Wang v Liu; Liu v Wang

1. [1]

   The plaintiff, Mr Ruifa Wang, seeks to recover from Mr Wensheng Liu $3.5 million, together with interest on that sum, being a total of $3.73 million. [1]

2. [2]

   Mr Wang contends that these amounts are due pursuant to a document called “Repayment Agreement (Supplement)”, dated 13 April 2016 and executed by Mr Wang, Mr Liu and a third person, Mr Xiguo Li, to whom I will return. As there is a dispute about the enforceability of this agreement, I will refer to it as the “13 April 2016 Document”.

3. [3]

   The 13 April 2016 Document was written in the Chinese language. It provided that it be translated into English “but the Chinese version shall prevail”. [2] Both sides adduced English translations of the document, and of other documents, that led to the 13 April 2016 Document. There are some differences between those translations but only one of any consequence. [3] There is also some grammatical awkwardness in some of the translations of the documents to which I later refer. I have not attempted to correct or otherwise highlight those matters and have reproduced the documents as written in translation.

4. [4]

   The 13 April 2016 Document is expressed to be subject “to the laws of Australia and the People’s Republic of China”. [4] As neither party adduced evidence to show that Chinese law is different to Australian law, I must presume that it is not. [5]

5. [5]

   At the heart of the dispute in these proceedings is the proper construction of the 13 April 2016 Document. The key question is who Mr Wang, Mr Liu and Mr Li intended to be the parties to that document.

6. [6]

   Although only Mr Wang, Mr Liu and Mr Li executed the 13 April 2016 Document, its opening words were:

7. [7]

   The persons referred to parenthetically are:

8. [8]

   The critical issue is whether, as Mr Liu contends, the description of “Party A”, “Party B” and “Party C” that I have set out at [6] bespoke an intention by Mr Wang, Mr Liu and Mr Li that the other persons named (Ms Wang, Ms Liu, Ms Shi and Mr Kai Li) were also to be parties to the agreement, such that the document did not come into effect as a binding agreement by reason of them not signing the document.

9. [9]

   For the reasons that follow, my conclusion is that this was not the intention of any of Mr Wang, Mr Liu and Mr Li.

10. [10]

    From 2011, Mr Wang, Mr Liu and Mr Li engaged in various business activities following the execution by them on 12 April 2011 of a “Cooperation Agreement”. Those dealings concerned, amongst other things, the development of a site in Hurstville (the “Petrol Station Site”) as a residential strata development and the possible purchase of a car park site then owned by Hurstville Council (the “Car Park Site”). There was also discussion of the possible purchase of a property at Airlie Beach. Mr Wang, Mr Liu and Mr Li arranged for a company called GR Capital Pty Ltd to be incorporated to carry out those activities. Much of the evidence adduced in the proceedings concerns those business dealings and the parties’ involvement in GR Capital but is not directly relevant to the issues I must determine. However, the documents executed by Mr Wang, Mr Liu and Mr Li prior to the 13 April 2016 Document are available to cast light on the manner in which the 13 April 2016 Document should be construed.

11. [11]

    It is common ground that between April 2011 and July 2013, Mr Wang advanced RMB 41 million to Mr Liu, and a further amount of some $950,000 to GR Capital, for the purposes of those business activities.

12. [12]

    It is also agreed that between August 2015 and November 2017 Mr Liu caused some $6.2 million to be paid to Mr Wang, following execution by him of a number of documents that Mr Wang contends evidenced a promise by Mr Liu to repay those advances. The last of those documents was the 13 April 2016 Document. Mr Liu now contends that none of those documents is enforceable and that he made the payments under the mistaken belief that they were. By his cross-claim, Mr Liu seeks to recover those funds as monies paid under a mistake of fact or law.

Decision

1. [13]

   The 13 April 2016 Document is enforceable as a legally binding agreement between, relevantly, Mr Wang and Mr Liu. Mr Wang is entitled under that agreement to recover the money he claims.

2. [14]

   Mr Liu made no mistake and his cross-claim must be dismissed.

The events leading to execution of the 13 April 2016 Document

1. [15]

   It is necessary to set out, in some detail, the events leading to the execution of the 13 April 2016 Document.

2. [16]

   Mr Wang and Mr Li have been friends for some 30 years. They are both Chinese nationals and businessmen living in China.

3. [17]

   Mr Liu was born in China but has lived in Australia since 1989. He became an Australian citizen in around 1996.

4. [18]

   Mr Liu caused a company called WDL International Investments Pty Ltd to be incorporated in March 2007. At all times Mr Liu controlled WDL International. Contrary to representations Mr Liu later made to Mr Wang and Mr Li, Mr Liu caused WDL International, not GR Capital, to acquire and develop the Petrol Station Site and to acquire the Airlie Beach property. Mr Liu later represented to Mr Wang and Mr Li that WDL International had somehow become a subsidiary of GR Capital. This was not true. WDL International did not ever become a subsidiary of GR Capital.

5. [19]

   Mr Li met Mr Liu in 2008. At that time, Mr Li wanted his family to migrate to Australia. Mr Li gave evidence that Mr Liu said to him:

6. [20]

   A short time later, also in 2008, Mr Li introduced Mr Wang to Mr Liu at a business banquet in Shijiazhuang.

7. [21]

   At that dinner, Mr Liu and Mr Wang had a conversation. Mr Wang’s account of the conversation was as follows:

8. [22]

   Mr Liu’s reference to a “potential real estate development project in Hurstville” was a reference to the possible development of the Petrol Station Site and the Car Park Site.

9. [23]

   Mr Liu gave a slightly different account of this conversation but agreed that he said:

10. [24]

    Matters progressed and in September 2010, Mr Liu arranged for councillors from the then Hurstville Council, including the Mayor, to travel to China to meet Mr Wang as well as a number of Shijiazhuang city government officials.

11. [25]

    Later in 2010, Mr Wang travelled to Australia to have further discussions with Mr Liu and Mr Li.

