Sui v Jiang

The terms of the agreement

1. The original document occupied two pages and was signed by Mr Sui and Mr Jiang and witnessed by a third party. It commenced with an identification of "Party A" (who was Mr Jiang) and "Party B" (who was Mr Sui). It gave those men's addresses, passport numbers and mobile numbers. That was significant, insofar as one issue at trial and on appeal was whether the company was a party to the agreement.
2. The agreement commenced with a prefatory statement by way of summary, and contained 5 clauses. It is a short agreement and may conveniently be reproduced in its entirety. What follows is the form as translated by Ms Sun, who was retained by Mr Sui. "Date 26/05/2017 Place: Sydney After many meetings to negotiate, Party A and Party B have reached the following agreement on the comprehensive development of agricultural land in Alice Spring, Northern Territory, Australia and on the transfer of the equity in 20 square kilometres of agricultural land: 1. The agricultural land is located at NT Por6108 MOARRD, NT Por 6110 Perry RD, with a total area of 20 square kilometres. 2. Party A agrees to transfer 40% of the equity in the 20 square kilometres of agricultural land to Party B, and Party B agrees to pay AUD 1.5 million (one million five hundred thousand Australian dollars) to the account of the newly established Australian Fu Lin Agriculture Investment Co.Ltd, which takes up 40% of the shareholding in the company. Within three working days from the date of signature of this agreement, Party B shall remit to the payee and account specified by Party A the RMB equivalent of AUD 150,000 as an advance payment. The balance shall be transferred to the account specified by Party A (payee: XING Xianggui Branch: Industrial and Commercial Bank of China Beijing Asian Games Village Branch) no later than 6 June 2017. 3. Party B shall transfer in total between RMB 10 million and RMB 12 million to the account specified by Party A. Party A guarantees that the funds be safely remitted to Party B's Westpac personal account in Sydney whose details are as follows: Payee: [Account Number omitted]. The funds will be converted to AUD using the bank exchange rate on the day. Party B shall transfer the investment funds of AUD 1.5 million to the account of the new company: [Account Number omitted]. Should problems arise out of the process of remitting funds from China to Australia, Party A shall bear full responsibility. 4. Party A guarantees the safety of the funds of Party B in Australian Fu Lin Agriculture Investment Co., Ltd. and guarantees an annual return of 10% for three years, i.e. Party A shall pay AUD150,000 cash to Party B by the 365th day from the date AUD1.5 million enters the account. Returns shall be paid in similar fashion in the second and third year. From the fourth year onwards, Party B is entitled to request an increase in the return on his investment, or choose to take part in the company's operation and become a true 40% shareholder, or choose to leave the company, but Party B is entitled to transfer the 40% equity in the 20 square kilometres to others at the then market price. In the event the sale price is for less than AUD1.5 million, Party A shall make up the difference. Prior to the transfer of the land, Party A guarantees that Party B has legal ownership of 8 square kilometres of the agricultural land and shall provide Party B with relevant legal documents. 5. This agreement is valid from the date of signature to December 31, 2020. Matters not covered by this agreement may be dealt with through friendly negotiation. Although this agreement is written in Chinese it has the legal effect of an agreement written in English. Party A Party B Witness JIANG Zhaoqing SUI Guangyi CUI Shangzhe [signature] [signature] [signature]"
3. The underlining in the translation reproduced above was not in the original. I have included it in order to describe one of the issues at trial. Each of the passages in the Mandarin text which was translated as "transfer of the equity" in the introductory clause, and "of the equity" and "of the shareholding" in cll 2 included the word "gu quan" or 股权. There was a lively dispute about the correctness of this translation at trial. The evidence was that the word "could mean about half a dozen different English words depending on the circumstances". It will be seen that Ms Sun translated text including that word variously as "equity" and "shareholding", with "equity" being used directly to apply to an interest in land as well as to an interest in the company. Further, the words translated by Ms Sun as "equity" and "legal ownership" in cl 4 (also underlined above) did not use the term "gu quan".
