Wickham Hill Investment Pty Ltd v Ding

Submitting appearance: Registrar of Personal Property Securities (Second Defendant) File Number(s): 2017/364588 Publication restriction: Nil

Judgment

1. Wickham Hill Investment Pty Ltd ("WHI") is the owner of a winery at Griffith, New South Wales, known as Wickham Hill Winery ("the Winery"). WHI holds the Winery assets (which include valuable plant and equipment as well as the vineyard land) as trustee of a unit trust called the Wickham Hill Unit Trust. These proceedings concern a disputed claim to a security interest in those assets.
2. WHI was incorporated, and the Trust was established, for the purpose of acquiring the Winery from its previous owner, Pernod Ricard. The acquisition took place at the end of June 2012. The acquisition cost was about $6.5 million. In the 2013 financial year, approximately a further $8 million was invested in the Winery.
3. The leading part in the acquisition of the Winery appears to have been played by Ruiyong (also known as "John") Chen. Mr Chen is a Chinese-Australian businessman. Mr Chen sought to raise funds for the purchase from a number of Chinese or Chinese-Australian business people. Among those business people was Xiaoxin Ding. He apparently lives in China. Mr Chen approached Mr Ding through his niece, Yisi Ding.
4. Initially, Mr Chen was the sole director of WHI. In October 2014 there was a change of control which resulted in his removal. Haiyang Xu became the general manager. Mr Xu is one of the investors who participated in the acquisition of the Winery; he is a substantial unit-holder in the Trust.
5. Mr Ding claims that in June 2012 he, or others acting on his behalf, advanced 20 million Chinese yuan (CNY, ¥; also known as renminbi (RMB)) towards the acquisition of the Winery. He claims that he provided a further advance of ¥6 million in February 2013. These advances are the subject of five written agreements concerning the provision of finance to the Winery which were signed by Mr Chen and others between April 2012 and the end of 2014.
6. Mr Ding further claims that he holds security over the Winery assets for these advances. He relies on the terms of the five finance agreements in this regard. For its part, WHI contends that it has never had any direct financial dealings with Mr Ding and has never granted any security interest to him.
7. In February 2017, Mr Ding registered a financing statement under the Personal Property Securities Act 2009 (Cth) ("PPSA") claiming a security interest over the assets of WHI (apart from its real property, which falls outside the PPSA). WHI applied to the Registrar of Personal Property Securities to register a financing change statement on the Personal Property Securities Register ("the Register"). The effect of doing so would be to remove Mr Ding's earlier financing statement. But the Registrar declined (or at least failed) to do so. That has resulted in the present proceedings.

Issues for determination

1. WHI commenced the proceedings by Summons in December 2017, joining Mr Ding and the Registrar as first and second defendants respectively. The Registrar filed a submitting appearance and played no role in the proceedings.
2. Apparently these are not the only legal proceedings which concern the Winery. On the first day of the hearing, counsel for Mr Ding foreshadowed an application to use material from other proceedings to which Mr Xu and WHI are party to cross-examine Mr Xu in these proceedings. In the end, the application was not pursued and there was no evidence before me about the claims and issues in the other proceedings.
3. By its Summons, WHI seeks orders that the Registrar register WHI's amendment demand under s 182(4)(a) of the PPSA. The relevant parts of s 182(4) provide: (4) On an application under this section, a court may make the following orders: (a) if the court considers the amendment demanded to be authorised under section 178 -- an order requiring the Registrar to register a financing change statement amending the registration (including an amendment to remove the registration); … (c) any other order that the court thinks fit.
4. In addition to the order under s 182(4)(a), WHI also seeks an injunction which would prevent Mr Ding from lodging any further financing statement with respect to any alleged security interest in the Winery assets.
5. Section 182(4)(a) refers to s 178. That section relevantly provides: (1) A person with an interest (including a security interest) in collateral described in a registration with respect to a security interest may give a demand (an amendment demand), in writing, to the secured party for a financing change statement to be registered to amend the registration as authorised by the following table: Authorised amendments Item When amendment is authorised What amendment is authorised 1 No collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party. Amendment to end effective registration (including an amendment to remove the registration). 2 The particular collateral in which the person has an interest does not secure any obligation (including a payment) owed by a debtor to the secured party. Amendment to omit the collateral.

Note: If the secured party does not comply with the amendment demand, the demand may be enforced under Subdivision A (administrative process) or Subdivision B (judicial process) of Division 2.

1. In the present case, it is item 1 which is relevant. The debate on whether WHI's amendment demand was authorised is centred on two questions: whether WHI had granted any security interest over the Winery assets at all; and, if so, whether there was any money owing to Mr Ding which was secured by the security interest. But a preliminary issue arose as to the nature of proceedings under PPSA s 182.
2. In Toyota Finance NZ Ltd v Christie [2009] NZHC 827, Asher J of the New Zealand High Court drew attention to the similarities between the personal property securities registration removal procedure (Personal Property Securities Act 1999 (NZ), s 167; PPSA, s 182) and the caveat removal procedure under Torrens Title legislation (Land Transfer Act 1952 (NZ), s 145A (since re-enacted); Real Property Act 1900 (NSW) s 74MA). His Honour said at [17]-[19]: [17] An application [under s 167] is normally brought by way of originating application. Inevitably, given the time constraints, a hearing of a s 167 application will be the type of hearing that is best determined on the affidavits only. There may be third parties with an interest who have not been served. There may be disputed questions of fact and credibility issues. Such a hearing is not suited to a final determination of rights. [18] I conclude that the tests that apply in respect of maintaining caveats under s 145A should where possible be applied where a party seeks to maintain registration, and the existence of a security interest is at issue. This means that: a) The person seeking to maintain their registration has the onus of establishing a sufficient interest. This is the approach taken in caveat cases: Castle Hill Run Limited v NZI Finance Limited [1985] 2 NZLR 104 at 106. b) The test is whether the person seeking to maintain the registration can establish a seriously arguable case that a security agreement exists between the relevant parties. The test of "reasonably arguable" is used in relation to caveat cases: Sims v Lowe [1988] 1 NZLR 656 at 660. c) Such a summary procedure is unsuitable for the determination of disputed questions of fact. This is also the approach in relation to caveats: Sims v Lowe [1988] 1 NZLR 656 at 659-660. … [19] I consider, therefore, that the Court should make a decision on whether there is a seriously arguable case. If there is, the interest will be maintained and the parties may litigate the substantive question between them.
3. Consistently with this approach, the proceedings before me were conducted without pleadings. In opening the case, counsel for WHI stated that the Court was not concerned with finally resolving factual disputes between the parties, but rather with determining whether there was sufficient basis to maintain Mr Ding's registration. Counsel for Mr Ding apparently took the same view.
4. But as the case went on, the ground shifted. There was extensive documentary and oral evidence surrounding the acquisition of the Winery and, in particular, the provision of finance. Counsel for both parties cross-examined each other's witnesses. And by the end of the case, an issue had clearly emerged concerning the onus of proof. Counsel for WHI, following the Toyota Finance approach, contended that the onus lay on Mr Ding to establish a sufficient factual basis for registration of his claimed interest. Counsel for Mr Ding submitted, to the contrary, that the onus lay on WHI to establish that the claimed interest did not exist.
5. The question of onus is thus the first question for determination in the proceedings. In the light of my conclusion on that issue, I must then consider whether a security interest, securing a debt owing to Mr Ding, subsists under the five finance agreements upon which Mr Ding relies. Finally, if I conclude that Mr Ding's registration should be removed, I must consider whether an injunction should be granted against the lodgement of any further financing statement, as sought by WHI.

Summary and analysis of evidence

1. The five finance agreements fall into two groups. The agreements in each group are in similar terms to each other and involve the same individual borrower parties.
2. The first group, to which I will refer as the "Loan Agreements", consists of three Agreements written in Mandarin. The form of each Agreement is similar and in some respects identical. The Agreements clearly had a common origin.
3. Each of the Agreements was expressed to be between one individual as Party A and three individual borrowers as Party B. In each case the borrowers were Jihong (known as "John") Liu, Mr Chen and Frank Fabrizio.
4. In the earliest Agreement, Party A was Ms Ding. Counsel for Mr Ding submitted that Ms Ding entered into this Agreement as his agent, although the Agreement itself did not say this. The Agreement was not a loan agreement as such, but rather an agreement under which Ms Ding undertook to obtain loan finance for Mr Liu, Mr Chen and Mr Fabrizio as borrowers.
5. The next Agreement in this group is a loan agreement between Lihua Zhang as lender and Mr Liu, Mr Chen and Mr Fabrizio as borrowers. Ms Zhang is Mr Ding's wife. Again, Mr Ding claims that Ms Zhang entered into the Agreement on his behalf, but this is not referred to in the Agreement itself. The third of the Agreements in this group is a loan agreement between Mr Ding himself as lender and Mr Liu, Mr Chen and Mr Fabrizio as borrowers.
6. The Agreements in the second group were both styled "Borrowing Agreement". Each Agreement was between Mr Ding (defined as Party A) as lender and Mr Liu and Mr Chen as borrowers (Party B). These Agreements had both a Mandarin and an English text. Both Agreements provided that in a case of conflict, the Mandarin text was to prevail. The two Agreements were largely the same in their layout and wording: they appear to have been prepared from the same standard form.
7. The Court was provided with agreed translations of each of the five financing agreements (in the case of the Borrowing Agreements, these were translations of the Mandarin text).
8. The agreed translations are far from ideal. In places the language of the translations is ungrammatical and the terminology inapt. The Borrowing Agreements particularly show the difficulty. The agreed translations of those Agreements are not the same as the English language versions. I appreciate the Mandarin versions were expressed to prevail but there is nothing to suggest that where the agreed translations differ from the English language versions, the differences represent variations in meaning which are only apparent on translating the Mandarin versions. Rather, the agreed translations appear to have been taken from the Mandarin versions without regard to the English language versions. While this might be adequate in most situations, it does not inspire confidence when the Court is being asked to construe the documents in a formal way. I refer further to this below.
9. I have already referred to the Winery assets being held by WHI under the terms of the Trust. There is another company involved in the Winery as well. That company is called Wickham Hill Holdings Pty Ltd ("WHH"). WHH is said to be "the trading company for the Winery".
10. Neither company is a subsidiary of, or holds shares in, the other. The shares in each company (and the units in the Trust) have, over the relevant period, been held by various individual investors who are (judging by their names) nearly all Chinese. The evidence before me, or at least the evidence to which I was referred, does not provide any further detail of WHH's activities or the relationship between WHH and WHI.
11. WHI's main witness in the proceedings was Haiyang Xu. The evidence indicates that Mr Xu was from 2012 the largest individual investor in the Trust, having been issued 17.3% of the units. He has been the general manager (although not a director) of WHI since October or November 2014. He is also the sole director and one of several shareholders of WHH. Mr Xu gave evidence by affidavit and was cross-examined.
12. WHI also called evidence from Sarah Cappello, a solicitor with Cappello Rowe Lawyers, who act for WHI. The evidence largely went to the procedures undertaken by WHI in causing the amendment demand to be issued, and subsequent activity. Ms Cappello's affidavit was not contentious and she was not cross-examined.
13. It was Mr Xu's evidence that his involvement in the Winery stemmed from an approach made to his father, Jingbo (also known as "Eric") Xu, by Mr Chen. Jingbo Xu is not himself a unit holder in the Trust but he has been a director and shareholder of WHI since November 2014. He is also a shareholder in WHH. He did not give evidence.
14. Mr Ding's witnesses were two of the borrowers under the finance agreements, Mr Liu and Mr Chen. Both gave evidence by affidavit and were cross-examined.
15. Mr Liu is an acquaintance of Ms Ding and, through her, of Mr Ding. Mr Liu has known Ms Ding for "at least 10 years" but became acquainted with Mr Ding more recently, meeting him for the first time in Beijing in around 2012. Mr Liu was a signatory to all five finance agreements the subject of these proceedings.
16. For his part, Mr Chen was the sole director and shareholder of WHI from June 2012 until October 2014. Like Mr Liu, Mr Chen was a signatory to all five of the finance agreements.
17. The role of the third borrower, Mr Fabrizio, is unclear. He was a signatory to the three Loan Agreements, but not the two Borrowing Agreements. Mr Fabrizio is not a unit holder in the Trust or a shareholder in WHI or WHH. In 2012 Judith Fabrizio (presumably Mr Fabrizio's wife or relative) was issued 16% of the units in the Trust. Neither of the Fabrizios gave evidence.
18. Mr Ding did not himself give evidence in the proceedings in support of his case. Nor did Ms Zhang or Ms Ding. There was no evidence that any of them was unavailable. Nor was there any evidence from them in the form of business records.
19. There was no evidence about the prior business relationship, if any, between the parties to the five finance agreements (Mr Ding, Ms Zhang, Ms Ding, Mr Liu, Mr Chen and Mr Fabrizio). Mr Liu did say that he, Mr Chen and Mr Fabrizio had been involved in a number of wine trading entities with Jingbo Xu since 2008. He did not provide any further details.

