 There are no telephone or electronic records arranging or referring to the 26 July meeting.

35 On 31 July 2017, Mr Zhang left the following audio message for Mr Guo at 9:22 am:

Your suggestion is spot on. I have just called Baoyu, and asked her for coffee at 2:30 pm to 3 pm at Crown, so we can talk alone. Thank you.

36 Mr Guo gave evidence that this message was in response to a conversation he had with Mr Zhang on 28 July 2017, which is referred to in paragraph 54 below.

37 On 31 July 2017, there was a meeting between Mr Zhang and Mrs Li at the Crown Casino.

38 On 2 August 2017, Mr Guo said to Mr Zhang by WeChat at 8:58 am:

Mr Zhang, according to the relevant terms of the Shareholders Agreement of Yingde Investment Company and your decision to totally withdraw, the company lawyer has prepared documents that need to be signed for the company structure change 1) Board resolution to be signed by Baoyu; 2) Director resignation letter to be signed by you; 3) The original shareholder's share certificate to be co-signed by Baoyu and you; 4) A share transfer document to be signed by the original shareholder. Please arrange time and place, DIAO Hui will bring the documents, could you, Ms Shi and Xiao Bi please sign. Look forward to your reply! Thank you

Ok Mr. Guo! Please send me the electronic copy of the document, I will ask the lawyer to review it and arrange to sign!

40 On 2 August 2017, Mr Guo said to Mr Zhang by WeChat at 9:06 am:

As instructed by Baoyu, 1) Arrange to pay you the expenses as soon as possible according to the agreement reached between you two, therefore please provide the receipts of your expenses; 2) Regarding to the land blocks where the deposit has been paid but the contract cannot be signed, please inform the agent that we request a refund.

Will send you the receipts today: the deposit for the two land blocks are in the lawyer's trust account, will arrange to have the lawyer transfer the money back today!

41 On 2 August 2017, after arrangements were made to meet at lawyer Fu's office at 4:00 pm to sign a Termination Deed, Mr Zhang said to Mr Guo by WeChat at 11:52 am:

ZHANG Xiaolong will resign as the Director and Sortop Company will no longer be a shareholder of Yingde Company; 2. The Principal Agreement and the Shareholders Agreement signed shall no longer be legally binding to Sortop company, ZHANG Xiaolong, BI Ran and SHI Xiaoling; 3. Sortop, ZHANG Xiaolong, BI Ran, and SHI Xiaoling are exempt from all legal liabilities. Mr Guo, these are the three personal requests from me.

(a) the Deed of Termination by Mutual Agreement ('Deed of Termination') was signed by Yingde, Sortop and Marvelsfield;

(c) Sortop shares in Yingde were transferred to Marvelsfield.

43 The Deed of Termination relevantly provided as follows:

(a) the parties agreed to terminate all agreements between them on 2 August 2017, including the Shareholders Agreement and the Second Term Sheet.

(c) Sortop would transfer its shares in Yingde to Marvelsfield.

(d) From 2 August 2017, Marvelsfield released Sortop, Mr Zhang, Mr Bi and Ms Shi from all claims and liability in connection with any obligations arising under the Shareholders Agreement and the Second Term Sheet.

(e) Sortop, Mr Zhang, Mr Bi and Ms Shi were not liable for any fees or payments to Marvelsfield including repayment of the Replacement Loan, under the Shareholders Agreement and the Second Term Sheet.

(a) ComAzor invoiced Yingde $184,147.98 for reimbursement of service fees, design fees and legal fees, including fees for negotiating and procuring the vendors to enter the Relevant Contracts.

(i) $780,000 land payments made on behalf of Yingde; and

(ii) $5,012.66 being Council rate and water rates paid on behalf of Yingde.

45 On 10 August 2017, Dayou Finance paid $969,160.64 claimed by ComAzor and Sortop into Sortop's account.

Was there a Termination of Nominations and Loan Agreement

46 I reject Mr Zhang's evidence about the entry into the alleged Termination of Nominations and Loan Agreement on the basis of the following three findings:

(b) Mr Zhang's evidence about the negotiation and terms of the alleged Termination of Nominations and Loan Agreement is inherently improbable.

(c) The conduct of the Sortop and Yingde parties after the alleged Termination of Nominations and Loan Agreement is inconsistent with the existence of such an agreement.

47 Despite the fact that there was evidence of numerous electronic communications, between Mr Zhang, Mrs Li and others, arranging meetings, there is no evidence of a communication arranging the 26 July meeting either by telephone or in writing.

48 The 26 July meeting at 350 Queen Street, Melbourne was also not referred to in any subsequent communications between the parties or even in the plaintiffs' statement of claim filed 22 May 2018 or the amended statement of claim filed 3 December 2019 pursuant to leave granted on 30 November 2018. It was first referred to in the Further Amended Statement of Claim filed 28 March 2019 pursuant to leave granted on 18 March 2019. The only documentary reference to the 26 July meeting was in Mr Zhang's diary, which was produced after the plaintiffs filed a list of documents on 3 August 2018. Except for the entry in Mr Zhang's diary, Mr Zhang's evidence of the 26 July meeting is uncorroborated.