4. No fewer than 3 translations of the contract were in evidence. The competing translation of Ms Lee used the language of "shareholder's right" in cl 2, rather than "equity" or "shareholding". Ms Sun and Ms Lee gave concurrent evidence and were cross-examined, and in what follows I shall refer to their translations and put to one side the untested translation. The cross-examination disclosed a high level of sophistication, with both sides eschewing any notion that translation merely involved choice of the particular word from a dictionary, notwithstanding that the hearing occurred some 2 months before the helpful statements to that effect in DVO16 v Minister for Immigration and Border Protection [2021] HCA 12; 95 ALJR 375 at [4]-[8] and [51]-[54]. Both sides well appreciated Sir Roy Goode's adage that "[t]he meaning of a word depends on the context in which it is used and the purposes for which its meaning is required to be elucidated": E McKendrick (ed), Goode on Commercial Law (Penguin Books 5th ed 2016), p 23.
5. There was considerable debate at first instance and on appeal as to the meaning to be attributed to the Mandarin word "gu quan" which was variously translated as "equity", "shareholding", "ownership" and "shareholder's right". That this was contestable strikes me as utterly unsurprising. The words "share" and "equity" and "ownership" in English carry a large number of meanings. The "share" in the assets comprising a business conducted by a partnership is very different from the same share in the same business conducted by the trustee of a trading trust or by a private company or by an unincorporated association. Legal ownership is different from beneficial ownership and ultimate ownership, as may be seen from considering whether the three shareholders of Fulin Agriculture "owned" the interest in land registered in the company's name. It is obvious that no one word could translate the meanings of "equity" (consider debt/equity ratios, the equities traded on financial markets, and the principles deriving from the High Court of Chancery). There are more subtle distinctions too; "equity" to a lawyer practising in the United States has a very different meaning from the same term in Australia (the commercial aspects are similar, but an American will bring to mind the Seventh Amendment, Delaware, and perhaps the so-called "New Equity" more recently espoused by the Supreme Court (see S Bray, "The Supreme Court and the New Equity" 68 Vanderbilt Law Review 997 (2015)).
6. Of course the difficulties in translating "equity" between legal systems which form part of the English-speaking common law tradition are dwarfed by those confronting the translation of the term into Mandarin. It is not merely the absence of any one-to-one correspondence between the words of the two languages. There is an absence of corresponding concepts within the legal system.
7. But on appeal, Mr Young SC, who had also appeared at trial, confirmed in his succinct submissions that his principal claim did not turn on the competing translations of cl 2, which was "essentially irrelevant", but rather on the relatively uncontroversial terms of cl 4. That is correct. The claim for anticipatory breach turned on Mr Sui's allegation that he could not receive what had been bargained for after the three year period had elapsed. That was governed by cl 4, and there were few salient differences between the translations of that clause.
8. Ms Lee's translation of cl 4 was as follows: "Party A guaranteed the safety of Party B's fund in Australia Fu Lin Agriculture Investment Pty Ltd and guaranteed that for three years, 10% per annum multiplied by the money invested will be Party B's earning, i.e., from the date the AUD[$]1.5 million enters the account to the 365th day, Party A needs to pay Party B AUD[$]150,000 in cash, and so on for the earnings for the second year and the third year. From the 4th year onwards, Party B has the right to request an increase in the return for the investment, or to fully participate in the operation of the Fu Lin Agriculture Investment Company and hence, to become a real shareholder with 40% of the shares, or to elect to exit from the company, but has the right to transfer 40% of the land of 20 sq. kilometres to other people according to the market price at that time. Party A shall bear [the monetary responsibility] for the difference if it is sold for less than AUD[$]1.5 million. Prior to the transfer, Party A guaranteed that Party B has the proprietary right of legally owning 8 sq. kilometres of agricultural land and shall give Party B the relevant legal documents."
9. It will be seen that Ms Lee translated the text into the past rather than the present tense. She referred to Party B becoming a "real shareholder", as opposed to a "true shareholder" after three years. She referred to the right to "transfer 40% of the land of 20 sq kilometres", rather than "transfer the 40% equity in the 20 square kilometres" and in the final sentence she referred to "the proprietary right of legally owning" rather than "legal ownership".