Initial financing approaches and Acquisition Agreement

1. The narrative of events commences in early 2012. According to Mr Haiyang Xu, discussions about acquiring the Winery and setting up the business (including incorporating both WHI and WHH) began some time in early 2012. Mr Xu deposed to a conversation he had with his father, Jingbo Xu, to the following effect: Jingbo Xu: [Mr] Chen wants to borrow $2 million to buy a winery. I would like the first $1 million to come from you and for you to be the other director of the winery so that you can receive the reports and monitor the winery's operations. Haiyang Xu: OK. I would be happy to accept the appointment. Jingbo Xu: Your appointment as director is a pre-condition of the loan you will give to Chen, Fabrizio and Liu. The loan is to be paid repaid [sic] within two to three years. Once the company is set up, can you please transfer the money for the loan from your account to the account Chen tells you to send it.
2. According to Mr Liu, he had discussions with both Ms Ding and Mr Chen concerning the proposal acquisition. Mr Liu said that one such discussion was to the following effect: Mr Liu: Do you know anyone who could lend money to buy Wickham Hill winery and a wine brand in Australia? Ms Ding: I will speak with my uncle, Xiaoxin Ding to see whether he would be willing to lend the money. How will the loan be secured? Mr Chen: The assets of Wickham Hill Winery are enough to cover the loan and will be granted as security. Mr Liu: Yes, the Wickham Hill wine business and assets can cover the loan amount.
3. There is no further evidence surrounding the events leading up to signing the first finance agreement, which was styled "Agreement on Joint Acquisition of Wickham Hill Winery and the Related Brand" (and to which I will refer as the "Acquisition Agreement"). The Agreement was signed in Beijing and provided that it was governed by the law of the People's Republic of China. It was dated 20 April 2012.
4. The preamble stated: Party B [Mr Liu, Mr Chen and Mr Fabrizio] has conducted business enquiries with respect to Griffith Wickham Hill Winery in the state of New South Wales of Australia ("target factory" hereinafter), and signed agreement(s) on acquiring the target factory and its brand with the original shareholder(s) of the target factory. Based on information provided by Party B on the target factory and out of its trust on Party B's reputation, Party A [Ms Ding] agrees to assist and support Party B to acquire the target factory.
5. Article 1 relevantly provided (italics and parentheses original in agreed translation): Party A's Responsibility and Obligation 1. Party A shall be responsible for raise [sic] RMB twenty million Yuan (RMB 20,000,000.00) to be used to acquire the target factory. In the agreement, the third party that provides loan to Party B shall be called lender for short. 2. Party A shall have the obligation to look for a lender and negotiate with the lender on behalf of Party B with respect to the repayment conditions, interest and amount of such loan. 3. (Party A shall) communicate with the lender and Party B and assist the two parties with reaching a loan agreement. 4. Upon receiving lender's principal or loan return paid by Party B, Party A has the obligation to allocate the principal or loan interest of the lender under the agreement.
6. Article 2 relevantly provided: Party B's Responsibility and Obligation 1. Before 30 July 2012, Party B shall assist Party B [sic] with completing the relevant legal paperwork and registration with respect to ascertaining the 4% shares held in the target factory and the brand. 2. Shares being registered can be adjusted as needed, but the shares Party A holds in the target factory and its brand shall not be less than 4%. Party A shall be the director of the target factory and its brand company and is entitled to its right as a shareholder and director and assumes responsibility accordingly. After acquiring the target factory and its brand, Party A shall participate in decision-making of the company as its director and shareholder. From the day that Party B repays the lender the full amount of principal and loan interest, Party A shall participate in allocation of profit and loss as a company shareholder and director. … 4. Party B shall pay Party B [sic] before 30 June 2015 the full amount of the lender's principal (RMB twenty million Yuan) and the loan return payable. …
7. Article 4 relevantly provided: Settlement of Payment Breach 1. Under this agreement party B uses its personal assets and all asset of the target factory as security for the performance of the agreement. Party B undertakes that if it fails to pay Party A the total amount as agreed in Article 2 of the agreement and has not obtained written consent from Party A, party A shall assume all the rights and interest in the target factory, and shall have the right to take over the target factory or to auction the factory via public bidding, and Party B shall not dispute this. 2. Pursuant to Paragraph 1 of Article 4 of the agreement, if the total rights and interests that Party B has transferred to Party A is not sufficient to cover the total amount payable to Party A, Party B has the obligation to transfer its personal property to Party A until the total amount of the loan return and lender's principal payable to Party A under Article 2 of the agreement is compensated in full. 3. Parties A and B agree to use earnings from a genuine auction to pay Party A in the event that the total rights and interests owned by Party B in the target factory outweigh the total amount payable to Party A, and the remaining earnings shall be owned by Party B. 4. Party B shall be fully responsible for the business operation and management of the target factory upon acquiring it, and Party [sic] has the right to participate in decisions [sic] making over significant items as a shareholder and director. The profit and loss by the target factory shall be assumed by Party B.
8. Shortly after the signing of the Acquisition Agreement, on 4 May, a meeting was held in the VIP Room of Star City Casino in Sydney. Those attending included Mr Haiyang Xu, Mr Jingbo Xu, Mr Chen and, in Mr Haiyang Xu's words, "other borrowers". According to Mr Haiyan Xu, Ms Ding was not present. During cross-examination, counsel for Mr Ding put to Mr Xu that he was at least aware of Ms Ding at around the time of the meeting and that he was aware that Ms Ding was providing finance. He denied both suggestions. There was no evidence to contradict him.
9. Apparently the 4 May meeting was held to discuss how the acquisition of the Winery was to be financed. According to Mr Xu, Mr Chen noted that external finance, probably in the form of a bank loan, would be needed. Mr Chen suggested that in the meantime he and his other businesses would contribute $1 million or so which was to be repaid when the bank loan was obtained. Mr Xu said that Mr Jingbo Xu agreed but added that no further finance was to be obtained without "our approval". According to Mr Haiyan Xu, this course of action was approved by the others at the meeting.

Incorporation of WHH and WHI and establishment of Trust

1. WHH was incorporated on 24 May 2012. Its authorised share capital consisted of 1,000 ordinary one dollar shares. Mr Haiyan Xu was, and remains, the sole director of the company. The ASIC search for the company which is in evidence shows a Form 484 was lodged on 30 May notifying changes in shareholder details. The evidence does not identify what the shareholding details were on incorporation, and what changes were made on 30 May. The Form 484 lodged on 31 October (see below), however, does show that, by 30 May, Mr Xu held 430 shares in WHH.
2. WHI was incorporated on 19 June 2012. Its authorised share capital consisted of 10,000 ordinary one dollar shares. Mr Chen was the sole director and secretary of the company. This remained the position until October 2014 (see below). Initially WHI's sole shareholder was Mr Chen, to whom one hundred shares were allocated on incorporation.
3. The Trust was established by trust deed dated 21 June 2012, two days after the incorporation of WHI. The trust deed provided in conventional form for the establishment and operation of a unit trust. The settlor was Qi (also known as "Grace") Wang. The trust deed recorded a receipt of an initial sum of $1, divided into one $1 unit held by Ms Wang.
4. Ms Wang later became an investor in the Winery. She was issued with 16% of the units in the Trust. There was no other evidence about her involvement. Ms Wang did not give evidence.

Acquisition of Winery

1. The purchase of the Winery was completed on 29 June 2012. A settlement sheet is in evidence. The purchase price was $6.46 million. This included $1.75 million for the land value.
2. A deposit of $665,000 had previously been paid, leaving a balance payable of $5.981 million. Taking into account adjustments for rates and the like, the total amount payable on settlement was approximately $5.983 million. Of this amount, approximately $32,000 was paid to Griffith City Council at the vendor's direction. The sum payable to the vendor was $5,951,297.89.
3. The payment to the vendor was made in two tranches. In evidence are domestic telegraphic transfer receipts issued by the Australia and New Zealand Banking Group Limited for each tranche. In each case the beneficiary was Premium Wine Brands Pty Ltd (presumably the Pernod Ricard subsidiary which held the Winery).
4. The first receipt was for $951,297.89. The applicant (that is, the source of the funds) was identified as WHI. The other receipt was for $5 million. The applicant was identified as Mr Chen/Mr Fabrizio.
5. WHI's bank statements and general ledger for the period up to 30 June 2012 are in evidence. The general ledger records the deposit of $665,000 being paid on 22 June. This payment did not go through WHI's bank accounts. It was recorded by journal entry, crediting WHH as unsecured creditor for that amount. This indicates that WHH paid the deposit directly to the vendor and that payment was treated as a loan to WHI.
6. The bank statements show overseas transfers totalling approximately $505,000 were received on 25 June 2012. These payments, together with money received from Parliament Hill Enterprise Pty Ltd, and Ausino Alliance Pty Ltd (see below), were used to make the payment of $951,297.89 on settlement, which came out of WHI's bank account. The $5 million attributed to Mr Chen and Mr Fabrizio did not pass through WHI's bank account; presumably the payment was made directly to the ANZ for transfer to the vendor.
7. The overseas transfer receipts of $505,000 and the payment of $5 million to the vendor on WHI's behalf (attributed to Mr Chen and Mr Fabrizio) were not recorded in the books of WHI as borrowings. Rather, the approximately equivalent sum of $5.5 million was credited to a general ledger account styled "Units Premium Reserve". In effect, $5.5 million was treated as a subscription of equity.
8. As at 30 June, WHI's accounts showed unsecured creditors as including Parliament Hill Enterprise Pty Ltd ($250,000) and Ausino Alliance Pty Ltd (approximately $330,000). An unsecured loan was shown as owing from an entity named as "Ausino Investment Unit Trust" of $20,000. These figures represented the net outcomes of a series of receipts and payments by way of internet transfer between 26 and 29 June. Parliament Hill Enterprise Pty Limited and Ausino Alliance Pty Limited appear to have been companies associated with Mr Chen. The evidence did not identify what the connection was.

