(xii) Signed by Chinese Representative Daihong Xu and Australian Representative Ziqiang Shi and witnessed by Xianjuan Zhou and Zhen Chen and dated Saturday 19 February 2005.
17 The defendants' counsel made a number of observations which placed some reliance on the absence from the document of any reference to return on the investment. In my reading, the document quite clearly provides for this subject by referring in paragraph 1 to the venture as a joint venture and by going on in paragraph 2 to provide for each of the two parties to hold 50 percent of the shareholding. With the adoption of the company mechanism this provides sufficiently clearly for what is to happen with respect to profits of the company.
18 Counsel also made observations against the effect which the plaintiff attributes to the document and relied on the absence of any provision about repayment. That is, all clause (xi) says is: "Daihong Xu agrees to lend $250,000 to Ziqiang Shi". In my opinion this is not a defect. The ordinary approach in the construction of a document about a loan in such terms (and terms like this are very commonly encountered) is that it is implied that the money is to be repaid on reasonable notice. If the document has contractual effect that implication is, in my opinion, altogether clear.
19 I go on to say that while it is not to be supposed that the parties had any grasp of the complexities which may arise from making reference to a shareholding without going on to specify whether the ownership is beneficial, there is no difficulty in understanding this document according to its own terms because the earlier reference to a joint venture made it clear enough in my view that the shareholding of 50 percent which, according to its terms the defendant was to have was to be held by him beneficially.
20 The terms of the document go considerably further than what evidence would show had earlier been arranged. It deals with subjects, most particularly the concept of the $250,000 as a loan, of which so far as evidence shows there had been no discussion between the parties and no explicit arrangements at any earlier stage than the appearance of this material in the draft document. When read in the factual context it is to be understood and indeed at a number of points the terms of the document show that it is stating the effect of arrangements which have already taken place; it is not an agreement to launch as at 19 February on a new joint venture. Some of the events which it seems to speak of were not literally enacted; there was no event, for example, in which the plaintiff handed over to the defendant $250,000 in a cheque, or for that matter in a carpet bag or in any other form; the reference to a loan is the character given to events which had already happened.
21 The case put forward by the plaintiff requires that I take the view that the agreement gives effect to and restates what the parties had earlier agreed in an arrangement that was not expressed well and some details of which had not earlier been specified at all.
22 The evidence about what took place in the discussion on 19 February seems to make it clear that there were aspects of the arrangements which the parties had not explicitly confronted earlier; interest on the loan being very prominent among these. I should interpose that although in the Statement of Claim the plaintiff claims interest, the claim cannot in my opinion be based on the provisions of clause xi about interest because the reference to "the bank interest rate" is indeterminate; nothing in the document and nothing in other evidence establishes what is the bank interest rate referred to. There could, of course, be many. The indeterminacy of that provision does not affect the contractual effect of the whole document.
23 The case for the defendant is that, whatever its terms, the document was not intended by the parties to be effective or to be a contractual arrangement at all. The defendant dealt in his affidavit at some length with the discussion of 19 February. See particularly paragraphs 125 and 126. I should note also a passage in his oral evidence as interpreted at transcript 185, line 36. There is a slight shift of context in the question, but the question is as follows:
Q. …the question was about whether in your understanding there was a loan?
INTERPRETER: Because at that time when we were dealing the whole business were based on trust so I think it was not very important on what was said in the document. And also at that point when I was sign the agreement and the loan was not happening, the 250,000 loan, that wasn't happening with Shi Ziqiang.
24 The defendant does not give evidence that an arrangement was made to produce a false document, indeed nobody does. In his evidence, however, all conversations before 19 February took place on the basis that the plaintiff was investing and buying a business and the defendant was helping the plaintiff to do so and was to manage the business. In any event, his evidence of those earlier conversations is all consistent with that reading.