12. [26]

    Ultimately these discussions led to the execution of the Cooperation Agreement by Mr Wang, Mr Liu and Mr Li.

13. [27]

    Mr Wang, Mr Liu and Mr Li agreed that each would nominate a family member to be a director and shareholder of the proposed joint venture company, ultimately GR Capital, which they intended would acquire and develop the Petrol Station Site and the Car Park Site. Mr Wang thought that this would assist his daughter, Ms Wang, to obtain residency in Australia. Ms Wang was then a student in Melbourne. Evidently, Mr Li thought these arrangements would also assist his wife, Ms Shi, and his son, Mr Kai Li, to migrate to Australia.

14. [28]

    There was no suggestion in those discussions that the nominated family member would contribute any money to the venture or play any role in the decisions that the three men, and the joint venture company, made.

15. [29]

    Thus, Mr Wang deposed to this discussion with Mr Liu:

16. [30]

    In her affidavit, Ms Wang said:

17. [31]

    Mr Liu gave evidence to the same effect. He deposed that in February 2011 he had this conversation with Mr Wang:

18. [32]

    In fact, Mr Wang’s first payment was made to Mr Liu for RMB 5 million, on 3 April 2011, a little over a week before Mr Wang, Mr Liu and Mr Li executed the Cooperation Agreement. This payment, and all subsequent payments made to Mr Liu, were made to an account Mr Liu maintained in China.

19. [33]

    On 12 April 2011, Mr Wang, Mr Liu and Mr Li signed the “Cooperation Agreement”. The document was drafted by Mr Liu.

20. [34]

    The Agreement recited that the three men had “reached an agreement on the cooperation of real estate and mining projects in Australia” and named one project as the development of the Car Park Site.

21. [35]

    The men agreed to establish a “cooperative company” to “develop the real estate projects” [6] and to make a “capital contribution” of 35% in the case of each of Mr Wang and Mr Li, and 30% in the case of Mr Liu. [7]

22. [36]

    The document provided that the board of directors of the “cooperative company” would “be composed of three directors” being Mr Wang, Mr Liu and Mr Li, with Mr Wang to be chairman of the board and Mr Liu to act as general manager. [8] This reflected the reality of the proposed arrangement, as the three men saw it.

23. [37]

    However, to reflect their agreement that a “nominated family member” would stand in their stead as directors and shareholders of the “cooperative company”, the document also provided that “[w]hen registering the company” Mr Wang’s representative would be his daughter, Ms Wang, Mr Liu’s representative would be his wife, Ms Liu, and that Mr Li’s representative would his wife, Ms Shi.

24. [38]

    Thus, it was recorded, under the heading “Note”:

25. [39]

    The latter provision reflected the potential immigration benefits the parties hoped for.

26. [40]

    As discussed prior to execution of the Cooperation Agreement, the “cooperative company” was named GR Capital Pty Ltd.

27. [41]

    GR Capital was incorporated on 3 May 2011. Ms Wang, Ms Liu and Ms Shi were appointed as the only directors of GR Capital and were allotted shares as follows:

28. [42]

    Thus, the shares were allotted to the three women in the same proportion as, in the Cooperation Agreement, the three men had proposed that the shares in the proposed “cooperative company” be allotted to them.

29. [43]

    In the meantime, after execution of the Cooperation Agreement, Mr Wang made two further payments [9] to Mr Liu totalling RMB 5 million.

30. [44]

    Mr Liu described the steps leading to the incorporation of GR Capital as follows:

31. [45]

    Mr Liu said that in late April or early May 2011 he said to his wife:

32. [46]

    This evidence shows Ms Wang, Ms Liu and Ms Shi became directors and shareholders of GR Capital at the instigation, indeed direction, of Mr Wang, Mr Liu and Mr Li and were regarded by the three men as their nominees. Mr Wang, Mr Liu and Mr Li did not intend that Ms Wang, Ms Liu or Ms Shi play any role in GR Capital or make any decisions concerning GR Capital’s activities. Subsequent events show that they did not.

33. [47]

    The Form 201 lodged with the Australian Securities and Investments Commission stated that each of Ms Wang, Ms Liu and Ms Shi owned their shares beneficially. This may have been true in the sense that Ms Wang, Ms Liu and Ms Shi had not, so far as the evidence reveals, signed a document recording that they held their shares on behalf of their father or husband, as the case may be. But it did not reflect the reality of the situation which was, as they knew, that they were acting as mere nominees. I need not decide whether Ms Wang, Ms Liu or Ms Shi thereby committed an offence. [10] I will, however, invite submissions as to why I should not refer these reasons to the Australian Securities and Investments Commission so that it can consider what, if any, further action should be taken about this.

34. [48]

    On 23 August 2011, Mr Wang, Mr Liu and Mr Li attended a meeting which they described, in a document they signed, as “The Second Board Meeting … of [GR Capital]”.

35. [49]

    The minutes of a “First Board Meeting” are not in evidence. It may be that Mr Wang, Mr Liu and Mr Li saw the occasion on which they signed the Cooperation Agreement as being a “First Board Meeting”.

36. [50]

    The fact that Mr Wang, Mr Liu and Mr Li described this meeting, and later meetings to which I will come, as “board” meetings reflects the reality as they saw it: they were the directors and controllers of GR Capital.

37. [51]

    The meeting was held at Airlie Beach in Queensland. Each of Mr Wang, Mr Liu and Mr Li signed the minutes.

38. [52]

    The minutes record that the following matter was approved:

39. [53]

    The reference to Mr Liu holding 30% of the shares in GR Capital was a mistake. In fact, it was his wife, Ms Liu that held that shareholding. But the slip is revealing and reflects the reality as Mr Liu saw it: Ms Liu held her shares on his behalf.

40. [54]

    Although the minutes recorded Ms Wang and Ms Shi as each “contributing” $7 million, Mr Wang, Mr Liu and Mr Li knew they had not, and that the $7 million had, or was to be, contributed by each of Mr Wang and Mr Li. The minutes correctly recorded that Mr Liu had, or was to, contribute $6 million. [11]

41. [55]

    The minutes concluded:

42. [56]

    This clause reflected the nominal role Mr Wang, Mr Liu and Mr Li intended that Ms Wang, Ms Liu and Ms Shi were to play in GR Capital.