2012 finance agreements

1. Several finance agreements were entered into following the meeting at Star City on 4 May. The first was an agreement in Mandarin dated 6 May. A translation is in evidence. The agreement was styled "Agreement regarding the Joint Acquisition of Wickham Hill Winery and its Brand". The parties to the agreement were Lai Risheng (Party A), described as "representative from China"; and Mr Liu, Mr Chen and Mr Fabrizio (Party B), described as "three representatives from Australia".
2. The agreement contemplated the acquisition of the Winery (defined as the "target enterprise") with $5 million raised by Mr Lai; acquiring a wine brand called "Poet's Corner" with $3 million raised by Mr Liu, Mr Chen and Mr Fabrizio; and the provision of working capital or operating funds of $3 million, also to be raised by Mr Liu, Mr Chen and Mr Fabrizio. It went on to provide: a. The capital for the acquisition of the target enterprise capital (A$5 million) will be raised by Party A, with a mortgage by Party B on the target enterprise and individual assets and credit guarantee, with Party B shareholders lending a total of $A5 million as a personal loan as investment to acquire the target enterprise. b. The parties shall hold proportional shares in the target enterprise as follows: Party A: Lai Risheng (Lai Ri Sheng) to hold 7% of shares; Party B: Liu Jihong (John Liu) to hold 34% of shares; Chen Ruiyong (John Chen) to hold 34% of shares; Frank Fabrizio to hold 25% of shares. c. Party B shareholders will lend the following sums to Lai Risheng: Liu Jihong (John Liu) to lend: A$2 million Chen Ruiyong (John Chen) to lend: A$2 million Frank Fabrizio to lend: A$1 million For the sake of convenient operation, the registration of shares can be adjusted as necessary, but Party A's 7% cannot be reduced.
3. Mr Lai was another investor in the Winery. He was issued 7% of the units in the Trust. There was no other evidence about his involvement in the acquisition. He does appear to have been involved in the change in control of the Winery in 2014. Mr Lai did not give evidence.
4. The reference in the translated version of this agreement to Mr Liu, Mr Chen and Mr Fabrizio lending $5 million to Mr Lai (clause (c) quoted above) is not easy to understand. In all of the other finance agreements which are in evidence Mr Liu, Mr Chen and Mr Fabrizio were borrowers. Elsewhere the agreement spoke (in clause 4) of the $5 million as "capital lent" or a "loan" by Mr Lai. Clause 5, which dealt with repayment terms, was clearly drafted on the basis that Party B was the borrower. I am inclined to think that what was truly contemplated was Mr Lai lending $5 million, and that the translation of clause (c) has gone wrong. There was no evidence from either party which would clarify the situation.
5. The next agreement was dated 25 May. Again it was in Mandarin but a translation is in evidence. The parties were Mr Haiyang Xu as lender and secured party (Party A) and Mr Liu, Mr Chen, Guorong Zhu and Mr Fabrizio as borrower and "guarantor" (Party B). At the time control of WHI changed in October/November 2014, Mr Zhu was involved in some of the meetings. Guorong Zhu as another investor in the Winery who was issued units in the Trust. There is no other evidence about his role. Mr Zhu did not give evidence.
6. Under the agreement, the borrowers were to borrow $1 million from Mr Xu for the purposes of acquiring the Winery. Clause 3 provided: All borrowers unanimously agree to provide a reverse guarantee in respect of the above-mentioned finance, that is, they agree to provide to Party A [Mr Xu] (Secured Party) a security over all the assets and brand (including trademark of the Winery) at its current value. Without the written consent of Party A, no shareholder, authorised attorney of the Winery or representative may create any further security over the assets of the Winery or transfer any assets of the Winery to any entity of individual.
7. A borrowing receipt, originally written in Mandarin and translated into English, is in evidence. It states: In accordance with the minutes of the first shareholder / director meeting in 2012 of Parliament Hill Enterprise Pty Ltd in Australia held on 4 May 2012 at VIP Room of Sydney Star City, the board of directors unanimously authorise Ruiyong Chen to seek external financing for Wickham Hill Holdings Pty Limited to be established before 30 June 2012 in accordance with the spirit of this meeting. Accordingly, Ruiyong Chen has borrowed from Haiyang Xu A$1 million, and the amount has been remitted into a bank account nominated by Ruiyong Chen.
8. Yet another finance agreement post-dating, or apparently post-dating, the Star City meeting is the second agreement upon which Mr Ding relies in these proceedings. It was styled "Loan Agreement between Lihua Zhang and Jihong Liu, Ruiyong Chen and Frank Fabrizio". I will refer to this as the "Zhang Loan Agreement".
9. The Zhang Loan Agreement was signed at Beijing and provided that it was governed by the law of the People's Republic of China. The Agreement was dated 2012, but the day and month were not inserted. Mr Chen's evidence was that it was signed in "mid June". Mr Liu said it was signed on 30 June. This discrepancy was not resolved. I am unable to say when precisely it was signed. In particular, it is unclear whether the Agreement (which does not mention WHI) was signed before or after the incorporation of WHI on 19 June.
10. Both Mr Liu and Mr Chen gave evidence of being told by Ms Ding that Ms Zhang would enter into the Agreement on Mr Ding's behalf. This evidence was not challenged in cross-examination.
11. The preamble stated: Party B [Mr Liu, Mr Chen and Mr Fabrizio] provides Party A [Ms Zhang] with comprehensive and true information with respect to Griffith Hill Winery ("the target factory" hereinafter) in the State of New South Wales, Party A agrees to lend RMB twenty million Yuan (RMB20,000,000.00) to Party B to support its acquisition of the target factory.
12. Article 1 relevantly provided: Loan Amount, Currency, Term and Bank Account 1. The amount of the loan under the agreement is RMB twenty Yuan [sic] (RMB 20,000,000.00), which will be used to support Party B in acquiring the target factory ("the principal" hereinafter). Specifically, Party A lends Jihong LIU RMB five million Yuan (RMB5,000,000.00); Party A lends Ruiyong CHEN RMB ten million Yuan (RMB10,000,000.00); Party A lends Frank Fabrizio RMB five million Yuan (RMB5,000,000.00). … 3. The loan term under the agreement for Party A shall be from the date that Party A remits the principal to the account(s) designated by Party B until 30 June 2015.
13. Article 3 relevantly provided: Loan Security and Settlement 1. Party B undertakes to use the total assets of the target factory and their personal property as security to take out a loan of RMB twenty million Yuan (RMB20,000,000.00). 2. Party B shall dispose of the assets of the target factory via auction or other means in order to repay the principal and interest due when either of the following conditions occur. (1) If Party B is unable to pay the principal and interest in full before 30 June 2015 and has not obtained Party A's written consent to late payment; (2) Party B did not pay Party A the principal or interest on time pursuant to Article 2 of the agreement, and such payment has been overdue for more than 20 working days, and Party B has not obtained Party A's written consent to late payment. 3. Pursuant to Paragraph 2 of Article 3, if Party B is still unable to compensate for the principal and interest to Party A after transferring the asset of the target factory based on its shareholding ratio, Party B has the obligation to dispose of their personal property and use the funds obtained therein to pay the principal and interest to Party A. 4. Pursuant to Paragraph 2 of Article 3, if the total asset of the target factory owned by Party B outweigh Party A's principal and interest, both parties agree to repay Party A's principal and interest using the funds from a genuine auction of the asset, and the remaining funds shall be owned by Party B. 5. Before Party B pays up Party A's principal and interest in full, the total remuneration paid by the target factory to Party B shall not exceed 50% of remuneration for equivalent positions in the same industry in Australia.
14. In evidence is a Mandarin document identified by Mr Liu as a receipt for ¥20 million signed by himself, Mr Chen and Mr Fabrizio. The receipt is dated 30 June 2012. No translation was provided, and the only other information I can glean from the receipt is that the payment was made in two tranches, one of ¥5 million on 15 June and the second of ¥15 million on 26 June.
15. It appeared from Mr Liu's oral evidence that the monies referred to in the receipt came from China via Hong Kong. Mr Liu said, as I understood him, that money was paid into his sister's bank account in Hong Kong and he received confirmation from her by text message that money had been received. Mr Liu indicated that the money provided by Mr Xu had been reached in the same sort of way. Mr Liu was not in a position to say from his own knowledge what the source of the money was and no transfer records were tendered. On the evidence before the Court, the receipt itself did not say.

Use of WHI's common seal on Acquisition Agreement and Zhang Loan Agreement

1. Each of the signed versions of the Acquisition Agreement and the Zhang Loan Agreement in evidence bears imprints of WHI's common seal. The seal did not appear on the execution page as would be conventional in Australian commercial practice. Rather, the document was fanned at the margin and the seal stamped across the fanned section so that a slither of the seal imprint appears on the margin of each page. This was done twice, in the lower quarter of the left hand margin.
2. Mr Chen's evidence was that it was he who stamped the seal on the two agreements in this way. He was unable to specify exactly when this was done. He accepted that it could not have been before the incorporation of WHI on 19 June and suggested it had been shortly after that. Whether it was days or weeks after WHI's incorporation cannot be determined on the evidence.
3. Mr Chen was asked about stamping the seal on the documents. He described a Chinese custom whereby a person's seal or "chop" is stamped on a document to authenticate it. He said that he considered that it was unnecessary for this to be done on an Australian legal document, but that he would do it if asked. Presumably that means that Ms Ding or Ms Zhang or one of their associates asked Mr Chen to stamp the seal on the Agreements in question.
4. Mr Chen was asked about the purpose of the custom. He gave the following evidence: Q. …when you apply the chop to the fanned pages of the document, you're doing so to make sure that the pages are not changed for other pages later, correct? A. Yeah. Q. If you want to make a party agree to the document, you stamp the last page, correct? A. Stamp only the last page? Q. Yes? A. Yes.

Trust unit holdings and share holdings

1. Among the exhibits to Mr Chen's affidavit was a trial balance for the trust as at 30 June 2012 and 2013 financial statements. The financial statements were unsigned by no point was taken about this.
2. The 2012 trial balance showed 1,000 issued units with a total value of $1,000. The 2013 financial statements showed the unit holdings as being: Haiyang Xu 173 Linru Feng 160 Qi Wang 160 Judith Fabrizio 160 Jihong Liu 160 Risheng Lai 70 Yisi Ding 40 Ruiyong Chen 77
3. An ASIC Form 484, notifying the transfer of 40 shares in WHH from Mr Haiyang Xu to Ms Ding on 31 October 2012, is in evidence. Mr Xu was asked about this in cross-examination but his evidence was vague. He seemed to suggest that although the form went out under his name, he had not been involved in giving instructions for it. Mr Chen, however, confirmed in his evidence that 40 units in the Trust and 40 shares in WHH were issued to Ms Ding; I infer that he was responsible for this.
4. There appears to have been no change to the shareholding of WHI at this time. The ASIC search for WHI shows no changes to details in shareholding being notified between the date of incorporation and the change in control in October/November 2014.

2013 financial year

1. In March 2013, WHH obtained a $3 million commercial overdraft facility from St George Bank. The facility was apparently negotiated by Mr Haiyang Xu on behalf of WHH. The security required included a first registered real property mortgage by WHI of the Winery land and a first registered general security agreements over the assets and undertaking of WHI as trustee for the Trust. Security was also to be provided over the assets and undertaking of Ausino Wine Brand Pty Ltd as trustee for the Coolabah Unit Trust. Settlement of the facility was effected in 28 March.
2. The financial statements for the Trust for the year ended 30 June 2013 show that during the year the book value of property, plant and equipment increased from $6.6 million to $14.6 million. This was reflected in an increase in equity of $8.35 million. The financial statements contained no further information about the nature of the further assets acquired. I was not referred to any other evidence on this question.

Ding Loan Agreement

1. The third agreement upon which Mr Ding relies was titled "Loan Agreement between Xiaoxin Ding and Jihong LIU, Ruiyong CHEN and Frank Fabrizio". It was dated 30 June 2013.
2. The preamble stated: Party B [Mr Liu, Mr Chen and Mr Fabrizio] provides Party A [Mr Ding] with comprehensive and true information with respect to Griffith Wickham Hill Winery ("the target factory" hereinafter) in the State of New South Wales of Australia and the Coolabah brand ("the target brand" hereinafter), Party A agrees to use a total of RMB thirty million six hundred thousand Yuan only (RMB30,600,000), including the loan of RMB twenty million Yuan (RMB20,000,000.00) to Party B on 30 June 2012, the loan of RMB six million Yuan (RMB6,000,000.00) to Party B on 18 February 2013 and the matured interest of RMB four million sixty hundred thousand Yuan (RMB4,600,000) to support the target factory to acquire the Coolbah brand.
3. Article 1 relevantly provided: Loan Amount, Currency, Term and Bank Account 1. The amount of loan under the agreement is RMB thirty million six hundred thousand Yuan only (RMB30,600,000), which will be used to support Party B in acquiring the target brand and target factory ("the principal" hereinafter). …
4. Article 2 relevantly provided: Interest Rate and Settlement Method … 4. Party B shall repay to Party A the full amount of principal and interest before 30 June 2015. …
5. Article 3 provided: Loan Security and Settlement 1. Party B undertakes to use the total asset [sic] of the target factory, the Coolabah brand and the personal property as security to take out a loan of RMB thirty million six hundred thousand (RMB30,600,000). 2. Party B shall dispose of the asset [sic] and brand of the target factory via auction or other means in order to repay the principal the principal and interest due when either of the following conditions occur. (1) If Party B is unable to pay the principal and interest in full before 30 June 2015 and has not obtained Party A's written consent to late payment; (2) Party B did not pay Party A the principal or interest on time pursuant to Article 2 of the agreement, and such payment has been overdue for more than 20 working days, and Party B has not obtained Party A's written consent to late payment; 3. Pursuant to Paragraph 2 of Article 3, if Party B is still unable to compensate for the principal, interest and late payment fee to Party A after transferring the asset and brand of the target factory and target brand based on its shareholding ratio, Party B has the obligation to dispose of its personal property and use the funds obtained therein to pay the principal, interest and late payment fee to Party A. 4. Pursuant to Paragraph 2 of Article 3, if the total asset of the target factory and brand (value) owned by Party B outweigh Party A's principal and interest, both parties agree to repay Party A's principal and interest using the funds from a genuine auction of the asset, and the remaining funds shall be owned by Party B. 5. Before Party B pays up Party A's principal and interest in full, the total remuneration paid by the target factory and brand to Party B shall not exceed 50% of remuneration for equivalent positions in the same industry in Australia.
6. Article 4 relevantly provided: Undertaking and Representation on the Target Factory 1. Parties A and B agree that the full loan issued by Party A shall be used to acquire the Griffith Wickham Hill Winery in the State of New South Wales of Australia and Coolabah brand. Without Party A's consent Party B shall not alter the use of the loan; otherwise Party A has the right to demand early repayment from Party B, including the principal, interest as well as late payment fee under the agreement. …
7. Article 7 relevantly provided: Obligation of Providing Information 1. Party B shall provide Party A with genuine financial statement(s) of the project factory and brand every six months. 2. Party B shall notify Party A on a timely basis of any pledge of assets relating to the project factory and brand, major transactions and events that impact upon the sustainable development. …
8. Article 10 relevantly provided: Supplementary Provisions 1. The agreement shall take effect upon being signed by both parties. The agreement shall terminate after Party B has paid up Party A the principal, interest and late payment fee in full and has completed the service of applying for migration to Australia for individuals designated by Party A. … 3. In the event that provisions of the agreement are at odds with resolution by the Board of Directors of the target factory or the local laws and regulations, the agreement shall prevail until Party B has repaid Party A all of the principal and interest. …
9. The Agreement contained a space for inserting the place where it was signed, but this was left blank. Article 9 provided that the "current Australian laws, regulations and rules" applied with respect to, among other things, the interpretation of the Agreement.

