Super Vision Resources Ltd v AC Holdings Co Pty Ltd

Judgment

1. On 31 August 2018 the second defendant, Mr Lawrence Xu, sold properties owned by him at Milsons Point and Sandringham in Sydney to the first defendant, AC Holdings Pty Ltd, for a total stated consideration of $8.8 million: $3.9 million for the Milsons Point property and $4.9 million for the Sandringham property.
2. The sole director and shareholder of AC Holdings is, and was then, Ms Qiao Wang.
3. Leaving aside adjustments for council rates and the like, on settlement AC Holdings paid Mr Xu $2.31 million for the Milsons Point property and $4.15 million for the Sandringham property: a total of $6.46 million. This was $2.34 million less than the total stated consideration of $8.8 million. Ms Wang has an explanation for this that I set out below. There is controversy about that explanation. Ms Wang arranged for AC Holdings to borrow the necessary funds from a third party lender.
4. The properties were worth more than $8.8 million as at 31 August 2018. It is common ground that the value of the Milsons Point property was then $4.9 million and that of Sandringham was $5 million: a total of $9.9 million; $1.1 million more than the stated consideration.
5. On 31 August 2018 the plaintiff, Super Vision Resources Pty Ltd, was a prospective creditor of Mr Xu. That is because Mr Xu had guaranteed to Super Vision the obligations of Hua Cheng International Holdings Group Ltd, a company of which he was the sole director and shareholder.
6. In these circumstances, Super Vision seeks declarations under s 37A of the Conveyancing Act 1919 (NSW) to the effect that Mr Xu's sales of the Milsons Point and Sandringham properties to AC Holdings are void on the basis that they were alienations made by Mr Xu with the intent of defrauding his creditors.
7. Section 37A provides, relevantly: 37A Voluntary alienation to defraud creditors voidable (1) Save as provided in this section, every alienation of property, made … with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. … (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.
8. Three questions arise: 1. First, whether Mr Xu alienated his interest in the two properties to AC Holdings "with intent to defraud [his] creditors". As I discuss below, Mr Xu has entered a submitting appearance and admitted this to be the case; 2. Second, whether Super Vision is a person "thereby prejudiced" and thus has standing to seek to have the transactions set aside; and 3. Third, whether AC Holdings was a "purchaser in good faith" of the properties, not having at the time of alienation "notice of [Mr Xu's] intent to defraud creditors".

Decision

1. Mr Xu has admitted that he alienated his interest in the two properties with intent to defraud his creditors. However, Super Vision is not a "person thereby prejudiced". In any event, Ms Wang was a purchaser in good faith without notice of Mr Xu's intent.
2. The proceedings should be dismissed.

Background

1. On 4 July 2014, Super Vision advanced some HKD 364 million (around $67.8 million) to Hua Cheng to enable it to undertake a residential and commercial development at Hurstville known as "Royal Plaza". Hua Cheng defaulted under the loan. Super Vision appointed receivers. Hua Cheng is now in liquidation.
2. On 1 December 2017, Super Vision commenced proceedings (the "Recovery Proceedings") against Mr Xu as guarantor of Hua Cheng's obligations in this Court seeking to recover the amount said to be due to it under that guarantee.
3. On 10 April 2019, Ball J entered judgment in favour of Super Vision against Mr Xu in the sum some HKD 133 million (approximately $23 million) for the reasons he gave that day: Super Vision Resources Ltd v Xu (No 2) [2019] NSWSC 389.
4. In the meantime, and arising from the 31 August 2018 transactions referred to at [1], Ball J made a freezing order in the Recovery Proceedings restraining AC Holdings from dealing with the Milsons Point and Sandringham properties, except in certain defined circumstances.
5. These proceedings were commenced on 8 March 2019. The freezing order in the Recovery Proceedings has been extended until further order, pending the outcome of these proceedings.

Ms Wang's credit

1. Ms Wang affirmed six affidavits read before me. Three were affirmed in the fortnight before the hearing commenced.
2. Each of those affidavits was in English and affirmed through a Mandarin interpreter.
3. Ms Wang gave evidence before me in Mandarin and through an interpreter.
4. Mr Zipser, who appeared for Ms Wang and AC Holdings, accepted that there were a number of unsatisfactory features about Ms Wang's affidavit and oral evidence. As Mr Zipser said "there were inconsistencies concerning recollections of some events between affidavits, topics and details raised in later affidavits which were not raised in earlier affidavits, and occasions in cross-examination when Ms Wang did not give direct answers to questions asked of her".
5. However, only Ms Wang gave evidence of her dealings with Mr Xu. In that sense, there was no contradictor to Ms Wang's account of those dealings.
6. Mr Knackstredt, who appeared for Super Vision, submitted that Ms Wang's credibility was so poor that I should not accept any evidence she gave unless it was against her interest or was corroborated by other independent evidence.
7. Mr Knackstredt submitted that there should be excluded from consideration what he described as "self-generated" documents created by Mr Xu or Ms Wang herself.
8. The "self-generated" documents were: 1. an "IOU" executed by Mr Xu on 29 July 2015 in which he appears to acknowledge that he was borrowing CNY 20 million from Ms Wang and a willingness to provide her with security over the Milsons Point and Sandringham properties "to secure" that borrowing ("the 29 July 2015 IOU") (see [71]-[75] below); 2. an exchange of WeChat messages on 7 May 2017 in which Mr Xu appears to acknowledge an intention to borrow a further $5 million from Ms Wang ("the 7 May 2017 WeChat Exchange") (see [151]-[155] below); 3. a caveat lodged on the title of the Milsons Point property on 7 May 2017 which was not executed by Ms Wang but which describes Ms Wang's "equitable interest" in that property by reference to a "Deed of Loan" dated 1 May 2017 recording a loan of $5 million ("the 7 May 2017 Caveat") (see [156]-[169] below); and 4. a mortgage dated 25 May 2017 lodged on the title of the Milsons Point property on 7 July 2017 executed by Mr Xu and Ms Wang which is expressed to secure a loan of $5 million advanced for a two year term commencing on 25 May 2017 at an interest rate of fourteen per cent per annum ("the 25 May 2017 Mortgage") (see [217]-[239] below).
9. Mr Knackstredt submitted that each of the documents was a "sham"; that is a concoction created by one or both of Mr Xu and Ms Wang deliberately designed to create a false picture.
10. I do not accept this submission. I find that the 29 July 2015 IOU, the 7 May 2017 WeChat Exchange and the 25 May 2017 Mortgage were genuine documents. The 7 May 2017 Caveat was not signed by Ms Wang and was lodged on the title of the Milsons Point property by Mr Xu. It falsely asserted the existence of a Deed of Loan dated 1 May 2017. It is common ground that no such document existed. But it referred to a loan of $5 million that I find Ms Wang did make to or at the direction of Mr Xu. I discuss these matters in detail below.
11. Mr Knackstredt in effect submitted that every utterance made by Ms Wang in her affidavits and in cross-examination was false.
12. In my opinion, the evidentiary landscape in this case is more nuanced than this.

The dealings between Mr Xu and Ms Wang

1. Ms Wang met Mr Xu in early 2010 through a mutual friend.
2. She said that her relationship with Mr Xu was always a "purely business relationship". She gave evidence that from the first time she met Mr Xu, and during her subsequent business dealings with him, she observed that Mr Xu "had a luxurious lifestyle". She said she "formed the impression he was a successful businessman with substantial financial resources".
3. Ms Wang said that her observations and impression of Mr Xu made her feel comfortable to have dealings with him. She said: "While some of our agreements and transactions were not documented, in my experience this is not an unusual way for Chinese people to do business".
4. The relationship between Ms Wang and Mr Xu was complex. It involved multiple communications and dealings and interconnections between the dealings. As Mr Zipser submitted, "aspects of the business relationship between Ms Wang and Mr Xu did not involve prudent or rational conduct by Ms Wang, and did not involve approaches to business dealings undertaken by prudent Western business people".
5. There were unusual aspects of Ms Wang's business relationship with Mr Xu. They shared office space on an informal basis. Mr Xu allowed Ms Wang to use his car. He paid rent on her behalf for some time (see [45]-[46] below). Ms Wang advanced large sums to Mr Xu on an informal basis, and often without documentation.
6. Ms Wang assumed control of a company associated with Mr Xu, DJ Royal Plaza Construction Pty Ltd, for some time (see [117]-[125] below).
7. It does seem clear that Ms Wang and Mr Xu had a very close relationship for a number of years. Ms Wang denied, strenuously and I thought genuinely, that the relationship was otherwise than a business relationship.
8. To understand how the impugned sales of the Milsons Point and Sandringham properties came about, it is necessary to look in detail at the dealings between the parties, commencing in May 2010.

Advance of $50,000

1. In May 2010 Mr Xu told Ms Wang that he was having "difficulties in cash flow" and asked her to lend him $50,000.
2. Ms Wang agreed and, on 31 May 2010, caused $50,000 to be transferred into Hua Cheng's bank account.

Purchase of units in the Royal Plaza development

1. At the time she met Mr Xu, Hua Cheng was developing the Royal Plaza project.
2. Ms Wang said that she agreed to buy three units in that development for $580,000 in respect of one unit and $590,000 in respect of the two others.
3. There is in evidence what appear to be contracts for the purchase by Ms Wang from Hua Cheng of three units in the development dated 14 September 2010 and 29 and 30 June 2012. Ms Wang executed fresh contracts for the same units on 8 May 2014, evidently to overcome a sunset clause in the original contracts.
4. Ms Wang said she paid to Hua Cheng a 10 per cent deposit for those units.
5. The only evidence of those payments comprises three cheque butts dated 27 July 2010 recording a payment to "More Legal" of $58,000 and two payments of $59,000.
6. There is a further cheque butt dated 29 July 2010 recording payment of $820,000 to Hua Cheng and a corresponding debit to a joint account maintained by Ms Wang and a person Ms Wang described as her "boyfriend at the time", Zheng Xiaojun.
7. Ms Wang said she "issued a cheque and transferred $820,000 to Hua Cheng as payment for the three units".
8. This payment appears to have led to an agreement by Mr Xu to pay rent for an apartment in which Ms Wang was to live.
9. Thus she said she had this conversation with Mr Xu: Ms Wang: "I only have $820,000 that I prepared to purchase a property to live. If I give you this money, I will have nowhere to live in Australia". Mr Xu: "Do not worry. You can make the $820,000 payment for the three units. You can rent a property to live. Before settlement of the three units, I will pay rent for you".
10. On 21 September 2016, Hua Cheng issued a receipt to Ms Wang for a payment of $100,000 said to have been made that day to be "used as part of purchasing" one of the units in Royal Plaza.
11. On 7 November 2016, a further $250,000 was transferred from Ms Wang's joint account with Zheng Xiaojun to Hua Cheng. Ms Wang said this was intended to be the final payment for the three units.
12. At around this time Mr Xu gave Ms Wang a letter, signed by him on behalf of Hua Cheng, acknowledging that Ms Wang "has paid in full for the purchase of the above [three identified] properties" and recording that "keys and new resident packs" of the properties had been given to Ms Wang. I see no reason to doubt that this document is genuine and that, as it states and as Ms Wang asserted, she paid to Hua Cheng the full purchase price for three units in the Royal Plaza development.
13. Thereafter Ms Wang went into possession of the three units, evidently believing she had clear title to them. However, Ms Wang never received title documents for the units. On 17 May 2019, Super Vision obtained judgment for possession of the units.
14. Ms Wang was not the only person in this position. Super Vision's solicitor, Mr Ross McClymont, said in an affidavit that "Hua Cheng had handed over possession of a number of units [in the Royal Plaza development] to purchasers who had allegedly paid 100 per cent of the purchase price to Hua Cheng but had not obtained a discharge of mortgage from Super Vision or made any payments to Super Vision".
15. In these circumstances Mr Zipser submitted that: "The relationship between Ms Wang, Hua Cheng and Mr Xu should not be viewed through the prism of prudent Western business people acting rationally. A prudent and rational person in the position of Ms Wang would not have advanced $820,000 to Hua Cheng in July 2010 without documentation or security, and would not have paid the balance of the purchase price in November 2016 without obtaining the certificates of title".
16. However, as Ms Wang said, this "is not an unusual way for Chinese people to do business" (see [30] above).
17. Ms Wang's communications with Mr Xu about the title documents for the units provides context for later developments.