43. [57]

    On the same day, 23 August 2011, Mr Wang paid a further RMB 5 million to Mr Liu.

44. [58]

    On 24 December 2011, Mr Wang, Mr Liu and Mr Li attended a “Third Board Meeting”.

45. [59]

    This meeting took place in Shijiazhuang. Each signed the minutes, which were headed “End-of-Year Review”.

46. [60]

    The minutes recited:

47. [61]

    This, of course, reflected what had, or was to occur. The three men intended that they would contribute the required capital.

48. [62]

    So far as concerns the development of the Car Park Site, the minutes recorded (with handwritten additions shown in italics):

49. [63]

    On 19 October 2012, Mr Wang, Mr Liu and Mr Li attended a “Fourth Board Meeting” of GR Capital.

50. [64]

    In the meantime, Mr Wang had paid a further RMB 7 million to Mr Liu. [13]

51. [65]

    This meeting was also held in Shijiazhuang.

52. [66]

    The minutes recorded:

53. [67]

    This passage of the minutes reflects that part of the $20 million “joint contribution” remained to be provided: hence the references to what the parties “shall contribute”. The minutes referred to the shareholders of GR Capital as being Ms Wang, Ms Liu and Ms Shi. The parenthetical references, after each of their names, to Mr Wang, Mr Liu and Mr Li was, evidently, the means by which the parties chose to reflect their “representative” status.

54. [68]

    The minutes went on to refer to the development of the Petrol Station Site. The Petrol Station Site was ultimately developed in the name of WDL International using funds that Mr Wang had sent Mr Liu for investment in GR Capital. Mr Liu characterised WDL International as GR Capital’s “subsidiary company”. That was not true. WDL International at all times remained under Mr Liu’s control. Development of the Petrol Station Site was completed by WDL International by March 2015.

55. [69]

    The 19 October 2012 minutes also referred to the development of the Car Park Site. In regard to that development, the minutes read:

56. [70]

    This appears to reflect what Mr Liu told Mr Wang and Mr Li. However, it was not true. GR Capital had not then, and did not ever, acquire the Car Park Site. No deposit was ever paid.

57. [71]

    Mr Wang, Mr Liu and Mr Li attended a further meeting on 9 December 2012, described in the minutes as an “End-of-Year” meeting.

58. [72]

    The minutes recited:

59. [73]

    This passage referred to what amount each of Mr Wang, Mr Liu and Mr Li “should” have contributed and reflected the real nature of the arrangements between the three men: they had or were to contribute the capital. The passage also reflected how the three men saw the shareholding in GR Capital. Ms Wang, Ms Liu and Ms Shi were not mentioned. In substance, the three men saw themselves as being the shareholders.

60. [74]

    The minutes also recorded that GR Capital owned “3 projects” being the Car Park Site, the Petrol Station Site and the Airlie Beach property. Evidently, this was something that Mr Liu told Mr Wang and Mr Li. It was not true. GR Capital did not own, and would never acquire an interest in any of these projects.

61. [75]

    The day after this meeting, 10 December 2012, Mr Wang paid Mr Liu a further RMB 10 million.

62. [76]

    On 16 July 2013, Mr Wang paid Mr Liu a further RMB 9 million. This was the last payment Mr Wang made directly to Mr Liu. The total amount Mr Wang paid Mr Liu between April 2011 and July 2013 was RMB 41 million.

63. [77]

    On 15 September 2013, Mr Wang, Mr Liu and Mr Li attended another meeting in Shijiazhuang in which they conducted a “Review of the Work for Past Year”. In a document called “Summary of [GR Capital] of the Year 2013”, Mr Wang was noted as chairman, Mr Liu as general manager and Mr Li as director. This reflected the reality as the three men saw it: they were the controllers of GR Capital.

64. [78]

    On 4 and 14 November 2013, Mr Wang paid $700,000 and $247,077.76 to GR Capital.

65. [79]

    These were the last payments that Mr Wang made, and the only two made to GR Capital. As I have said, all the other payments were made by Mr Wang personally to Mr Liu’s bank account in China.

66. [80]

    Overall, the value of the payments Mr Wang made was a little over $7 million.

67. [81]

    By early in 2014, Mr Wang was becoming concerned as to the fate of the funds he had advanced. He deposed:

68. [82]

    Thus, in April 2014, Mr Wang asked Mr Liu for written confirmation that “the amounts paid to your Chinese account were part of this investment”.

69. [83]

    This led to the creation of two documents.

70. [84]

    First, Mr Liu, under the “official seal” of GR Capital and WDL International signed a document dated 4 April 2014 and headed “GR Capital’s Confirmation of Receipt of Investments from Shareholders” which stated:

71. [85]

    The attachment was headed “Details of Receipt on Fund from Ruifa Wang” and acknowledged receipt of the three amounts totalling RMB 10 million that Mr Wang paid into Mr Liu’s Chinese bank account in April 2011. [14] For reasons unexplained and unexplored in the evidence, it did not refer to the other payments Mr Wang had made.

72. [86]

    Second, on 11 April 2014, Mr Liu made a statutory declaration in which he stated:

73. [87]

    Although Mr Liu’s statutory declaration referred to Mr Wang’s and Mr Li’s investment in WDL International and GR Capital, the true position was that Mr Liu had caused the funds Mr Wang had sent to Mr Liu’s Chinese bank account for the purposes of investment in GR Capital to be paid to WDL International. As I have said, although Mr Liu had told Mr Wang and Mr Li that WDL International was a subsidiary of GR Capital, [15] this was not true. Mr Liu used the funds paid into WDL International’s account to acquire the Petrol Station Site and the Airlie Beach property.