The interests in land owned by Australian Fulin Agriculture

1. The leases of portions 6108 and 6110 were in evidence. Rent of some $3125 was payable each quarter. The term was 5 years, and it was a condition that in each year of the lease, the lessee must clear, cultivate, and plant a minimum of 10 hectares (ie 1% of the total land) with agricultural crops. Other conditions required the construction of infrastructure within 5 years of the commencement of the lease. There was an entitlement to convert the lease to freehold if the conditions were satisfied.
2. There was evidence of the transfer of both leases from the name of Fortune Agribusiness Farms Management Pty Ltd to Australian Fulin Agriculture in December 2017, and the transfer was stamped for ad valorem duty of some $47,916. Mr Sui became a director of the second respondent, which became registered as the lessee under each Crown lease. Mr Sui gave uncontradicted evidence that after delays in the first and second payments of $150,000 and the provision of land title documents, he investigated the land, found that no crops had been planted and no infrastructure had been constructed. Mr Sui commenced proceedings promptly thereafter.

Reasons of the primary judge

1. Delays at trial occurred following a change in representation on the part of the defendants and the late service of translation evidence. The result was a hearing which extended over parts of four days between 30 September 2020 and 22 February 2021, and a special costs order. Nothing more need be said about those aspects of the proceedings at first instance.
2. The primary judge delivered judgment on 30 April 2021: Sui v Jiang [2021] NSWSC 435. His Honour concluded that the contract did not entitle Mr Sui to obtain ownership of a parcel of 8 square kilometres out of the 20 square kilometres the subject of the 2 Crown leases. His Honour described the legal meaning of the 3 choices conferred on Mr Sui at the end of 3 years as follows at [123]: "I do not favour a construction of the 2017 written agreement whereby, in some way, Mr Sui would be entitled to obtain ownership of eight square kilometres out of the 20 square kilometres which comprised the Northern Territory land. This was not a contract which allowed for the purchase of land by Mr Sui. Rather, Clause 4 of the 2017 written agreement provided for three different scenarios: on the first scenario, Mr Sui could request an increase in the return on his investment of the sum of A$1.5 million, which would then continue the arrangement at a renegotiated rate of return; on the second scenario, Mr Sui could become involved in the operation of Fulin, and become a 40% shareholder in Fulin in an ongoing and practical way; or on the third scenario, Mr Sui could choose to end his association with Fulin, and thus leave the company in circumstances where he would be entitled to transfer the 40% shareholding to others and, in the event that he did not receive A$1.5 million in payment, look to Mr Jiang to make up the difference between the sale price of the shares and the sum of A$1.5 million."
3. That construction was inconsistent with an anticipatory breach based on an inability to convey title to 8 square kilometres of the land to Mr Sui if he so elected. That led to his Honour's conclusion at [133]-[134]: "I am not persuaded by Mr Sui that either or both Defendants have committed anticipatory breaches of the 2017 written agreement. I do not accept that the 2017 written agreement includes a promise by Mr Jiang to ensure that Fulin had freehold title over the Northern Territory land. Nor am I satisfied that, as at 30 August 2019, Mr Jiang or Fulin was wholly and finally disabled from performing the obligation with respect to the Northern Territory land after May 2020, should Mr Sui elect to trigger the rights in the 2017 written agreement (see [59] above). In these circumstances, I am not satisfied that Mr Sui has demonstrated, on the balance of probabilities, that he is entitled to damages against Mr Jiang or Fulin arising from the alleged breach or anticipatory breach of the 2017 written agreement of 26 May 2017. Mr Sui has not succeeded in the cause of action which he has pleaded against Mr Jiang and Fulin."
4. On that basis his Honour dismissed the proceedings.

The parties' submissions

1. Mr Sui's principal submission on appeal was that the contract entitled him after 3 years to an election between agreeing to receive a higher rate of return, or becoming a "real" or "true" shareholder who was involved in management and whose returns would reflect the profitability of the company's business, or else a right to exit. Mr Sui, placing reliance on the concluding sentence in cl 4, said that he was entitled to 8 square kilometres of the land owned by the company, which he would be permitted to sell to third parties, and in respect of which he was entitled to obtain legal documents proving his ownership. He maintained that in the first three years, he was a passive shareholder, holding shares effectively as a security interest.
2. Mr Sui grappled with the difficulty presented by the fact that he had been made a 40% shareholder, and that if cl 4 entitled him to ownership of 8 square kilometres of land, it was silent as to what happened to the shares, and in particular made no mention of redemption. He submitted: "I would submit that if one reads this agreement with the idea that he is not a true shareholder in the sense that although he legally owns the shares, he is holding them as, in effect, a mortgagee of the shares then it really goes without saying once he is paid that he would provide the shares back because they are simply security that is held."
3. He was also alert to the difficulties presented by the fact that the parcels of land were held as two Crown leases, each of 10 square kilometres. Even if they were converted to freehold, in order to have a transfer of 8 square kilometres to Mr Sui, a subdivision would be necessary. Whether a Crown lease or the freehold parcel of land could be subdivided was not the subject of evidence. However, Mr Sui said that this did not matter, because there was still a breach of contract if the agreed 8 square kilometres was not transferred to him at his election.
4. Mr Jiang submitted that the first option in cl 4 was merely an agreement to agree, the second was as Mr Sui contended, but the third gave him merely a right to sell his 40% shareholding in Australian Fulin Agriculture Pty Ltd which owned the land, rather than 40% of the land itself. It was put orally: "[A]t the time of formation there was a company of which Mr Jiang was the sole shareholder, and the negotiations between the two gentlemen were in the context of discussing Mr Jiang's company's project in relation to this land. Therefore, all that Mr Jiang held as at the date of the agreement was shares in the company. He did not own land, his company owned land. We say that he wasn't intending to transfer a portion of the land that was held by way of two leases. Instead, there was an agreement to transfer shares. There's no dispute that is exactly what happened, that shares were in fact transferred."
5. If Mr Jiang's construction were correct, then there was no challenge to the reasoning of the primary judge, save in one respect to which I shall return. Mr Sui in that case accepted that he had not established a case for damages based upon loss of the opportunity to sell a 40% parcel of shares, and indeed had not even established a case for anticipatory breach.