25 Xi Shi shown as Lucy Shi, the defendant's daughter, a highly educated person who has perfect English, gave an account of the conversation of 19 February. It was disputed by the plaintiff that she was even present on the occasion. I do not see any clear resolution of this issue of fact, but as the account of the conversation which she gives does not differ in any way which I regard as important from the accounts of other persons who were undoubtedly there, I do not see a purpose in pursuing this issue, potentially adverse to credit or even to character of some of those involved, as it could not affect the outcome. Her account of the conversation does not show or in any way tend to show that the document produced was fictitious or intended to be a sham or otherwise that there was an arrangement to make a document which did not have its purported effect. Indeed, the same is true of the evidence of Julia Shi.
26 In the defendant's case migration and creating conditions for a successful application by the plaintiff for a visa based on ownership of a business in Australia are the central subject and the real subject of the arrangements. The arrangements began to be made in China during the August 2004 visit. There was earlier discussion of possible migration and references to the subject from January 2004 onwards. The defendant and Julia Shi had strong family motivation to assist in a project of this kind.
27 The defendant's case, therefore, is that the document does not represent real arrangements that were made, but was produced to make it seem there was a co-owned business, on some view that this would assist an application for an immigration visa. I am asked to find that it was not intended that the defendant would really own shares, or would really part own the business, or would need to pay for these shares, or would borrow money to do so. The document exhibit A was produced to give what was thought to be an appearance favourable to a visa application, not to record any actual agreements.
28 There is a lengthy outline in Defence paragraph 2 of what are alleged to be the true arrangements. According to this outline, the loan was fictitious, the defendant handled money on the plaintiff's behalf and he did not receive any of it himself. In my understanding nothing in the evidence articulates at any point the concept that the agreement was a construction, a fabrication or was not truly intended to be effective, or that it was a sham or was in any other way not a record of the parties' arrangements.
29 As appears clearly from the exposition of McHugh JA in Air Great Lakes Pty Limited v K S Easter (Holdings) [1985] 2 NSWLR 309 at 336 and 337, before one approaches legal rules which limit the interpretation of a written agreement to its contents and the qualifications on those rules, it is necessary that there should be a finding that the document was intended by the parties to be contractually binding on them. McHugh JA's judgment in the passage referred to shows, in what I would respectfully say is an illuminating way, a number of lines of reasoning or shapes which facts might assume which show that that was not the case. His Honour tellingly quoted a passage from Corbin on Contracts (at 337D). "… we need not begin excluding parol evidence until we know a contract has been made". There is further illuminating discussion in the judgment of Mahoney JA at 330 - 332.
30 A related subject on which defendant's counsel relied and from time to time has been followed is a line of reasoning to show that arrangements which could have been understood in their terms as contractually binding do not have that effect. This reasoning appears from a passage of the judgment of Salmon LJ in the Court of Appeal of England and Wales in Jones v Padavatton [1969] 2 All ER 616, at 621 CD. It should be seen that the subject under consideration was quite limited and related to an allowance or subvention paid to a daughter to assist her to follow a particular career path, and to leave her earlier career path. It is hardly surprising that where allowances are paid by parents to children, even adult children, tribunals charged with finding the facts quite frequently determine there was no intention to create a legal relationship. There is, as Salmon LJ's dictum shows, no legal rule involved, but rather a consideration, sometimes according to facts quite a powerful consideration, for assessment by the tribunal of fact which has the task of finding what the parties intended. I note some consideration of this subject in Gray v Gray [2004] NSWCA 408 in the judgment of Young CJ in Eq, with which Sheller JA and I agreed, at paragraphs [55 - 57] where the limits of the dictum in Jones v Padavatton are expounded. I particularly note the passage quoted from Fleming v Veebers in the Court of Appeal New Zealand (Tipping J): "Each case will turn on its own facts and there is no substitute for a careful examination of those facts."
31 The plaintiff's claim as presented at trial is far simpler than the Statement of Claim seems to show. It is a claim to recover the debt of $250,000 purportedly recorded in exhibit A. Of course the claim depends on establishing the issue to which I have referred, that is, that the document exhibit A was intended by the parties to create legal obligations in accordance with its terms; the onus of showing which is on the plaintiff.