74. [88]

    On 6 March 2015, Mr Wang, Mr Liu and Mr Li attended a “2014-2015 Annual Shareholders Meeting” of GR Capital, the minutes of which record Mr Wang as “Chairman”, Mr Liu as “General Manager” and Mr Li as “Director”.

75. [89]

    On 19 March 2015, each of Mr Wang, Mr Liu, Mr Li as well as Ms Wang, Ms Liu, Ms Shi and Mr Kai Li signed a document entitled “Resolutions in the Board meeting”.

76. [90]

    Mr Wang said the meeting took place Mr Kai Li’s home in Hurstville and that he, Mr Liu and Mr Li had finalised the draft of the resolution before the meeting and the purpose of this meeting was to confirm this final version with everyone and to sign the resolution.

77. [91]

    Ms Wang described the circumstances in which she signed the document as follows:

78. [92]

    The document records the “participants” as being “Ruifa WANG (Yang WANG), Xiguo LI (Kai LI) and Wensheng LIU”.

79. [93]

    The notes recorded, under the heading “Basic Situation of [GR Capital]”:

80. [94]

    But everyone present at the meeting knew that the “three parties” that had contributed or were to contribute the $20 million referred to were, or were to be, Mr Wang, Mr Liu and Mr Li, and not Ms Wang, Ms Liu or Mr Kai Li. [16] Everybody present also knew that Ms Wang, Ms Liu and Ms Shi had been made shareholders in GR Capital at the direction of Mr Wang, Mr Liu and Mr Li. Everyone present at the meeting knew that the three men had at all times acted as if they were directors of GR Capital and had conducted the affairs of the company without reference to the nominal directors.

81. [95]

    The English translation of the document that the seven individuals signed comprises four closely typed pages and refers in some detail to the development of the Petrol Station Site, the Airlie Beach property, the Car Park Site as well another project in Hurstville called the “Haolifang Project”.

82. [96]

    Mr Cook SC and Ms Little, who appeared for Mr Wang, described the meeting at which this document was signed as “the last attempt to try and salvage the joint venture”.

83. [97]

    One matter the minutes record is that one unit in the development constructed on the Petrol Station Site was to be transferred to each of Ms Wang, Ms Liu and Ms Shi. This occurred and unit 702 was later transferred to Ms Wang. Although Mr Liu seeks to recover the money he paid to Mr Wang between August 2015 and November 2017, he makes no application to recover this property from Ms Wang.

84. [98]

    Another matter the minutes record is that GR Capital had paid $8.8 million to the “land owner” of the Car Park Site, that is Hurstville Council. That was not true.

85. [99]

    Only Mr Liu had dealings with Hurstville Council about the Car Park Site. It must have been Mr Liu who told the meeting that GR Capital had made the “pre-payment” of $8.8 million to the “land owner”. Nonetheless, Mr Liu gave this evidence in cross-examination:

86. [100]

    I do not accept Mr Liu’s evidence that it was Mr Wang who told the meeting that GR Capital had paid $8.8 million for the Car Park Site nor that he contradicted Mr Wang by saying anything to the effect that the money had not been paid.

87. [101]

    That evidence led me to ask Mr Liu this question:

88. [102]

    Evidently, Mr Liu was unable to see any tension between his statement that he had said at the meeting that the money had not been paid and his statement that, nonetheless, Mr Wang asked him to show a receipt for the payment (that he said had not been made).

89. [103]

    In relation to Mr Liu’s evidence that the document was “meant to be used in China, not meant to be used here”, [17] Mr Liu gave this evidence:

90. [104]

    I am unable to make any finding about whether the 19 March 2015 minutes were used in China for any commercial purpose. It certainly contained a statement, that GR Capital had paid $8.8 million for the Car Park Site, that Mr Liu must have known to be false. But Mr Liu’s statement that he agreed that a document he knew to be false could be used in China for a commercial purpose speaks poorly about his commercial morality and credit generally.

91. [105]

    It is against this background that two agreements leading to the execution by Mr Wang, Mr Liu and Mr Li of the 13 April 2016 Document were created. Those agreements were dated 25 May 2015 and 11 December 2015. I will refer to these as the “25 May 2015 Document” and the “11 December 2015 Document”. Each was originally written in the Chinese language and was expressed to be governed by the “laws of Australia and the People’s Republic of China”. Each recited that the agreement would be translated into English “but the Chinese version shall prevail”. [18] So far as concerns the proper construction of these agreements, and the question of ascertaining whether each came into effect, I must assume Chinese law to be the same as Australian law, as neither party adduced evidence of Chinese law. [19]

92. [106]

    As to the proper construction of the agreements, the principles are well established and were summarised by the High Court of Australia in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [20] as follows:

93. [107]

    The context in which the 25 May 2015 Document and the 11 December 2015 Document, as well as the 13 April 2016 Document itself, were executed includes the facts, known to each of Mr Wang, Mr Liu, Mr Li, as well as Ms Wang, Ms Liu, Ms Shi and Mr Kai Li, that, as I have set out:

94. [108]

    The 25 May 2015 Document is not the agreement on which Mr Wang relies in these proceedings. Mr Wang sues on the 13 April 2016 Document. However, the circumstances of the 25 May 2015 Document provide vital context for the proper construction of the 13 April 2016 Document. It provides particularly relevant context for Mr Liu’s contention that the 13 April 2016 Document only became “valid” if executed by the three shareholders of GR Capital (Ms Wang, Ms Liu and Ms Shi) or alternatively by all seven persons named as Party A, Party B and Party C to the 13 April 2016 Document (Mr Wang, Ms Wang, Mr Liu, Ms Liu, Mr Li, Ms Shi and Mr Kai Li). [23]

95. [109]

    The events leading to the execution of the 25 May 2015 Document provide context relevant to the construction of its text.

96. [110]

    Mr Wang said that in early May 2015, shortly before Mr Liu executed the 25 May 2015 Document, he had a conversation with Mr Liu that included:

97. [111]

    Mr Li said that at about this time Mr Wang telephoned him, and that they had this conversation:

98. [112]

    Thus, both Mr Wang and Mr Li deposed that Mr Wang had proposed to Mr Liu that because, as Mr Wang saw it, Mr Liu had used the funds that Mr Wang had advanced to Mr Liu “as his own”, Mr Wang’s investment in GR Capital should be treated, as between them, as a loan.

99. [113]

    Mr Liu gave a different account of his conversation as follows:

100. [114]

     Ms Wang said that she received a telephone call from Mr Wang in which he said:

101. [115]

     Ms Wang said that she drafted the 25 May 2015 Document with the assistance of Mr Wang and that, on 25 May 2015, she met Mr Liu and Mr Li at Mr Kai Li’s apartment. Ms Wang said that on that occasion, she and Mr Liu and Mr Li signed the document. Ms Wang said that, at the time, she had this conversation with Mr Liu:

102. [116]

     Although Mr Liu denied this conversation, Ms Wang was not cross-examined about it. Mr Insall SC, who appeared for Mr Liu, did not ask any questions of Ms Wang.

103. [117]

     I do not accept Mr Liu’s account of his conversation with Mr Wang, set out at [113] above, for a number of reasons. First, for the reasons set out at [104] above, I have doubts about Mr Liu’s credibility generally. Second, Mr Wang’s account of his conversation with Mr Liu is consistent with Mr Li’s account and Ms Wang’s account of their contemporaneous conversations with Mr Wang. Third, Ms Wang’s unchallenged evidence, set out at [115] above, is that Mr Liu accepted that he had agreed to repay “as a loan” the funds Mr Wang had advanced. Fourth, the fact was that Mr Wang had advanced all of his payments, except for the last two made to GR Capital, to Mr Liu personally. And fifth, Mr Liu had in fact treated the funds that Mr Wang had advanced to him as his own, and had used them for purposes other than those for which they were advanced: to enable GR Capital (not WDL International) to make the investments discussed.

104. [118]

     I find that in May 2015, Mr Liu agreed with Mr Wang that he, personally, would repay to Mr Wang the funds that Mr Wang had advanced him, as well as the two payments that Mr Wang made to GR Capital. It was in these circumstances that, as Ms Wang deposed, Mr Liu signed the 25 May 2015 Document at Mr Kai Li’s apartment.

105. [119]

     The 25 May 2015 Document recited:

106. [120]

     “Party A”, “Party B” and “Party C” were described as follows:

107. [121]

     A critical question is whether the manner in which the parties described Party A, Party B and Party C in this document, and also later documents including the 13 April 2016 Document, bespoke their intention that the 25 May 2015 Document and those later documents would only come into effect as an agreement if all the persons so named executed the document.

108. [122]

     In fact, only Ms Wang, Mr Liu and Mr Li executed the 25 May 2015 Document.

109. [123]

     Mr Liu’s case, as set out in his Cross-Claim List Statement, is that:

110. [124]

     Before dealing with the question of whether Mr Liu’s construction of the 25 May 2015 Document and his contention that the document never took effect as an agreement is correct, and the related question of whether the parties’ subsequent conduct sheds light on whether a contract was formed, I turn to the text of the document.

111. [125]

     “Article 1” of the document was headed “Basic Information” and read:

112. [126]

     Although this passage refers to “Party A” as being Mr Wang and Ms Wang, and as having “contributed” $7.2 million “accounting for 35%” of the shareholding in GR Capital, Mr Wang, Ms Wang, Mr Liu and Mr Li knew that it was Mr Wang and not Ms Wang that had made this “contribution”. They also all knew that, although the corresponding 35% shareholding was in Ms Wang’s name, Ms Wang held her shares as a nominee or “representative” of her father, Mr Wang.

113. [127]

     Thus, it is apparent that Mr Wang, Mr Liu and Mr Li adopted the convention or drafting device of naming their “representative” as being included as a “Party” notwithstanding that they were not, in substance, the relevant actors. Why the men adopted this drafting device was not in terms explained in the evidence and not explored in cross-examination.

114. [128]

     This passage also records that WDL International was a “subsidiary” of GR Capital. As I have said, this was what Mr Liu told Mr Wang and Mr Li. Mr Liu prepared these minutes and there is no suggestion that Mr Wang or Mr Li made this comment. As I have said, WDL International was at all times under the control of Mr Liu and was not, at any time, a subsidiary of GR Capital.

115. [129]

     Under the heading “Article 2 Withdrawal of share and return of capital” the agreement continued:

116. [130]

     The passages I have emphasised are expressed in terms of Party A withdrawing “equity” in GR Capital, having “capitals” returned and foregoing dividend entitlements and of Party B and Party C assuming “all shareholders’ rights” and liabilities. This reflects the fact that Mr Wang, Mr Liu and Mr Li knew that Mr Wang had advanced his funds to Mr Liu on the basis that Mr Wang, by his daughter Ms Wang, would acquire the 35% shareholding in GR Capital earlier referred to.

117. [131]

     “Article 3” then provided under the heading “Payment methods”:

118. [132]

     In the passages I have emphasised, Party C assumed personal liability to pay $7.2 million to Party A by the dates mentioned. Although “Party C” was expressed to be both Mr Liu and Ms Liu, I find that Mr Liu understood that this was intended to be his obligation, not shared with Ms Liu, to pay the money to Mr Wang, and not to Mr Wang’s representative, Ms Wang; notwithstanding the fact that it was Ms Wang and not Mr Wang that executed this document.

119. [133]

     In “Article 4”, under the heading “Liabilities for breaching of agreement”, the document provided:

120. [134]

     Finally, “Article 5” provided, under the heading “Applicable law and dispute resolution”:

121. [135]

     The reference in the passage I have emphasised to the agreement being made in “triplicate” with each of the “three shareholders holding one copy” shows that the parties understood there to be but three parties to the agreement, notwithstanding the fact that six persons were named as being included in Party A, Party B and Party C. The reference to the agreement coming into effect after being signed by those three shareholders “or their representatives” shows further that the parties intended that only three signatories were required before the agreement came into effect.