Change in control of WHI, October/November 2014

1. Mr Xu gave evidence that a meeting between investors and other parties interested in the Winery took place at Mr Chen's office in Sydney on 27 October 2014. Among those who attended were Mr Jingbo Xu, Mr Lai, Xia Zhang, Mr Liu, Mr Chen, Mr Fabrizio and Ms Wang. Ms Ding was notified but did not attend. Mr Xu said that this was the first time he had heard of her involvement with the Winery.
2. Xia Zhang is Mr Lai's wife, and should not be confused by Lihua Zhang, Mr Ding's wife. As will be seen, Xia Zhang has become involved as an investor in the Winery and a director of WHI. She did not give evidence.
3. Mr Xu said the purpose of meeting was to discuss the poor financial performance of the Winery. He said that it was agreed at the meeting that a steering group be formed and that the shareholding and debt rights over the Winery be clarified. It was agreed by 16 November, any person claiming to have an interest had to put in evidence supported by relevant contracts, bank receipts etc.
4. In evidence is a minute of the meeting of 27 October. The minute is generally consistent with Mr Xu's account. It also referred to further loans being made to keep the Winery going. The minute was signed by persons described as "shareholders" and "directors". The "shareholders" who signed were Mr Lai, Mr Jingbo Xu, Mr Haiyang Xu, Mr Chen, Ms Wang, Mr Liu, and Ms Zhang. The "directors" who signed were Mr Fabrizio, Mr Lai, Mr Jingbo Xu, Mr Chen and Mr Liu.
5. Also in evidence are three ASIC forms dated 28 and 29 October. The first of those, lodged under Mr Chen's name, recorded Ms Zhang's appointment as an additional director of WHI. The next, dated 29 October and lodged under Ms Zhang's name, recorded that Mr Chen ceased to hold office as a director on the previous day, 28 October. The third, also lodged under Ms Zhang's name on 29 October, recorded the transfer of 51 of Mr Chen's shares in WHI to Ms Zhang.
6. Mr Chen said that he did not agree to resign as director of WHI, or to transfer his shares in WHI, as recorded in the two ASIC forms lodged under Mr Zhang's name on 29 October. But there was no evidence that he took any steps to contest what was done. He seems, for practical purposes, to have ceased being involved in management of the Winery from this point.
7. The ASIC search for WHI shows that a further form was lodged with ASIC on 21 November notifying changes to its details. The form is not in evidence but from other parts of the search it can be deduced that the form notified: (1) the appointment of Jingbo Xu as an additional director from 11 November; (2) the issue of a further 9,900 shares, taking the shares on issue to 10,000; (3) the allocation of 469 shares to each of Ms Fabrizio, Ms Wang, Mr Liu, and Mr Zhu.
8. The ASIC search also refers to a further change in company details form lodged four days later, on 25 November. This form is in evidence. It recorded the transfer of forty shares to Ms Ding, twenty from Mr Haiyang Xu and twenty from Ms Zhang. Mr Xu was shown as retaining 2,168 shares and Ms Zhang as retaining 5,447 shares. Presumably these shares were allocated to them (apart, in Ms Zhang's case, from the 51 shares she already owned from 29 October) in the share issue the subject of the 21 November notification. The date of the change was, however, shown as 13 November.
9. Mr Xu's evidence was that he was present when his father telephoned Lei Rong, who is Ms Ding's husband, after the meeting on 27 October. Mr Rong was told of the decision requiring any person claiming an interest in the Winery to provide evidence by 16 November. Mr Xu said that Mr Rong accepted this.
10. Mr Xu gave evidence that a further meeting took place on 16 November, at Mr Chen's office. The meeting was also attended by Mr Lai, Ms Zhang, Mr Jingbo Xu, Mr Chen, Ms Ding, Mr Rong and others. Mr Haiyang Xu, Mr Lai and Ms Zhang submitted agreements and documents to the meeting. Ms Ding did not. Mr Xu said that there was several follow up requests to Mr Rong and Ms Ding to produce documents or paperwork, but nothing was provided.
11. The evidence of those events is difficult to understand. It does not explain why all of the directors named in the minute of the 27 October were not formally appointed as directors of WHI. Mr Xu's account of events following the meeting, and in particular his evidence that Ms Ding was unable to sustain any interest in the Winery, seems inconsistent with the issue of shares to her on 13 November. But this was not explored in cross-examination.
12. On the information notified to ASIC, Ms Ding retained a holding of forty shares in WHI (0.4% of the total) after 21 November and she still had her 4% per cent holding in WHH (no changes to shareholder details were lodged for WHH during this period). But subsequently Ms Ding, along with Mr Chen, Mr Liu, Ms Wang, Mr Zhu and Ms Fabrizio, have been recorded in ASIC's register as having ceased to be shareholders in WHI (and WHH, in Ms Ding's case).
13. The ASIC search of WHI shows the shareholdings (at September 2016) to be: Haigen Xu 2831 shares Jingbo Xu 480 shares Xia Zhang 5575 shares Jiawei Liu 1114 shares
14. The ASIC search of WHH shows the shareholdings (at September 2016) as: Haiyang Xu (283); Jingbo Xu (48); Xia Zhang (62); Jiawei Liu (111) and Daihong Zhang (496).
15. These two ASIC extracts show that after November 2014, two further ASIC forms notifying a change in shareholder details were lodged in May and August 2015. Presumably Ms Ding's shareholder status ceased by August 2015 at the latest.
16. There is no evidence of any change to the unit holdings of the Trust from those details recorded in the Trust's 2013 financial statements. It is not clear if any of Ms Ding, Mr Liu, Mr Chen or Ms Fabrizio still remain unit holders.

Borrowing Agreements

1. The Borrowing Agreements are the other two agreements upon which Mr Ding relied. Each Agreement was undated. Neither Agreement specified where it was signed by the parties. As I have mentioned, each Agreement was written in both Mandarin and English. Because of my doubts about the Mandarin translations, in quoting from the Agreements I have used the English language versions.
2. The first of these two Agreements, to which I will refer as the "¥20 million Borrowing Agreement", began by identifying the parties in the following terms: Lender (hereafter referred to as Party A): - Xiaoxin Ding Borrower (hereafter referred to as Party B): - John Liu (Wickham Hill) - John Chen (Wickham Hill)
3. The preamble stated: Party A and Party B have entered into this agreement regarding Party B borrowing CNY 20,000,000 from Party A between 01 May 2012 and 30 June 2012 to purchase all assets of Coolabah & Wickham Hill. Party A is the Lender while Party B is the Borrower.
4. The Agreement relevantly provided: 1. Amount borrowed: CNY 20,000,000; 2. Borrowing period: till 28/02/2015; … 4. Party B shall repay the principal and interest of CNY 34,560,000 into the designated account of Party A before 30 June 2015; 5. Guarantee: Party B shall take all personal and company's properties and assets as the guarantee to repay the principal and interest to Party A on agreed time; …
5. In the second Borrowing Agreement, to which I will refer as the "¥30.6 million Borrowing Agreement", the parties were defined in the same way as in the ¥20 million Borrowing Agreement except that in the brackets after the name of each of Mr Liu and Mr Chen, in place of the words "Wickham Hill" there appeared the following: Cheviot Wine Group Pty Limited, Coolabah Wine Group Pty Limited, Wickham Hill Investment Pty Limited, Wickham Hill Holdings Pty Limited, Ausino Wine Brand Pty Limited ATF Coolabah Unit Trust.
6. The preamble stated: Party A and Party B have entered into this agreement regarding Party B borrowing CNY 26,000,000 from Party A between 01 May 2012 and 01 March 2013. Between 01 May 2012 and 30 June 2013, the total amount borrowed from Party A is CNY 30,600,000. Party A is the Lender while Party B is the Borrower.
7. The Agreement relevantly provided: 1. Amount borrowed: CNY 30,600,000; 2. Borrowing period: until 30/06/2015; … 4. Party B shall repay the principal and interest of CNY 44,064,000 into the designated account of Party A before 30 June 2015; 5. Guarantee: Party B shall take all personal and company's properties and assets as the guarantee to repay the principal and interest to Party A on agreed time;
8. Mr Liu stated in his affidavit that the Borrowing Agreements were signed in "late 2014". That was as far as his evidence was taken. Mr Chen said that both agreements had been signed "in or about November 2014". He was not asked to give any further evidence about this either in chief or in cross-examination.

Financing Statement and amendment (removal) application

1. In February 2017 Mr Ding caused to be lodged on the Register a financing statement that identified Mr Ding as the secured party and WHI as the grantor of a security interest attaching to all WHI's present and after-acquired property.
2. In March 2017 the solicitors acting for WHI sent a letter to Mr Ding's solicitors requesting information under PPSA s 275 concerning the security interest said to support Mr Ding's financing statement. The letter also requested a statement from Mr Ding setting out the obligations said to be secured by the alleged security interest. Mr Ding's solicitors wrote back, stating that Mr Ding's security interest secured a repayment obligation in the amount of approximately ¥70.6 million. This was made up of ¥26 million in loans and more than ¥44 million in interest. The letter also enclosed the five agreements referred to above (including the original Mandarin and English translations).
3. In June 2017 an amendment demand was served on Mr Ding's local representative. In July 2017, following Mr Ding's non-compliance with the amendment demand, WHI caused an amendment notice to be issued by the Registrar and was subsequently served by WHI's solicitors on Mr Ding's local representative. That notice gave Mr Ding an opportunity to provide to the Registrar a response as to why WHI's amendment demand should not be registered. Such a response was provided by Mr Ding's solicitors in August 2017. The Registrar subsequently invited the parties to provide further submissions about the nature of the security interest under which Mr Ding claims.
4. In late October 2017, WHI's solicitors were informed by a representative of the Registrar that the financing statement would not be removed. It seems the Registrar made no formal determination in writing informing the parties of this decision.

Conclusions on financing of Winery acquisition

1. The evidence leaves a great deal of uncertainty about where the finance for the $6.5 million used to acquire the Winery came from. WHI's accounts (which date to the period when Mr Chen was in control) treat the money received by WHI as equity rather than as loans. Mr Chen and Mr Fabrizio provided $5 million of that amount. Beyond that the arrangements are opaque.
2. There is a loan agreement from Mr Xu to Mr Liu, Mr Chen, Mr Fabrizio and Mr Zhu for $1 million and this is consistent with Mr Xu's evidence that he was approached to lend $1 million through Mr Chen. There does not seem to be any doubt that $1 million came from Mr Xu.
3. Mr Xu's $1 million appears to have gone into WHH, at least initially. The receipt for the loan refers to it as having been provided pursuant to a resolution for financing of WHH. If so, there may be some connection between this and the apparent fact that Mr Xu was the sole director of WHH from the outset. But the evidence did not explain this.
4. The source of the remaining $5.5 million remains unclear. Mr Chen and Mr Fabrizio are recorded as providing $5 million of it. But the evidence does not show from where they got that money from.
5. If Ms Zhang (allegedly on behalf of Mr Ding) did lend ¥20 million, that would not have been enough to cover the amount required. At the then current exchange rate, ¥20 million was approximately $3 million. Clearly if this loan had been made there must have been other financiers, presumably lenders. Mr Chen did not refer to this in his evidence and was not asked about it in cross-examination.
6. Mr Lai's loan agreement further complicates the picture. It is notable that the agreement refers to the finance being raised in three components, the first two being $5 million for the acquisition of the Winery and the second being $3 million for the acquisition of the "Poet's Corner" brand. If the first component is equated with the $5 million paid before settlement and attributed to Mr Chen and Mr Fabrizio, the second component of $3 million would match with the ¥20 million referred to in Mr Ding's finance agreements. If that is correct, any money provided by Mr Ding may not have gone into the purchase of the land and Winery assets from Pernod Ricard at all. But as already noted, there seem to be difficulties with the translation of the Lai agreement and it does not necessarily follow that the transaction was carried out in the manner foreshadowed in that agreement. Indeed, the total of the first two components, $8 million, is not consistent either with the $6.5 million investment in the 2012 financial year or the total investment of $14.6 million by the end of the 2013 financial year. Again, there was no evidence from either party on these questions.
7. There are similar difficulties with understanding what happened in 2013. The Ding Loan Agreement referred to a further loan of ¥6 million in February 2013. From the reference to the Coolabah brand it might be inferred that some sort of intellectual property might have accounted, at least in part, for the additional investment in property, plant and equipment in the 2013 financial years. On the other hand there is also a reference to the Winery experiencing financial difficulties. But there was no evidence about this from anyone and the accounts do not assist. At the then exchange rate, ¥6 million represented approximately $0.94 million. That was far less than the additional investment shown in the accounts.
8. The Acquisition Agreement took the form of an undertaking by Ms Ding to source loan finance for Mr Liu, Mr Chen and Mr Fabrizio. Part of the consideration for this was for Ms Ding to receive at least a 4% "shareholding" in the "target factory". In fact Ms Ding did receive a 4% unit holding in the Trust (as well as a 4% shareholding in WHH). This might suggest that Ms Ding did indeed obtain the ¥20 million loan from Mr Ding's wife, Ms Zhang. But even that is not clear. The Acquisition Agreement provided for Ms Ding to become a director of the "target factory" and neither she nor Mr Ding (nor Ms Zhang) ever did. The evidence did not explain why not.
9. Another curious feature of the case is the lack of any evidence of Mr Ding pursuing repayment from the borrowers. The loan agreements all provided for repayment on 30 June 2015. By then Mr Chen had well and truly lost control over the Winery. But the evidence about repayment consisted of formulaic recitals in the affidavits. Mr Liu said that he did not make any repayment under any of the Agreements, and was not aware that anyone else did. All Mr Chen said was that while he was a director of WHI no repayment was made by WHI; and that as far as Mr Chen was aware, "no other party" had ever made any repayments. Neither counsel took this any further when Mr Liu and Ms Chen gave evidence.
10. Mr Chen's formulation notably failed to acknowledge that Mr Chen himself had, or has, any liability to repay Mr Ding. The implication was that WHI was the borrower, presumably as trustee of the Trust. But this is inconsistent with the Trust's accounts. In any event, whether or not they properly included WHI as a borrower, the Loan Agreements undoubtedly made the individual borrowers personally liable to repay. They also provided expressly for a grant of security, among other things, over the borrowers' "personal assets". On the evidence, the Court is left to wonder why, if Mr Ding is now owed more than ¥70 million, he has apparently taken no action to recover the debt from the principal borrowers and has apparently contented himself with lodging a financing statement against WHI.
11. Underlying all of this is the fact that no one from Mr Ding's camp has given evidence. On the face of it, if loans have been made by Mr Ding and monies are owing, evidence and supporting business records could readily have been produced by Mr Ding and his associates to prove that is so. Instead, Mr Ding has left it to Mr Liu and Mr Chen to carry his evidentiary case.