32 There are other matters in the pleaded Defence to which I should refer. There is a reference in the Defence paragraph 9 to the absence of clean hands and (as its terms seem to show) to illegality or some process of deception on public authorities. Having regard to the facts in evidence, these references are not really in point. There is no element on the facts of illegal or deceptive dealing with migration authorities. The plaintiff's claim is a common law claim and absence of the clean hands is not a defence in any event. There was nothing in the evidence which in my understanding could be regarded as an absence of clean hands, and in particular there is nothing in the dealings of the plaintiff with the defendant which could reasonably be so regarded.
33 As I earlier said, to my mind the central issue is to be disposed of by making a finding having regard to what appear to be the probabilities of the situation. The most significant element which I regard as bearing on the probabilities is the form of the document and the fact that the defendant Mr Shi himself typed it out and also the fact that he signed it. According to its terms it is an agreement. It says so in the heading. Its language, although it is only accessible to me through interpretation, deals fairly concisely and fairly clearly with a number of matters appropriate to a legally binding agreement between these parties. Mr Shi knew what it said, indeed he had more or less composed it and he signed it. It is extremely improbable in my view that he would have done this if he did not regard it as correctly stating the effect of the arrangements which he had made. The improbability is heightened by discussion which undoubtedly took place that evening in his presence; and also earlier than that, about the purpose of the document being to protect the positions of the parties.
34 There are other matters of probability which support this view. Notwithstanding the family relationship, it is improbable that the defendant gave him, or in effect gave him shares which had just cost about $250,000. At this point I refer to the observations in Gray v Gray. The application of the principle there considered is a matter of scale. Even among closely related persons, the point probably arises well before $250,000 where the arrangement simply being a personal arrangement relying on trust ceases to be a feasible explanation.
35 There are some other matters. The defendant put $2,000 of his own money down as a deposit before obtaining the plaintiff's approval. He gave a lot of attention and effort and used his own judgment and life experience for the decision to acquire the business. He left a job which had he had held for three years and worked in the business. His hourly rate was the same Telstra had paid him. To my mind, this as a matter of probability supports the view that he had further involvement and there were further prospective advantages for him than had been held out at his job at Telstra.
36 The defendant dealt at length with Oscar Lau, the previous manager. He investigated the value of the business and went to considerable effort to do so. He negotiated at length with Mr Brett Li; and dealt in detail with Grace Fung, the solicitor whom he chose and instructed. He made all arrangements to take over the company. He went to a great deal of trouble, which it is difficult to accept he did only to assist a relative and a family member. All of the events make the whole project much more consistent with his being motivated by his own economic participation. He guaranteed the lease. He brought money in when the business was declining. In 2006 he brought in some of his own money, not indeed a great deal, to support it. All of this is very unlikely if he did not have a high sense of involvement as a proprietor and not just as a nominee for a relative.
37 Nothing which the evidence suggests was said in the events leading up to signing exhibit A shows or even suggests that preparing and signing Exhibit A was a joke or was less than seriously intended. I see nothing in the event which could be a joke. Handing over a quarter of a million dollars and signing a document to pay it back are both of them well beyond a joke and well beyond an informal family arrangement.
38 There are many references in evidence to the plaintiff's migration application. In her evidence the subject was introduced when the defendant reported to her in September or October 2004 on his negotiation with Brett Li the vendor, who said he could assist with a migration and visa application. According to the plaintiff's evidence, she formed the intention of seeking a visa and migrating to Australia only after the Padstow business had been purchased. In the defendant's evidence the subject arose in Pudong Shanghai in August 2004, and as depicted in advocacy for his case was central to all the business in hand.
39 There was an application to an agency of the State of New South Wales for State sponsorship about April 2005. This was refused about 6 July, relodged on 22 August and again refused on 29 August 2005. On 20 October 2005, an application for sponsorship was lodged with an agency of the Victorian Government based on a business proposal for a different business venture. This led to the grant of a State sponsored business visa on 22 September 2006. Several projected businesses were put forward for consideration in connection with visa applications and the business at Padstow did not have any prominent place. Indeed one projected business was a newsagency in a shopping centre at Narre Warren in Victoria. I note that the business visa eventually obtained did not confer permanent residency and was valid until 22 April 2011.