49 Mr Zhang sought to explain this meeting occurring without any prior arrangement as follows:

After my meeting with Sheldon [Fu, his lawyer], I was very upset and I wanted to confront Mrs Li about the terms of the Shareholders Agreement. I decided to do so in person and, after leaving Sheldon's office, which is at 234 Queen Street, I walked a few blocks directly to the building where 3L Alliance's office is located at 350 Queen Street, Melbourne.

50 According to Mr Zhang, he was very upset when, about a week after signing the Shareholders Agreement, he visited his lawyer and learnt for the first time that there was a 'trap' in the Shareholders Agreement being that, if Sortop failed to pay the Replacement Loan by the due date, it could lose its shareholding in Yingde.

51 I reject Mr Zhang's evidence that he only realised on or about 26 July 2017 that Sortop was at risk of losing its shares if it did not repay the Replacement Loan by the due date - for the following reasons:

(a) Mr Zhang's evidence that he only realised there was a risk of losing his shares on about 26 July 2017 is not consistent with the fact that clause 4.6 of the Second Term Sheet executed on 30 June 2017 contained a provision to similar effect. Clause 4.6, as with the rest of the Second Term Sheet, contained a Mandarin translation and it was Mr Zhang who handwrote '30' days in both the English and Mandarin parts and initialed clause 4.6. Mr Zhang did not say that he did not read the Second Term Sheet. In fact, his deputy CEO Ms Zhao gave evidence that Mr Zhang looked serious and was frowning as he read the document.

(b) There were extensive opportunities for Mr Zhang and Mr Fu to examine the Shareholders Agreement. In particular:

(i) The draft Shareholders Agreement was provided to Mr Zhang on 12 July 2017 and again on 14 July 2017 at 7:01 am.

(ii) By WeChat on 14 July 2017 at 8:10 pm to Mr Zhang, Mr Guo asked whether Mr Zhang's lawyer had any feedback on the Shareholders Agreement and said the tasks should have been completed that week. Mr Zhang replied two minutes later saying, 'I've had a bit too much to drink today, let's talk tomorrow morning!' On 17 July 2017, Mr Zhang further replied providing Mr Fu's mobile telephone number.

(iii) The draft Shareholders Agreement was referred to at the meeting of Yingde on 18 July 2017, which both Mrs Li and Mr Zhang attended.

(iv) By WeChat on 19 July 2017 at 10:23 am Mr Fu replied to another follow up WeChat from the solicitor for the Yingde parties, stating: 'In relation to the shareholders agreement, we are still in the process of reviewing it, and will revert to you as soon as possible.'

(v) Mr Zhang attended the meeting for the final negotiations and signing of the Shareholders Agreement on 21 July 2017 between 2:00 and 5:00 pm with Mr Fu and his deputy CEO, Ms Zhao.

52 In these circumstances, Mr Zhang's evidence that Mr Fu effectively abandoned him by returning to his office because he said that the document was complicated and he needed more time to review, is inherently improbable. Emails at 4:18 pm and 4:32 pm demonstrate that Mr Fu was discussing the addition of clauses into the Shareholders Agreement with Mr Tan, Yingde's solicitor. The fact that these discussions resulted in the incorporation of clauses 5.4 and 6.2 into the Shareholders Agreement is indicative of Mr Fu being actively involved in the finalisation of the Shareholders Agreement, and that he returned to his office for that purpose.

53 Mr Fu was not called to give evidence to confirm that he had found the Shareholders Agreement too complicated or that the Replacement Loan and potential loss of shares had not been explained to Mr Zhang at the time of the Second Term Sheet, the Shareholders Agreement or at any time in between.

54 After the alleged 26 July meeting, there is no written communication by Mr Zhang referring to the alleged Termination of Nominations and Loan Agreement reached with Mrs Li. The only communication between the parties appears to be an audio message left by Mr Zhang for Mr Guo on 31 July 2017 stating:

[H]ello. Your suggestion is spot on. I have just called Baoyu, and asked her for coffee at 2:30 pm to 3 pm at Crown, so we can talk alone. Thank you.

There is no explanation of this audio message by Mr Zhang. Mr Guo gave evidence that after a conversation with Mr Zhang he sensed that Mr Zhang was worried about whether he would make the due payment, so Mr Guo advised him that 'if he thinks there would be a problem meeting the 30 days deadline, it's better to talk to Ms Li as early as possible'.[3] Mr Guo's evidence is consistent with Mrs Li's version of events that Mr Zhang first raised the issue of repaying the Replacement Loan at the meeting on 31 July 2017 at Crown Casino. The audio message, and Mr Guo's explanation for it, are not consistent with Mr Zhang's evidence that, by this time, Mrs Li had agreed to forgo Yingde's interest in the Purchase Contracts at the 26 July meeting.