Advances from Jin Guan Xinneng (Beijing) Architectural Engineering Design Pty Ltd

1. On 1 September 2012, Ms Wang caused a Chinese State owned corporation, Jin Guan Xinneng (Beijing) Architectural Engineering Design Pty Ltd, to advance $200,000 to Hua Cheng. On 6 March 2013, Ms Wang arranged for the same company to advance a further $400,000 to Hua Cheng.
2. Both loans were recorded in documents which stated the purpose of the loans was "making the project of Imperial Building Hurstville in NSW Australia progress well".
3. Ms Wang said that Jin Guan "was owned by the Chinese government or by an agency of the Chinese government" and that she "ran and managed" Jin Guan.
4. In cross-examination, Ms Wang said that: "Jin Guan … is a State owned company but in actual effect [sic: fact] it's under my control and I own the company. I was, I'm simply using the name. In China we have a special term for this kind of operation, is called attaching the name or borrowing the name to use and I pay like a loyalty fee or use fee … I ran the company under them using the name of the company. There's a special way of running the business in China and it's a very common method in China … It is my money from my project. I own the company but I think we just use their name the nominal sense … The money was from the profit of a project we did as a team in the company … The money in China, even the money in China belongs to myself but it's the Chinese style of running business in China … In China for major projects you have to get the social relationship, the network to win, to get the project. For example, for a certain major project it requires a company with a national level accreditation or a qualification to carry out the project. But this big company who has this qualification doesn't have anything of any relationship with the person who is going to do the project. So the project, the person who manages or who is responsible for the project is my own personal relations and the person wanted to give the project to me so I had to use a qualification of that State owned company. So I simply used the name of that company to do the tender for it. After I went, won the bid, I would pay a fee to this company. So I only used the name of the company superficially for that purpose. It's like a Chinese way of doing projects in China".
5. Mr Knackstredt submitted that this was "deeply unsatisfactory evidence about having used a Chinese state-owned enterprise to fund her private unit purchases from, as well as alleged lending to, Hua Cheng" and "appeared to amount to an admission of a complex and ongoing fraud on the Chinese government".
6. I do not see Ms Wang's evidence as amounting to an admission of that kind. Ms Wang was clear that the funds she transferred were hers, and that she was able to use the name of Jin Guan in exchange for paying a "loyalty fee". The explanation that Ms Wang gave was certainly curious. But it is not contradicted nor so inherently improbable that I feel able to reject it.
7. What it does show is that, one way or the other, Ms Wang procured that $600,000 was advanced to Hua Cheng, evidently to assist in the Royal Plaza development.

Events in 2015 - the CNY 20 million advance

1. Ms Wang gave evidence that between July and October 2015 she negotiated with her sister, Ms Ying Wang, to borrow CNY 20 million to on lend to Mr Xu.
2. Ms Wang's evidence was corroborated by her sister. Mr Knackstredt cross-examined Ms Ying Wang by audio visual link and did not, in final written submissions, challenge the truthfulness of her evidence.
3. However, in final oral submissions, and after evidence belatedly emerged in relation to advances ostensibly made by Mr Xu's father, Mr Buyuan Xu, to Hua Cheng and to DJ Royal Plaza Construction, Mr Knackstredt submitted that there was reason to doubt Ms Ying Wang's evidence. I will return to that matter below.

Mr Xu seeks a further loan of $10 million

1. Ms Wang gave evidence that in early 2015, Mr Xu said he needed more money to complete the Royal Plaza project and that he asked Ms Wang whether she could lend him a further $10 million. Ms Wang said that Mr Xu said: "I own two properties in Sydney. I am willing to use the two properties to secure the loan from you".
2. Ms Wang said that she was cautious about lending further money to Mr Xu but was persuaded that she should do so because she had an interest in seeing the Royal Plaza development completed.
3. Ms Wang said: "At the time, I did not have $10 million to lend [Mr Xu]. However, I knew people who might be able to lend me money to lend to [Mr Xu]. Over the next few weeks, I spoke with a few people about borrowing money from them to lend to [Mr Xu]. One person I spoke with was my older sister Ying Wang in China. Ying Wang and her husband had been involved in business in China for a number of years. I believed they were successful in their businesses. I believed they had money which, if they wanted to, they could lend to me".
4. Ms Wang said she asked her sister whether she could lend CNY 50 million and that her sister replied that she would "ask around and get back to you".
5. Ms Ying Wang corroborated that evidence and said that in July 2015 she and her husband and daughter had "signed a contract to sell the mining company" that they owned and that she had also sold some shares. She said that she then rang Ms Wang and said: "In the last six months you asked me whether I could lend you money, but I did not have money to lend at the time. I should be able to lend you CNY 20 million soon. The money is not yet available. The money should be available soon. I will contact you in when the money is available."
6. Evidently, Ms Ying Wang was not able to procure the CNY 50 million sought by Ms Wang.

The 29 July 2015 IOU

1. Ms Wang said that shortly afterwards she had this conversation with Mr Xu: Ms Wang: "I can lend you CNY 20 million on the terms we discussed. The money is not yet available, but should be available in September in a bank account in China. We should have a written loan agreement prepared by lawyers." Mr Xu: "I will give you a declaration stating the terms we discussed signed by me. Once the money becomes available, we can engage a lawyer to prepare a more formal written agreement."
2. Ms Wang said that on 27 July 2015 she flew from Sydney to Beijing. She said that on 29 July 2015 she met Mr Xu and that at that meeting Mr Xu "had access to a draft declaration on his mobile phone" and that "through his mobile phone, he emailed the draft declaration to me". Ms Wang said that she and Mr Xu negotiated terms of the document and that once those terms were agreed Mr Xu "signed the declaration in my presence".
3. Ms Wang said that Mr Xu then said: "You have told me that the money is not yet available. Once the money is available and paid into the third-party account, I will give you the original [of the declaration]."
4. None of this evidence was challenged in cross-examination. I see no reason to doubt it. The "declaration" of which Mr Xu spoke came to be the 29 July 2015 IOU. I accept that the 29 July 2015 IOU is a genuine document and records the agreement then made between Mr Xu and Ms Wang. I am not satisfied the document is a "sham". To attribute such a characteristic to the document is to attribute to Mr Xu and Ms Wang an intention, as far back at July 2015, to create false documentary trail intended by them to disguise some other reality. I think that most unlikely. There is nothing in the evidence to support a conclusion that Mr Xu and Ms Wang had any reason to behave this way.
5. The 29 July 2015 IOU was written in Mandarin. Its English translation is headed "IOU" and reads: "I, Lawrence Xu … In order to maintain working capital for the construction of the Royal Plaza Project in Hurstville, am borrowing CNY 20 million from [Ms Wang] for a period of nine months from the date the loan is made … The loan has a fixed interest rate of 15% and a penalty interest rate of 25% p.a. … The principal and interest shall be paid back upon the maturity of the loan … I own two Australian properties whose respective addresses are [the Sandringham property] and [the Milsons Point property]. I am willing to refer [Ms Wang] to a lawyer to secure the loan with the two properties. This IOU is hereby established to acknowledge the above details."

Did the 29 July 2015 IOU give Ms Wang an equitable interest in the properties?

1. Mr Zipser submitted that the effect of the 29 July 2015 IOU was to give Ms Wang an equitable charge over the Milsons Point and Sandringham properties.
2. For an equitable mortgage equitable charge to arise it is necessary that "property of the chargor is appropriated to the chargee for payment of a debt and the chargee has a present right to have it made available for the payment of its debt". Further, "there must be an intention to create an immediate proprietary interest or immediate right of recourse to identifiable, present, or in the case of a charge, future property": Roberts v Investwell Pty Ltd (2012) 88 ACSR 689; [2012] NSWCA 134 at [26] and [29] (Bathurst CJ with whom Beazley JA and Tobias AJA agreed).
3. In my opinion, the words in the 29 July 2015 IOU do not go this far.
4. Mr Xu was in that document doing no more than expressing a willingness to refer Ms Wang to "a lawyer" with a view to that lawyer creating, at some time in the future, a document providing Ms Wang with security.
5. Mr Xu's words do not bespeak an intention to, there and then, confer on Ms Wang an interest in the properties or to "specially appropriate" the properties to the discharge of the proposed borrowing of CNY 20 million the properties (to adopt the language of Buckley LJ in Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 595: cited with approval in Roberts v Investwell at [27]).
6. However, I read the words in the 29 July 2015 IOU as recording Mr Xu's agreement that, in consideration of Ms Wang lending him CNY 20 million, he would arrange to provide Ms Wang with security for repayment of the loan over the Milsons Point and Sandringham properties.
7. Mr Xu said in the document that he was "willing to refer" Ms Wang to his lawyers for this purpose. I read those words as meaning that Mr Xu agreed that he would in fact take that step. I think Mr Zipser was correct to submit that this was a specifically enforceable agreement. However, otherwise than by insisting that Mr Xu grant her a mortgage over the Milsons Point property (the 25 May 2017 Mortgage) Ms Wang did not seek to take this further.
8. The 29 July 2015 IOU certainly bespeaks a willingness on Mr Xu's part to give Ms Wang security over both properties. I find this to be a factor pointing to the probability that the 25 May 2017 Mortgage was intended by him and Ms Wang to create genuine interest in Ms Wang over the Milsons Point property. I will return to this.

The advances from Ying Wang to Ms Wang

1. Ms Ying Wang said that by 29 September 2015 the sale of the mining company was completed and that there was CNY 20 million in a bank account in her name at the Commercial Bank of China.
2. Ms Ying Wang said that she told Ms Wang that CNY 20 million "is now available in my account to lend you" and that Ms Wang replied that she would send "a list of nominated bank accounts in China" to which specified amounts should be paid.
3. Ms Ying Wang explained that she understood that because of Chinese government "restrictions on the transfer of money out of China" it was necessary for money first to be transferred to the bank account of a "nominated third party in China".
4. Shortly after that, Ms Wang sent her sister a "list of nominated accounts written in Mandarin". On 30 September 2015, Ms Ying Wang attended her bank and arranged for the amounts of money in the list to be transferred from her account to the nominated accounts. On 8 October 2015, Ms Wang sent her sister a further list of accounts and on that day Ms Ying Wang arranged for the amounts of money in that second list to be transferred to the nominated accounts.
5. The amount so transferred on 30 September 2015 totalled CNY 8.5 million and the amount transferred on 8 October 2015 CNY 11.5 million: a total of CNY 20 million.
6. I am satisfied from this evidence that Ms Wang borrowed CNY 20 million from her sister and directed her sister to pay the money to the accounts in the two lists she provided.
7. I am also satisfied that those funds were borrowed by Ms Wang from her sister to enable Ms Wang to on lend the funds to Mr Xu.