Onus

1. I have already set out what Asher J said in Toyota Finance about the New Zealand s 167 procedure. At the end of his judgment, when considering the way forward, his Honour added (at [29]): When the Court upholds a security interest, a Court will not invariably make an applicant issue substantive proceedings to prove its interest. On occasions where the Court has little doubt about the validity of a security interest, it might well be reluctant to require the secured party to take such an expensive step. Here, however, there is real doubt about the validity of that security interest. If Toyota had ensured that there was a written agreement transferring title to the Landcruiser from Gateway to Mr Christie before it entered the third finance agreement, no issue could have been taken with its interest. It did not. Here, in accordance with a practice that is common in relation to caveat cases, it is appropriate that an obligation be placed upon Toyota, that has the benefit of the maintenance of the registration, to issue proceedings so that the substantive issue can be determined.
2. In Macquarie Leasing Pty Ltd v DEQMO Pty Ltd [2014] NSWSC 1466, there was a dispute between two financiers (Macquarie and DEQMO) about security over a truck. DEQMO registered a financing statement claiming a security interest in the truck. Macquarie, which claimed to have a prior interest, served an amendment demand requiring the removal of DEQMO's registration. DEQMO took no action but its registration remained on the register. Macquarie then applied under PPSA s 182 to have its amendment registered (thereby removing DEQMO's registration). After concluding on the evidence that Macquarie had established that it had a prior security interest over the truck, Rein J said (at [23]): The next question for the court is whether DEQMO has a security interest in the truck and, secondly, if it does whether DEQMO's security interest has priority over Macquarie's interest or that there is at least a serious question to be tried that DEQMO's interest has priority over Macquarie's security: see Toyota Finance New Zealand Ltd v Christie [2009] NZHC 827 at [16] and Harris and Mirzai, Annotated Personal Property Securities Act 2009 (Cth), Wolters Kluwer, 2nd Ed, 2014, para 182.5.1-5.2.
3. His Honour continued (at [27]): … I am of the view that the circumstances of the case, including the service of the amendment demand made it incumbent on DEQMO, if it wished to resist the order sought by the judicial process specified in s 182 of the PPSA, to establish the basis of its security interest, which it has wholly failed to do. Further, I draw the inference from DEQMO's failure to produce any evidence that it could not support the claim to security interest and I would decide in favour of Macquarie on that basis as well.
4. In Capital Finance Australia Ltd v Clough [2015] NSWSC 1327 at [12], Rein J said (at [12]): As I noted in the case of Macquarie Leasing Pty Ltd v DEQMO Pty Ltd [2014] NSWSC 1466 if a party wishes to resist the order sought by Judicial process specified in s 182 of the Act it must establish the basis of its security interest: see also Toyota Finance New Zealand Ltd v Christie [2009] NZHC 829 at [16] to [18]. I also draw from the failure of the defendant to appear the inference that she was unable to produce any evidence that could support her claim.
5. But in National Australia Bank Ltd v Garrett [2016] FCA 714, Beach J referred to Toyota Finance and Capital Finance and said (at [33]): In my view, caution has to be exercised in aligning the procedure under s 182 with the procedure for removing or maintaining a caveat over real property and the suggestion of some reverse onus mechanism. In my view, NAB has the relevant legal onus under s 182(4) to establish that the amendment demanded is authorised under s 178(1). In terms of evidence, NAB needs to, at the least, adduce prima facie evidence to establish the relevant element of the table referred to in that section. NAB has done that in the present case; moreover, that evidence has not been satisfactorily answered by the first and second respondents.
6. Counsel for WHI, who is one of the authors of the text cited by Rein J in Macquarie Leasing, contended that I should follow the approach in Toyota Finance and treat Mr Ding, as the party claiming the security interest in question, as bearing the onus of establishing its existence. Counsel for Mr Ding contended that I should prefer the approach stated by Beach J in National Australia Bank v Garrett, under which WHI would bear the onus of negativing Mr Ding's claim.
7. In support of that contention, counsel for Mr Ding made three submissions based on specific provisions of the PPSA. Counsel also submitted more broadly that the approach in Toyota Finance is inapplicable under the PPSA. I will address the submissions in that order.
8. Counsel for Mr Ding first pointed to s 157(3) which contains certain requirements for registration of a financing statement by the Registrar. Counsel also pointed to s 181(1) which provides that the Registrar cannot register a financing change statement if the Registrar suspects on reasonable grounds that the amendment is not authorised under s 178. Counsel submitted, as I understood the argument, that where a financing statement had been registered and the Registrar had declined to register a financing change statement which would have the effect of removing the earlier financing statement from the Register, this gave the earlier financing statement some sort of prima facie validity and supported the idea that the onus should lie on the party seeking removal to establish that the security interest claimed is not valid.
9. PPSA Part 5.3 deals with registration. Section 150 establishes an administrative process for registration of the financing statement, which requires an application to be made to the Registrar. But the Act contains no obligation on the Registrar to verify any of the information contained in a financing statement. Indeed, by s 150(3) a Registrar is required to register the financing statement if it is in the approved form, the relevant fee has been paid and the Registrar is not satisfied that the application is frivolous, vexatious or offensive or contrary to public interest or contravenes s 151. Section 151 provides that a person must not apply to register a financing statement unless that person believes on reasonable grounds that the person specified as the secured party is, or will become, a secured party in relation to the relevant collateral (otherwise than by virtue of the registration itself). Contravention of this provision gives rise to a civil penalty but does not affect the validity of the registration.
10. Part 5.6 deals with amendment demands. Amendments to the register are made pursuant to amendment notices. Once an amendment notice has been given to a secured party then the Registrar must register a financing change statement reflecting the demand unless the Registrar suspects, on reasonable grounds, that the amendment is not authorised under s 178. In deciding whether to register a financing change statement the Registrar is required to consider any response from the secured party to the amendment notice and any other relevant information. But the Registrar has no duty to resolve factual disputes or complex issues of law (and no real means of doing so); and it seems, is not required to give reasons.
11. Clearly the Act gives the Registrar the power (and the duty) to consider amendment demands. But the Registrar is not necessarily concerned to enquire into whether the amendment demand is in fact justified. The Registrar need not register the amendment demand if the Registrar believes on reasonable grounds that the amendment is not authorised under s 178. Presumably the Registrar took this position in the present case on the basis that the dispute between Mr Ding and WHI gave rise to contested issues of fact and law.
12. Under Part 5.6 there is both an administrative process and a judicial process for determining whether a finance statement should retain registration in the face of an amendment demand. The Act itself uses those two terms. In no sense is the judicial process a continuation, or review, of the administrative one. It is quite independent. Under s 179(2) the administrative process stops applying as soon as proceedings are brought under s 182. There is nothing in the Act which suggests that the fact that the outcome of the administrative process has any significance for the outcome of the judicial process. In my opinion the state of the Register is a neutral factor.
13. Counsel for Mr Ding next pointed out that under s 182(1), either the secured party or the giver of an amendment demand may make a s 182 application. Counsel argued that it followed that the party applying would bear the onus. On counsel's argument, in the present case, because WHI was the applicant, the onus would lie on it.
14. In my view, this provision simply reflects the fact that the Registrar may register the financing change statement (which may leave the secured party aggrieved) or may decline to do so (which may leave the grantor aggrieved). The provision is simply there to cover both situations. I think this factor is also neutral.
15. Counsel also relied on s 296 which deals with the onus of proof. The section contains two provisions which apply generally to proceedings under the PPSA. They are that the onus of proving that "a security interest attaches to personal property" or that "a security interest is perfected by registration" lies with the person asserting those facts. But attachment and perfection of security interests have specified meanings under the PPSA (see ss 19 and 21). The present proceedings under s 182 are concerned with whether a security interest exists, which is a different question. The section contains a number of further provisions which deal with the onus of proof of particular facts for the purposes of particular provisions of the PPSA. But those provisions do not include ss 178 or 182. Accordingly, s 296 does not assist either party.
16. But it remains necessary to deal with counsel's general argument that the Toyota Finance approach is not applicable. In general, it has been said that, because the PPSA is modelled on the New Zealand provisions, the Court should generally follow the approach that has been taken in New Zealand and Canada in construing the PPSA: Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd (2013) 277 FLR 337; [2013] NSWSC 852 at [32]. But of course this general approach must give way if there are material differences in the statutory context.
17. One consequence of the Toyota Finance approach is that proceedings under s 167 of the NZ Act decide only that there is a "substantial question" as to the validity of the security interest claimed. Separate proceeding are required to determine the substantive existence or otherwise of the claimed rights. In the first proceedings, the court is exercising powers derived from statute. In the second, it is exercising its general law power to determine questions of title.
18. In a unitary system of law such as New Zealand's, this difference is unimportant. The New Zealand High Court can exercise both its statutory and its general law jurisdictions sequentially. The same is true when a comparable statutory power is conferred on this Court. For example the Court often exercises its power under the Real Property Act 1900 (NSW), s 74K, to extend a caveat at a preliminary stage of proceedings, which then go on to determine whether the interest claimed exists or not. The two powers are thus exercised both by the same court and in the same proceedings.
19. But the PPSA is Commonwealth legislation (albeit based on the referral of State powers) and the jurisdiction exercised under the Act is federal jurisdiction. That jurisdiction is conferred not only on state courts but on federal courts. The jurisdiction of those federal courts is limited and they do not possess a general law jurisdiction to determine questions of title except to the extent it is conferred on them as part of the "matter" with respect to which they exercise their statutory jurisdiction.
20. The scope of federal jurisdiction must be the same whether it is exercised by a federal court or by a state court. The starting point in determining the nature of the Court's powers on a s 182 application must therefore be the conferral of jurisdiction.
21. Jurisdiction under the PPSA is conferred with respect to "PPS matters". A PPS matter is defined in s 206(1) as a matter: (a) arising under a provision of this Act authorising an application to be made to a court; or (b) otherwise arising in relation to this Act, other than a matter in respect of which the Federal Court or the Federal Circuit Court has jurisdiction under the Administrative Decisions (Judicial Review) Act 1977; or (c) otherwise arising in relation to a security agreement or a security interest.
22. This definition should be read in the light of the referral of State powers which underpins the PPSA. These "referred PPS matters" are defined in s 245(1) as: (a) the matter of security interests in the personal property; and (b) without limiting the generality of paragraph (a), each of the following matters: (i) the recording of security interests, or information with respect to security interests, in the personal property in a register; (ii) the recording in such a register of any other information with respect to the personal property (whether or not there are any security interests in the personal property); (iii) the enforcement of security interests in the personal property (including priorities to be given as between security interests, and as between security interests and other interests, in the personal property).
23. For the purposes of s 206(1)(a), the relevant "provision of this Act" is s 182. The Court's jurisdiction is accordingly with respect to any matter "arising under" that section. But in addition the Court has jurisdiction with respect to any matter "otherwise arising in relation to" the PPSA and "otherwise arising in relation to" a security agreement or security interest. The question is whether this jurisdiction is limited to deciding whether there is a "reasonable basis" for the security interest claimed by Mr Ding in his registration statement or whether, on the other hand, it extends to determination of the substantive validity or otherwise of that claimed interest.
24. Before considering this question, I should note that the approach in Toyota Finance has not uniformly been followed in the New Zealand High Court. Cases which support it include: Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722 at [35]-[36]; Daniel Smith Industries Ltd v Cranes International NZ Ltd [2009] NZHC 2589 at [30]-[32]. But in Universal Trucks and Equipment Ltd v Reynolds [2012] NZHC 483 Mallon J said (at [35]): The statutory test requires that the Court be "satisfied" that "none of the grounds ... exist". In other contexts where a statute requires that a decision maker be "satisfied", the Courts have said that it requires the decision maker to evaluate all the relevant matters and to reach a judgment as to whether he or she is satisfied. It does not imply any onus or standard of proof. Here the statutory words require that a judgment be made as to whether the debtor's ground for requiring a change does not exist. If the applicant establishes only a reasonably or seriously arguable case that the registered interest exists, that does not seem to me to be the same as saying that the Court is "satisfied" that "none of the grounds for making the demand ... exist".
25. Mallon J also referred to the urgency with which s 167 applications are ordinarily brought. His Honour observed that if such an application gave rise to disputed facts procedures were available to allow evidence to be taken orally and for cross-examination to take place, as well as for the joinder of other affected parties. He also pointed out that although there are time constraints for obtaining the order, an interim order could be obtained to preserve the position. He concluded (at [39]): [39] I approach the application on the basis that the Court is required to evaluate the material put forward and determine on the basis of that material whether the asserted ground has not been made out. In this case, if I am satisfied that the trailers are collateral under the security agreement between the secured party and the debtor, then the ground for making the demand does not exist.
26. Subsequently, in Vegar-Fitzgerald v Mawdsley [2012] NZHC 1311, Associate Judge Bell acknowledged the support the text of the statute gave to Mallon J's approach but considered, apparently by reference to "context and purpose", that the approach taken in the Toyota Finance line of cases was preferable. But in Working Capital Solutions Holdings Ltd v Pezaro [2014] NZHC 1020; 3 NZLR 379 Gendall J agreed with Mallon J's view. Gendall J considered that the question to be answered was whether the plaintiff had shown that none of the grounds for making an amendment demand in fact existed.
27. The position so far as New Zealand High Court authority is concerned thus remains unclear. There is apparently no New Zealand appellate authority on the issue. There is also a conflict of approach in this country. I think I must try to resolve the question for myself, by reference to first principles.
28. In its terms, s 182(1)(a) depends on whether the court considers the amendment demanded "to be" authorised, and this in turn (by s 178) requires the court to determine (relevantly) whether the collateral in question "secures" any obligation to the secured party. The ordinary meaning of this language would require the court to determine what the position actually is, not what may be "seriously arguable". The question is whether there is something in the language or context which requires that ordinary meaning to be read down so that the court should determine only whether there are reasonable grounds for saying that the interest exists.
29. As already noted, the Toyota Finance line of authority in New Zealand emphasises that a s 167 application takes place in urgent circumstances. That is somewhat blunted by the considerations mentioned by Mallon J. In any event, the Australian context is different. In New Zealand, the filing of an amendment notice results in the automatic removal of the registration unless the court intervenes. In Australia if the Registrar decides (as apparently was decided in this case) that the amendment may not be justified, then it remains on the Register until and unless removed by the Court under s 182. The court's ability to investigate the facts and the law on an application under s 182(4)(a) is not constrained by any time limit under the Act. As in this case, there can be a full trial on disputed issues of fact if that is what is required.
30. Furthermore, if the Toyota Finance approach were applicable in Australia under the PPSA, it could give rise to unnecessary and undesirable bifurcation of proceedings between different jurisdictions. If the s 182 "matter" were confined to whether the claimed interest was "seriously arguable", it might not engage the general law jurisdiction to determine whether the claimed interest actually exists. That would mean that if a s 182 application was made to a federal court that court might be limited to determining whether the registration should remain on the register pending some final determination in other proceedings as to whether the interest actually existed. Those other proceedings might then have to be taken in a state court exercising general law jurisdiction.
31. While the referred powers which underpin the PPSA include powers in connection with registers and registration, this does not limit the general referral of the matter of "security interests in the personal property" in s 245(1)(a). The subsistence or otherwise of such a security interest is in my view directly picked up under s 206(1)(a) because of the wording of s 182. But it would also probably be covered in any event by sub-paras (b) and (c). To read down the grant of jurisdiction would also be contrary to the general principle that the Constitutional term "matter" should be given broad interpretation: Fencott v Muller [1983] HCA 12; 152 CLR 570 at 609.
32. It follows, in my view, that the Toyota Finance approach does not apply under PPSA s 182. Once that conclusion is reached, there is no reason to adopt some special rule as to onus. The statutory requirement for removal is negative in form. The consequence is, as Beach J said in National Australia Bank v Garrett, that the onus lies on a grantor seeking removal of the registration to demonstrate that no security interest exists.
33. There is nothing strange or unusual about this. If a right or entitlement depends upon a certain state of affairs not existing, then in the absence of some statutory provision to the contrary, the onus lies on the party seeking to establish that right or entitlement to negative the existence of that state of affairs. Had WHI sought a declaration under the Court's general equitable jurisdiction that Mr Ding has no security interest over the property, WHI would have had to prove the negative: Stapley v Towing Masters Pty Ltd (t/as Dynamic Towing) [2009] NSWCA 382 at [107], citing Sanpine v Koompahtoo Aboriginal Land Council [2005] NSWSC 365 at [170]-[186] and Blanch v British American Tobacco Australia Services Ltd [2005] NSWSC 241; 62 NSWLR 653 at [6]-[7].
34. In taking this view of the onus in proceedings under s 182, I do not disagree with the actual decisions by Rein J in Macquarie and Capital Finance. A party who bears the legal onus on an issue may present sufficient material to the Court for the evidentiary onus to shift to the opposing party. In a s 182 application, generally speaking it is the secured party who is best placed to lead evidence which would sustain the security interest claimed. In such circumstances, little evidence may be required from an owner of the collateral who is disputing the security for an evidentiary onus to shift to the secured party to prove that the claimed interest exists.
35. I also respectfully think that principle would be better served if the onus did lie on the security holder in an application under s 182. The lodgement of a finance statement on the Register, as we have seen, is purely an administrative process. It is not realistic to expect the Registrar to consider the bona fides of such statements when they are lodged. But a registration may have an important practical effect, making it harder for the owner of the collateral to raise finance. Registration also has a legal effect on the relative priorities between security holders. I think the balance will be better struck if the onus lay on the party claiming to have a security interest, once challenged, to justify that interest. This was the view taken in Bruce Whittaker, 'Review of the Personal Property Securities Act 2009 - Final Report' at 227-8 and I respectfully agree.
36. The circumstances of this case illustrate another merit of this view. The clauses of the five finance agreements upon which Mr Ding relies for his alleged security interest did not distinguish between personal property and land. If Mr Ding is correct in his contention that the agreements gave rise to a security interest, the security interest would extend to the Winery land. Had Mr Ding lodged a caveat over that land, then, if WHI had disputed the interest, Mr Ding would have borne the onus of proving that it existed. It is clearly undesirable that the onus with respect to personal assets is the other way around when there is a single dispute, especially when the dispute may (and generally should) be dealt with in one set of legal proceedings.

Does Mr Ding have a security interest in the Winery assets?

1. Counsel for Mr Ding relied primarily on the Ding Loan Agreement to support Mr Ding's registration, but relied on each of the other four financing agreements by way of fall-back. I propose to deal first with the Acquisition and Loan agreements and then with the Borrowing Agreements.
2. The Ding Loan Agreement post-dated (and apparently superseded) the Zhang Loan Agreement. In turn, the Zhang Loan Agreement post-dated the Acquisition Agreement. It is convenient to deal with them in that order.

Ding Loan Agreement

1. WHI was not, of course, named as a party to the Ding Loan Agreement. It was not even referred to. The first question is whether the Agreement contained, as a matter of implication or necessary intendment, a grant of security by WHI over the Winery assets.
2. When the Court interprets an English language document, it draws, often instinctively, on the Court's knowledge of shades of meaning and variations in usage of the words used. This can, if required, be supplemented with a dictionary. Where a legal term such as "security" or "guarantee" is used, the Court can be expected to be familiar with the legal concept and associated commercial practice. When the interpretation of foreign language document is in issue, the Court lacks this assistance. It can only be supplied by expert evidence.
3. No such assistance was provided in this case. The Court was simply presented with translated versions of the Agreements, without any opportunity to question the translator about the meaning and usage of the Mandarin words. Two of the Agreements, at least, are governed by Chinese law. But there was no evidence of what Chinese law says about the issues before the Court. I must thus proceed on the assumption that it is the same as Australian law.
4. I have therefore had no alternative but to interpret the English language translations as best I can, as if they had been composed in English and were governed by Australian law. I am uncomfortably aware of how artificial this is. I have already referred to the apparent deficiencies in the translations. They have made an already unsatisfactory task even less satisfying.
5. The Ding Loan Agreement described the purpose of the loan as being "to be used to support [the borrower] in acquiring the target factory". The implication of this is that the loan was to the individual borrowers, not the "target factory". The rest of the Agreement proceeded in the same way. The only borrowing referred to was by the individual borrowers.
6. For the purposes of determining which parties were parties to the Agreement, it is possible to refer to surrounding circumstances and subsequent events: Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 at [74]-[84]. I have already summarised the evidence on how the purchase of the Winery was financed. It may well be that the $5 million contributed by Mr Chen and Mr Fabrizio in 2012 came ultimately, in whole or part, from borrowed funds, to which Mr Ding contributed. But WHI's financial records and accounts reinforce the conclusion reached from a reading of the Agreement itself that the loan was to Mr Chen, Mr Liu and Mr Fabrizio personally, not to WHI.
7. It follows that if the Agreement gave rise to a security interest at all, it must have been a third party security interest. WHI would have had to agree to grant security over its assets for the loan from Mr Ding to the three individual borrowers. Commercially that is unlikely given that Mr Ding's loan monies did not account for all of the funds which went into the acquisition. There was no apparent commercial reason for Mr Ding to receive priority over other lenders.
8. For convenience, I repeat the critical provision in article 3, cl 1: Party B undertakes to use the total asset [sic] of the target factory, the Coolabah brand and the personal property as security to take out a loan of RMB thirty million six hundred thousand (RMB30,600,000).
9. This clause provided for the individual borrowers to use "the total asset" of the "target factory" as security for Mr Ding's loan. If the "target factory" is, or includes, WHI, that, in literal terms, would have been legally impossible. The borrowers could not themselves give security over WHI's assets; only WHI could do that. If the author of the Agreement did intend to have the borrowers grant security over WHI's assets, he or she can have had no idea of the basic principle that a company is an entity distinct from its shareholders and directors.
10. There are, I think, three possible ways in which the clause could be read in the light of this issue. The first would be to read the reference to Party B as implicitly including WHI itself as the "target factory". The second would be to read the clause as an undertaking by Party B as borrower to procure WHI as the "target factory" to grant security. The third would be to treat the reference to the grant of security as a grant of security by the borrower of the borrowers' ownership interest in the "target factory".
11. In my view, the preferable construction is the third one. The term "factory" is more closely aligned with an income-producing business than a corporate structure through which such a business is held. Had the borrowers acquired the Winery business in their own personal names, the security would have extended to the assets of that business. In the events which have happened, the security covered any shares in the companies and units in the trust which the borrowers, individually, obtained as part of the acquisition.
12. It might be objected that this construction results in redundancy, because the borrowers also granted security over "their personal property". Of course shares and units are, to a lawyer, types of personal property. But the Agreement was not drafted by lawyers or, if it was, not by lawyers familiar with the Australian legal system. I find it more natural to read this further grant of security as a reference to assets held by the individuals which were separate from the Winery to be acquired. The words serve to confirm that recourse under the loan, and the grant of security, was not limited to the Winery assets but extended to all assets held by the borrowers.
13. If I am wrong in this view, then the choice is between interpreting the clause as an agreement by the "target factory", as a separate legal entity, to grant security to Mr Ding for Mr Ding's loans to the individual borrowers; or an undertaking by the individual borrowers to procure the grant by the "target factory" of security. If I were required to make this choice, I would select the latter interpretation. The Agreement does not speak of the "target factory" doing anything. It is individual borrowers who are to "use" the assets of the target factory to grant security. If it is necessary to assume that the target factory is a separate legal entity then this sits most comfortably, in my view, with an undertaking to procure that separate legal entity to take action.
14. On this view, Mr Ding would at most have had a right to enforce the procurement obligation against the individual borrowers. For as long as they retained control of the "target factory" companies, it might have been possible to seek orders against them compelling them to procure the grant of security, or at least to attempt to do so. But it is now too late to obtain that relief. Mr Ding's only entitlement would be to damages against the individual borrowers for breach of the procurement obligation. There would be no directly enforceable right to security against WHI.
15. Counsel for Mr Ding relied on the definition of "security interest" in PPSA, s 12(1), which provides as follows: A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).
16. Where the "transaction" in question is recorded in a formal agreement, I do not read s 12(1) as authorising some sort of departure from the ordinary principles of construction. In applying s 12(1), the Court takes the agreement, on its true construction, as it finds it. What s 12(1) then requires is that the Court determine whether the agreement, so construed, and as a matter of substance, gives rise to a security interest as defined.
17. In the present case, I have concluded that the Agreement, on its true construction, did not provide for WHI to grant security to Mr Ding. That conclusion is a matter of substance, not merely one of form. In my opinion, s 12(1) has no further role to play.
18. Counsel for WHI submitted that, even if I concluded that WHI had agreed to grant a security interest under the Agreement, the Agreement did not, on the evidence, secure any debt. Clearly, on WHI's records, there was no debt from WHI to Mr Ding. But for WHI's amendment demand to succeed it would be necessary to show that there was no debt owing by any debtor. If I had been satisfied that the Agreement, on its proper construction, gave rise to a third party security then I would have needed to consider whether, on the evidence, there was any debt owing from the individual borrowers to Mr Ding.
19. I have already discussed the deficiencies in the evidence about the ultimate source of funds for the acquisition of the Winery. The legal onus is on WHI and requires WHI to negative the existence of any debt owing to Mr Ding by any debtor. But I think that in the circumstances of this case, once WHI proved (as it has, on the evidence) that it owes no money to Mr Ding and that it has had no dealings with him, there would be an evidentiary onus on Mr Ding to establish his case. I think there would be a real issue about this. But as it is not necessary for me to decide, I do not propose to discuss it further.

Zhang Loan Agreement

1. The terms of the Zhang Loan Agreement do not vary in any material way from those of the Ding Loan Agreement. My reasoning concerning the construction of the Ding Loan Agreement is equally applicable to the Zhang Loan Agreement. WHI is not named as a party and there was no express grant of security by WHI to Ms Zhang. For the reasons which I have given, there was no implication to this effect either.
2. Counsel for Mr Ding argued, however, that the stamping of WHI's seal on the agreement after it was incorporated changed the position. This contention was not based on ratification, which would have required that the Agreement when made had purportedly been made on behalf of WHI: Bennett v Strauss [2016] NSWCA 324 at [49]. Rather, the contention was that the stamping of the seal in effect operated as an accession by WHI as an additional party to an already existing agreement.
3. This contention gives rise to a question of corporate capacity, which is governed by Australian law as the law of the place of WHI's incorporation. In any event, as already noted, there is no evidence that Chinese law on this question is any different from Australian law.
4. Execution of a document under the common seal of the company is the corporate act of the company; it is the equivalent to a signature by an individual: Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; 170 CLR 146 at 160. Where an individual signs a contract, the contract will be void if the party signed it without any intention, by that signature, to signify assent to its terms. A typical example of such a case is where the person signing the contract signs under the influence of misrepresentation that it was a contract of a different nature. But the doctrine is not limited to such cases. The same result would follow if a lunatic signs a contract "in a frenzy", not even being aware "what were the motions his hand was performing"; or if the signature is written by a person who was sleepwalking: Gibbons v Wright [1954] HCA 17; 91 CLR 423 at 443. The same must apply where, rather than signing the document, the company's common seal is stamped on it.
5. Of course there is no question of Mr Chen being under any mistaken belief about the nature of the Agreement when he signed it, or when he later stamped the company seal on it. But the issue concerns, not Mr Chen's individual state of mind, but WHI's corporate state of mind. It is necessary, for the stamping of the seal to have been effective to bind WHI, for the seal to have been stamped so as to signify the company's corporate assent to the Agreement as a contract binding on it.
6. But that is not all. In Sheahan v Londish [2010] NSWCA 270; 244 FLR 64 at [214] Lindgren AJA said: A degree of formality has always been important in company law. It provides the means by which human action that is to be attributed to the fictional person can be identified distinguished from that which is not.
7. The formal requirements for the use of a common seal are set out in the Corporations Act 2001 (Cth), s 127. That provides for execution by common seal in the case of a sole director company, "if the seal is fixed to the document and the fixing of the seal is witnessed by" the sole director and company secretary. This definition is not confined merely to fixing (or in the current case stamping) the seal on the document. Separately it requires that the affixation (or sealing) be "witnessed". That is one of the formalities spoken of by Lindgren AJA. It requires something more than the director merely stamping the seal on the document. In my view the reference to witnessing the seal is a reference to a recognition of the sealing as a corporate act which the company, considered as a separate legal entity, has resolved upon. It requires the director to turn his or her mind to the company, as a distinct legal entity, becoming a party.
8. The evidence in the present case shows that Mr Chen's purpose in affixing the seal was to comply with Chinese custom. Mr Chen did not see it as a necessary step for the purpose of Australian law; that is why he only did it on request, and after it had already been completely executed by all the named parties. On Mr Chen's concession in cross-examination (quoted above), the purpose of fanning the pages of the agreement and stamping the seal across them, in Chinese custom, was to authenticate the pages of the document as a precaution against substitution of different pages after execution. Mr Chen accepted that to signify execution on behalf of the company the seal would instead have been stamped in a signature block on the last page of the document.
9. It follows that the seal was not placed on the document to signify that, as a corporate act, WHI was adopting the terms of the Agreement. In my view, the use of the seal on the Agreement had no legal significance.
10. For this reason, the Zhang Loan Agreement does not assist Mr Ding in the present case. It is not necessary to go into whether monies were in fact advanced under the Agreement.
11. Two further points potentially arise. First, WHI may not even have been incorporated at the time the Agreement was signed. Although WHI bears the legal onus, for reasons already given Mr Ding might well have failed to discharge the evidentiary onus on this question.
12. The second point is that the Ding Loan Agreement post-dates, and appears to cover the same ground as, the Zhang Loan Agreement. Arguably the effect of entering into the Ding Loan Agreement was to supersede the Zhang Loan Agreement so that it had no ongoing force. It is not necessary to come to a final conclusion on these points in view of my conclusion on the construction of the Agreement itself.
13. The assertion that Mr Ding's wife Ms Zhang, in entering the Agreement, was acting on his behalf was not contested. Nevertheless it may be arguable that if Ms Zhang was acting as some sort of nominee for Mr Ding, she was the person who at law held the security interest and she, not Mr Ding, should have lodged the financing statement for it. But as this point was not argued and does not affect the outcome it is not necessary to say any more about it.

Acquisition Agreement

1. The Acquisition Agreement was dated 12 April 2012, which was before WHI was incorporated. Counsel for Mr Ding accepted that this meant that the Acquisition Agreement, in the form executed on 12 April, could not have been a valid grant of security on behalf of WHI. The provisions of the Corporations Act dealing with pre-incorporation contracts (ss 131-133) were not relied upon. WHI's seal was later stamped on the side of the Agreement but, as with the Zhang Loan Agreement, that makes no difference. For these reasons, the Acquisition Agreement does not assist Mr Ding.
2. As with the Zhang Loan Agreement, the Acquisition Agreement was not executed by Mr Ding himself. Counsel for Mr Ding submitted that this Agreement, like the Zhang Loan Agreement, was entered into on Mr Ding's behalf. On the face of it, that seems difficult to accept.
3. There was no evidence, as there was for the Zhang Loan Agreement, of Ms Ding saying that the Acquisition Agreement was being entered into on Mr Ding's behalf. The Agreement was an undertaking by Ms Ding to find a lender for the individual borrowers. It was not contemplated that Ms Ding would herself be the lender. The consideration that she was to receive under the Agreement was a small percentage holding of the investment itself. On the face of it, Ms Ding was acting independently and in her own interest, not on behalf of Mr Ding. Again, however, this was not argued, and it is not necessary to pursue it further.