40 There is nothing wrong and nothing which should be concealed about buying or owning a business with the hope of assisting a visa application. Many people do this. Investing in a business in Australia is obviously likely to assist a visa application. There are different kinds of visas with different requirements. The plaintiff made a visa application in 2005 which did not succeed. At a later stage she made one which did. Nothing has been shown to me which in a comprehensible way shows that making exhibit A and putting incorrect provisions in it helped or could be expected to help a migration application. In my finding migration was a possible course for the plaintiff to take in the future, considered in the period from August 2004 up to and including February 2005. This was known and discussed in the family, but it is not the explanation for what is written down in exhibit A. In my finding exhibit A is about what it says it is about and it records what the parties intended to do.
41 Later events can be compressed. The business was not a success. The problems all fell on the defendant to manage. The plaintiff was in China. The plaintiff did not respond or would not agree to what the defendant wanted to do, sell the business. But she made no other useful intervention and took no initiative at significant times. The thought or fear that selling the business might prejudice her then pending migration application was in her mind. Eventually the defendant acted without her, and notwithstanding protests by her he appointed a selling agent, agreed that the company should sell the business to Y N S Trading Pty Limited, took a deposit, obtained and sent to the plaintiff an accountant's report on the state of affairs and repeatedly urged her to join in and authorise what was happening. In doing this, he behaved with economic rationality whatever his position was, whether mere agent or participating co-venturer. The plaintiff refused to participate, challenged the effectiveness of the sale and generally withheld co-operation. She was able to come to Sydney at an appropriate time, although not immediately as the defendant at one point demanded.
42 On 2 February the defendant, with what might be thought to be high-handed behaviour, but behaviour which had in a way an economic justification, held a purported directors meeting and was a party to documents which transferred or appeared to transfer the plaintiff's shares to himself and to dismiss her as a director. These were altogether irregular acts, not authorised by the company's constitution or by the plaintiff. They had no effect. Each party still owned half the shares and the plaintiff still was a director. The true position is that each is still entitled to 50 percent of the shareholding.
43 However, on 5 February 2006 the defendant executed a second or substituted agreement for sale in much the same terms as the earlier one providing for sale at $130,000 together with up to $100,000 for stock. The sale was settled on 12 February 2006. In effect he wound up the company's affairs informally. He collected the balance of moneys and left them in the company's bank accounts of which (I interpose) he was the only signatory. A complete deadlock and breakdown has taken place. Co-operation cannot be hoped for. The company's business has ended and its enterprise and purpose are no longer there. The only two principals are at law against each other. There has been a loss of $220,000 or so of goodwill and perhaps there have been other losses.
44 In the circumstances the company must be wound up . It is just and equitable to do so. When the consent of a liquidator is produced I will make an order to that effect. I see, however, the possibility that the parties may make some other arrangement. I leave it to their judgment whether they should do so. Of course, they must make a judgment about the adverse impact on the interests of creditors or of others, and I have no involvement in that. I have not heard of there being any outside creditors.
45 A great deal of the time taken in adducing evidence and indeed a great deal of the submissions of counsel at the end of the evidence related to what were put forward as questions of credit. I do not regard the case as turning on questions of credit. Many things which were put forward as anomalies appear to me to be probably the kind of misunderstanding and difficulty of expression to be expected in a case where evidence is given by interpretation, particularly a case about conversations which took place four or five years ago. Submissions went to considerably close details about the times and terms in which there were references to or discussions of the subject of the plaintiff's possible migration. As other observations show, I do not attribute high importance to this subject. Essentially there is no evidence which shows or tends to show that the document was put together to give a good colour to a migration application without any real intention that the document should be effective.
46 I do mention a passage at transcript 176, line 22 where, after a passage in cross-examination of the defendant about the preparation and terms of exhibit A the following appears: