Sui v Jiang

The Earlier Proceedings

1. On 27 September 2019, Mr Sui commenced the Earlier Proceedings against Mr Jiang and the Company.
2. I will return below to the significance of the allegations made by Mr Sui in the Earlier Proceedings so far as concerns his claim before me that he has exercised Option 3.
3. In the Earlier Proceedings, Mr Sui propounded a construction of the Agreement that this Court, both at first instance and on appeal, has found to be incorrect.
4. Thus, the Statement of Claim in the Earlier Proceedings alleged, concerning the proper construction of cl 4 of the Agreement: "7. It is a term of the Agreement that after 26 May 2020, the plaintiff was to elect between the following alternatives: (a) To enter into a further agreement whereby the loan of the sum of $1,500,000 would be rolled-over into a new loan of that sum at such higher new rate of interest to be agreed; (b) To waive recovery of the loan of $1,500,000 in exchange for the plaintiff becoming a true 40% shareholder of the second defendant, in that the plaintiff would cease to hold 40% shares in the second defendant merely by way of security but instead hold them beneficially; or (c) To waive recovery of the loan of $1,500,000 in exchange for a transfer into the plaintiff's name of freehold title to 40% of the Land, with the plaintiff being able to sell that land and the first defendant agreeing to make up the shortfall should the sale price of that land be less than $1,500,000."
5. As Mr Young SC, who appeared for Mr Sui before me, and also in the Earlier Proceedings, explained, Mr Sui thus argued in the Earlier Proceedings that cl 4 of the Agreement: "… meant that the $1,500,000 was effectively a loan to the Company by [Mr Sui] with [Mr Jiang] as a guarantor and the 40% shareholding held by [Mr Sui] merely by way of security and that on termination of the Agreement [Mr Sui] was entitled (at his election) to call up on the Company to transfer 40% of the Northern Territory land to [Mr Sui] …"
6. Johnson J did not accept Mr Sui's construction of cl 4 of the Agreement.
7. Thus, his Honour held: [6] "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: (a) 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; (b) on the second scenario, Mr Sui could become involved in the operation of [the Company], and become a 40% shareholder in [the Company] in an ongoing and practical way; or (c) on the third scenario, Mr Sui could choose to end his association with [the Company], 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."
8. Mr Sui appealed. The Court of Appeal, by majority, dismissed the appeal. Leeming JA, with whom Gleeson JA agreed, concluded: [7] "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. 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 [the Company]. 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."
9. Brereton JA dissented.
10. Before me, Mr Young described what happened in the Earlier Proceedings as follows: "Both Johnson J at first instance and two out of three judges of the Court of Appeal however disagreed with the plaintiff's construction of the Agreement (only Brereton JA accepting the plaintiff's construction of the Agreement as correct). Instead, it was found that the $1,500,00 was not a loan, the Company was not a party to the Agreement, the plaintiff's rights were not to receive a transfer of 8 square kilometres of land from the Company, there was thus no anticipatory breach and thus the plaintiff could not and did not terminate the Agreement. The trial judge and the majority of the Court of Appeal found instead that clause 4 of the Agreement, properly construed, was to the effect that if after 3 years from payment of the sum of $1,500,000 the plaintiff decided to sell the shares, then if the plaintiff received less than $1,500,000 for the shares Mr Jiang (the present defendant, who was also a party to those first proceedings and the appeal therefrom) was obliged to pay the plaintiff the difference. The plaintiff was also entitled to receive "interest" from the defendant at the rate of 10% per annum on his $1,500,000 investment for each of the 3 years, of which the first two payments of $150,000 have been paid, but the third payment of $150,000 has not."

Did Mr Sui exercise Option 3?

1. In the light of the decision in the Earlier Proceedings, Mr Sui now brings these proceedings alleging that he has exercised Option 3 and that, now that he has sold his shares in the Company for $1,000, and consistently with his entitlements under the Agreement as determined in the Earlier Proceedings, he is entitled to recover the difference between that figure and $1.5 million from Mr Jiang.
2. The critical question is whether Mr Sui has exercised Option 3 and whether he did so within the period of the Option Window.
3. The conduct of Mr Sui upon which Mr Young relied as bespeaking Mr Sui's exercise of Option 3 occurred prior to that period.

Principles

1. It is common ground that the question of whether Mr Sui exercised Option 3 is to be determined objectively.
2. It is not necessary for Mr Sui to show that his subjective intention was to exercise the option. [8]
3. Where, as here, the agreement contains no express provision specifying how the option is to be exercised, "any definitive communication of an election would suffice" but it is necessary that the communication should "express clearly and unequivocally" the fact that the option is being exercised. [9]
4. The relevant communication must be "an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option". [10]

Was Mr Sui obliged to exercise an option?