¥30.6 million Borrowing Agreement

1. The ¥20 million Borrowing Agreement referred only to events in 2012, whereas the ¥30.6 million Borrowing Agreement referred to events in 2013. As with the other Agreements, it is convenient to deal with the latter agreement first.
2. For convenience, I set out the critical clause again: Guarantee: Party B shall take all personal and company's properties and assets as the guarantee to repay the principal and interest to Party A on agreed time…
3. The ordinary meaning of the term "guarantee" is an unsecured obligation to answer to the debts of another. The contention for Mr Ding in effect requires the work "guarantee" to be read as "security". But this is not implausible in the context of the sentence which refers the use of assets to cover repayment. That is the language of security rather than of personal obligation.
4. Counsel for Mr Ding naturally referred to the reference to the list of companies, including WHI, which appeared in the definition of Party B (the borrower. But I think this is not straightforward. The companies listed were not identified as parties in the same way as Mr Liu and Mr Chen were. If they had been, they would have appeared separately with a dash point, and space would have been provided for execution at the end by each of them. Instead their names appeared (twice) in parentheses after the names of Mr Chen and Mr Liu. This in itself tends to suggest that the companies' names were recorded as adjuncts to the names of Mr Liu and Mr Chen as parties rather than as separate and distinct parties in their own right.
5. I also think it is important to take into account, as part of the matrix of fact, that the Borrowing Agreement was signed well after the borrowings to which it referred. As already noted, and as reflected in the Acquisition and Loan Agreements, no loan had been made to WHI or any of the other companies. It had been Mr Liu and Mr Chen personally (together with Mr Fabrizio) who had borrowed the money. When the Borrowing Agreement spoke of Party B "borrowing" (meaning "having borrowed") ¥26 million, the reference to Party B was to Mr Chen and Mr Liu personally, not WHI or any of the other companies.
6. The Borrowing Agreement also does not specify a consideration to WHI. It was not even a question of acknowledging past consideration. WHI had not borrowed the money from Mr Ding. Nor had WHI borrowed any money from Mr Liu, Mr Chen or Mr Fabrizio.
7. The chronology of events, taken on its own, would suggest that the commercial purpose of the Borrowing Agreement was to obtain from the borrowers an acknowledgement of the borrowing and an undertaking to repay a specified amount including interest on a specified date. Such a purpose did not require the grant of security by WHI. The fact that WHI was not a borrower and that the Agreement did not provide for any consideration to WHI supports that analysis.
8. In these circumstances, I do not think there is sufficient justification for reading the Agreement as a separate undertaking by WHI (and the other companies) to be responsible to Mr Ding for the repayment of the amounts borrowed and to grant security to Mr Ding for that obligation. I think the more natural reading of the Agreement is as an undertaking by Mr Liu and Mr Chen personally to be responsible for repayment of the specified amounts, and to make available all of their personal assets as well as all assets they held as a result of acquisition of the Winery, in support of that "guarantee". At most, that might carry with it a personal obligation on Mr Liu and Mr Chen to procure the companies to grant security for the borrowings. But for reasons I have given concerning the Acquisition and Loan Agreements, this would not constitute a direct grant of a security interest by WHI.
9. It is unclear whether Mr Chen was a director of WHI when the Agreements were signed. There is thus a real issue about whether the Agreements were authorised by WHI. On the evidence before me, Mr Ding might well have struggled to discharge the evidentiary onus. There is also a question about whether a grant of security by WHI was supported by consideration such as to make it enforceable as a matter of contract. But in view of the conclusion that I have reached on construction, it is not necessary to consider these matters further.

¥20 million Borrowing Agreement

1. The wording of the ¥30.6 million Borrowing Agreement is in all relevant respects the same as that of the ¥20 million Borrowing Agreement. The only difference is that a reference to "Wickham Hill" appeared in parentheses next to Mr Chen's and Mr Liu's names as parties, rather than the list of companies including WHI. I have concluded that, even with the reference to WHI, the ¥30.6 million Borrowing Agreement did not contain a grant of security from WHI to Mr Ding. That conclusion applies a fortiori to the ¥20 million Borrowing Agreement which did not refer to WHI by name at all.
2. Again, there are potential issues of authority and consideration which it is not necessary to consider. It is also unnecessary to consider whether this Agreement was superseded by the ¥30.6 million Borrowing Agreement.

Injunction against registering further financing statements

1. WHI's application for an injunction to restrain Mr Ding from registering any further financing statements was based on the decision of Robson J in Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217; 285 FLR 267 at [108]-[117]. His Honour concluded that he had power to make such an order, relying on a line of authorities concerning Torrens caveats. His Honour's decision was followed by Rein J in Macquarie Leasing (see at [30]).
2. The Court, of course, has power under its general law equitable jurisdiction to grant an injunction requiring a defendant to remove a financing statement from the Register where the maintenance of the financing statement on the Register would be a breach of some legal or equitable obligation on that defendant's part. Equally, the Court has power in an appropriate case to restrain a defendant from lodging a financing statement for registration where registration would be a breach of the defendant's obligations. The most obvious example of such a case is where the defendant has undertaken a contractual obligation (perhaps as part of a compromise) not to claim a security interest over the collateral in question.
3. WHI's application in the present case involves something different. Mr Ding has not made any relevant promise, or undertaken any other relevant obligation, which would prevent him from claiming a security interest in the assets of the Winery. There is no suggestion that, were Mr Ding to lodge a further application, his conduct would be unlawful.
4. The earliest in the line of caveat cases is Stocks & Holdings (Imperial Arcade) Ltd v Fink [1965] NSWR 504. A dispute arose between some of the tenants in a shopping arcade and the landlord concerning the terms of an agreement for the redevelopment of the arcade. The tenants claimed that the landlord had breached the agreement. They threatened to commence proceedings for recovery of an amount claimed to be due, and in the meantime to lodge caveats on the title of the property to protect their interests.
5. McLelland CJ in Eq concluded that the tenants had no caveatable interest in the property. A further issue arose as to whether an injunction should be granted to restrain the tenants from lodging the caveats as threatened. The suggestion was that the landlords were adequately protected by the provision in the Real Property Act which entitled them to compensation in the event of the lodgement of a caveat without reasonable cause. His Honour concluded, however, that the award of such compensation would not be an adequate remedy and the landlord was entitled to an injunction (at 513).
6. Halaga Developments Pty Ltd v Grime (1986) 5 NSWLR 740 concerned land which was the subject of a primary application to bring the land under the provisions of the Real Property Act. The plaintiff, Halaga, lodged a primary application. The first defendant, Mr Grime, lodged a caveat. The caveat lapsed in accordance with the provisions of the Act after three months. The day before the first caveat lapsed, Mr Grime lodged a second caveat. That too lapsed after three months but the day before it lapsed Mr Grime lodged a third caveat. Proceedings were commenced on behalf of Halaga seeking removal of the caveats and an order restraining the defendant from lodging any further caveats. On behalf of Mr Grime, a cross-claim was filed seeking a determination that Mr Grime had title to the land, and in the meantime restraining Halaga and the Registrar-General from proceeding with the primary application.
7. Orders were then made for the separate trial of three preliminary issues. The first was whether Mr Grime's second and third caveats were invalid because the first caveat had been allowed to lapse. The second question was whether, if so, and assuming that Mr Grime did in fact have good title to the land, he was entitled to restrain the further progress of the primary application. The third question was whether, if so, an injunction should be granted to Mr Grime on the facts.
8. The trial of the separate hearing came before Waddell CJ in Eq. His Honour's judgment concerned only the first two questions; the evidence on the third question was incomplete. His Honour was thus dealing with issues of principle.
9. On the first question, his Honour considered that Mr Grime's conduct in lodging a fresh caveat the day before the expiry of the first caveat, and so on, thereby indefinitely postponing consideration of the primary application, was an abuse of the caveat procedure. His Honour said: The caveats after that lodged on 28 February 1985 are all in the same terms as the first caveat. In my opinion, they represent a clear abuse of the caveat provisions and each of them is invalid. If it is necessary that they should be removed an order should be made to that effect.
10. On the second question, it was argued for Halaga that, by seeking to protect his rights by means of caveat, Mr Grime had deprived himself of the opportunity to invoke the Court's general law jurisdiction to grant relief to a person claiming to have an interest in land. His Honour said: … it seems to me to be well recognised that the jurisdiction of the Court to protect rights of property extends to granting an injunction against a person who has been made a party to the proceedings from doing something which is lawful if it is necessary to do so to protect the plaintiff's rights. One instance is the practice of granting injunctions restraining a bank from permitting a defendant to operate on his account where to do so would be an infringement of the plaintiff's rights. Hodgson J has considered the question in Williams v Marac Australia Ltd (1985) 5 NSWLR 529, and concluded that the Registrar-General may be restrained from acting lawfully in order to protect the rights of a plaintiff. I respectfully agree with his Honour's conclusions and reasons. Further it seems to me to be now beyond question that the Court has jurisdiction to grant such an injunction derived from the Supreme Court Act 1970, s 23, which provides: "The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales". This clearly authorises the granting of an injunction against the Registrar-General if he has been made a party to the proceedings and it is necessary in order to do justice between the other parties.
11. His Honour went on to conclude that this jurisdiction was not ousted by the RPA provisions concerning caveats.
12. In Milne Feeds Pty Ltd v Bride (unreported, Supreme Court of WA, Murray J, 7 May 1996) the defendant had previously lodged two caveats over the property. The first was lodged in 1989 and was removed. The second was lodged in 1992 and was also removed. In each case the defendant appealed unsuccessfully. The proceedings before Murray J concerned a third caveat. His Honour concluded that there was no substance to the caveator's claim and the third caveat should be removed. He cited the passage of the judgment of Waddell CJ in Eq concerning the second question in Halaga Developments which I have quoted above and also the decision in Stocks & Holdings. Murray J concluded: I have arrived at the settled view that the caveat G35519 should be removed and, in my opinion, the history of this matter reveals clearly that it is necessary for the court at this stage to take the unusual step of making the further orders sought by the plaintiff to restrain the first defendant from lodging any further caveat against the land until further order. To assist the efficacy of that order it should be ordered that the second defendant be restrained from registering any such further caveat until further order of the court. Only by that means will it be possible, in my opinion, to ensure that time is not unnecessarily wasted and proceedings not unnecessarily proliferated. The effect of those orders of course will be to require the first defendant to obtain leave before the further caveat may be lodged and registered. Such an application would necessarily require cogent evidence in its support and in support of the contention of a caveatable interest.
13. His Honour's decision was applied by Murphy J in Gangemi v Gangemi [2009] WASC 268 in a similar case where a caveat was lodged in defiance of an earlier decision of the Court.
14. The headnote in Halaga Developments states: (1) It is an abuse of the caveat provisions of the Real Property Act 1900 to lodge a series of identical caveats which would prevent indefinitely consideration of a primary application and each such caveat other than the first is therefore invalid. (2) By virtue of both the ordinary jurisdiction of the Court to protect rights of property and the Supreme Court Act 1970, s 23, the Court has jurisdiction to grant an injunction to restrain a party from acting lawfully where such restraint is necessary to protect the rights of another party.
15. The juxtaposition of these two propositions could be misleading if it were taken to imply that they are necessarily related. Waddell CJ in Eq found, in accordance with proposition (1), that the repeated caveats were an abuse of process. But he merely ordered their removal. His Honour did not consider whether to grant an injunction against further caveats as well. Proposition (2) concerned the question whether a caveator could obtain a general law injunction. This is not the question which arises in this case.
16. An injunction was granted in Stocks & Holdings where there was an express threat to lodge a caveat and a finding that the interest claimed in the threatened caveat did not exist. In Milne Feeds and Gangemi, similarly, there were repeated lodgements of caveats where the court had previously decided the question of title adversely to the caveator. In both Milne Feeds and Gangemi there was liberty to apply, so the injunctions were not final.
17. In my view, the proper explanation of the decisions in Stocks & Holdings, Milne Feeds and Gangemi, is that where the court exercises its jurisdiction to determine a question of title, it may, in a proper case, grant an injunction in aid of that determination. It hardly needs to be said that the exercise of this power would be sparingly exercised. There would need to be a real basis for thinking that the unsuccessful party will not accept the Court's conclusion. But in a proper case I think that the Court has power to ensure that its decision quelling the dispute is not frustrated by collateral means.
18. On this analysis, the power derives from the Court's general law jurisdiction to determine title to property. It can therefore be exercised by this Court outside the framework of the PPSA. But, having regard to my analysis of s 182, I also think that a declaration of right, and, in a proper case, an injunction in aid of that declaration, can be granted under PPSA, s 182(4)(c).
19. The question is therefore whether this is a proper case for an injunction. I do not think it is.
20. As already noted, WHI was initially invited to deal with the case on the basis that the Court would not need to decide whether Mr Ding's claimed security interest actually existed. WHI did not seek a declaration that Mr Ding had no security interest. I do not know whether, had it been clear at the outset that WHI was seeking a final determination that no security interest existed, Mr Ding's case would have been conducted differently. Having regard to the way the case has been conducted, I decline to grant an injunction in the terms sought.

Conclusions and orders

1. I have concluded that: (1) on the evidence before the Court, Mr Ding has no security interest in the Winery assets, and, accordingly, WHI's amendment demand is authorised and Mr Ding's registration should be removed; (2) the Court should not, however, make an order restraining Mr Ding from lodging any further financing statement for registration under the PPSA.
2. I see no reason why costs should not follow the event. I will therefore order that Mr Ding pay WHI's costs. Any application for variation of that order can be made in accordance with the Rules.
3. The orders of the Court are:
4. Order that the second defendant register a financing change statement removing registration number 2017 02030061920 from the Personal Property Securities Register.
5. Order that the first defendant pay the plaintiff's costs of the proceedings.

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