55 In my opinion, Mr Zhang's version of the meetings of 26 July and 31 July 2017 and finalisation of the Termination of Nominations and Loan Agreement is inherently improbable for the following reasons:

(a) After Mr Zhang threatens to terminate all the Purchase Contracts and cause Mrs Li to lose deposits exceeding $16 million, Mrs Li benignly agrees to withdraw from the purchase of the Relevant Properties after investing over $16 million, and apologises for causing offence to Mr Zhang by meeting with the agents and other matters.

(b) Mrs Li accepts that, in consideration of forgoing the investment in the Relevant Properties, she will accept a promise from Mr Zhang to pay $16 million plus 15% interest in 12 months' time without any suggestion of any security for the loan. Mr Zhang agrees to guarantee the repayment but Mrs Li does not bother to document this guarantee.

(c) Mrs Li insists, apparently on her husband's motion, on advancing Mr Zhang the further sum of over $900,000, being the amounts the Sortop parties claimed they had expended on the Relevant Properties.

(d) The Termination Deed was signed by Mrs Li on behalf of Yingde with no provision for the unsecured loan of $16 million and the further sum of over $900,000 plus interest at 15% for 12 months.

(e) Yingde was incorporated as a single purpose vehicle to be the owner of the Relevant Properties. There is no explanation for why, after the meeting on 31 July 2017 and the termination of the Nomination Forms, Mrs Li would have any interest in retaining sole ownership of Yingde. It would appear incongruous for Mrs Li, after entering into Termination of Nominations and Loan Agreement, to organize with great expedition to secure her interest in Yingde by the documentation of:

(i) Mr Zhang's resignation as a director of Yingde; and

but do nothing to document the loan of approximately $17m to Mr Zhang.

In the absence of any evidence of another explanation, the only sensible inference is that the parties intended Yingde to retain the one asset for which it was incorporated, being the rights under the Nomination Forms.

The conduct of the Sortop parties and the Yingde parties after the alleged Termination of Nominations and Loan Agreement is inconsistent with the existence of such an agreement.

56 By WeChat on 2 August 2017 at 8:58 am to Mr Zhang, Mr Guo referred to Mr Zhang's 'decision to totally withdraw' from the Shareholders Agreement and the documentation necessary to effect the withdrawal. Mr Zhang's request for the documentation to be sent to him makes no reference to Sortop being the entity resuming its investment in the Relevant Properties.

57 After the Termination of the Nominations and Loan Agreement was allegedly entered into, the Yingde parties persistently requested the Sortop parties to revoke the Nomination Forms and enter into fresh nominations for the purposes of:

(b) obviating the need for Mr Zhang, as a director and signatory of the Nomination Forms, to guarantee the performance by Yingde of the Purchase Contracts.

These communications make it clear that the Yingde assumed the entitlement as purchaser of the Relevant Properties under the Purchase Contracts. Although ultimately Mr Zhang refused to execute further nominations or a power of attorney, he did not assert that Sortop was the party entitled to purchase the Relevant Properties. In my opinion, this is inconsistent with:

(i) the parties entering into the Termination of Nominations and Loan Agreement; and

(ii) Mr Zhang's evidence that, from August 2017, he believed that Mr Bi and Sortop were entitled to purchase the Relevant Properties under the Purchase Contracts.

58 These conclusions are based on the following communications between the parties:

(a) Mr Guo gave evidence that on or about 12 August 2017, after solicitors advised that Marvelsfield may be required to pay stamp duty on the transfer of shares from Sortop to Marvelsfield, he telephoned Mr Zhang to raise the question of Ran Bi revoking the Nomination Forms and executing new nomination forms.

(b) By WeChat on 12 August 2017 to Mr Guo, Mr Zhang said:

GUO Zong, please arrange for your lawyer to send two letters to my lawyer: one is a dismissal letter for the Nomination form; one is a letter to re-sign the Nomination form. Just briefly tell him the reason should be fine!

(c) By email of 14 August 2017 to Mr Fu of Sabelbergs, Mr Tan of Lincoln Lawyers attached a deed of cancellation of nomination and new nomination forms (signed by Mrs Li on behalf of Yingde) 'for your client's consideration and execution'.

(d) By email of 15 August 2017 to Mr Tan, Mr Fu states that he is 'instructed to request your client to provide an explanation as to whether they are requesting our clients to terminate the previous nomination forms, and to re-sign the new nomination forms?'

(e) By email of 17 August 2017 to Mr Fu, Mr Tan explained:

Pursuant to the Contracts of Sale, in the event that the Corporate Entity is the purchasing entity, the Vendor would require personal guarantees to be provided by the directors of the Company. As Mr Xiaolong Zhang executed the nomination form, the Vendor may require personal guarantees from Mr Zhang. The new nomination forms only has Baoyu Li listed as the director of the Company and reflects the accurate position of Board of the Company.

(f) By WeChat on 17 August 2017 at 6:10 pm to Mr Zhang, Mr Guo followed up:

Do you and your lawyer think the brief reply from our lawyer is OK? When is it convenient for DIAO to go to BI and have them signed?

I will talk to Baoyu tomorrow on the phone. I've asked my lawyer and it seems it's totally different to what she has told me the other day! Our lawyers are to each other now (sic).

(g) By WeChat on 18 August 2017 at 1:58 pm to Mr Zhang, Mr Guo said:

ZHANG Zong, this small matter is not worth you and Baoyu to put too much thought into it! We wanted to discuss this with you for two reasons: First, it is a kind of protection for you. For LI Zong, you are helping him to legally avoid taxes. Second, Baoyu is very optimistic about you and the team, and we want to build trust and cooperation with you. Just like when Baoyu lent money to you without charging interest isn't it helping you?! If you really don't want to help with this, just say so! I can pass on the message to Baoyu and we can complete the nomination process, it's only stamp duty!

Mr Zhang replied to Guo, 'let the lawyers talk it over. We will sign the documents when it's time.'

Mr Guo replied '[Thanks] will wait for the lawyers to discuss first'.

(h) By WeChat on 29 September 2017 at 11:05 pm to Mr Zhang, Mr Guo said:

Manger ZHANG, regarding the land contracts for the 16 lots of land, it is still necessary to sign supplementary documents, and would require your cooperation for this! Yingde Investment have recently appointed a new team of lawyers responsible for the West area project. Considering we are not only purchasing the 16 lots of land, but there will also be more acquisitions to come, we need a stronger team of lawyers. The new lawyers have reviewed the land contracts for the 16 lots of land and reiterated the need to sign supplementary documents, in particular because: (1) significant changes in the shareholder structure; (2) obligations that the buyer must fulfil during the first five-year period and option lines after the five years and land settlement ... It is not enough to simply sign the "nomination form"... I propose to choose a convenient time next week, I will come to your office to discuss in person. Baoyu promised that any expenses incurred by our party in consulting lawyers will be borne by Yingde Investment Company. waiting for your reply!

(i) Mr Guo gave evidence that, on 5 October 2017, he and Diao Hui went to Sortop's offices in St Kilda Road to request Mr Bi sign a Power of Attorney.

(j) By WeChat on 6 October 2017 at 6:38 pm to Mr Zhang, Mr Guo said:

ZHANG Zong, does [Ms Zhao] have any opinions after reading the "Power of Attorney" document? If you don't mind, I can contact [Ms Zhao] or BI ran directly about it. I really don't want to bother you all the time, just want to have it all wrapped up. So we can all get on with our work. You never know what might happen in life next, maybe one day we can work together again! happy weekend!

On 9 October 2017, Mr Zhang replied 'GUO Zong, we don't need to sign any other legal documents with your side anymore.'

(k) By WeChat on 10 October 2017 at 6:38 pm to Mr Zhang, Mr Guo said:

ZHANG Zong, your opinion is different to our lawyer's! If this is the case, then there is a possibility that we'd need to bother you again in the next few years (before land settlement) to complete relevant procedures. As you have chosen to do it this way, then we can only be in touch again when something comes up.

Wishing all the best for your business!

(l) By WeChat on 21 November 2017 at 10:30am to Mr Zhang, Mr Guo said:

Hello, ZHANG Zong, we have to bother you today! Our lawyer has informed that some of the land we nominated still have the 'restriction order' added by Biran. It requires Biran's signature to remove in order to transfer to Yingde Investment Company. Please approve Biran to meet with Diaohui of our side to settle.

59 I also reject Mr Zhang's evidence that it was only in December 2017 that he realised that Yingde was asserting that it was entitled to purchase the Relevant Properties under the Purchase Contracts. It would have been patently clear to Mr Zhang, as a commercial lawyer and property developer, from the above correspondence, that Yingde considered itself entitled as purchaser pursuant to the Nomination Forms.

60 Further, even after Mr Zhang's purported realisation of Yingde's assertion, his failure prior to the filing of this proceeding to dispute Yingde's assertion and clearly articulate either the claim of the Sortop parties to be the purchasers of the Relevant Properties, or the existence of the alleged loan agreement, is inconsistent with his contention that the parties entered into the Termination of Nominations and Loan Agreement. This conclusion is based on the following communications:

(a) WeChat messages confirm that on 22 March 2018, there was a meeting between Mr Zhang and Mrs Li. Mrs Li gave evidence, in substance, that:

(i) Mrs Li said that she wanted to talk to him to obtain his co-operation with some requests concerning the Nomination Forms.

(ii) Mr Zhang said that he did not want to talk about business that day because his father was ill.

(iv) On the following day they met again at the café at Crown Towers Hotel lobby and Mr Zhang again refused to talk about the Nomination Forms.

(b) By WeChat on 26 March 2018 at 7:51 am to Mrs Li, Mr Zhang stated:

I have confirmed with the lawyer and the vendor/s. It's your company who installed a lock on the land that we already had a lock on. Not only that, a high price was quoted as a condition to irritate the vendor/s, so the vendor/s was furious, the vendor/s made it clear that your company remove the lock on the land.

(c) By WeChat on 26 March 2018 at 12:34 pm to Mr Zhang, Mrs Li replied:

Our contract transaction was executed on 30 June 2017, Yingde Investment Company has officially become the buyer of the 16 lots of land. It was a concern that it might be hard for your firm to settle after the financial year, due to the very tight timeframe, the transaction process was not perfect. In October 2017, staff from my company went to fix the problems left undealt with in the transaction, which are still unresolved so far, my staff reported to me, I was intending to talk to you directly to discuss and consult with you to seek resolution of the leftover problems in the transaction contract for us to properly fulfil our obligations as the buyer to avoid a dispute over the contract. After reading your wechat and hearing what you said I am taken aback, I don't really know where your accusations are coming from and what it means? We will verify the details with your lawyer Mr Fu. We shall resolve this together after our lawyers have communicated the details and worked out a solution. Also: Xiaolong, the council bills on the vendor's end which need to be paid under the contract is with Lawyer FU, could you organise with Lawyer FU for them to be forwarded to us so we can get them paid? Thanks!

(d) By WeChat on 26 March 2018 at 12:24 pm to Mrs Li, Mr Zhang replied:

I just finished a meeting! The contract of 30 June you mentioned has been cancelled through an agreement (in writing). The contract is no longer in existence; please do not make a point about this agreement. Any legal relationship between the two of us has being extinguished as a result of the signing the deed of termination. If you are unsure about contractual and legal issues, please consult your lawyer! Under the agreement of both parties, we are not obliged in any way to provide you with any documents or transaction record.

(e) By WeChat on 26 March 2018 at 2:29 pm to Mr Zhang, Mrs Li replied:

I just finished a meeting too and read your message. You are also a practising lawyer you must be very clear about the leftover problems in our settlement agreement. My feeling is that we can resolve any following issues by way of negotiation, which discharges the liabilities of BI Ran, Shi Xiaoling and Sortop! I will be in touch after I consult with my lawyer.

(f) By WeChat on 27 March 2018 at 6:52 am to Mrs Li, Mr Zhang replied:

If your esteemed firm could respect the hard efforts made by our company in acquiring land in this area; respecting that the private lives of the vendors in this area are not disturbed; protect our company's reputation in this area; uphold principles of positive development to the benefit of the community, our company then will be willing to sit down and work together to find a solution! If your esteemed company sticks with your way of dealing by saying one thing while doing dodgy things behind the scenes, then let's be straightforward to deal with it in the open!

(g) After a number of further WeChats between Mrs Li and Mr Zhang with respect to a new project, by WeChat of 29 March 2018 at 7:01 am to Mr Zhang, Mrs Li states:

[S]orry to disturb you. I would like to organise a time to talk about things about the support you mentioned last time for your new project and also the leftover problems about the land settlement earlier.

(h) By WeChat of 29 March 2018 at 9:01 pm to Mrs Li, Mr Zhang states that his father had died and seeks reconciliation. Towards the end of the message he states:

I hope you and elder brother can forgive me and I will organize the withdrawal of the proceeding.

(i) By letter dated 17 April 2018 to Mr Fu of Sabelbergs, Cornwall Stoddart (now the solicitors for Yingde) requests that Mr Bi and Sortop execute powers of attorney, deeds of acknowledgment and deeds of indemnity for the purpose of ensuring that nominations to Yingde are effected; and that the guarantees that Sortop/Mr Bi signed are acknowledged. The enclosed Specific Power of Attorney appoints Yingde as the attorney of Mr Bi for the purpose of executing documents to complete the obligations of the purchaser under the Purchase Contracts.

61 On 25 May 2018, the plaintiffs filed the writ in this proceeding claiming that Mr Bi and Sortop are the parties entitled to purchase the Relevant Properties under the Purchase Contracts because of the alleged Termination of Nominations and Loan Agreement and, for the first time, alleging the loan agreement under which 'Sortop would pay Yingde approximately $18,270,000 (inclusive of interest at the rate of 15% per annum) in 12 months after the date of termination'.

62 The reference above to the 26 July meeting being uncorroborated was subject to Exhibit 5P, being a spirax A4 notebook produced by Mr Zhang. I am not satisfied that the entries in the notebook are accurate or were made contemporaneously with the events they purport to record, principally because of the inherent improbabilities in Mr Zhang's version of the events (referred to above), but also because of the following features of the entries.

63 There are four entries relevant to disputed discussions with Mrs Li in the notebook. The similarities between these entries in writing instrument and writing style suggest they were written at the same time, and not contemporaneous with the events they purport to describe:

(a) An entry dated 30 June ('the 1st Entry'), the English translation of which is as follows:

Agreement 30th June

At 2 pm this afternoon, deliver 16.7 million dollars to the trust account of the lawyers and agent. Next Wednesday morning, take Biran to sister-in-law Baoyu's place to sign.

At the last minute, we paid money for the land, and saved our reputation. Need to do the following next:

1) Be dedicated to maintaining and look after this cooperative company. The interests of the cooperative company comes first.

2) Maintain one core. Sister-in-law Baoyu is the president, so she is the core of the company. Support her, respect, ask for permission and report to her.

3) Do the job seriously. Do more, be professional, diligent, cautious and look at the big picture. It's important to do things paying attention to detail.

4) Need to communicate more, enhance communication.

Summary: although at the last minute, Li Baoyu forced me to sign the Cooperative principle clause and shortened the loan term by 30 days, and the equity ratio is out of balance, and now the project is controlled by Baoyu, I will do my best to support Baoyu, as she is female. I hope their cooperation is sincere.

Except for the italicised part of the entry (which is written in ink and uncontroversial), the relevant and controversial part of the entry:

(ii) is in a neat narrative style rather than notetaking style.

(b) An undated entry ('the 2nd Entry'), the English translation of which is as follows:

1. Development history of the Greater Melbourne Region

2. Tarneit area - west

3. PSP

4. project hectare

5. feasibility development plan project cycle

Fund utilization

Australia is a society ruled by law. YD never follows the stipulations of law when conducting business. Shareholder's agreement is a document of paramount significance, but they did not even allow our lawyers to participate in the amendment of the document. Aren't they concerned that such legal documents are void? Also, we can tell from this that YD is not genuine in our collaboration. They didn't even care about Sortop, nor did they respect Sortop. [REDACTED PORTION] I personally felt very berated and indignant!!

Except for the italicised part of the entry (which is written in ink and uncontroversial), the relevant and controversial part of the entry (which is separated by a horizontally drawn line across the page):

(iv) appears to be written in the same pencil as the other controversial entries (similar pigment and sharpness); and

(v) is in a neat narrative style rather than notetaking style.

(c) An undated entry inserted on a page immediately prior to an entry dated 30 July 2017 ('the 3rd Entry'), which Mr Zhang asserted was with respect to the 26 July meeting. The English translation from Mandarin is as follows:

Summary:

1. Points of dispute between the two parties

(1) Other partners including Li Baoyu are still spreading rumours in the market. They say that Sortop has backed away from Rockbank land market, and has transferred all existing land parcels to YD. They also got the old farmer of parcel no.4 on their side to slander us together.

(2) They went directly to the agent Max without us. They disrupt the market with shady tricks.

(3) Our current major task is to apply for the permit; otherwise, we can't get ready for development immediately. So team building is the most important task at hand, but Li Baoyu has no team at all to apply for PSP. They don't want to apply for PSP as soon as possible; instead, they are just sitting on the land. They also did false marketing by renting luxurious venue to swindle Chinese buyers, so we are against the idea to rent a whole floor of 3L to be our office, but this may harm the interest of Ms Li from 3L.

(4) From the fundamental articles and shareholders' agreement (refer to 2.11), we can see that the shareholders behind YD showed no good faith in collaborating with us; instead, they are trying every avenue to exclude us from it. So our counter-attack is justifiable.

(5) Name transfer agreement is invalid. This was drafted by the lawyers on the other side. Our lawyer never participated in it. I have reminded Ms Li about the invalidity but they all thought I was kidding so they didn't take my advice.

2. Negotiation:

Based on the above circumstances, I had a serious communication with Li Baoyu on behalf of Sortop. I believe both parties have lost the foundation for collaboration and such collaboration should come to a halt immediately. But, Li Baoyu thought they were in charge because they had poured in large sums of funds. I believed this had nothing to do with how much money they put in and that the thing was the group including Ms Li were simply trying to expel us from the market. We solemnly stated that if YD didn't pull out, Sortop would terminate all land contracts with the old farmers - neither YD or Sortop would be able to get the land. I reiterated the invalidity of the name transfer agreement and that the over 16 million contributed together with YD to be converted into debts owed by Sortop to YD with an annual interest at 15% to pay back the principal and interest. Such arrangements would benefit YD and Ms Li, so Ms Li personally agreed. She also said she needed to consult other partners about this. However, Li Baoyu is the biggest shareholder and director with regard to YD, and I am also a director. The decision to exit YD by the two of us is sufficient.

3. Decision

(1) YD to pull out from the land market.

(2) Sortop to pay back the principal plus interest, of which the detailed figures will be based on legal documents to be provided by Li Baoyu.

(3) Terminate all legal documents between the two parties.

(4) Exit YD' shares.

(5) Waive any legal liabilities between Sortop and all relevant parties to it.[4]

The entire entry is relevant and controversial and:

(ii) appears to be written with the same pencil as the other controversial entries (similar pigment and sharpness); and

(iii) is in a neat narrative style rather than notetaking style.[5]

(d) An entry dated 3 August 2017 ('the 4th Entry'), the English translation of which is as follows:

3/8/2017

Yesterday afternoon, Lawyer Fu handled and completed the resignation of Yingde and return of share money.

In the morning, Baoyu signed the indemnity agreement.

Tarneit

YD finally exited the land contact. We can finally be relieved. Next is to prepare for the land payment for the coming year and the debt repayment to YD and their principal. Thirdly, we are to work closely to progress the PSP approval.

Neither Gang Li or Baoyu Li can control the shareholders at the back. The couple has saying that they have the money from the very beginning, but as a matter of fact, they didn't have any money. The money were all raised (fund raising). A bunch of amateurs! They neither have any experience in PSP approval procedures nor do they have a development team; despite so, every single one of them was trying to be the boss, so it was an absolutely correct decision to get away from them. Now we can develop this whole area based on our own projection and ideas. I believe with our team's high morale and pursuit of excellence, we can definitely build this area into a wonderful community.

* An important issue: Baoyu Li took the initiative and offered to pay Sortop the amount totalling over AUD$900,000 including the deposit for the land, lawyer's fees, accountant's fees which we advanced, and the reasons as explained by her were that the complete amount could be settled altogether taking into account the annuities and interest at a later date, thus the accounts would be clear. As far as I'm concerned, Baoyu Li doesn't need to pay this amount to our company based on the current circumstances. However, she insisted paying. Could there be any tricks involved? Nevertheless, the two parties of us have cancelled our collaborative relationship altogether, and that YD has exited the land contract, so from a legal perspective, they have lost all rights. Therefore, even if they are playing any tricks, there won't be any actual effect. If she's really going to pay, we will accept her payment, and it will do when we just return the whole amount next year.

Except for the italicised part of the entry of 3 August 2017 and the diagram immediately below it (which are in ink), the relevant entry:

(ii) appears to be written with the same pencil as the other controversial entries (similar pigment and sharpness); and

(iii) is in a neat narrative style rather than notetaking style.

64 The relevant pencil entries are found in places in the diary, which could have been left blank when the diary was initially being compiled. In particular:

(a) The 1st Entry contains uncontroversial notes in ink in the top two thirds of the page (the italicised part above). The summary, the content of which is controversial, is written on the bottom third of a page in neat pencil narrative style.

(b) The 2nd Entry contains uncontroversial notes in ink and notetaking style in the top 60% of the page (the italicised part above). The balance, the content of which is controversial, is written on the bottom 40% of a page in neat pencil narrative style.

(c) The 3rd Entry is written on two complete pages in neat pencil narrative style. These two pages both have staple marks, which Mr Zhang said was from pages that had been stapled to these pages (at a time he is unable to recall). The notebook demonstrates that Mr Zhang has a practice of stapling pages into the notebook in this manner and, on occasions, he leaves the page, to which the notes are stapled, blank.

(d) The top half of the page with the 4th Entry is also in ink (the part italicised and the diagram which are both uncontroversial). The bottom half of the page, which is controversial, is in the same pencilled neat narrative style as the other controversial parts; and it continues on the reverse of the page, which is the last page in the notebook. The notebook demonstrates that Mr Zhang frequently leaves the reverse pages in the notebook blank.

65 As noted above, Mr Zhang explained that pages containing the 3rd Entry did have pages of notes stapled to them. Mr Zhang's evidence was that he removed the stapled pages of notes in July 2018 because:

I found that ... those ... two pages of documents were not that significant, and then ... they are stapled ... I found it more important ... and then I find that ... they covered ... the more important page. So that's why I took them out.

He gave further evidence that he has been since unable to locate the removed pages. I find this explanation unsatisfactory because the litigation had been commenced by July 2018.

66 The note of the 26 July meeting (in the 3rd Entry') provides little support for Mr Zhang's evidence about his principal justification for terminating the joint venture. The note states the points of dispute between the parties as:

(a) 'Other partners including Li Baoyu are still spreading rumours in the market ... that Sortop has backed away from the Rockbank land market';

(b) 'They went directly to the agent Max without us';

(c) Mr Zhang was 'against the idea to rent a whole floor of 3L to be our office';

(d) 'From the fundamental articles and shareholders' agreement (refer to 2.11),[6] we can see that the shareholders behind YD showed no good faith in collaborating with us; instead, they are trying every avenue to exclude us from it. So our counter-attack is justifiable'; and

67 With the possible exception of the comment 'they are trying every avenue to exclude us', the note of the 26 July meeting with Mrs Li makes no mention of the alleged complaint which allegedly motivated Mr Zhang's decision to confront Mrs Li and demand her withdrawal, being:

(i) the requirement to repay the 40% deposit within 30 days otherwise lose his interest ('the trap'); or

(ii) her initial refusal to amend the Shareholders Agreement with respect to repayment of the loan.

68 The above findings are sufficient to dispose of this proceeding; but I will also deal with the defendants' contention that the contracts between the parties in this case were all wholly written, and comprised of:

(a) the Second Term Sheet dated 29 June 2017 between Sortop, Grangefield and Mr Zhang;

(b) the Shareholders Agreement dated 25 July 2017 between Yingde, Marvelsfield and Sortop; and

(c) the Deed of Termination dated 2 August 2017 between Yingde, Marvelsfield and Sortop.

69 It was submitted on behalf of the defendants that, as the termination agreement was wholly written, the evidence of the conversations relied upon by Mr Zhang in support of the alleged oral Termination of Nominations and Loan Agreement and Mr Zhang's diary entries were inadmissible under the parol evidence rule because the parties were bound by the Deed of Termination.

70 Counsel for the defendants relied on the decision of the High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd,[7] in which the relevant facts were as follows:

(a) The respondents/investors had subscribed for units in limited liability partnerships formed to operate an agricultural farm in Queensland.

(b) For the purpose of paying the subscription moneys and interest in advance, the respondents/investors had entered into written loan agreements with the appellant/lender related to the promoter of the scheme.

(c) The respondents/investors alleged that, prior to entering into the written loan agreement, they had each entered into an oral loan agreement in which the lender had limited recourse to the prepaid interest and two capital repayments.

71 The Court held that, in the absence of allegations of fraud, mistake or misrepresentation (which were not made in that case) the respondents/investors were bound by the written contract they had executed.[8]

72 Accordingly, it was submitted on behalf of the defendants that, as the Deed of Termination had been executed after the alleged oral agreement, the plaintiffs were bound by it and unable to rely upon the alleged earlier oral agreement.

74 The High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd did not state that an earlier oral agreement could not constitute:

(a) a collateral agreement to the written agreement; or

(b) the oral part of a contract that was partly oral and partly in writing.[9]

75 On the facts of that case, the Court found that the respondents/investors did not contend for a collateral agreement and that the earlier oral consensus could not form part of an agreement that was partly oral and partly in writing, because the 'oral limited recourse terms alleged by the respondents contradict[ed] the terms of the written loan agreement'.[10]

76 The plaintiffs contend that the Termination of Nominations and Loan Agreement was partly oral and partly in writing and partly implied.[11]

77 In Masterton Homes Pty Ltd v Palm Assets Pty Ltd,[12] Campbell JA summarised the principles to be applied by a court in determining whether an agreement is wholly written, or partly written and partly oral, as follows:

The principles that are applicable in deciding whether an agreement that parties have entered is one that is wholly in writing, or partly written and partly oral, include the following:

(1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties.

(2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing. Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them.

(3) The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing.

(4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact.

(5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are. If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in light of the surrounding circumstances. If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed.

(6) A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract.[13]

78 Accordingly, whether the parties intended a document to be the exclusive record of the terms of their agreement is a question of fact;[14] and the Court must have regard to the whole of the circumstances for the purpose of determining that question.

79 On the plaintiffs' case, the parties clearly intended that the Deed of Termination would not be the exclusive record of the terms of the agreement. The Deed of Termination made no reference to the loan agreement and Mr Zhang's evidence was that the loan agreement was to be documented by Mrs Li.

80 Contrary to the submissions of the defendants, the defence pleads that the Deed of Termination was partly oral and partly written.[15] In particular, the Deed of Termination does not include the alleged oral terms which include:

(a) Yingde would complete the Purchase Contracts;[16]

(b) Mr Zhang, Mr Bi, Sortop and Ms Shi would not hinder, interfere or prevent Yingde from concluding the purchase of the land;[17]

(c) Mr Bi would do all things reasonably necessary including executing all documents necessary to ensure that Yingde was nominated as substitute purchaser of the Relevant Land and that the Relevant Land was transferred to Yingde;[18] and

(d) The agreement by Mr Li to reimburse payments made by Sortop and ComAzor.[19]

81 Accordingly, the case of both parties was that the Deed of Termination was not the exclusive repository of the terms of the agreement between the parties; and I reject the defendants' submission that the evidence of the oral consensus between Mrs Li and Mr Zhang is irrelevant and inadmissible.

82 In the circumstances, I find that the parties did not enter into the Termination of Nominations and Loan Agreement and accordingly, under the Nomination Forms, Yingde is entitled to be nominated as the purchaser under each of the Purchase Contracts.

83 I dismiss the plaintiffs' claims and make a declaration in the Counterclaim that Yingde is entitled to be nominated by Ran Bi as the purchaser under each of the Purchase Contracts.

84 I will hear the parties on further and consequential orders.

Sale of Land / Option agreements entered into by Ran Bi

[1] The iMessages, SMS messages and WeChat messages referred to in these Reasons were communicated in Mandarin. I have included only the English translation. There are minor variances in the translations obtained by the plaintiffs and the defendants which are not significant.

[2] The underlined parts were amended pursuant to leave granted on 18 March 2019.

[3] This evidence was not accepted but it was not contradicted in Mr Zhang's evidence or challenged in cross-examination.

[6] There is no clause 2.11 in the shareholders agreement but this may refer to clause 2.1 which provided that Mrs Li was to be the managing director with day to day management.

[7] [2004] HCA 55; (2004) 218 CLR 471 (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ).

[12] [2009] NSWCA 234; (2009) 261 ALR 382.

[13] Ibid 401 [90] (with whom Allsop P and Basten JA agreed) (citations omitted), adopted by Elliott J in Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd (No 2) [2014] VSC 598, [373].

[14] Carmichael v National Power Plc [1999] UKHL 47; [1999] 1 WLR 2042, 2049 (Lord Hoffmann).

[15] Third amended defence and counterclaim [27D] and [28A].

[16] Third amended defence and counterclaim [28A(a)].

[17] Third amended defence and counterclaim [28A(f)].

[18] Third amended defence and counterclaim [28A(g)].

[19] Third amended defence and counterclaim [27D(f)].