122. [136]

     The later conduct of Mr Wang, Mr Liu and Mr Li, to which I will return below, makes clear that they each understood that they had reached a binding agreement between themselves in the terms of the 25 May 2015 Document, notwithstanding the fact that Ms Wang rather than Mr Wang had executed the document and notwithstanding the fact that the other persons included in the descriptors Party B and Party C (Ms Shi and Ms Liu) had not.

123. [137]

     Post-contractual conduct is admissible on the question of whether a contract was formed. [24]

124. [138]

     Included in such post-contractual conduct is the cross-claim that Mr Liu has brought in these proceedings. By that cross-claim, Mr Liu seeks to recover the $6.2 million he paid Mr Wang between August 2015 and November 2017 on the basis of mistake of fact or law. In support of that claim, Mr Liu has given evidence as to his state of mind concerning his execution of the 25 May 2015 Document and the 13 April 2016 Document.

125. [139]

     As to the 25 May 2015 Document, Mr Liu deposed:

126. [140]

     Thus, Mr Liu’s evidence was that when he executed the 25 May 2015 Document, he mistakenly believed that he had a personal obligation to Mr Wang or Ms Wang “to return the capital contributed to GR Capital” and that he executed the document for that reason. That is, Mr Liu contends, he assumed an obligation under the 25 May 2015 Document under the mistaken belief that he was otherwise personally liable to repay Mr Wang. I do not accept that evidence as it cannot be reconciled with the conversations that I find Mr Liu had with Mr Wang as set out at [110] to [113] above nor with the terms of the documents Mr Liu executed. But Mr Liu’s contention accepts, indeed asserts, that he had obligations under the terms of the 25 May 2015 Document and shows that, inconsistently with the pleading set out at [123] above, he understood that the 25 May 2015 Document did take effect as an agreement. His conduct in prosecuting his cross-claim is consistent only with a contract having been formed in terms of the 25 May 2015 Document.

127. [141]

     There is further conduct of each of Mr Wang, Mr Liu and Mr Li, post 25 May 2015, consistent only with a contract having been formed in terms of the 25 May 2015 Document, to which I refer below.

128. [142]

     That conduct includes Mr Liu paying the $6.2 million to Mr Wang. That conduct shows that whether or not, prior to his execution of the 25 May 2015 Document, he understood that his obligation to Mr Wang was personal to him, he understood that the 25 May 2015 Document had taken effect as an agreement binding on him.

129. [143]

     Further, if it be relevant, Mr Liu did not suggest that at the time he signed the 25 May 2015 Document that he understood that the fact that the document was executed by Ms Wang, Mr Liu and Mr Li and not by the other persons named as being included in Party A, Party B and Party C (Mr Wang, Ms Liu and Ms Shi) had the result that the document never took effect as an agreement.

130. [144]

     The 25 May 2015 Document required Party C to pay $5 million in cash to Party A before 1 August 2015. The “rest” of $2.28 million was to be “returned” before 31 December 2015.

131. [145]

     Mr Liu did not pay the $5 million by 1 August 2015, or at all. On 26 August 2015, Mr Liu caused $420,000 to be paid to Mr Wang. On 30 November 2015, Mr Liu caused a further $140,000 to be paid to Mr Wang.

132. [146]

     On 11 December 2015, Mr Wang, Mr Liu and Mr Li met in Beijing.

133. [147]

     Mr Wang deposed that on that occasion he had this conversation with Mr Liu:

134. [148]

     Although Mr Liu denied this conversation, I accept Mr Wang’s evidence that it occurred.

135. [149]

     On 11 December 2015, Mr Wang, Mr Liu and Mr Li signed the 11 December 2015 Document. It was a called “Repayment Agreement”.

136. [150]

     The 11 December 2015 Document described the parties as follows:

137. [151]

     Thus, Party B was identified as being Mr Liu himself (he and Ms Liu were “Party C” in the 25 May 2015 Document) and Mr Li (but not Ms Shi, as in the 25 May 2015 Document) became “Party C”.

138. [152]

     The signature block on the document nonetheless referred to Ms Wang, Ms Liu, Ms Shi and Mr Kai Li, albeit only parenthetically, as follows:

139. [153]

     Again, there is no evidence explaining, in terms, why the parties adopted this drafting device. The matter was not explored in cross-examination.

140. [154]

     However, the context I have described suggests that this was the method adopted by Mr Wang, Mr Liu and Mr Li to reflect their role as the principal actors in the transaction and the role they saw Ms Wang, Ms Liu and Ms Shi playing; namely as their “representatives” in GR Capital, as anticipated in the Cooperation Agreement.

141. [155]

     The 11 December 2015 Document was signed only by Mr Wang, Mr Liu and Mr Li. The original Chinese language version of the document made provision only for three signatures, thus:

142. [156]

     That points to the conclusion that Mr Wang, Mr Liu and Mr Li intended the 11 December 2015 Document to be binding as an agreement once each had signed, and without the necessity of Ms Wang, Ms Liu or Ms Shi also signing.

143. [157]

     Turning to the text of the 11 December 2015 Document, after reciting the identity of the parties as set out at [150] above, the document provided:

144. [158]

     As these words follow immediately after the recitation of the parties as being Mr Wang, Mr Liu and Mr Li, the “three parties” referred to must be those three men.

145. [159]

     “Article 1” followed and provided, under the heading “Reasons and terms of the original agreement”:

146. [160]

     The repeated references here to the “three parties” must be to Mr Wang, Mr Liu and Mr Li, and point again to the conclusion that the three men intended the 11 December 2015 Document to be an agreement between only them.

147. [161]

     “Article 2” provided, under the heading “Implementation of the original agreement”:

148. [162]

     The emphasised reference to the “original agreement” is obviously a reference to the 25 May 2015 Document and represents an acknowledgement by Mr Wang, Mr Liu and Mr Li that they intended the 25 May 2015 Document to be an agreement binding on them.

149. [163]

     The emphasised reference to “Party A’s representative” is obviously to Ms Wang and shows the distinction the parties saw between the active actors in the project and their “representative”.

150. [164]

     “Article 3” was entitled “Agreement on repayment” and provided:

151. [165]

     The further reference in Article 3(a) to the “three parties” is, again, necessarily a reference only to Mr Wang, Mr Liu and Mr Li. Thus, the promise in the second sentence by “Party B” to pay $7 million to “Party A” can only be a promise by Mr Liu himself to pay that sum to Mr Wang.

152. [166]

     Article 5, entitled “Applicable law and dispute resolution” was in the same terms as Article 5 of the 25 May 2015 Document.

153. [167]

     Mr Liu said:

154. [168]

     Thus, Mr Liu did not contend that the 11 December 2015 Document did not impose any obligation on him by reason of the fact that its signature block made parenthetical reference to Ms Wang, Ms Liu, Ms Shi and Mr Kai Li, or by reason of the fact that those persons had not signed the document.

155. [169]

     The mistake under which Mr Liu contends he laboured was not that the 11 December 2015 Document was binding, despite not having been signed by Ms Wang, Ms Liu, Ms Shi or Mr Kai Li. Rather the alleged mistake was that he hitherto had had a personal obligation to “repay the capital” that Mr Wang “had contributed to GR Capital”. But Mr Liu was not mistaken. By reason of his execution of the 25 May 2015 Document he had assumed such a personal obligation. That was the whole point of the 25 May 2015 Document.

156. [170]

     In any event, Mr Liu had now signed the 11 December 2015 Document which, according to its terms, clearly imposed on him a personal obligation to pay $7 million to Mr Wang by 15 January 2016. If it is true that Mr Liu “did not get a proper chance” to read the document before he signed it, that is irrelevant. He does not seek to set aside the agreement constituted by the 11 December 2015 Document. Assuming, as I must, that Chinese law is the same as Australian law, having signed the document, knowing (as he must have) that it contained contractual terms, Mr Liu is bound by those terms, whether or not he read the document before signing it. [27]

157. [171]

     Although the 11 December 2015 Document required Mr Liu to pay Mr Wang $7 million by 15 January 2016, Mr Liu made no payments to Mr Wang between January and April 2016.

158. [172]

     In April 2016, Mr Liu again met Mr Wang and Mr Li in Beijing.

159. [173]

     Mr Wang deposed, and I accept, that he had this conversation with Mr Liu on 13 April 2016:

160. [174]

     Mr Liu’s account of this conversation was as follows:

161. [175]

     I see no significant difference between the accounts given by Mr Wang and Mr Liu of the conversation. On Mr Liu’s own account of the conversation, he acknowledged his obligation to Mr Wang and agreed to pay “your capital” by 31 May 2016.

162. [176]

     Mr Wang, Mr Liu and Mr Li then signed the 13 April 2016 Document.

163. [177]

     To repeat, [28] the 13 April 2016 Document described the parties as follows:

164. [178]

     The signature block on the document described the parties in the same way and, like the opening description of the parties, described the parties as being Mr Wang, Mr Liu and Mr Li and referred, parenthetically to their “representatives” Ms Wang, Ms Liu and Ms Shi; and also, for some reason Mr Kai Li.

165. [179]

     Once again, for reasons unexplained in terms in the evidence and unexplored in cross-examination, the parties adopted this drafting device.

166. [180]

     As with the 25 May 2015 Document, Mr Liu pleaded in his Cross-Claim List Statement that because the persons referred to parenthetically in the signature block of the 13 April 2016 Document (Ms Wang, Ms Liu, Ms Shi and Mr Kai Li) had not signed the document it did not take effect as an agreement.

167. [181]

     Mr Liu pleaded:

168. [182]

     Like the 11 December 2015 Document, the 13 April 2016 Document was signed only by Mr Wang, Mr Liu and Mr Li. Further, like the 11 December 2015 Document, the original Chinese language version made provision only for three signatures, those of Mr Wang, Mr Liu and Mr Li, thus:

169. [183]

     This suggests that it was the intention of Mr Wang, Mr Liu and Mr Li that the 13 April 2016 Document was an agreement between them only, that it became binding on them once their signatures were appended, and without Ms Wang, Ms Liu, Ms Shi and let alone Mr Kai Li also signing.

170. [184]

     Immediately after describing the parties in the manner I have set out, the document read:

171. [185]

     The “re-negotiation” referred to was obviously the conversation I have set out at [173] and [174] above between Mr Wang and Mr Liu in which, on his own version of it, Mr Liu acknowledged his obligation to Mr Wang and agreed to pay the “capital” by 31 May 2016.

172. [186]

     The reference to the “above three parties” should be construed as a reference to those of the persons referred to “above” as had participated in the “re-negotiation”: Mr Wang, Mr Liu and Mr Li.

173. [187]

     In Article 1, under the heading “Reason and original agreement terms” the document provided:

174. [188]

     On the proper construction of the document, the reference to the “three parties” that signed the 19 March 2015 resolution must be a reference to the “above three parties” referred to in the opening words of the document, and thus, again, to Mr Wang, Mr Liu and Mr Li. Mr Wang, Mr Liu and Mr Li did sign the 19 March 2015 resolution. Ms Wang, Ms Liu, Ms Shi and Mr Kai Li also signed that document. But the words used in the 13 April 2016 Document make clear that, here, the reference is only to Mr Wang, Mr Liu and Mr Li.

175. [189]

     Further, in Article 1(2), there is, in the passage I have emphasised, a specific reference to “Party B, Wensheng LIU”. This bespeaks the parties’ intention that “Party B” was Mr Liu alone and not Mr and Ms Liu. This also shows that the parenthetical reference to Ms Wang, Ms Liu, Ms Shi and Mr Kai Li in the opening recitation of the parties and in the signature block, was not intended by those that signed the document, Mr Wang, Mr Liu and Li, to render Ms Wang, Ms Liu, Ms Shi or Mr Kai Li parties to the agreement.