1. Although Mr Young submitted that Mr Sui was obliged to exercise one of three options in cl 2 of the Agreement, I cannot see how that can be correct.
2. Clause 4 says that "from the fourth year onwards" Mr Sui is "entitled" to do one of the three things thereafter specified.
3. I see no words in cl 4 which would have the effect of compelling Mr Sui to take any step in relation to the options.
4. If Mr Sui took no such step then he would remain in the same position that he was prior to the "fourth year"; that is, the holder of 40% of the shares in the Company.

What was the nature of Option 3?

1. Mr Young submitted that the nature of Option 3 was to "choose to leave the Company", picking up the words used in cl 4.
2. However, the question for me is whether, during the period of the Option Window, looking at the question objectively, Mr Sui made an absolute and unqualified and clear and unequivocal exercise of the right of election provided for in cl 4 of the Agreement.

The acts Mr Sui relies on to show he exercised Option 3

The WeChat communications

1. Mr Young pointed to a number of WeChat communications between Mr Sui and Mr Jiang that he submitted showed that Mr Sui had "chosen to leave the Company" and thereby exercised Option 3.
2. Those WeChat communications commenced on 11 August 2017 and concluded on 22 January 2019; well before the period of the Option Window.
3. In the earlier WeChat communications, Mr Sui made enquiries as to when the land the subject of the two Crown Leases held by the Company would be converted to freehold.
4. Thus, on 11 August 2017, Mr Sui enquired: "Has the title deed for the Northern Territory been issued?"
5. Mr Jiang made various replies including that there are "some problems with transferring ownership". [11]
6. On 5 November 2018, Mr Sui sent Mr Jiang this message: "Hello, Mr. Jiang! I looked through our WeChat history between you and me. On the 11th of August 2017, you said that the title deed for the 20 square kilometres in the Northern Territory would be issued in two weeks! Why haven't you shown me the title deed until now, 5th of November 2018? Moreover, I invested 1.5 million Australian dollars in [the Company], and you guaranteed that I would have legal ownership of 8 square kilometres and you would provide me with the corresponding legal documents. 17 months have passed, why haven't the corresponding title deed and legal documents been provided to me? Please answer me! If the corresponding documents cannot be provided, please quickly return my investment of 1.5 million together with relevant interests! Because you have violated the original agreement to transfer 40% of the equity of the land. Please give me an answer! Thank you."
7. It seems Mr Jiang did not reply to that message prompting Mr Sui to send this further message on 7 November 2018: "Hello, Mr. Jiang! This afternoon your accountant Elena sent me some files about [the Company], but the bank statement was not sent to me, which means that I don't know where the investment money that I invested in [the Company] went, right? Also, the investment agreement signed with you, with Cui Shangze being the witness and introducer clearly states that before the land transfer, [Mr Jiang] guarantees that [Mr Sui] has the legal ownership of 8 square kilometres of agricultural land and provides [Mr Sui] with the corresponding legal documents. On the 11th of August 2017, you replied to me on WeChat that the title deed would be issued in two weeks. Now it is the 7th of November 2018. It has been nearly 17 months from the registration date of June 15 2017 till now. No title deed, and I don't know where the money went! There is no guarantee for my investment of 1.5 million Australian dollars. This has violated the agreement signed on the 26th of May 2017. I require you, Mr. Jiang, to provide me with a copy of the bank statement, make the matter open, we have a good talk about how to solve it. If we can't come to an agreement, I require you to terminate the agreement immediately and return the principal and interest to me. Of course, if you really can't come up with the money, you can give me a property that worth 1.8 million Australian dollars as a security since we are good friend. The agreement can continue to be implemented until the 15th of June 2020, and we will discuss then." (Emphasis added.)
8. On 12 November 2018, Mr Jiang replied: "I am on a business trip overseas, in a small city in Thailand, sometimes there is no reception. I will get back to you when I get in. You don't have to worry. No one can cheat you of your money, especially me. This does not exist. It's decided that you would exit, then I will arrange the money. You don't have to worry anymore." (Emphasis added.)
9. The passage I have emphasised in this WeChat exchange appears to bespeak Mr Jiang's agreement that he would repay the $1.5 million that Mr Sui had paid for his shares in the Company. Thus, he stated that he would "arrange the money" for Mr Sui's "exit".
10. At around this time, described by Mr Sui as being "early December 2018", he had the following WeChat exchange with Mr Jiang: Mr Sui: "Did you receive messages to you? Please hurry up on your endeavours to organise money to pay my investment out." Mr Jiang: "I am doing that right now."
11. The only other WeChat communication evidence is one sent by Mr Jiang on 22 January 2019, evidently in reply to the WeChat communication set out in the preceding paragraph: "Mr Sui, I have read your message. I've been busy these two days, and I am also treating my back. The case is, firstly, the money is indeed as I said, the cash flow is not very good now. All the money invested has not been returned. Some are still in operation. Projects are still moving forward. Agricultural projects are also under continuous negotiation with the government. You are a shareholder, a director, and an investor. You have signed the agreement, but now it's not possible to take money out even [if] it is desired. I will surely execute the rest according to the agreement. However, I definitely cannot achieve it with my current ability because I am not prepared." (Emphasis added.)
12. Mr Jiang here appeared to be recanting on his agreement to "arrange the money" for Mr Sui's "exit" from the Company.
13. These WeChat communications make clear that Mr Sui was seeking to have his investment of $1.5 million returned and that Mr Jiang had indicated that he would do this.
14. It may be that the inference arises from these matters that Mr Sui was also proposing that, once his investment was returned, he would return his 40% shareholding to Mr Jiang, although there is no evidence that this was discussed.
15. However that may be, I see these WeChat communications as falling far short of an unequivocal or definitive communication by Mr Sui of an intention to exercise Option 3. Mr Sui was not entitled to exercise Option 3 at the time of these WeChat communications and indeed would not become entitled to exercise Option 3 for some 17 months following the last of these communications in January 2019.
16. There is no evidence of any communications between Mr Sui and Mr Jiang between January 2019 and June 2020, when the period of the Option Window commenced. So far as the evidence reveals, Mr Sui took no steps to enforce what appears from the WeChat communications to be an agreement made or understanding reached in December 2018 that Mr Jiang would "arrange the money" for Mr Sui's "exit" from the Company.

The events within the period of the Option Window

1. Within the period of the Option Window, two things happened.
2. First, on 30 August 2019, Mr Sui purported to terminate the Agreement based on Mr Jiang's alleged anticipatory breach of it.
3. Thus, on 30 August 2019, Mr Sui's solicitors sent a letter to Mr Jiang and to the Company: "We refer to the agreement signed by you and Mr Guangyi Sui on 26 May 2017 ('Agreement') and advise that we act for Mr Sui. In order to fulfil your obligations of the Agreement, you personally and the company Australian Fulin Agriculture Pty Ltd ('the Company', which we contend was also a party to the Agreement) needed to undertake the necessary steps and actions to develop the land as required under the Crown Leases governing the land in order to obtain freehold title thereof in order to transfer 40% of the land to our client if he so elected. You and the Company have failed to take such steps, such that it is now impossible to fulfil the conditions of the Crown Leases and obtain freehold title thereunder. As this will make it impossible to transfer 40% of the freehold title to our client, it amounts to an anticipatory breach of the Agreement by the Company and by you under the Agreement. We therefore are instructed to, and do, hereby terminate the Agreement forthwith and demand the repayment of the $1,500,000 advanced to the Company by our client. If that sum is repaid within 7 days of the date of this letter our client will accept that sum in full satisfaction of your and the Company's obligations to him. If payment is not forthcoming within that period, however, we are instructed that our client intends to commence Supreme Court proceedings against both you personally and the Company and that he will in those proceedings claim damages against you and the Company for breach of contract in excess of the amount of the $1,500,000 debt." (Emphasis added.)
4. The passages I have emphasised show that Mr Sui maintained the construction of cl 4 later articulated in Mr Sui's Statement of Claim in the Earlier Proceedings, set out at [21] above, and later rejected by Johnson J and by the majority of the Court of Appeal in the circumstances to which I have referred.
5. The letter makes no reference to Mr Sui's shareholding nor, in my opinion, manifests any intention to exercise Option 3. Indeed, the letter could not constitute an exercise of Option 3 as it purports to terminate the Agreement under which such option existed.
6. Second, on 27 September 2019, Mr Sui commenced the Earlier Proceedings.
7. The Statement of Claim alleged breaches of the terms to which I have referred above requiring that the land be developed, [12] described as the "Block Development Breaches", and then alleged: "16. By reason of the Block Development Breaches, it will be impossible for the second defendant to obtain under the Crown Leases freehold title to any part of the Land. 17. By reason of the immediately preceding paragraph, if the plaintiff elects after 26 May 2020 to have 40% of the Land transferred into his name, it will be impossible for the defendants to comply with the Agreement by transferring to him 40% of the freehold title to the Land ('the Impossibility'). 18. By reason of their giving rise to the Impossibility, the Block Development Breaches constituted anticipatory breaches by the defendants of the Agreement ('the Anticipatory Breaches'). 19. By reason of the Anticipatory Breaches, the plaintiff became entitled to terminate the Agreement. 20. On 30 August 2019, in consequence of the Anticipatory Breaches, the plaintiff terminated the Agreement by notifying the defendants in writing of the said termination. 21. By reason of the Anticipatory Breaches, the defendants are liable to the plaintiff for breach of contract for losses caused to the plaintiff by reason of him being unable to make the promised election after 26 May 2020. Particulars The value of the election was at least $1,500,000, as the plaintiff was to receive a minimum of $1,500,000 from the sale of his share of the Land. 22. In the alternative, the defendants are indebted to the plaintiff in the further sum of $1,500,000, being the amount loaned to the second defendant and guaranteed by the first defendant." (Emphasis added.)
8. Consistently with the 30 August 2019 letter, the Statement of Claim thus alleged at par 20 that Mr Sui had terminated the Agreement.
9. Further, in the paragraphs I have emphasised, Mr Sui positively alleged that he had not and could not "make the promised election"; that is, exercise Option 3.
10. These assertions no doubt reflected Mr Sui's erroneous understanding of his entitlements under the Agreement, namely, upon exercise of Option 3, to call for a transfer of 40% of the property the subject of the Crown Lease. But that does not alter the fact that Mr Sui was asserting that he had not and could not exercise Option 3.
11. I cannot see how, in those circumstances, I could conclude that what Mr Sui said in the course of his WeChat communications with Mr Jiang a year and a half earlier could themselves amount to an exercise of Option 3.
12. Mr Sui does not point to any other act by him within the period of the Option Window that could amount to an exercise by him of Option 3.
13. My conclusion is that Mr Sui has not, within the period of the Option Window, purported to exercise Option 3.
14. It follows that he has no entitlement to look to Mr Jiang to make out the difference between $1.5 million and the sale price of $1,000 that Mr Sui was able to achieve.

Did Mr Sui manifest an intention to "leave the Company"?

1. As I have said, Mr Young contended that his WeChat communications with Mr Jiang that I have set out made clear that Mr Sui had "chosen to leave the Company" for the purposes of cl 4 of the Agreement.
2. But he has not done so. He has retained his shareholding in the Company. He has purported to terminate the Agreement. It has been held that his actions were not effective to achieve that result.

The sale of the shares

1. As I have said, Mr Sui sold his shares in the Company for $1,000. The purchaser was an entity associated with Mr Sui's solicitor's brother.
2. As I have found that Mr Sui did not exercise Option 3, it is not necessary to further examine the circumstances in which Mr Sui sold his shares in the Company.
3. In any event, and although much time was devoted during the hearing to this question, Mr Lawrance ultimately made only one submission in answer to it.
4. Clause 4 of the Agreement provided, as construed in the Earlier Proceedings, that if Mr Sui exercised Option 3, he was entitled to sell his shares in the Company at "the then market price" and that, if the sale price was less than $1.5 million, he could recover the difference from Mr Jiang.
5. Mr Lawrance submitted that this provision obliged Mr Sui, in these hypothetical circumstances, to sell the shares at the market price prevailing at the time he exercised Option 3 and that, although there was evidence that at the time of the sale in May 2023 the shares had no value, there was no evidence of their value during the period of the Option Window.
6. I do not accept that this is the proper construction of cl 4. The more natural meaning to be attributed to the expression "the then market price" is the market price at the time of the election of the option.
7. Otherwise, as Mr Young pointed out, were the market price of the shares to double immediately on expiry of the period of the Option Window, Mr Sui would nonetheless be obliged to sell the shares at the lower price prevailing during the period of the Option Window. The parties cannot have intended this result.

The claim for $150,000 - is there an Anshun estoppel?

1. As I have said, Mr Sui also seeks judgment in the sum of $150,000 for the interest that fell due for payment in June 2020.
2. Mr Jiang contends that Mr Sui ought reasonably to have included that claim in the Earlier Proceedings and contends for an Anshun estoppel. [13]
3. Mr Jiang offers no other defence to this claim.
4. There is no dispute about the relevant principles. They are that: "(1) Anshun estoppel operates to preclude a party from asserting a claim or raising an issue of fact or law that is so closely related to the subject matter of proceedings already conducted that it ought reasonably to have been asserted or raised at an earlier time; (2) the question is whether the matter relied on in the present proceeding was so relevant to the subject matter of the [earlier] proceeding that it was unreasonable not to rely on it in the [earlier] proceeding; (3) this question is not answered merely by a mechanical approach to identifying common facts in proceedings said to give rise to an Anshun estoppel. There are a variety of reasons why it might be justifiable for a party to refrain from litigating an issue in one proceeding and seek to litigate it in a subsequent proceeding; (4) the mere fact that the matter could have been raised does not mean that it should have been raised. The matter has to have been so relevant to the earlier proceeding as to make it unreasonable not to raise it; and (5) it is a serious step to shut out a claim that a party wishes to pursue without determination of its intrinsic merit on the ground that it ought to have been raised in earlier litigation." [14] (Emphasis in original.)
5. The $150,000 interest payment was not due when the Earlier Proceedings were commenced on 27 September 2019. However, as Mr Young accepted, the pleadings in the Earlier Proceedings could have been amended in June 2019 to include such a claim.
6. The Statement of Claim in the Earlier Proceedings alleged the existence of Mr Sui's entitlement to receive the relevant payment of interest. Thus par 2 of the Statement of Claim read: "It was a term of the Agreement that on each of 26 May 2018, 26 May 2019, 26 May 2020, [15] [Mr Sui] would receive from [the Company] [16] payments of interest, each payment to be in the sum of $150,000."
7. Further, as I have said, in the Earlier Proceedings Mr Jiang made a claim "in the alternative" that Mr Jiang and the Company were indebted to him for $1.5 million.
8. Mr Young submitted, I think correctly, that that alternative claim, like the claim for damages for anticipatory breach of the Agreement, was premised on the Agreement having ended by reason of Mr Sui's purported termination of 30 August 2019.
9. That was certainly how Mr Young ran the case before Johnson J as the following passage reveals: "Mr Young SC referred to Mr Sui's alternative claim in debt for A$1.5 million in that this sum was the amount advanced by Mr Sui to [the Company]. Even if [the Company] was found not to be a party to the 2017 written agreement, it had still been the recipient of a A$1.5 million loan which it will need to repay to Mr Sui, in circumstances where that agreement has now been validly terminated, so that the terms of that agreement applicable to alternative means of satisfying the loan are no longer available." [17]
10. That matter was noted in Leeming JA's judgment in the appeal. [18]
11. In those circumstances, I do not think it was unreasonable of Mr Sui not to include a claim for the $150,000 in the Earlier Proceedings. To do so would have been to posit an alternative claim which, inconsistently with the other claims made by Mr Sui in the proceedings, would be premised on the Agreement remaining on foot.
12. There is no Anshun estoppel here.

Conclusion

1. Mr Sui's claim arising out of his alleged exercise of Option 3 fails. Mr Sui's claim for payment of the $150,000 succeeds.
2. The parties should confer and agree on the orders necessary to give effect to these reasons.
3. If there is a dispute as to costs, the parties should agree a timetable for written submissions. I will deal with that question on the papers.

Endnotes

1. Mr Sui contends 14 June; the difference is immaterial.
2. See par B2 of the Commercial List Statement which posited as an issue in the proceedings whether Mr Sui ceased to have rights under cl 4 after 31 December 2020.
3. Sui v Jiang [2021] NSWSC 435.
4. Sui v Jiang [2021] NSWCA 285.
5. See Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45.
6. At [123].
7. At [42] and [43].
8. For example, Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646 (Stephen J, McTiernan ACJ agreeing); [1974] HCA 40.
9. Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 196 (Dixon CJ, McTiernan J agreeing); [1957] HCA 90.
10. Quadling v Robinson (1976) 137 CLR 192 at 201 (Gibbs J); [1976] HCA 31.
11. On 5 September 2017.
12. At [2].
13. See Port of Melbourne Authority v Anshun Pty Ltd (supra).
14. Donnelly v Kempsey Local Aboriginal Land Council [2020] NSWSC 1548 at [90] (Williams J), citing Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at [22] (French CJ, Bell, Gageler and Keane JJ); Conference & Exhibition Organisers Pty Ltd v Johnson [2016] NSWCA 118 at [21]-[24] (Meagher JA, McColl and Leeming JJA agreeing).
15. As I have said above at [8], the correct date would be either 14 or 15 June of those years; the difference is immaterial.
16. In fact, the obligation is from Mr Jiang not the Company but, again, the difference is immaterial.
17. At [85].
18. At [45]-[47]. 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: 14 August 2024