Consideration

1. Conformably with the way in which the appeal was argued, nothing turns on the original Mandarin document and the competing translations. Mr Sui's submissions turn on cl 4, and there is only minor difference in the competing translations. The fact that Ms Sun has used the present tense and Ms Lee has used the past tense to translate the same Mandarin text is unimportant (and neither side made any submission to the contrary). Whether Mr Sui was better regarded as having the right to become a "real" shareholder or a "true" shareholder is not to the point; either way the sense is of a person who became entitled to a proportionate share in the actual returns of the company, rather than a defined amount. I shall return to the other two points of difference below, and to one further minor matter (it is the fifth point mentioned below) which also turns on translation, but otherwise the resolution of the main grounds of appeal turn on a conventional process of ascertaining the legal meaning of a written document, replete with imperfections, by reference to the objective meaning deriving from the contractual text in light of its context and purpose. Accordingly, I put to one side the instinct to consider the Mandarin original so as better to determine the intention to be imputed to Messrs Sui and Jiang from their chosen text; cf James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141 at 152-154 and Kobras v Lutheran Church of Australia Incorporated [2005] NSWSC 817 at [11]-[12].
2. The primary judge reproduced passages of principle from Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[51], Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16] and In the Matter of Jimmy's Recipe Pty Ltd (No 2) [2020] NSWSC 632 at [22]. Neither side cavilled with any of those principles.
3. A number of considerations favour the construction upheld by the primary judge.
4. First, the premise of the agreement was that an agricultural enterprise was to be conducted on the land. It does not matter for present purposes whether at the time of entry Mr Sui was unaware of the conditions on the Crown leases of improving parts of the land. It must have been obvious that after 3 years of clearing, cultivation and planting, the entitlement to be transferred 8 square kilometres of land for which Mr Sui contends presented a problem with two aspects. 1. The first is merely legal. A subdivision was required, and while there was no evidence as to the requirements of Northern Territory law, there is no reason to think that it would be straightforward. However, the fact that the parties' contract is silent as to this is of relatively little weight; it is easy to see how two non-lawyers might neglect the legal difficulties likely to accompany consent for a subdivision. 2. The second is practical and obvious. Even the non-lawyers who executed the agreement must be taken to have thought about how to identify the particular 8 square kilometres. The contract provides no mechanism to identify which particular 8 square kilometres were to be transferred to Mr Sui at the time of his exit, and there is every reason to think that some parts of the land would be more valuable than others. It does not make commercial sense to entitle Mr Jiang at the time the parties were separating their commercial interests to choose the worst or least valuable 8 square kilometres to transfer to Mr Sui. The difficulties are far from insuperable, and ultimately might be addressed by some analogue to a partition suit, or by implying a power on the part of the company. The only point for present purposes is that the absence of any provision in the contract dealing with these obvious practical difficulties tells against Mr Sui's construction.
5. Secondly, there is no mention of redemption of the shares. If Mr Sui is correct and he became entitled to legal ownership of 8 square kilometres of land owned by the company, he had somehow to relinquish his 40% holding in the company's shares. But the agreement is silent as to this. This also tells against Mr Sui's construction. On the other hand, if the agreement is construed as the primary judge construed it, then Mr Sui is entitled to sell his shares as a minority holding in a land-rich company, and there is no occasion to deal with the redemption of those shares.
6. Thirdly, if as Mr Sui contends, his shareholding is in substance a security interest analogous to that of a mortgagee, then there is no mention of the repayment of the $1.5 million. Clause 4 deals at length with the choices available to Mr Sui after 3 years, but is conspicuously silent about repayment. But that is exactly the place where it would be expected, if the transfer of the shares were to be regarded as a form of security for the repayment of the $1.5 million.
7. Fourthly, the background to the transaction was that, according to Mr Sui, he was told that Mr Jiang had been "having some personality difficulties with" an Australian agricultural expert who owned 40% of the company which had formerly owned the land and as a result of which Mr Jiang said "so, I'm looking for an investor to take his 40% out". There is a sound basis to think that the third alternative in the mechanism agreed between the parties in the event that the pair separated their interests would be similar to that which was relied upon when Mr Sui first invested in the company, namely, a transfer of a minority interest in the company which owned the land, rather than a transfer in a minority of the land itself. There is nothing to suggest that the exiting investor owned anything other than 40% of the shares in the company which formerly owned the land.