The ostensible Buyuan Xu transaction

1. During closing submissions, Mr Knackstredt tendered caveats that Mr Xu's father, Mr Buyuan Xu, lodged on the title of the Milsons Point and Sandringham properties on 9 September 2016.
2. Annexed to the caveats was what purports to be a Deed of Loan dated 7 September 2016 which purports to record that Mr Buyuan Xu had: 1. on 30 September 2015 loaned HKD 10,050,000 to DJ Royal Plaza Constructions Pty Ltd (to which I have referred at [33] above); and 2. on 8 October 2015 loaned $2,481,441.40 to Hua Cheng.
3. The Deed of Loan appears to have been executed by Mr Xu on behalf of both Hua Cheng and DJ Royal. Mr Xu executed the document purportedly on behalf of DJ Royal pursuant to "Power of Attorney Book 4713 No 398". There is no evidence as to whether any such a power of attorney was registered pursuant to s 51 of the Powers of Attorney Act 2003 (NSW).
4. On 7 September 2016 Ms Wang was the sole director of DJ Royal. I will refer below to the circumstances of Ms Wang's involvement with that company (see [117]-[127]).
5. It is common ground that HKD 10,050,000 was, on 30 September 2015, equivalent to CNY 11 million and that $2,481,441.40 was, on 8 October 2015, equivalent to CNY 9 million; a total of CNY 20 million.
6. Those are the amounts remitted by Ms Ying Wang to the accounts in the lists provided to her by Ms Wang on those dates (see [88] above).
7. That is unlikely to be a coincidence.
8. Mr Knackstredt also tendered withdrawals of those caveats.
9. The withdrawal of the caveat in respect of the Milsons Point property was, according to the title searches in evidence, registered on 7 July 2017: the same date that the 25 May 2017 Mortgage from Mr Xu to Ms Wang over the Milsons Point was registered.
10. The withdrawal of the caveat over the Sandringham property was registered a few days earlier, on 2 May 2017: on the same date that an unidentified mortgage was registered on that title.
11. None of these matters was explored in Mr Knackstredt's cross-examination of Ms Wang or Ms Ying Wang. That is because the question of whether Mr Buyuan Xu had lodged a caveat on the titles on the properties only arose during discussion on the second of the three days of final oral submissions; well after evidence had closed.
12. Until closing submissions, the only evidence concerning a caveat lodged by Mr Buyuan Xu came from Ms Wang in cross-examination when she said that she thought "my lawyer tell me that at that time his father has put a caveat on the property"; evidence which Mr Knackstredt then suggested was "absolutely false".
13. It was only following discussion during final submissions, after I raised the question and following Mr Knackstredt's statement that he did not believe Mr Buyuan Xu had lodged caveats on the titles (which I accept was Mr Knackstredt's state of mind at the time), that the caveats and the Deed of Loan were tendered.
14. At all relevant times, the court book contained title searches of the Milsons Point and Sandringham properties. Those searches recorded Mr Buyuan's caveats by reference to their dealing numbers. The caveats were publically available and could have been accessed and tendered on behalf of Super Vision at any time during the hearing. Evidently, the matter was overlooked by those advising Super Vision.
15. It may be that, in circumstances not in evidence, Mr Xu's father came into possession of the CNY 20 million that Ms Ying Wang advanced to Ms Wang on 30 September and 8 October 2015 and on lent it to Hua Cheng and DJ Royal.
16. It may be that the Deed of Loan between Mr Xu and his father is a device adopted by them to disguise the source of the funds. The fact that the Deed of Loan purports to record loans made almost a year earlier suggests that Mr Buyuan Xu was content for any advance made by him to Hua Cheng and DJ Royal to be undocumented during that period. This suggests, at the least, a high level of informality between father and son and in relation to a significant sum.
17. Further, it may be that, when Mr Xu agreed to give Ms Wang a mortgage over the Milsons Point property, he asked his father to withdraw his caveat on the title of the property to make way for Ms Wang's mortgage. It may be that Mr Xu used part of the $5 million that Ms Wang advanced on 8 May 2017, and which was credited to the DJ Royal Investment Account, to repay his father.
18. None of this was explored in cross-examination with Ms Wang or Ms Ying Wang. That is because the material, which was at all times publically available, was not timeously deployed in Super Vision's case.
19. Following closing oral submissions, and in response to my enquiry, Mr Knackstredt submitted: "Only [Ms] Wang, [Mr] Xu and Buyuan Xu know about the significance of these dealings, which they would have been aware of prior to them being identified by the Court. Despite this, they have chosen to say nothing about them. Anything that might now be said about them would, therefore, amount to pure speculation".
20. Mr Knackstredt submitted that I should infer that any evidence that Ms Wang could have given about this matter would not have assisted her case: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 (Handley JA).
21. But, as Mr Zipser pointed out, there is no evidence that Ms Wang was a party to these dealings. It was not for her to give evidence or make submissions about material not yet in evidence. The belated introduction of this material into evidence is not a matter that can give rise to an inference against Ms Wang.
22. It would be unjust to Ms Wang to draw any inference adverse to her case by reason of the belated tender of these documents. It would, in particular, be unjust in these circumstances to draw any evidence adverse to the credit of Ms Ying Wang, who credit is otherwise unchallenged.
23. Further, as Mr Zipser submitted, Super Vision has appointed a receiver to Hua Cheng and has since then, and throughout this proceeding, had power to access the books and records of Hua Cheng through the receiver. Indeed, Super Vision has deployed the evidence of Mr Marcus Ayres one of the receivers, in these proceedings. If Mr Buyuan Xu did advance funds to Hua Cheng, it would have been open to Super Vision to tender evidence from the records of Hua Cheng to that effect.
24. In those circumstances, I am not able to come to any conclusion about these matters. In particular, I do not see these matters as a reason to disbelieve the evidence given by Ms Wang and her sister concerning the advance of CNY 20 million in September and October 2015.

Events in 2017 - Mr Xu's request for a further loan of $5 million

1. On Ms Wang's account of it, the events leading to the impugned contracts of 31 August 2018 commenced shortly prior to May 2017 when Mr Xu made a further request of Ms Wang for a loan, this time for $5 million.
2. Before turning to the circumstances in which Ms Wang says she made an advance pursuant to that request, it is necessary to consider some background matters.

Ms Wang's assumption of control of DJ Royal Plaza Construction Pty Ltd

1. DJ Royal was registered on 12 July 2007.
2. Ms Wang said that: "On 1 August 2014 [Mr Xu] transferred [DJ Royal] to me for $1.00 and I became the sole shareholder of [DJ Royal]. The person who completed the paperwork for the transaction was [Mr Xu's] accountant".
3. The sole director of DJ Royal from 12 July 2007 until 3 June 2017 is stated in the ASIC Historical Extract to be "Hongxia Xia". Ms Xia is, or was, Mr Xu's wife. However, the address and birth details given in the ASIC records for Ms Xia are those of Ms Wang. Ms Wang accepts that, in fact, she was the sole director of DJ Royal throughout this period.
4. Ms Xia became the sole director of DJ Royal on 3 June 2017, and was replaced by Mr Xu as sole director on 1 August 2018.
5. The ASIC records show Ms Wang was the sole shareholder of DJ Royal at some stage and was later replaced as sole shareholder by Ms Xia and then by Mr Xu. The ASIC records do not state during what period Ms Wang was sole shareholder of DJ Royal. I infer it was during the same period she was sole director; from registration on 12 July 2007 until 3 June 2017.
6. In an affidavit, Ms Wang said: "From approximately August 2014 to November 2016 [DJ Royal] assisted Hua Cheng to build the Royal Plaza at Hurstville. The assistance that [DJ Royal] provided consisted of [DJ Royal] entering into an agreement with a subcontractor who then acted as project manager and arranged for completion of various construction works for the development".
7. In cross-examination Ms Wang said that "I was the builder; Hua Cheng was the developer". This is consistent with Ms Wang's evidence that, from the commencement of their relationship, she wanted to work with Mr Xu in property development.
8. Ms Wang explained her transfer of control of DJ Royal to Ms Xia as follows: "I sold [DJ Royal] to Hongxia Xia because I no longer wished to be involved in the development of the Royal Plaza and [Mr Xu] therefore requested that I transfer [DJ Royal] to Hongxia Xia"
9. Ms Wang said in cross-examination that she sold her share in DJ Royal to Ms Xia for "one dollar" and that the reason she sold her share was: "Because during the construction of the project, when there was the workers who didn't have a licence was severely injured would leave high amount of compensation and this person was introduced to work on the construction project by Mr Xu and Ms [Xia] so I didn't want to take the responsibility for the injury and compensation, so I transferred the company to [Ms Xia]".
10. Mr Zipser submitted that another factor likely to be relevant to Ms Wang's decision was the appointment by Super Vision of a receiver to Hua Cheng on 22 June 2017. However, that was not was Ms Wang's evidence when asked the direct question of why she sold the share to Ms Xia. Rather, she gave the answer I recorded at [125] above. In any event, the receiver was appointed some two weeks after share transfer.
11. This evidence concerning Ms Wang's involvement with DJ Royal is another example of the peculiar and informal business relationship which existed between Ms Wang and Mr Xu. However, there is no evidence contradicting Ms Wang's account of these matters and I see no reason to reject it.

The DJ Royal bank accounts

1. DJ Royal maintained a trading account at the Commonwealth Bank Australia styled "Premium Business Cheque Account" ("the DJ Royal Cheque Account").
2. Ms Wang said that she "controlled" the DJ Royal Cheque Account. She said that: "The cheque book [for the DJ Royal Cheque Account] was kept in the office at Hurstville in which [Mr Xu] and I worked. Jolina Jiang worked in the Hurstville Office. Jolina worked for me, as well as for [Mr Xu]. Jolina looked after the cheque book for the [Cheque Account]. I had a practice of signing blank cheques in the cheque-book so that, when it was necessary for [DJ Royal] to give a cheque, I could instruct Jolina to fill in details of a payee and payment amount on a cheque I have signed".
3. In cross-examination Ms Wang said that she "gave authorisation" to Mr Xu to operate the DJ Royal Cheque Account. Ms Wang said: "I need to visit China or Japan or some other place very often so at the very beginning I actually already gave him authorisation".
4. Ms Wang did not say, and was not asked, how she gave such "authorisation" to Mr Xu.
5. The bank statements for the DJ Royal Cheque Account for May 2017 show numerous withdrawals from the account made otherwise than by the presentation of a cheque. Ms Wang gave no evidence, and was not asked about, her knowledge or involvement in the making of these withdrawals.
6. Mr Zipser submitted that this was principally because of the late point at which the bank statements were made available.
7. There was a further account at the CBA in the name of DJ Royal, styled "Direct Investment Account" (the "DJ Royal Investment Account"). It appears that this account was opened on 8 May 2017. Ms Wang said that she "did not know that there were actually two bank accounts" until Mr Knackstredt drew the bank statements for the DJ Royal Investment Account to her attention.
8. Ms Wang said that "following the transfer of the share, I no longer had access to or control over the bank account of [DJ Royal]".

Mr Xu's meeting with China Orient in April 2017

1. By April 2017, Hua Cheng was in default under its facility with Super Vision.
2. On 21 April 2017, Super Vision served Notices of Default on Hua Cheng and demanded payment of $35.5 million.
3. On 24 April 2017, Mr Xu travelled to Hong Kong to meet with representatives of Super Vision's parent, China Orient Asset Management (International) Holdings Ltd.
4. At that meeting, Mr Xu agreed that Hua Cheng would make a payment of HKD 30 million to Super Vision by 9 May 2017.
5. Ms Wang said that shortly after this, Mr Xu said to her: "As you are aware, there is a dispute between Hua Cheng and its creditor China Orient. I have just returned from a meeting in Hong Kong with China Orient. As I previously told you, I cannot give you the certificates of title for the three units you purchased [in the Hurstville development] until the dispute is resolved. If Hua Cheng pays HKD 30 million to China Orient, the dispute will be resolved, you will get the certificates of title, and I can repay any further amounts for loans and interest owing to you".
6. Ms Wang said she responded: "I do not have HKD 30 million".
7. Ms Wang said that a short time later Mr Xu said that he had "now found HKD 20 million" and asked her to lend the shortfall of HKD 10 million. Ms Wang did not say what her response was to this request.
8. Ms Wang said that, shortly afterwards, Mr Xu said: "I can no longer get HKD 20 million. But if you lend AUD 5 million, this will resolve the dispute with China Orient, you will get the certificates of title to your three units within three days, and I can repay any further amounts owing to you".
9. Mr Xu was thus looking for funds with which to satisfy his agreement with China Orient that Hua Cheng pay to Super Vision HKD 30 million by 9 May 2017.
10. This suggests that, at this stage at least, Mr Xu was seeking to cause Hua Cheng to comply with its obligations to Super Vision, rather than evade them. The 9 May 2017 deadline was ultimately extended to 22 May 2017 and the HKD 30 million was paid by then; albeit not from funds advanced by Ms Wang. I will return to this.
11. Ms Wang said that she asked how any such loan would be repaid. She said that Mr Xu responded by saying that if the dispute between Hua Cheng and China Orient was resolved Hua Cheng could sell the remaining unsold apartments in the Hurstville development, from which Ms Wang's loan would be repaid and that: "In addition, as you are aware, I own an apartment in Milsons Point and a house in Sandringham. Your loan will be secured over the two properties".
12. Ms Wang said in one of her affidavits: "By April 2017 I had visited both properties as a guest of [Mr Xu]. Based on my observations, both properties appeared to me to be high-quality residential properties. By April 2017 [Mr Xu] had told me that he purchased the Milsons Point Property for $2.8 million and the Sandringham Property for $5.5 million. I believed that the properties were worth at least these amounts. Based on my previous investigations, I was satisfied that [Mr Xu] owned the two properties."
13. Ms Wang continued: "20. At this point in time, I decided to lend the money (AUD 5,000,000) [Mr Xu] requested. I took into account the following matters: a) If I did not lend the money, I would not get the certificates of title for the Three Units. b) If I did not lend the money, I may not be repaid the money I had previously lent to Hua Cheng and [Mr Xu]. c) If I lent the money, I believed the loan could be repaid from the proceeds of sale of the remaining 14 apartments. In addition, the loan would be secured over the Milsons Point Property and the Sandringham Property. . d) If I lent the money, I believed that I would get the certificates of title for the Three Units and that the previous loans I had made to [Mr Xu] and Hua Cheng would be repaid with interest. e) If I lent the money, I believed that [Mr Xu] and I could work together on further building projects in Australia."
14. Ms Wang said that, following this she contacted Mr Xu and said: "I am willing to lend you AUD 5 million. But first you must give me the security over your properties at Milsons Point and Sandringham".
15. Ms Wang said Mr Xu replied that he would "get my lawyer to arrange the security".
16. On 7 May 2017 Ms Wang and Mr Xu exchanged WeChat messages. This is the 7 May 2017 WeChat Exchange to which I referred at [23(b)] above. The messages read: "[Ms Wang]: Tomorrow you borrow $5 million from my account to transfer to [China] Orient. Yesterday you asked me to transfer you $5 million. Is this to transfer to [China] Orient? [Mr Xu]: Yes. [Ms Wang]: Did you say that shortfall was HKD 10 million?"
17. The copy of the WeChat messages, in Mandarin, in the court book are in this form:
18. As I have mentioned, Mr Knackstredt submitted that I should find 7 May 2017 WeChat Exchange to be a concoction. But Mr Knackstredt did not put that proposition to Ms Wang in cross-examination. Nor did he make the submission that the document was not genuine until oral submissions in reply, and only after Mr Zipser had emphasised its importance to Ms Wang's case and noted that Mr Knackstredt had not mentioned it in his submissions.
19. I accept that Mr Knackstredt made clear throughout the proceedings that Ms Wang's credit was challenged and that Super Vision's position was that Ms Wang should not be believed unless her evidence was corroborated from objective sources or was against her interest. Nonetheless, the proposition that the 7 May 2017 WeChat Exchange was not genuine was one which, as a matter of fairness, Mr Knackstredt was bound to put to Ms Wang directly. Because the proposition was not put, I do not have the benefit of seeing Ms Wang's response to it. During final submissions, Mr Knackstredt sought to have Ms Wang recalled so that the matter could be put to her. I refused that application. Mr Knackstredt had cross-examined Ms Wang over three days between 23 and 25 October 2019. It would not have been fair to Ms Wang to be recalled, near the conclusion of final submissions, for further cross-examination.
20. It is curious that in the 7 May 2017 WeChat Exchange Ms Wang enquired about a "shortfall" of HKD 10 million. By that time, on her account of her conversations with Mr Xu, Mr Xu told her he needed to find HKD 30 million; then roughly equivalent to the $5 million that Ms Wang said she had offered to advance. However, as Ms Wang was not asked about this, I am not prepared to draw any inference adverse to Ms Wang about this.

The 7 May 2017 Caveat

1. In one of her affidavits, Ms Wang said that shortly after Mr Xu told her that he would "get [his] lawyer to arrange security" (see [150] above) she was contacted by "Shirley" from Pancific Legal who said to her (in Mandarin): "[Mr Xu] has told me that you are about to lend him AUD 5,000,000 to be secured over property he owns. On the instructions of [Mr Xu], we have lodged a caveat which records the security interest."
2. Ms Wang said that she had not previously met "Shirley". She said she had met lawyers at Pancific Legal and knew that Pancific Legal did legal work for Mr Xu.
3. A caveat was lodged on the title of the Milsons Point property on 7 May 2017 by Pancific Legal. This is the 7 May 2017 Caveat to which I referred at [23(c)] above.
4. The interest claimed by the caveat was said to be an "equitable interest" arising by virtue of a "Deed of Loan" dated 1 May 2017 between Ms Wang as lender and Mr Xu as borrower.
5. The caveat recited that the "equitable interest" arose: "Pursuant to clause 8 in the Deed of Loan. Loan from Qiao Wang to Lawrence Xu for the sum equivalent to A$5,000,000".
6. It is common ground that there was no "Deed of Loan" of the kind asserted in the caveat. The statement in the 7 May 2017 Caveat about the "Deed of Loan" was false.
7. A statutory declaration to the effect that "the caveator has a good and valid claim to the estate or interest" claimed in the caveat was made by Shu Juan Lau, who gave as his or her address the offices of Pancific Legal.
8. Mr Xu endorsed the caveat signifying his consent to its registration.
9. There is no evidence that Ms Wang played any role in the preparation or lodgement of the caveat. She said she was not aware of it until notified by "Shirley" in the conversation I have set out at [156] above. There is no evidence to the contrary.
10. In cross-examination Ms Wang said: "I asked him to apply for this caveat so that I would be willing to lend the money to him, he said he's going to use it for [China Orient] … I was helping him to raise this much of money already, I asked him to apply for this caveat so that I can transfer my money to him".
11. Mr Knackstredt asked Ms Wang whether she read the caveat before it was lodged. Ms Wang replied: "After it's been made, I saw it".
12. Although Ms Wang said she asked Mr Xu to "apply for this caveat" I think it more likely that she did no more than ask Mr Xu to "arrange" the security of which he spoke.
13. Mr Knacktstredt submitted that the caveat was a sham transaction and pointed, in particular, to the fact that it referred to a document, the 1 May 2017 "Deed of Loan" that, it is common ground, did not exist. The caveat is certainly a false document to that extent.
14. But I see no reason to conclude that Ms Wang knew this. I am satisfied that she understood no more than that the caveat provided her with some form of security. As she said "if I hold a caveat on the property, the other party cannot sell this property".

5 May 2017 - $4,997,865.51 transferred to Ms Wang's Westpac account

1. Ms Wang maintained a cheque account at the Hurstville branch of Westpac Banking Corporation.
2. On 5 May 2017, $4,997,865.51 was credited to that account. That credit was the proceeds of a telegraphic transfer from China of the equivalent in CNY. Ms Wang said that source of was Zheng Xiaojun, who as I have said, Ms Wang described as her boyfriend (see [43] above).

8 May 2017 - $4,997,856.51 transferred to DJ Royal Investment Account

1. On 8 May 2017, $4,997,856.51 was debited from Ms Wang's Westpac account and credited to the DJ Royal Investment Account at the CBA.
2. As I have mentioned, the DJ Royal Investment Account appears to have been opened that day. The $4,997,856.51 deposit is the first transaction recorded on the account statement.
3. As I have said, Ms Wang was at that time the sole director and shareholder of DJ Royal. She said she "controlled" the DJ Royal Cheque Account (see [129] above) but had not realised there was a second account (i.e. the DJ Royal Investment Account).
4. Ms Wang gave differing accounts of the circumstances of this deposit.
5. In her 11 October 2019 affidavit, Ms Wang said that on 8 May 2017 she met Mr Xu at the Hurstville branch of Westpac. Ms Wang said: "The bank teller with whom we dealt spoke Mandarin. I told the teller that I wanted to withdraw $4,997,865.51 from my account by bank cheque. The reason I specified this amount is that this was the amount deposited into my account on 5 May 2017 to lend to [Mr Xu]. I permitted [Mr Xu] to give the teller details of the person or entity to which the bank cheque was to be made out. I do not recall the details of the person or entity. The teller then prepared a bank cheque and gave it to me. I handed the bank cheque to [Mr Xu]. [Mr Xu] and I then left the bank. [Mr Xu] took the bank cheque with him."
6. In fact, the transfer from Ms Wang's Westpac account the DJ Royal Investment Account was by telegraphic transfer. Evidently, that fact was drawn to Ms Wang's attention after she swore this affidavit.
7. Thus, in her affidavit 22 October 2019, Ms Wang said: "Aided by the Westpac telegraphic transfer dated 8 May 2017, I now recall that the amount of $4,997,865.51 was not paid out of my account by bank cheque. Instead, shortly before 8 May 2017 [Mr Xu] showed me a joint account in the name of [Mr Xu] and his two sons, and asked me to transfer the money into that account. The conversation continued, and included words to the following effect: [Ms Wang]: I prefer to transfer the money into the account of D J Royal Construction. I will then arrange for you to receive the money from the account of D J Royal Construction. [Mr Xu]: Fine. At the Hurstville branch of Westpac, I signed the telegraphic transfer. At the time I signed the telegraphic transfer, I knew the money would be transferred into the account of D J Royal Construction Pty Ltd. Once the bank office told me that the transfer to [the D J Royal Investment Account] was completed, I phoned [Ms Jiang]. We had a conversation which included words to the following effect: [Ms Wang]: I am lending AUD 5 million to [Mr Xu]. I have just transferred the money into the bank account of D J Royal Construction at Westpac. [Mr Xu] will contact you and tell you who to write the cheque to. Please give him the cheque. [Ms Jiang]: OK. I told [Mr Xu] that I had given [Ms Jiang] this instruction, and he could collect a cheque from [Ms Jiang]. As far as I am aware, [Ms Jiang] carried out my instructions and gave a cheque to [Mr Xu]."
8. As I have set out at [129] above, Ms Wang said that it was her practice to sign blank cheques drawn on the DJ Royal Cheque Account, and later to instruct Ms Jiang to "fill in details of a payee and payment amount on a cheque".
9. Thus, Ms Wang's evidence was that the last she knew was that Mr Xu would contact Ms Jiang and let her know to whom "the" cheque, presumably for the $5 million, would be drawn.

Fund movements in the DJ Royal Cheque Account

1. The only bank statement for the DJ Royal Investment Account in evidence is that for the period 8 May to 1 October 2017. It does not record any amounts being withdrawn by cheque.
2. The only bank statements in evidence for the DJ Royal Cheque Account are for 1 to 31 May 2017. Those bank statements show some withdrawals by cheque (denoted as "Chq" followed by a six digit number), but none for anything like $5 million: the largest is for $280,000.
3. I infer from these facts that Mr Xu did not seek to utilise Ms Wang's $4,997,865.51 deposit to the DJ Royal Investment Account by giving Ms Jiang a direction as to how she should fill out a cheque, signed in blank by Ms Wang and drawn on the DJ Royal Cheque Account.
4. The largest withdrawals from the DJ Royal Cheque Account are shown in the bank statements as "Wdl" which I infer denotes withdrawals other than by cheque. Presumably those withdrawals were made by some form of electronic funds transfer.
5. Following the credit of $4,997,865.51 to the DJ Royal Investment Account, representing the telegraphic transfer from Ms Wang's Westpac account, there was a credit to that account on 9 May 2017 of $1,305,167.44 (the source of which is not revealed in the evidence), and two debits totalling $553,032.95 in respect of which there are corresponding credits in the DJ Royal Cheque Account.
6. There is then recorded in the bank statement for the DJ Royal Investment Account under date 9 May 2017 an unidentified debit of $50,000 followed by a debit of $5,700,000.
7. Thus: Date Credit Debit 9 May 2017 4,997,865.51 9 May 2017 1,305,167.44 9 May 2017 353,032.95 9 May 2017 200,000.00 9 May 2017 50,000.00 9 May 2017 5,700,000.00

1. Documents produced on subpoena by the CBA show that the debit of $5,700,000 corresponds to an International Money Transfer remitted to Mr Xu at an unidentified account in Hong Kong.
2. Applying the rule in Clayton's Case (Devaynes v Noble; Baring v Noble (1816) 1 Mer 529; (1816) 35 ER 781), I have assumed that funds withdrawn from the running account were drawn on the funds first deposited. Thus the amount of the $5,700,000 debit referable to Ms Wang's deposit of $4,997,865.51 is $4,394,832.56 ($4,997,865.51 - $553,032.95 - $50,000 = $4,394,832.56). The balance of the $5,700,000 debit was sourced from the unidentified deposit of $1,305,167.44.
3. The document initiating the $5,700,000 transfer bears a signature. An issue arose as to whether the signature is that of Mr Xu.
4. Each party produced evidence from a NAATI certified English and Chinese translator to give evidence about that signature.
5. For Ms Wang, Mr Jiangu Yu gave evidence that the signature appeared to comprise three Mandarin characters for which the English translation was "Xu Xiaohui" (Mr Xu's Chinese name).
6. The weight I can give to that evidence is effected by the fact that the instruction given to Mr Yu by Mr Zipser's instructing solicitor, Mr Wenaho Cai (in Mandarin and by WeChat message) was: "The page with the signature, can you do the translation in a hurry because it was needed by the courts, the last page but one and the signature is Xuao [sic: Xiaohui] Xu. We need it urgently".
7. Accepting that there was a limited time frame within which Mr Cai located and retained Mr Yu, this was an inappropriate instruction for Mr Cai to give to Mr Yu. In effect he proposed to Mr Yu the answer that he evidently wanted from Mr Yu.
8. To his credit, Mr Yu recognised the difficulty and said that, even if he had not been "given any tip" he would "probably" have come to the conclusion that the signature was as he stated.
9. Thus he said: "Well, for the Chinese writing sometimes it can also be quite difficult to read, but I would say that this person's writing, although it's a bit illegible, but judging by the form and by giving, you know, the tip from the client, I would say that they probably match the three Chinese characters."
10. On the other hand, Super Vision called another NAATI certified translator, Mr Roy Rong Shen, who gave this evidence: "In the "Signature" box, there appears to be Chinese characters. When I first reviewed this document, I was unable to read these characters clearly. I concluded that, without being provided any further information about these Chinese characters, the first character could be "Xu" but this was not clear. I also concluded that I was unable to read the following characters. I was subsequently informed by Ms Yang [Mr Knackstredt's instructing solicitor] that there was a suggestion that these Chinese characters were "Xu Xiaohui". Despite being told that, it remains unclear to me whether the Chinese characters can be phonetically transcribed as "Xu Xiaohui". Although the first character could be "Xu", the following characters are unclear."
11. In light of this evidence I do not feel able to come to any conclusion as to whether the Mandarin characters on the document in question were those corresponding with Mr Xu's name.
12. Even if they were, it would not follow that I could conclude that those characters represented Mr Xu's signature.
13. The fact remains that the $5,700,000 was remitted to Mr Xu in Hong Kong.
14. On 16 May 2017, there was a credit to the DJ Royal Cheque Account for $5,442,976 described on the bank statement as: "Xu Lawrence Ref 2017051600013783 Lending".
15. That description suggests the transfer was initiated by Mr Xu and that he instructed the remitting bank to describe it as "Lending". There is no evidence of the account from which transfer was initiated.
16. Although Ms Wang in cross-examination said that she did not know what that deposit represented, Mr Zipser in final submissions said: "Well I expect that part of that money is or was Ms Wang's money".
17. That is an available inference, although the evidence is not clear. What is known is that on 8 May 2017 Ms Wang caused a little under $5 million to be transferred into the DJ Royal Investment Account, the bulk of that deposit funded the 9 May 2017 transfer of $5.7 million from that account to an account of Mr Xu in Hong Kong and on 16 May 2017 Mr Xu caused some $5.433 million to be transferred back into the DJ Royal Cheque Account a week later on 16 May 2017. It seems unlikely these transactions are unrelated.
18. On the day following the $5,442,976 deposit, 17 May 2017, five withdrawals (four of which were for exactly $1,000,000) were made from the DJ Royal Cheque Account totalling $5,443,000. The close correspondence between that withdrawal and the 16 May deposit (the difference is only $24) is probably not a coincidence. But the destination of the $5,443,000 is unknown.
19. On 19 May 2017, three amounts totalling $3,443,113.20 were credited to the DJ Royal Cheque Account and described as "Transfer In Branch Hurstville".
20. These deposits came from a "Sale Proceeds Account" that, under the 4 July 2014 Loan Agreement between Super Vision and Hua Cheng, Hua Cheng was obliged to maintain and into which it was obliged to pay the proceeds of sale of units in the Royal Plaza development.
21. Email correspondence between Hua Cheng and Super Vision on 18 May 2017 shows that Super Vison agreed that the amount in the Sales Proceeds Account could be used by Hua Cheng as a contribution towards the HKD 30 million Hua Cheng had promised to pay Super Vision.
22. Also on 19 May 2017, $3,470,415.01 was debited from the DJ Royal Cheque Account. That sum was equivalent to HKD 20 million and was remitted to Super Vision on account of Hua Cheng's promise to pay HKD 30 million. The balance of HKD 10 million was sent to Super Vision from a source in China which is unidentified in the evidence.

What to make of these fund movements?

1. The only reason revealed in the evidence as to why Ms Wang would transfer almost $5 million (and, for convenience, I will from here refer simply to $5 million rather the precise amount) from her account at Westpac to an account in the name of DJ Royal is a request from Mr Xu.
2. There is no suggestion in the evidence that Ms Wang or Mr Xu thought that DJ Royal itself required any such funding.
3. Ms Wang did not explain why she preferred to pay the $5 million into a DJ Royal account, rather than directly to Mr Xu. It may be that she preferred to pay it into an account over which she had some control and so nominated a DJ Royal account.
4. She said she expected that to access the $5 million she had deposited to the account Mr Xu would utilise one of the blank cheques that she left with Ms Jiang. That evidence is consistent with Ms Wang's evidence that she did not realise there was a second DJ Royal Account, the DJ Royal Investment Account.
5. There is no evidence explaining the operations on the DJ Royal Investment Account and the DJ Royal Cheque Account that led to: 1. the $5.7 million being transferred from the DJ Royal Investment Account to an account of Mr Xu in Hong Kong (see [186]-[199] above); 2. the deposit a short time later of a slightly smaller amount into the DJ Royal Cheque Account (see [200]-[201] above); 3. the withdrawal the next day from the DJ Royal Cheque Account of an almost identical amount (see [204] above); 4. the deposit two days later to the DJ Royal Cheque Account of the funds from the Sale Proceeds Account (see [205]-[207] above); and 5. the payment the same day of an almost identical amount from the DJ Royal Cheque Account to Super Vision, as part of the HKD 30 million required by China Orient (see [208] above).
6. Mr Knackstredt did not suggest to Ms Wang that she was responsible for these debits and credits. I think it unlikely that she was. I think it I think it more likely that, as Ms Wang said, she authorised Mr Xu to conduct operations on the DJ Royal Cheque Account and that he initiated each of these transactions.
7. Why Mr Xu would wish to cause the fund movements I have described to take place is not explained in the evidence. They show that Mr Xu did not use Ms Wang's $5 million to pay Super Vision. Mr Xu used Ms Wang's $5 million for other, unexplained, purposes. He used the funds in the Sales Proceeds Account, plus other funds from an unidentified source within China to pay Super Vision. Only Mr Xu had a reason to cause the funds from the Sale Proceeds Account to be paid into the DJ Royal Cheque Account and then immediately to be paid out to Super Vision. This provides a further indication that it was Mr Xu, rather than Ms Wang, who initiated the transactions I have described.
8. But I do not see those facts as a reason to doubt that, as the 7 May 2017 WeChat Exchange suggests, Mr Xu told Ms Wang that he would use her $5 million to pay Super Vision.

The Mortgage

1. In an affidavit, Ms Wang said that after she paid the $5 million into the DJ Royal Investment Account she had this conversation with Mr Xu: Ms Wang: "You promised me that if I lent you AUD 5,000,000, you would give me the certificates of title to the three units [in the Royal Plaza development] within three days. Where are the certificates of title?" Mr Xu: "There is still a problem with China Orient. You will have to wait".
2. Ms Wang said that shortly afterwards she spoke with "the person in China from whom I had borrowed money to lend to" Mr Xu and that this person "recommended to me that I get a government document to ensure that my loan to [Mr Xu] is secured over the two properties owned by [Mr Xu]".
3. Ms Wang said the following that conversation she had this further conversation with Mr Xu: Ms Wang: "If you do not give me the certificates of title, you must give me a document to prove that my loan to you is secured over the two properties you own." Mr Xu: "OK. I will ask Pancific Legal to prepare the document."
4. Ms Wang said that shortly afterwards Mr Xu told her that Pancific Legal had "prepared a security document". Ms Wang said that on 25 May 2017 she attended the office of Pancific Legal and met a lawyer who showed her a form of mortgage and asked her to sign it. She did so. Ms Wang said that the lawyer said there was a fee of $1,400 "for lodging the mortgage" and that she paid that fee in cash.
5. The document Ms Wang executed was the 25 May 2017 Mortgage to which I have referred (see [23(d)] above).
6. In cross-examination Ms Wang said: "All I knew is that I authorised Mr Xu to find a lawyer to get me a government document, a legal government document … …. I thought [the mortgage] was a government document, and I thought it was done. And I've never, ever saw this kind of document before".
7. A short time later the following exchange occurred: "Q . You didn't care what was in the mortgage, did you, Ms Wang? A. What do you mean by I didn't care? Of course I care, I need this kind of receipt, it's a legal document from government, and all other documents we signed before were in Chinese".
8. The 25 May 2017 Mortgage is stated to secure a "Principal Sum" of $5 million and specifies an interest rate of 14 per cent per annum.
9. The mortgage was registered on the title of the Milsons Point property on 7 July 2017.
10. Ms Wang did not mention the 25 May 2017 Mortgage in her affidavits of 30 January 2019 and 31 July 2019. The 25 May 2017 Mortgage was, however, included in the court book tendered on behalf of Super Vision at the commencement of the hearing on 23 September 2019. Its provenance was at the time unexplained in the evidence.
11. Mr Zipser was then very recently briefed to appear for Ms Wang and AC Holdings and raised the issue of the 25 May 2017 Mortgage in his opening submissions. That led to the adjournment of the proceedings until 23 October 2019. In the meantime, Ms Wang affirmed affidavits on 9 October 2019, 11 October 2019 and 22 October 2019 in which the issue of the 25 May 2017 Mortgage, and other matters, were agitated.
12. As with the 29 July 2015 IOU, the 7 May 2017 WeChat Exchange and the 7 May 2017 Caveat, Mr Knackstredt submitted that the 25 May 2017 Mortgage was a "sham".
13. In support of this submission, Mr Knackstredt said that "there is no evidence of any A$5m advance from Wang to Xu (or from Wang's company to Xu's company".
14. It is true that Ms Wang did not pay the $5 million to which I have referred to into an account in Mr Xu's name. Rather, she "preferred" to pay the $5 million into the DJ Royal Investment account.
15. But, as I have discussed, Ms Wang authorised Mr Xu to operate on that account. I am satisfied that Ms Wang intended that Mr Xu could use the $5 million she paid into the account for his own purposes. There is no suggestion in the evidence that Ms Wang made any use of the $5 million once it was paid into the DJ Royal Investment Account.
16. Mr Knackstredt also referred to evidence Ms Wang gave in her affidavits about a meeting she had with Mr Xu in the Sovereign Room at the Star Hotel. In her 30 January 2019 affidavit Ms Wang said this meeting occurred on 6 August 2018. In her 31 July 2019 affidavit, she said it occurred in July 2017.
17. In both accounts of this meeting, Ms Wang said she complained to Mr Xu about his failure to repay to her an amount of CNY 20 million. In neither account did Ms Wang say that she had loaned $5 million to Mr Xu.
18. However, there is no doubt that in May 2017 Ms Wang caused $5 million to be transferred into her Westpac account and then to the DJ Royal Investment Account. There is no evidence that there was in 2017 and 2018 a significant difference between $5 million and CNY 20 million. Indeed, in relation to the purported 7 September 2019 Deed of Loan between Mr Buyuan Xu and Hua Cheng and DJ Royal, Mr Knackstredt submitted that $2,481,442 was roughly equivalent to CNY 11 million; which suggests $5 million may well have been roughly equivalent to CNY 20 million at the time of Ms Wang's conversation with Mr Xu.
19. To attribute to Ms Wang and Mr Xu the intention to create a "sham" mortgage, that is, one that did not reflect any genuine underlying transaction, is to ignore not only the indication given by Mr Xu in the 29 July 2015 IOU of a preparedness to give Ms Wang security over the two properties, but also the 7 May 2017 WeChat Exchange and the fact of Ms Wang's 8 May 2017 $5 million payment into the DJ Royal Investment Account.
20. It is also to attribute to Ms Wang and Mr Xu the intention of creating a false document for no apparent purpose. As Mr Zipser submitted, if the 25 May 2017 Mortgage was a sham, why did Ms Wang and Mr Xu not utilise it by, for example, having Ms Wang purporting to enforce the mortgage, sell the property and then cause the funds to be paid to Mr Xu?
21. If the mortgage was a sham, why would Ms Wang wait a year, contract to buy the properties, cause AC Holdings to borrow $7.2 million and to pay that money over at Mr Xu's direction and then simply discharge the mortgage?
22. I am not persuaded the 25 May 2017 Mortgage was a "sham".
23. I find that it was a genuine document, intended by both Mr Xu and Ms Wang to provide Ms Wang with security over the Milsons Point property for her $5 million advance. As I have mentioned, the 25 May 2017 Mortgage recorded that the $5 million advance was for two years from the date of the mortgage and accrued interest at the rate of 14 per cent per annum.

The impugned contracts

1. In one of her affidavits Ms Wang said: "On or around December 2017, I heard from my friend that [Mr Xu] was selling his properties … at … Sandringham… and … at … Milsons Point … I then had a conversation with [Mr Xu] to the following effect: [Ms Wang]: [Mr Xu], I heard that you are selling your Sandringham property and Milson[s] Point property. You did not repay me the money. Why you did not [sic] notify me? How much are you selling them for? [Mr Xu]: $12,000,000 for the Sandringham property and $7,500,000 for the Milsons Point property. [Ms Wang]: I think that is too expensive given Sydney['s] real estate market is cooling and prices are dropping. Nobody will be willing to pay such prices for those properties. [Mr Xu]: [L]et's see, someone will be willing to buy. I will repay you the money and interest by proceeds." Because [Mr Xu] said he would repay me by the proceeds I continued to chase [Mr Xu] about the money he owed me and whether he had sold the properties".
2. Thereafter, Ms Wang said that she either directly, or through an intermediary, had the following negotiations with Mr Xu about the purchase by her of the Sandringham and Milsons Point properties: 1. Ms Wang offered $4.5 million for the Sandringham property and $3.5 million for the Milsons Point property: a total of $8 million; 2. Mr Xu countered with an offer of $5 million for the Sandringham property and $4 million for the Milsons Point property: a total of $9 million; 3. Ms Wang countered with an offer of $4.5 million for the Sandringham property and $3.3 million for the Milsons Point property: a total of $8.8 million; and 4. Mr Xu accepted that offer.
3. As Mr Knackstredt pointed out, Ms Wang did not call the intermediary through which she said she had these negotiations with Mr Xu. But the fact remains that the only evidence about these matters comes from Ms Wang and her evidence is not contradicted. I accept the evidence. It was given in detail in her affidavits and does not appear to me to be inherently improbable. On the contrary.
4. At around this time, Ms Wang arranged for AC Holdings to borrow $7.2 million from an arms' length lender, Golden J Wealth Pty Ltd for the purpose of acquiring the Sandringham and Milsons Point properties.
5. That advance was confirmed on 28 August 2018 when AIG Capital Mortgages Pty Ltd wrote to Ms Wang confirming the availability of a 12 Month advance from it "or its nominee" to AC Holdings of $7.21 million to be secured over the Sandringham and Milsons Point properties. Ultimately the funds were advanced to AC Holdings by Golden J Wealth, evidently the nominee of AIG Capital Mortgages.
6. Ms Wang said that, thereafter she had negotiations with Mr Xu as to what "deduction" Mr Xu should allow from the agreed total purchase price of $8.8 million for the two properties on account of the amount that Ms Wang said Mr Xu owed her. At around this time Ms Wang said that she told Mr Xu that she regarded him as owing her something in the order of CNY 33 million. Ms Wang said she told Mr Xu she had arranged for AC Holdings to borrow funds for the purchase, that "the lender will only lend me 7.2 million" and that "I won't pay money from my own pocket to complete the purchase".
7. Ms Wang said the negotiations were as follows: 1. first Mr Xu proposed a 10 per cent deduction: that is $880,000; 2. Ms Wang countered with a deduction of $1 million from the Sandringham purchase price and $2 million from the Milsons Point purchase price: a total of $3 million; and 3. Mr Xu countered with a deduction of $750,000 from the Sandringham property and a deduction of $1,590,000 from the price of the Milsons Point property: a total of $2,340,000.
8. Ms Wang said that she agreed to the latter proposal.
9. AC Holdings was registered on 29 May 2018. Ms Wang said she arranged for this to be done for the purpose of acquiring from Mr Xu the Milsons Point and Sandringham properties.
10. Again, Ms Wang did not call the intermediary or intermediaries through whom these negotiations were said to have taken place.
11. Nonetheless, I see no reason to doubt that negotiations occurred as Ms Wang deposed. There is no evidence to contradict Ms Wang's account these negotiations. That evidence does not strike me as being inherently improbable.

The Prime Capital documents

1. On 9 July 2018, Prime Capital Securities Pty Ltd approved a loan of $7.9 million for AC Holdings.
2. Ms Wang denied any knowledge of this loan approval. She said that what purports to be her signature on what purports to be an acceptance by AC Holdings of the loan is a forgery.
3. Mr Knackstredt did not challenge that evidence. I am not prepared to reject it. I can only speculate as to how what purports to be Ms Wang's signature came to be on the document.

The 31 August 2018 contracts

1. On 31 August 2018, Ms Wang and Mr Xu exchanged contracts for the sale by Mr Xu to Ms Wang of the Sandringham property for $4.9 million and the Milsons Point property for $3.9 million: a total of $8.8 million.
2. Super Vision has adduced valuation evidence that the market value of the Sandringham property on 31 August 2018 was $5 million and that the market value of the Milsons Point property on that date was $4.9 million: a total of $9.9 millon.
3. As I have mentioned earlier, there is no dispute about these matters.
4. But there is no evidence that Ms Wang knew, at the time, that the contract prices were below actual value.
5. Ms Wang did not obtain a valuation for either of the properties. But again, on Ms Wang's account of it, that is not necessarily a cause for suspicion. On her case, which I accept, she bargained with Mr Xu to achieve the purchase prices recorded in the contracts. The process of bargaining might suggest that Ms Wang had some general idea about property values at the time. But it does not compel the conclusion that she knew, as a matter of valuation, that the agreed purchase prices were below actual value.
6. Ms Wang annexed to one of her affidavits a valuation obtained by Golden Wealth which valued the Milsons Point property at $4.3 million. But Ms Wang did not say that she had seen that valuation prior to entry into the 31 August 2018 contract and she was not asked about this in cross-examination.
7. Neither contract made provision for the payment of a deposit. However, again, on Ms Wang's account of it, this is not necessarily suspicious. Her evidence was, as I have set out at [246] above, that she negotiated what was in effect a deduction of $2.34 million from the agreed purchase prices for the two properties on account of what she contended was Mr Xu's antecedent indebtedness to her. Mr Xu has acknowledged in writing his agreement to this deduction (see [270] below). That figure equals the total of the amounts recorded in the settlement sheets as the "deposit paid" for the properties. This was a little irregular but not necessarily a basis from which to conclude knowledge of Mr Xu's intent to defraud creditors.
8. Neither contract provided for the intervention of an agent. But that is not surprising. On Ms Wang's account of it, she negotiated the sale directly with Mr Xu.
9. Although each contract provided that completion take place within 42 days of exchange, completion took place on 19 September 2018. I do not see this factor as significant.
10. Each contract named Ming Wang & Co as the "Vendor's Solicitor". Ming Wang & Co are in fact accountants who acted for both Mr Xu and Ms Wang on the transaction. Again, this is slightly irregular but not of any relevant significance.
11. The settlement sheet for the Milsons Point contract stated that: 1. a deposit of $1,590,000 had been paid; 2. the balance due on settlement was $2,313,545.51; 3. on settlement $750,000 was paid to the outgoing mortgagee, National Australia Bank Ltd; 4. on settlement a further $400,000 was paid to Aojia Investment Pty Ltd (a creditor of Ms Wang: see [283]-[286] below) ; and 5. on settlement $1,099,550.86 was paid to Mr Xu's father, Mr Buyuan Xu.
12. The settlement sheet for the Sandringham contract stated that: 1. a deposit of $750,000 had been paid; 2. the balance due on settlement was $4,154,923.12; 3. on settlement a total of $4,111,738.32 was paid to the outgoing mortgagees, NAB and Australia and New Zealand Banking Group Ltd; 4. on settlement an amount of $36,136.39 was paid to Mr Buyuan Xu.

No deposit was paid

1. Although the settlement sheets stated that deposits totalling $2,340,000 ($1,590,000 plus $750,000) had been paid under the contracts, no deposits were in fact paid. The figure of $2,340,000 was, as I have said, the deduction Ms Wang and Mr Xu had agreed, allegedly on account of, and evidently in forgiveness of Mr Xu's indebtedness to Ms Wang (see [245]-[246] above).
2. In one of her affidavits, Ms Wang said: "At some point in time during the negotiations between [Mr Xu] and me to purchase the Sandringham property and the Milsons Point property, I was informed that Golden J Wealth Pty Ltd, from which AC Holdings was borrowing money to complete the purchase, would only lend AC Holdings $7.2 million. However, the total price for which I had agreed to purchase the properties was $8.8 million. In addition, there were further expenses associated with the purchases. I did not want to pay money from my own pocket to complete the purchase of the two properties. I had a conversation with [Ms Jiang] which included words to the following effect: 'Please pass the following message on to [Mr Xu]. I am borrowing money to complete the purchase of the Sandringham property and the Milsons Point property. The total purchase price is $8.8 million. There are further expenses associated with the purchases. The lender will only lend me $7.2 million. I won't pay money from my own pocket to complete the purchase. I propose that the gap between the total cost of the purchases and $7.2 million be deducted from the money [Mr Xu] owes me. If [Mr Xu] agrees, I want a declaration signed by him concerning this part of the agreement'."
3. Ms Wang said that "not long afterwards" Ms Jiang said that Mr Xu agreed to do this.
4. Thus, on 13 September 2018, Mr Xu made a "Declaration" that: "I have received the full amount of deposit payment totally [sic] $2,340,000 from Qiao Wang. This deposit payment has been agreed and deducted from the business between Qiao Wang and me. I fully recognize this payment".

Ms Wang's mortgage over Milsons Point discharged

1. On settlement, a representative from Pancific Legal attended with a discharge of Ms Wang's mortgage over the Milsons Point property. No payment was made to Ms Wang or at her direction in exchange for the discharge of that mortgage.
2. In effect, Ms Wang surrendered her entitlements under the 25 May 2017 Mortgage in exchange for the purchase by her company, AC Holdings of the two properties on the basis I have set out.
3. As I said at [3] above, leaving aside adjustments for council rates and the like, on settlement AC Holdings paid Mr Xu $6.46 million for the two properties: the stated consideration of $8.8 million less the $2.34 million.
4. The transfers of the property from Mr Xu to AC Holdings were, in due course, registered.

The payment to Buyuan Xu

1. The settlement sheets show that on settlement $1,135,687.25 was paid to Mr Xu's father, Mr Buyuan Xu.
2. As I have set out above at [91]-[114] there is in evidence a Deed of Loan dated 7 September 2016 pursuant to which Mr Buyuan Xu is recorded to have loaned Hua Cheng and DJ Royal the equivalent of CNY 20 million on 30 September 2015 and 8 October 2015.
3. As I have set out, on 9 September 2016, Mr Buyuan Xu lodged caveats on the titles of the two properties purportedly to protect his interest under that Deed of Loan. Those caveats were withdrawn on 2 May 2017 and 7 July 2017 (see [99]-[100] above).
4. On settlement, the cheques in favour of Mr Buyuan Xu were given to Mr Xu's solicitor.
5. Ms Wang agreed that she "knew that as part of the settlement, Mr Xu's father, Buyuan Xu, was going to be paid over $1.1 million".
6. Mr Knackstredt asked Ms Wang about this in cross-examination: "Q. Given that you saw Mr Xu had not repaid you some 60 million Chinese yuan, weren't you concerned by the fact that $1.1 million was going to his father on the settlement? A. All I knew is that I asked my lawyer, 'Do not pay any money to [Mr] Xu himself. I don't want to pay even one cent to him,' and I did not check every single transaction of that settlement … Q. Ms Wang, if Mr Xu owed you in excess of $12 million when this transaction happened, why didn't you insist that that $1.1 million was paid to you? A. I did not know where these payments go to. I remember there were many cheques; I did not check the name and all I knew is that I don't want to pay him any money."
7. Whether or not Mr Xu really owed his father any money at this stage is a matter about which I can draw no conclusion. Ms Wang said, and I accept, that she had been told by her lawyer that Mr Buyuan Xu had lodged a caveat on "the property". It turns out Mr Buyuan Xu's caveats were withdrawn from the titles of both the Milsons Point and Sandringham properties more than a year before the August 2018 contracts: in May 2017. But there is no evidence Ms Wang knew this.
8. The effect of Ms Wang's evidence is that, though she knew that Mr Xu proposed to use part of the proceeds of sale for this purpose, she did not give the matter great attention. Her focus, she said, was to ensure that no part of the proceeds was paid to Mr Xu himself.
9. I see no reason to doubt this evidence.

The payment to Aoija Investment

1. Of the proceeds of the sale of the Milsons Point property, $400,000 was paid to Aojia Investment Pty Ltd.
2. In her affidavit of 22 October 2019, Ms Wang gave this explanation for the Aojia payment: "[Aojia] Investment Pty Ltd…was a design company in Melbourne. [Aojia] had commenced court proceedings against a company I controlled in respect of money [Aojia] alleged my company owed [Aojia]. I believed that [Mr Xu] was responsible for the debt. During one of my conversations with [Ms Jiang] in which I asked her to pass a message to [Mr Xu], I requested that [Mr Xu] acknowledge in writing that he was responsible for the debt."
3. Evidently, that led to Mr Xu including in his declaration made on 13 September 2018: "Regarding to [sic] Aojia Investment Pty Ltd payment, I personally have an outstanding payment to Aojia. The other party is chasing on $400,000 payment. So, to save time, I suggest to make a bank cheque payable to Aojia Investment directly".
4. Thus Mr Xu accepted responsibility for the amount due to Aojia Investment and directed that this amount be paid out of the proceeds of sale of the Milsons Point property.

Subsequent transactions

1. Golden J Wealth commenced proceedings against AC Holdings for possession of the Sandringham and Milsons Point property alleging that AC Holdings had made default under the relevant security documents (the "Possession Proceedings").
2. The Possession Proceedings were fixed for hearing on 29 August 2019. On the previous day, 28 August 2019, AC Holdings entered into contracts to sell to the third and fourth defendants, Yanqun Xue and Yibin Xu, the Sandringham property for $2,700,000 and the Milsons Point property for $1,880,000.
3. These sale prices are less than half what is agreed by Ms Wang to be the value of the properties as at 31 August 2018.
4. On 3 September 2019, Hammerschlag J made an order restraining completion of those sales pending the outcome of these proceedings.
5. It is hard to see what Ms Wang thought could be achieved by entering these transactions.
6. However, the consequence of those sales is not a matter presently before me for consideration.

The first limb of s 37A of the Conveyancing Act - did Mr Xu transfer the properties to AC Holdings with intent to defraud his creditors?

1. It has been held that s 37A is to receive a liberal construction which gives effect to its legislative purpose of supressing fraud: Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 at [20] (French CJ, Gummow, Crennan and Bell JJ).
2. An intent to defraud creditors includes an intent to hinder or delay creditors: Marcolongo v Chen at [56].
3. Mr Xu has entered a submitting appearance in these proceedings.
4. Mr Xu has admitted, by failing to respond to Notices to Admit Facts served on his solicitor on the record on 5 September 2019, that he transferred the Milsons Point and Sandringham properties to AC Holdings: 1. with the intent of preventing, hindering or delaying Super Vision from executing a potential judgment against him which it was seeking to obtain in the Recovery Proceedings; 2. with the intent of preventing, hindering or delaying his creditors from recovering their debts against him; 3. knowing that by transferring the properties it could prevent, hinder or delay Super Vision from executing a potential judgment against him which it was seeking to obtain in the Recovery Proceedings; and 4. knowing that by transferring the properties it could prevent, hinder or delay his creditors from recovering their debts against him.
5. Mr Xu is bound by these admissions, notwithstanding the fact that he has entered a submitting appearance as: "The filing of a submitting appearance does not immunise a party from the effects of non-response to a Notice to Admit Facts": P33 of 2003 v Refugee Review Tribunal [2004] FCA 474 at [34] (French J).
6. Those admissions are sufficient to enliven the first limb of s 37A; that is that Mr Xu's alienation of the two properties to AC Holdings was made with intent to defraud his creditors.

The second limb of s 37A - is Super Vision "thereby prejudiced"?

1. Relief is available under s 37A only to "any person thereby prejudiced"; that is prejudiced by the alienation made with intent to defraud creditors.
2. Super Vision is a creditor for the purpose of s 37A. The word "creditor" in s 37A has been held to include future and prospective creditors: Chen v Marcolongo; Chan v Lym International Pty Ltd (2009) 260 ALR 353; [2009] NSWCA 326 at [13], [18] and [27] (Allsop P, Giles JA agreeing). The decision of the Court of Appeal was reversed by the High Court, but this reasoning was not disturbed. This is not a case where there is any dispute about whether Super Vision's case against Mr Xu would necessarily or probably succeed. Super Vision had judgment against Mr Xu.
3. However, to establish that it is "thereby prejudiced" Super Vision must show, in addition to its being a creditor, that Mr Xu has "dispose[d] of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach": to adopt, with emphasis, the words of Russell LJ in Lloyds Bank Ltd v Marcan [1973] 3 All ER 754; [1973] 1 WLR 1387 at 1390-1391, cited with approval by the High Court in Marcolongo at [32].
4. At the date of the contracts for sale, 31 August 2018, the total value of the Milsons Point and Sandringham properties was $9.9 million.
5. The properties were encumbered by mortgages to the NAB and the ANZ Bank. At settlement, the amount due to those banks was some $2.3 million in the case of the NAB, and some $2.4 million in the case of the ANZ: a total of some $4.7 million.
6. The Milsons Point property was, I have found, also encumbered by the 25 May 2017 Mortgage in favour of Ms Wang under which $5 million, together with interest at 14 per cent was secured: a total in the order of $5.8 million as at the date of settlement of the sales of the Milsons Point and Sandringham properties.
7. Thus, the total amount secured over the two properties was in the order of $10.5 million.
8. Super Vision was a prospective unsecured creditor of Mr Xu. But the Milsons Point and Sandringham properties were fully encumbered to Mr Xu's secured creditors. There is no suggestion in the evidence that the NAB and ANZ would discharge their mortgages without payment of the amount secured. Accordingly, and unless Ms Wang agreed to surrender her security without payment of the amount secured, the sale proceeds of the properties were not, and would not become available to Super Vision.
9. It is true that Ms Wang had mortgage security only over the Milsons Point property whereas the NAB and ANZ had security over both the Milsons Point and Sandringham properties.
10. But Ms Wang would have been entitled to compel the banks to marshal their securities in her favour and to have resort first to the property over which they had security but Ms Wang did not: Sandringham. This is because: "A person having resort to two funds shall not by his choice disappoint another, having one only": Trimmer v Bayne (1803) 9 Ves 209 at 211; 32 ER 582 at 583, cited with approval in Miles v Official Receiver in Bankruptcy (1963) 109 CLR 501 at 511; and see generally J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) Ch 11 esp at [11-005]-[11-202].
11. On settlement of the sale, Ms Wang produced a discharge of the 25 May 2017 Mortgage which she caused to be handed over to Mr Xu's solicitors without receiving any payment. In effect, Ms Wang surrendered her rights under the 25 May 2017 Mortgage. Ms Wang's reasons for taking this course were not explored in the evidence. Presumably, she thought the acquisition of the properties by AC Holdings on the terms I have described to be a sufficient reason. Ms Wang negotiated the price she was prepared to pay for the properties, and the deduction she required on account of Mr Xu's outstanding indebtedness to her in the manner I have set out above (see [241] and [246]). Although this proposition was not put to Ms Wang, and although she did not address it in terms in her affidavit evidence, I think it obvious, in all the circumstances of this case, that but for those negotiations Ms Wang would have maintained her position as a mortgagee of the Milsons Point property. That is, I would infer, Ms Wang only agreed to discharge the 25 May 2017 Mortgage in exchange for Mr Xu's agreement to sell to AC Holdings the two properties on the terms I have described.
12. In those circumstances, I think Mr Zipser was correct to submit that: " … on the sale of the two properties to AC Holdings … the secured liabilities of Mr Xu reduced by over $10 million. Hence, the pool of unsecured assets available to creditors did not diminish".
13. To put that another way, Mr Xu's disposal of the properties was not a disposal of "an asset which would be available to his creditors" as the assets were fully encumbered to Mr Xu's secured creditors: the NAB, the ANZ and Ms Wang.
14. It follows that Super Vision is not a "person thereby prejudiced" by Mr Xu's alienation of the properties, notwithstanding his admitted intention.
15. That conclusion is sufficient to dispose of the proceedings.

Was AC Holdings a purchaser in good faith not aware of Mr Xu's admitted intention to defraud his creditors?

1. It is a defence to a claim under s 37A if the transferee can establish that he she or it is a "purchaser in good faith" not having at the relevant time notice of the transferor's intent to defraud creditors.
2. It is common ground that, here, AC Holdings (and thus, in effect, Ms Wang) has the onus of making out this defence.
3. A "purchaser" for the purposes of s 37A is a "purchaser for valuable consideration": s 7 of the Conveyancing Act.
4. As Ms Wang was the sole director and shareholder of AC Holdings, the question in substance involves consideration of Ms Wang's state of mind.
5. Did she cause AC Holdings to acquire the properties as a purchaser in good faith not having notice of Mr Xu's intention to defraud his creditors?
6. In my opinion, the answer is "yes".
7. For the reasons I have set out, I am satisfied that Ms Wang was, and genuinely believed she was, a substantial creditor of Mr Xu.
8. Ms Wang contracted to purchase three units from the Royal Plaza development and had paid the requisite purchase price. And yet she did not acquire title to those units.
9. Ms Wang had advanced to Mr Xu, or at his direction, the CNY 20 million she borrowed from her sister in September and October 2015, and the $5 million she paid into the DJ Royal Investment Account in May 2017.
10. I am satisfied that, under the informal arrangements between Ms Wang and Mr Xu, both regarded these advances as having been made by Ms Wang to Mr Xu. This is notwithstanding the fact that the CNY 20 million was paid, I would infer at Mr Xu's direction, to the entities nominated in the lists Ms Wang provided her sister in September and October 2015 and the fact that Ms Wang paid the $5 million into an account of DJ Royal rather than to Mr Xu directly.
11. I find that Ms Wang negotiated the purchase price for the properties without knowing that, as a matter of valuation fact, that the agreed price was less than the actual value of the properties.
12. I also find that Ms Wang negotiated the deduction of $2.34 million from that agreed price on account of the much larger amount that she genuinely believed Mr Xu owed her. I do not think it necessary to decide whether, to adopt an expression used in submissions, this deduction had the effect of "wiping the slate clean" as between Ms Wang and Mr Xu. Mr Xu's reference in his 13 September 2018 "Declaration" to deducting the $2.34 million "from the business between Qiao Wang and me" suggests it did not.
13. AC Holdings gave value to Mr Xu for the transaction. It paid some $6.46 million for the properties.
14. Mr Knackstredt submitted that AC Holdings "did not itself provide any consideration for the transfers; there was no deposit paid, and the entirety of the purchase price was funded by the incoming mortgagee". There was no deposit paid. But the funds AC Holdings borrowed from Golden Wealth and paid to Mr Xu represented consideration paid by AC Holdings to Mr Xu, notwithstanding AC Holding's undoubted obligation in due course to repay a corresponding amount to Golden Wealth in accordance with the agreement between them. Once AC Holdings borrowed the funds from Golden Wealth, the funds were those of AC Holdings to dispose of as it saw fit.
15. Mr Knackstredt also submitted that because the amount paid by AC Holdings to Mr Xu ($6.42 million) was less than the value of the properties ($9.8 million), AC Holdings should be seen as a "quasi-volunteer".
16. I do not accept that submission. To obtain the benefit of s 37A(3), AC Holdings must show it gave "valuable consideration"; that is, consideration that is real and valuable and is not illusory or a sham. However, as with the position in contract, AC Holdings need not show that the consideration was equivalent to the value of the property purchased. The consideration must be sufficient. It need not be adequate.
17. Thus, in Saba v Plumb (2018) 97 NSWLR 278; [2018] NSWCA 60 at [99], the question was whether the purchaser was a purchaser for valuable consideration as defined in s 7 of the Conveyancing Act.
18. Macfarlan JA said at [100]: "As the High Court indicated in Barton v Official Receiver (1986) 161 CLR 75 at 86; [1986] HCA 44, in this context the court does not make any inquiry as to the adequacy of consideration, it being sufficient if the transferee has given consideration for its purchase 'which has a real and substantial value, and not one which is merely nominal or trivial or colourable'."
19. The difference between the consideration given and value might, in other circumstances, bespeak an understanding by a party in AC Holdings's position (that is, in effect by Ms Wang) that Mr Xu was seeking to defraud his creditors.
20. But, in the peculiar circumstances of this case, I am satisfied that Ms Wang did not know that, by entering the transaction, Mr Xu intended to defraud his creditors. I am satisfied that Ms Wang's focus was entirely directed to endeavouring to recover from Mr Xu all or part of what she believed he owed her. As she said: "I think I care for myself, so what happened with him [Mr Xu] and others I actually don't know. All I knew is that I went after him all the time to get my - to want to get my money back".
21. And, if it be relevant, Ms Wang gave consideration for the transaction.
22. First, she discharged her mortgage over Milsons Point. I have found that mortgage was not a "sham". It provided security to Ms Wang for the $5 million she had advanced to Mr Xu in May 2017 and paid into the DJ Royal account.
23. Second, by causing AC Holdings to purchase the properties she in effect surrendered her right to enforce the promise made by Mr Xu to her in the 29 July 2015 IOU to provide her with security over the Milsons Point and the Sandringham properties for the CNY 20 million advance. That advance was at a "fixed interest rate of 15%" with a "penalty interest rate of 25%". Mr Zipser calculated, and Mr Knackstredt did not dispute that the amount due to Ms Wang under the 29 July 2015 IOU as at August 2018 was equivalent to some $7.185 million.
24. Third, Ms Wang agreed to reduce the amount owing to her by Mr Xu by $2.34 million being the amount of the agreed deduction from the stated total purchase price of $8.8 million and being the amount that Mr Xu agreed in his 13 September 2018 "Declaration" to accept in lieu of "the full amount of deposit" for the properties.
25. Fourth, Ms Wang procured that AC Holdings actually pay Mr Xu some $6.46 million for the properties.
26. Mr Knackstredt described the transaction as being a "cost neutral" acquisition for Ms Wang. That is true in the sense that Ms Wang caused AC Holdings to borrow all of the funds advanced to Mr Xu on settlement. But a commitment to repay those funds, some $7.2 million, is hardly "cost neutral".
27. I do not think that the fact that Ms Wang caused AC Holdings to be incorporated for the purposes of the transactions bespeaks bad faith on her part.
28. The evidence does suggest Ms Wang was aware that Hua Cheng was in financial difficulty. For example, Mr Zipser accepted that it was clear that Ms Wang knew prior to entering into the 31 August 2018 contracts that Super Vision has appointed receivers to Hua Cheng.
29. However, Ms Wang did not agree that she knew Mr Xu might be personally liable for Hua Cheng's debts. Mr Knackstredt put to Ms Wang that she knew this and she replied: "I'm not quite sure whether he personally act as a guarantee because this is - this is confidentiality".
30. Overall, I am satisfied that Ms Wang has sustained her onus under s 37A(3).

Conclusion

1. The parties should bring in short minutes to give effect to these reasons.

Amendments 14 February 2020 - Corrected formatting in heading 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 February 2020