Sui v Jiang

1. [1]

   On 14 September 2015, Fortune Agribusiness Funds Management Pty Ltd (“Fortune”) was granted Crown Leases in respect of two blocks of undeveloped land in the Northern Territory.

2. [2]

   The Crown Leases imposed conditions on the tenant to clear, cultivate, prepare, and plant specified areas of the land for commercial horticultural crops. There was a provision that the Crown Leases could be converted into freehold title, but only if the phased development conditions were met. The Crown Leases were originally for a five-year term expiring on 14 September 2020. They were extended for one year and ultimately terminated on 13 September 2021.

3. [3]

   Fortune is a company associated with the defendant, Mr Zhaoqing Jiang.

4. [4]

   On 26 May 2017 Mr Jiang entered an agreement (the “Agreement”) with the plaintiff, Mr Guangyi Sui, pursuant to which Mr Jiang agreed to transfer to Mr Sui 40% of the shares in a company that was to acquire the Crown Leases. That company was Australian Fulin Agriculture Pty Ltd, a company also then associated with Mr Jiang (the “Company”). The Agreement provided that Mr Sui pay Mr Jiang $1.5 million for that 40% shareholding. Mr Jiang transferred the shares to Mr Sui on 9 June 2017. Mr Sui paid Mr Jiang the $1.5 million between 9 and 15 June 2017.

5. [5]

   On 16 December 2017, Fortune executed a transfer of the Crown Leases in favour the Company. The transfer was registered on 18 December 2017.

6. [6]

   Clauses 4 and 5 of the Agreement provided:

7. [7]

   The original Agreement was written almost entirely in Mandarin. It is agreed that what I have set out is a correct translation to English.

8. [8]

   As can be seen from the first sentence of cl 4, it was a term of the Agreement that for the first three years, Mr Jiang guaranteed Mr Sui an agreed annual return of 10% of the $1.5 million invested, payable by the 365th day from the date of each anniversary of the date on which the investment money was provided. Those payments, of $150,0000 each, were therefore due on 15 [1] June 2018, 2019, and 2020. The first two payments were made. The third was not. Mr Sui seeks to recover the third payment in these proceedings.

9. [9]

   As can be also seen from the later terms of cl 4, the Agreement gave Mr Sui an option “from the fourth year onwards” to elect to:

10. [10]

    The entitlement to exercise the options was expressed in cl 4 of the Agreement to be “from the fourth year onwards”. The earlier words in cl 4 make clear that the “fourth year” is to be ascertained by reference to when Mr Sui paid the $1.5 million for the shares. As I have said, that was on 15 June 2017, such that the “fourth year” thereafter commenced on 15 June 2020.

11. [11]

    Thus, Mr Sui could only exercise one of these options in the period commencing on 15 June 2020.

12. [12]

    Although it was evidently earlier a matter in contest, [2] before me it was common ground that Mr Sui could only exercise the options in cl 4 prior to 31 December 2020.

13. [13]

    Mr Lawrance SC, who appeared with Mr Elliott for Mr Jiang, described the period between 15 June 2020 and 31 December 2020 as the “Option Window”. I shall do the same.

14. [14]

    In earlier proceedings (the “Earlier Proceedings”), Johnson J, [3] and then the Court of Appeal, [4] determined that on the proper construction of the Agreement, and despite the reference in Option 3 to “the 20 square kilometres”, Option 3 did not confer on Mr Jiang an obligation to transfer any part of the land in the Crown Lease to Mr Sui in the event that Mr Sui exercised Option 3. I return to this below.

15. [15]

    Mr Sui contends that he has exercised “Option 3” and relies on a series of WeChat messages he exchanged with Mr Jiang between August 2017 and January 2019 to show that, looking at the matter objectively, he had manifested an intention to “leave the company” and thereby to exercise Option 3.

16. [16]

    Mr Sui has now sold his shares in the Company for $1,000 and seeks to recover the difference between that sum and $1.5 million from Mr Jiang.

17. [17]

    As I have said, Mr Sui also seeks to recover from Mr Jiang the $150,000 due on 14 June 2020. Mr Jiang contends for an Anshun [5] estoppel in respect of that claim arising from the Earlier Proceedings. I return to this below.

The Earlier Proceedings

1. [18]

   On 27 September 2019, Mr Sui commenced the Earlier Proceedings against Mr Jiang and the Company.

2. [19]

   I will return below to the significance of the allegations made by Mr Sui in the Earlier Proceedings so far as concerns his claim before me that he has exercised Option 3.

3. [20]

   In the Earlier Proceedings, Mr Sui propounded a construction of the Agreement that this Court, both at first instance and on appeal, has found to be incorrect.

4. [21]

   Thus, the Statement of Claim in the Earlier Proceedings alleged, concerning the proper construction of cl 4 of the Agreement:

5. [22]

   As Mr Young SC, who appeared for Mr Sui before me, and also in the Earlier Proceedings, explained, Mr Sui thus argued in the Earlier Proceedings that cl 4 of the Agreement:

6. [23]

   Johnson J did not accept Mr Sui’s construction of cl 4 of the Agreement.

7. [24]

   Thus, his Honour held: [6]

8. [25]

   Mr Sui appealed. The Court of Appeal, by majority, dismissed the appeal. Leeming JA, with whom Gleeson JA agreed, concluded: [7]

9. [26]

   Brereton JA dissented.

10. [27]

    Before me, Mr Young described what happened in the Earlier Proceedings as follows:

Did Mr Sui exercise Option 3?

1. [28]

   In the light of the decision in the Earlier Proceedings, Mr Sui now brings these proceedings alleging that he has exercised Option 3 and that, now that he has sold his shares in the Company for $1,000, and consistently with his entitlements under the Agreement as determined in the Earlier Proceedings, he is entitled to recover the difference between that figure and $1.5 million from Mr Jiang.

2. [29]

   The critical question is whether Mr Sui has exercised Option 3 and whether he did so within the period of the Option Window.

3. [30]

   The conduct of Mr Sui upon which Mr Young relied as bespeaking Mr Sui’s exercise of Option 3 occurred prior to that period.

4. [31]

   It is common ground that the question of whether Mr Sui exercised Option 3 is to be determined objectively.

5. [32]

   It is not necessary for Mr Sui to show that his subjective intention was to exercise the option. [8]

6. [33]

   Where, as here, the agreement contains no express provision specifying how the option is to be exercised, “any definitive communication of an election would suffice” but it is necessary that the communication should “express clearly and unequivocally” the fact that the option is being exercised. [9]

7. [34]

   The relevant communication must be “an absolute and unqualified acceptance of the rights and liabilities conditionally created by the option”. [10]

8. [35]

   Although Mr Young submitted that Mr Sui was obliged to exercise one of three options in cl 2 of the Agreement, I cannot see how that can be correct.

9. [36]

   Clause 4 says that “from the fourth year onwards” Mr Sui is “entitled” to do one of the three things thereafter specified.

10. [37]

    I see no words in cl 4 which would have the effect of compelling Mr Sui to take any step in relation to the options.

11. [38]

    If Mr Sui took no such step then he would remain in the same position that he was prior to the “fourth year”; that is, the holder of 40% of the shares in the Company.

12. [39]

    Mr Young submitted that the nature of Option 3 was to “choose to leave the Company”, picking up the words used in cl 4.

13. [40]

    However, the question for me is whether, during the period of the Option Window, looking at the question objectively, Mr Sui made an absolute and unqualified and clear and unequivocal exercise of the right of election provided for in cl 4 of the Agreement.

14. [41]

    Mr Young pointed to a number of WeChat communications between Mr Sui and Mr Jiang that he submitted showed that Mr Sui had “chosen to leave the Company” and thereby exercised Option 3.

15. [42]

    Those WeChat communications commenced on 11 August 2017 and concluded on 22 January 2019; well before the period of the Option Window.

16. [43]

    In the earlier WeChat communications, Mr Sui made enquiries as to when the land the subject of the two Crown Leases held by the Company would be converted to freehold.

17. [44]

    Thus, on 11 August 2017, Mr Sui enquired:

18. [45]

    Mr Jiang made various replies including that there are “some problems with transferring ownership”. [11]

19. [46]

    On 5 November 2018, Mr Sui sent Mr Jiang this message:

20. [47]

    It seems Mr Jiang did not reply to that message prompting Mr Sui to send this further message on 7 November 2018:

21. [48]

    On 12 November 2018, Mr Jiang replied:

22. [49]

    The passage I have emphasised in this WeChat exchange appears to bespeak Mr Jiang’s agreement that he would repay the $1.5 million that Mr Sui had paid for his shares in the Company. Thus, he stated that he would “arrange the money” for Mr Sui’s “exit”.

23. [50]

    At around this time, described by Mr Sui as being “early December 2018”, he had the following WeChat exchange with Mr Jiang:

24. [51]

    The only other WeChat communication evidence is one sent by Mr Jiang on 22 January 2019, evidently in reply to the WeChat communication set out in the preceding paragraph:

25. [52]

    Mr Jiang here appeared to be recanting on his agreement to “arrange the money” for Mr Sui’s “exit” from the Company.

26. [53]

    These WeChat communications make clear that Mr Sui was seeking to have his investment of $1.5 million returned and that Mr Jiang had indicated that he would do this.

27. [54]

    It may be that the inference arises from these matters that Mr Sui was also proposing that, once his investment was returned, he would return his 40% shareholding to Mr Jiang, although there is no evidence that this was discussed.

28. [55]

    However that may be, I see these WeChat communications as falling far short of an unequivocal or definitive communication by Mr Sui of an intention to exercise Option 3. Mr Sui was not entitled to exercise Option 3 at the time of these WeChat communications and indeed would not become entitled to exercise Option 3 for some 17 months following the last of these communications in January 2019.

29. [56]

    There is no evidence of any communications between Mr Sui and Mr Jiang between January 2019 and June 2020, when the period of the Option Window commenced. So far as the evidence reveals, Mr Sui took no steps to enforce what appears from the WeChat communications to be an agreement made or understanding reached in December 2018 that Mr Jiang would “arrange the money” for Mr Sui’s “exit” from the Company.

30. [57]

    Within the period of the Option Window, two things happened.

31. [58]

    First, on 30 August 2019, Mr Sui purported to terminate the Agreement based on Mr Jiang’s alleged anticipatory breach of it.

32. [59]

    Thus, on 30 August 2019, Mr Sui’s solicitors sent a letter to Mr Jiang and to the Company:

33. [60]

    The passages I have emphasised show that Mr Sui maintained the construction of cl 4 later articulated in Mr Sui’s Statement of Claim in the Earlier Proceedings, set out at [21] above, and later rejected by Johnson J and by the majority of the Court of Appeal in the circumstances to which I have referred.

34. [61]

    The letter makes no reference to Mr Sui’s shareholding nor, in my opinion, manifests any intention to exercise Option 3. Indeed, the letter could not constitute an exercise of Option 3 as it purports to terminate the Agreement under which such option existed.

35. [62]

    Second, on 27 September 2019, Mr Sui commenced the Earlier Proceedings.

36. [63]

    The Statement of Claim alleged breaches of the terms to which I have referred above requiring that the land be developed, [12] described as the “Block Development Breaches”, and then alleged:

37. [64]

    Consistently with the 30 August 2019 letter, the Statement of Claim thus alleged at par 20 that Mr Sui had terminated the Agreement.

38. [65]

    Further, in the paragraphs I have emphasised, Mr Sui positively alleged that he had not and could not “make the promised election”; that is, exercise Option 3.

39. [66]

    These assertions no doubt reflected Mr Sui’s erroneous understanding of his entitlements under the Agreement, namely, upon exercise of Option 3, to call for a transfer of 40% of the property the subject of the Crown Lease. But that does not alter the fact that Mr Sui was asserting that he had not and could not exercise Option 3.

40. [67]

    I cannot see how, in those circumstances, I could conclude that what Mr Sui said in the course of his WeChat communications with Mr Jiang a year and a half earlier could themselves amount to an exercise of Option 3.

41. [68]

    Mr Sui does not point to any other act by him within the period of the Option Window that could amount to an exercise by him of Option 3.

42. [69]

    My conclusion is that Mr Sui has not, within the period of the Option Window, purported to exercise Option 3.

43. [70]

    It follows that he has no entitlement to look to Mr Jiang to make out the difference between $1.5 million and the sale price of $1,000 that Mr Sui was able to achieve.

44. [71]

    As I have said, Mr Young contended that his WeChat communications with Mr Jiang that I have set out made clear that Mr Sui had “chosen to leave the Company” for the purposes of cl 4 of the Agreement.

45. [72]

    But he has not done so. He has retained his shareholding in the Company. He has purported to terminate the Agreement. It has been held that his actions were not effective to achieve that result.

The sale of the shares

1. [73]

   As I have said, Mr Sui sold his shares in the Company for $1,000. The purchaser was an entity associated with Mr Sui’s solicitor’s brother.

2. [74]

   As I have found that Mr Sui did not exercise Option 3, it is not necessary to further examine the circumstances in which Mr Sui sold his shares in the Company.

3. [75]

   In any event, and although much time was devoted during the hearing to this question, Mr Lawrance ultimately made only one submission in answer to it.

4. [76]

   Clause 4 of the Agreement provided, as construed in the Earlier Proceedings, that if Mr Sui exercised Option 3, he was entitled to sell his shares in the Company at “the then market price” and that, if the sale price was less than $1.5 million, he could recover the difference from Mr Jiang.

5. [77]

   Mr Lawrance submitted that this provision obliged Mr Sui, in these hypothetical circumstances, to sell the shares at the market price prevailing at the time he exercised Option 3 and that, although there was evidence that at the time of the sale in May 2023 the shares had no value, there was no evidence of their value during the period of the Option Window.

6. [78]

   I do not accept that this is the proper construction of cl 4. The more natural meaning to be attributed to the expression “the then market price” is the market price at the time of the election of the option.

7. [79]

   Otherwise, as Mr Young pointed out, were the market price of the shares to double immediately on expiry of the period of the Option Window, Mr Sui would nonetheless be obliged to sell the shares at the lower price prevailing during the period of the Option Window. The parties cannot have intended this result.

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

1. [80]

   As I have said, Mr Sui also seeks judgment in the sum of $150,000 for the interest that fell due for payment in June 2020.

2. [81]

   Mr Jiang contends that Mr Sui ought reasonably to have included that claim in the Earlier Proceedings and contends for an Anshun estoppel. [13]

3. [82]

   Mr Jiang offers no other defence to this claim.

4. [83]

   There is no dispute about the relevant principles. They are that:

5. [84]

   The $150,000 interest payment was not due when the Earlier Proceedings were commenced on 27 September 2019. However, as Mr Young accepted, the pleadings in the Earlier Proceedings could have been amended in June 2019 to include such a claim.

6. [85]

   The Statement of Claim in the Earlier Proceedings alleged the existence of Mr Sui’s entitlement to receive the relevant payment of interest. Thus par 2 of the Statement of Claim read:

7. [86]

   Further, as I have said, in the Earlier Proceedings Mr Jiang made a claim “in the alternative” that Mr Jiang and the Company were indebted to him for $1.5 million.

8. [87]

   Mr Young submitted, I think correctly, that that alternative claim, like the claim for damages for anticipatory breach of the Agreement, was premised on the Agreement having ended by reason of Mr Sui’s purported termination of 30 August 2019.

9. [88]

   That was certainly how Mr Young ran the case before Johnson J as the following passage reveals:

10. [89]

    That matter was noted in Leeming JA’s judgment in the appeal. [18]

11. [90]

    In those circumstances, I do not think it was unreasonable of Mr Sui not to include a claim for the $150,000 in the Earlier Proceedings. To do so would have been to posit an alternative claim which, inconsistently with the other claims made by Mr Sui in the proceedings, would be premised on the Agreement remaining on foot.

12. [91]

    There is no Anshun estoppel here.

Conclusion

1. [92]

   Mr Sui’s claim arising out of his alleged exercise of Option 3 fails. Mr Sui’s claim for payment of the $150,000 succeeds.

2. [93]

   The parties should confer and agree on the orders necessary to give effect to these reasons.

3. [94]

   If there is a dispute as to costs, the parties should agree a timetable for written submissions. I will deal with that question on the papers.