8. It is true that Mr Sui gave evidence that he told Mr Jiang that he also required a 40% interest in the land, to which Mr Jiang acceded. Mr Sui's account of the conversation was admitted into evidence on the basis that while parts might contravene the parole evidence rule, it was admissible as part of the factual matrix. The nature of the minority interest held by the exiting investor, which seems to have been uncontroversial, bears upon the construction to be given to the agreement whereby Mr Sui in substance replaced him. The fact that Mr Sui maintained that there was a pre-contractual conversation in terms which correspond to the construction for which he contends is of more limited value for the purposes of construction.
9. Fifthly, a concession was elicited from Ms Sun in cross-examination, namely, that her translation of the concluding sentence of cl 4 which commences "prior to the transfer of the land" incorporated words that were not found in the agreement. She thought that the parties' words, translated as "prior to the transfer", implicitly referred to the transfer of the land. The evidence was as follows: "PEDEN: Do you agree that "of the land" does not exist in the original text? WITNESS SUN: I think it's implied in there because it talks about that 8 square kilometre of land and it is the transfer of that land. As a matter of fact, I think that needs to be included. PEDEN: So you've made a decision that because you consider this all to be about the transfer of land, that you've inserted "of the land"? WITNESS SUN: Correct."
10. The fact that the cross-examiner exposed that the Mandarin text did not explicitly connote a transfer of land makes an alternative reading that the words refer to the right conferred upon Mr Sui to transfer his minority shareholding in the company to a third party more plausible.
11. Against the force of the above, it is true that the concluding sentence of cl 4 points in favour of an entitlement to be transferred a parcel of land in specie. It does not matter whether that be translated as "the proprietary right of legally owning 8 sq kilometres" or "legal ownership of 8 square kilometres". Mr Young is correct to submit that either way, the natural meaning of those translations is that Mr Sui would be entitled to ownership of land, as opposed to ownership of shares in a land-owning company. The awkwardness of the construction determined by the primary judge is somewhat greater if the words are translated by "legal ownership" as opposed to "proprietary right of legally owning" but either way there is concededly a measure of awkwardness if the words refer to the transfer of shares in a land-rich company as opposed to a transfer of land.
12. But the Court's task is to determine the meaning to be imputed to those words by reference to the contract as a whole and in context. It would be contrary to settled principle to proceed on the basis that the better meaning of the concluding sentence of cl 4 is as Mr Sui contends, and to let that conclusion fix the legal meaning of the entire contract. That is not merely because contracts are to be read as a whole. It is also because Mr Sui's reliance on the last sentence of cl 4 has a strong flavour of the tail wagging the dog, in that it gives a great deal of work to a sentence which after all is merely referring to an obligation which is guaranteed by Mr Jiang prior to the transfer of the 40% equity referred to in the previous sentence.
13. The most natural reading of the entirety of the contract is that upheld by the primary judge. True it is that Mr Sui's right to sell his 40% shareholding after 3 years (as opposed to a right to receive 40% of the land) sits awkwardly with the last sentence of cl 4. But there is no way of construing this admittedly imperfectly drafted contract without there being some distortion from the literal meaning. And telling against Mr Sui's construction are the matters mentioned above: the absence of provisions dealing with subdivision, identification of the 8 square kilometres, repayment and perhaps most importantly, the silence as to what is to happen to Mr Sui's shareholding if rather than selling it, he is entitled to sell 40% of the company's land.
14. I have concluded that the legal meaning of the parties' contract departs from the literal meaning of the concluding words of cl 4, which should be read as entitling Mr Sui to legal ownership of 40% of the shares in Australian Fulin Agriculture. That is somewhat strained. However, it is the least strained meaning in light of the text which precedes it, and it is the meaning which most naturally is to be imputed to the parties in light of the text and context, which included Mr Sui buying out another minority shareholder. Mr Sui is entitled to sell the minority shareholding which he acquired, and has the benefit of a guarantee if the sale price is less than $1.5 million.
15. Mr Young conceded, and in my view the concession was properly made, that if the Court reached that conclusion, the case based on anticipatory breach must fail.

The alternative claim for debt

1. By way of fallback, Mr Sui claimed an entitlement to recovery of the $1.5 million as a debt. He maintained that the $1.5 million was a loan which had not been repaid, and which was guaranteed by Mr Jiang.
2. This claim was separately pleaded and separately maintained at trial. Mr Sui's submission was summarised by the primary judge at [85], but was not separately addressed in his Honour's reasons. In fairness, it may be said that the rejection of the claim was at least arguably implicit.
3. The 2017 agreement is not suggestive of a loan. Mr Sui was promised a shareholding (which he in fact received) the consideration for which was the $1.5 million. The document makes no mention of any obligation of repayment. There is no mention of interest (the payments of $150,000 are a "return" on the "investment"). Instead, there is a right to sell the interest acquired (namely, a minority of shares) and a guarantee that if the price is less than $1.5 million, Mr Jiang will pay the difference. All of this tells against there being a loan.

Conclusion and orders

1. I have in the above proceeded directly to the construction of the contract, rather than dealing with each ground of appeal. That reflects the way the appeal was argued, focussing on the question of construction.
2. Grounds 1 and 7 alleged error in failing to find that there had been a loan of $1,500,000. Grounds 2, 4, 5 and 6 were premised on an entitlement on the part of Mr Sui after three years to a transfer of 8 square kilometres of land. Each of those grounds is resolved by what has been said above.
3. Ground 3 alleged error in failing to find that Australian Fulin Agriculture was not a party to the agreement. Nothing turns on this in light of the other grounds, but in any event I would not depart from the form of the written agreement, which was between Messrs Sui and Jiang. The company was not stated to be a party, and it did not execute the document. Insofar as the agreement involved actions by the company, Mr Jiang was in a position to control a general meeting of members of the company.
4. I propose that the appeal be dismissed. There is no reason for costs not to follow the event.
5. BRERETON JA: As a result of an agreement dated 26 May 2017 between the appellant Mr Guangyi Sui (as Party B) and the first respondent Mr Zhaoqing Jiang (as Party A), they are the shareholders, as to 40% and 60% respectively, in the second respondent company Australian Fulin Agriculture Pty Ltd, which holds 20 square kilometres of crown leasehold land in the Northern Territory (being portion 6108 in plan S2001/001 and portion 6110 in plan S2001/003) ("the Land"). The relevant facts, issues and arguments are comprehensively described, and the agreement is set out in full, in the judgment to be delivered by Leeming JA, which I have had the considerable benefit of reading in draft.
6. I agree that ground 3 (which contends that the trial judge erred in finding that the company was not a party to the agreement) fails. The only parties to the agreement were Mr Sui and Mr Jiang. The parties were identified as Party A and Party B. Each signatory appears to have executed the agreement only in his personal capacity. It does not purport to be executed by or on behalf of the company. It did not purport to impose any obligation on the company. Contrary to the appellant's submission, the company was not a party.
7. I also agree that ground 1 (which contends that the trial judge erred in failing to find that Mr Sui had lent $1.5 million to the company, guaranteed by Mr Jiang) fails. Mr Sui's investment was not a loan. In clauses 3 and 4 of the agreement it is characterised as an "investment", not as a loan. No provision is made for repayment by any borrower, as distinct from guarantees of "the safety of the funds" or of any shortfall by Mr Jiang.
8. It follows that ground 7 (which contends that the trial judge erred in failing to find that the respondents were liable to repay $1.5 million as a loan) must also fail.
9. However, I have reached a different conclusion on the issue, raised by ground 2, as to whether clause 4 of the agreement entitled Mr Sui, upon electing to leave the company, to transfer to a third party 8 square kilometres of land (equivalent to 40% of the Land), or his 40% shareholding in the company which holds that land.
10. Clause 4 was as follows: [1] 4. Party A guarantees the safety of the funds of Party B in Australian Fu Lin Agriculture Investment Co., Ltd. and guarantees an annual return of 10% for three years, i.e. Party A shall pay AUD150,000 cash to Party B by the 365th day from the date AUD1.5 million enters the account. Returns shall be paid in similar fashion in the second and third year. From the fourth year onwards, Party B is entitled to request an increase in the return on his investment, or choose to take part in the company's operation and become a true 40% shareholder, or choose to leave the company, but Party B is entitled to transfer the 40% equity in the 20 square kilometres to others at the then market price. In the event the sale price is for less than AUD1.5 million, Party A shall make up the difference. Prior to the transfer, Party A guarantees that Party B has legal ownership of 8 square kilometres of the agricultural land and shall provide Party B with relevant legal documents.
11. Clause 4 entitled Mr Sui to a guaranteed return on his investment of 10% per annum for three years and, at the expiry of that period, to elect between: 1. requesting an increase in the return on his investment; or 2. choosing to take part in the company's operations and become a "true" (or "real") 40% shareholder; or 3. choosing to leave the company, to transfer his interest in the 20 square kilometres to others at the then market price, and to recover any shortfall under his $1.5 million investment from Mr Jiang.
12. I agree that, but for the last sentence of clause 4, the context and content of the agreement would tend in favour of a construction that the third option was to transfer Mr Sui's shareholding, as distinct from a portion of the land in specie. However, in my judgment, that last sentence is intractable, and although I acknowledge that it appears towards the end of the document and should not necessarily outweigh contrary inconsistent indicia, it is not inconsistent with the other provisions of the contract.
13. The last sentence of clause 4 refers to "legal ownership of (or "the proprietary right of legally owning") 8 square kilometres of the agricultural land" and "relevant legal documents". The references to "legal ownership of" (or "proprietary right of legally owning", to "8 square kilometres" (as distinct from "an interest in 40% of the Land" or to that effect), and to "relevant legal documents" (with the connotation of documents of title), are redolent of title to a portion of the Land - not to a shareholding in the land-holding company.
14. As it seems to me, the effect of the agreement was that, during the initial three-year period, Mr Sui, though a shareholder, was a nominal - as distinct from "real" or "true" - shareholder, in the sense that his rights were analogous to those of a preference shareholder to receive a guaranteed return. The first option in clause 4 was to continue that arrangement, potentially negotiating a higher guaranteed return. The second option involved conversion of his rights from a guaranteed return into participation pro-rata in the profits by way of dividend.
15. In the third option, which involved choosing "to leave the company", it is implicit that he would retransfer his shares: in a contract which provided only in passing for him to acquire a shareholding, the absence of more express provision for their surrender upon exit is quite unremarkable. In any event, "to leave the company" necessarily involves giving up one's shareholding.
16. To my mind, the absence of reference to subdivision, or of description of the particular 8 square kilometres to which Mr Sui was to be entitled, is also unremarkable, in circumstances where there is no reason to expect that any particular portion was more significant or valuable than the remainder, no reason to suppose that Mr Sui was not content to accept whichever 8 square kilometre portion Mr Jiang might select, and (as reflected in clause 5) the parties contemplated that "[m]atters not covered by this agreement may be dealt with through friendly negotiation." For that same latter reason, not much significance can be given to the absence, in an agreement drafted by laypersons, of provision in respect of other matters for which provision might have been made by lawyers.
17. From the beginning, the focus of the contract was the Land. Thus the preamble describes the agreement as an "agreement on the comprehensive development of agricultural land … and on the transfer of the equity in 20 square kilometres of agricultural land"; and clause 1 identifies and describes the Land by particulars of title. It is true, as Leeming JA points out, that the background to the transaction included that, according to Mr Sui, he was told by Mr Jiang that he was "looking for an investor to take [a previous investor's] 40% out". However, the full context of the relevant conversation deprives it of the capacity to suggest that when the parties were agreeing to the form of clause 4, it was clear to all concerned that Mr Sui was buying a minority shareholding, rather than a direct interest in land. The full conversation was as follows (emphasis added): "Me: What is your reason for looking for investors and what can you offer to investors? Jiang: That land is currently under the name of Aozhou Cai Fu Nong Ye Tou Zi Ji Jin (in Chinese which, in English is Australian Fortune Agriculture Investment Fund). This company is currently owned by me as to 50%, by Mr Cui as to 10%, and by an Australian gentleman with a PHD in agriculture as to 40%. I've been having some personality difficulties with our Mr PHD. So, I'm looking for an investor to take his 40% out. It's a great opportunity. An investment of $1.5 million will get you 40% of this company with 20 square kilometres of land with water rights in Northern Territory. This kind of land with water rights increases in value every year. So many foreigners want to buy it but the Australian government won't let it be sold to foreigners. Me: I am very interested. But if I invest $1.5 million, I will require that we set up a new company which takes the land over from Fortune Agriculture in which I will be 40% shareholder; you will be 50% shareholder and Mr Cui is 10% shareholder - the same ownership rights as now. Jiang: Yeah. I have no problem with that. Me: I will also require 40% ownership in the land as well; otherwise, just 40% shares in the company is not enough security for me for put in $1.5 million in a new company. Jiang: Honestly, you should just trust me. I guarantee the security of your investment and a 10% annual return on your investment money. I am a man of real assets: two wineries in Melbourne; one international golf course in Sydney. My office building in Sydney is worth about $13 to $16 million. I also have two residential towers being built in Melbourne. I won't run away for $1.5 million. But if it matters to you that much, you can have 40% ownership in the land as well. Me: Thank you for your understanding. Can you send me the land title? Jiang: I don't have it at this moment. We will only be able to get it once the land is transferred from Fortune Agriculture to our new company."
18. The emphasised portions prevent a conclusion being drawn from the conversation that the parties were not contemplating that Mr Sui would acquire an interest in the land as well as a shareholding.
19. Accordingly, I do not consider that the matters which might weigh somewhat in favour of the construction favoured by the trial judge do so decisively. On the other hand, the last sentence of clause 4 points intractably in the opposite direction. It follows that in my opinion, the appeal should succeed on ground 2.
20. The trial judge's rejection of the contention that there was an anticipatory breach of the contract was intertwined with his Honour's rejection of the argument that the agreement included a promise that Mr Sui would be able to transfer title to 8 square kilometres of the Land; it was on that basis that his Honour was not satisfied that Mr Jiang was wholly and finally disabled from performing its obligation with respect to the Land should Mr Sui elect to trigger his rights in the agreement. [2] It follows from my above conclusions that, on the proper construction of the contract, Mr Jiang promised that should Mr Sui elect to leave the company after May 2020 (three years after the commencement of the agreement), he would be given legal title to 8 square kilometres of the Land within a reasonable time. When Mr Sui elected to terminate the agreement by filing the Statement of Claim on 27 September 2019, in circumstances where nothing had been done by way of improvement of the Land in accordance with the conditions of the crown leases, there was no prospect of Mr Jiang being able to perform that obligation. The respondent's submission that the leases were capable of variation does not negate the proposition that freehold title could not be given to Mr Sui within a reasonable time after May 2020. Mr Sui was therefore entitled to terminate for anticipatory breach, and to damages for breach of contract, reflecting what he would have had had the contract been performed: land and the guarantee to a total value of $1.5 million, less the value (if any) of the minority shareholding that he retains. Mr Jiang does not appear to have adduced any evidence that that shareholding had any value. It follows that, as against the first respondent Mr Jiang only, grounds 4, 5, and 6 succeed.
21. In my opinion, therefore, the appeal should be allowed, as against the first respondent, with costs. The judgment in the Common Law Division in favour of the first defendant should be set aside, and in lieu thereof there should be judgment for the plaintiff against the first defendant for $1.5 million and interest. The appeal as against the second respondent should be dismissed, with costs; the judgment in favour of the second defendant should be undisturbed. As this is a minority judgment, I need not address the complexities that arise in respect of the costs at first instance.

Endnotes

1. Per the translation of Ms Sun, save that I have omitted the words "of the land" in the last sentence, as in cross-examination it was agreed that those words did not appear in the Mandarin text. As noted by Leeming JA above at [30], nothing otherwise turns on the minor differences between the competing translations.
2. Sui v Jiang [2021] NSWSC 435 at [133] (Johnson J). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 November 2021