176. [190]

     Then, after setting out some details concerning the proposed development of the Petrol Station Site, Article 1 continued:

177. [191]

     In the passage I have emphasised, the parties recite the agreement reached in the conversation between Mr Wang and Mr Liu in May 2015 that I have set out at [110] above.

178. [192]

     The latter part of Article 1(3) recorded the parties’ agreement that “Party A”, that is Mr Wang, would “no longer participate in the profit distribution” of GR Capital. I do not find that provision to be inconsistent with the construction of the 13 April 2016 Document as an agreement by Mr Liu to pay a debt to Mr Wang. The evidence I have set out above shows that in May 2015, Mr Liu and Mr Wang agreed that, as between themselves, Mr Wang’s investment in GR Capital should be treated as a debt due by Mr Liu to Mr Wang. That is consistent with the fact that all of the payments that Mr Wang made, except for the last two, were made by him directly to Mr Liu. It was the corollary of that agreement that Mr Wang would cease to be involved in GR Capital or to receive any benefit from it.

179. [193]

     The parties then recorded, in Article 2, under the heading “Execution process of the agreement”, what had occurred since 25 May 2015:

180. [194]

     The reference to “compensation”, that is interest, being calculated at “14,000” per month is a mistranslation. As set out in the passage at [190], the agreed interest rate was 2% per month (reflecting the conversation at [173] and [174] above). The reference should be to “$140,000 per month”. [29] Mr Liu’s translation of this document referred to “0.14 million”.

181. [195]

     The parties thus recited, accurately, the events I have set out above. The references here to “Party A”, “Party B” and “Party C” can only be to Mr Wang, Mr Liu and Mr Li as only those three men participated in the acts described; particularly the signing of the 11 December 2015 Document.

182. [196]

     The operative part of the 13 April 2016 Document is contained in Article 3, which is headed “Repayment agreement” and which provided:

183. [197]

     Again, the “three parties” referred to must be those that “negotiated according to the terms of the agreement”. “Party A”, “Party B” and “Party C” can only be Mr Wang, Mr Liu and Mr Li as only they participated in the negotiations described.

184. [198]

     Article 3(1) obliged “Party B”, that is Mr Liu, to pay “Party A”, that is Mr Wang, $7 million before 31 May 2016 together with “compensation fee for the use of fund[s] arising from [the] deferred repayment”.

185. [199]

     Although this is not stated in terms, I construe the reference to “compensation fee” as meaning the payment of interest at the rate that the parties accurately recited in Article 1(3) as being payable under the 25 May 2015 Document and recited in Article 2(1) as being the “compensation fees” payable: 2% per month.

186. [200]

     Article 4(2) provided, relevantly:

187. [201]

     Article 5(2) provided:

188. [202]

     The reference here to “investment funds” must be a reference to the $7 million referred to in Article 3(1). The evident purpose of Article 5(2) was to make clear that once Mr Liu had repaid the $7 million to Mr Wang, Mr Liu was at liberty to alter the records of GR Capital to remove reference to Mr Wang’s “investment” in GR Capital represented by Ms Wang’s shareholding.

189. [203]

     Article 5(3) provided:

190. [204]

     This clause draws a distinction between the “three shareholders” (who were in fact Ms Wang, Ms Liu and Ms Shi) and “Party A, Party B, and Party C” and again points to the conclusion that the latter descriptor referred only to Mr Wang, Mr Liu and Mr Li.

191. [205]

     Overall, taking all these matters into consideration, I think it clear that, on the proper construction of the 13 April 2016 Document, it was intended by Mr Wang, Mr Liu and Mr Li to be an agreement between only them and came into effect as an agreement once each signed it. I do not accept the construction posited by Mr Liu, as set out at [181] above.

192. [206]

     For those reasons, my conclusion is that there are only three parties to the 13 April 2016 Document.

193. [207]

     In any event, and if it be relevant, Mr Liu did not in his evidence suggest that he understood that it was necessary for anyone other than he, Mr Wang, and Mr Li to sign the 13 April 2016 Document before it became binding.

194. [208]

     As he said in relation to the 25 May 2015 Document, he also said in relation to the 13 April 2016 Document that:

195. [209]

     Again, the mistake that Mr Liu asserted was as to whether he, rather that GR Capital, was obliged to return Mr Wang’s investment in GR Capital and executed the 13 April 2016 Document labouring under that mistake. As I said in relation to the 25 May 2015 Document, it is necessarily implicit in that assertion that the 13 April 2016 Document binds him.

196. [210]

     In closing submissions, Mr Insall accepted that if what I have said at [206] were the correct conclusion, the claim hitherto made on behalf of Mr Liu, that the 13 April 2016 Document failed to take effect for want of consideration, could not be sustained. [30]

197. [211]

     Mr Liu agreed that, following his execution of the 13 April 2016 Document, he made the following payments in cash to Mr Wang:

198. [212]

     In his Cross-Claim List Statement, Mr Liu alleged that he made those payments “in the mistaken belief that the [13 April 2016 Document] gave rise to binding obligations on [Mr Liu] to make payments to [Mr Wang]”.

199. [213]

     But, for the reasons I have set out, there was no mistake. Mr Liu was bound to make those payments. Rather than evidencing a mistake by Mr Liu, they represent post-contractual conduct pointing unmistakably to the existence of an anterior binding agreement.

200. [214]

     Mr Wang and Mr Li gave evidence that on 12 November 2017 Mr Liu signed a document in which he acknowledged his debt to Mr Wang.

201. [215]

     Mr Liu denied that he signed the document and, in effect, alleged that what appeared to be the writing of his name on the document was a forgery.

202. [216]

     In view of my conclusions as to the 13 April 2016 Document, it is not necessary for me to resolve this dispute.

203. [217]

     This document constituted a table which was followed by an “Explanation”.

204. [218]

     The table was headed “Statistical proof of Australian Wensheng LIU’s debts (repayment of principal and interest)” and was in the following form (with each figure representing $10,000):

205. [219]

     The “Explanation” set out at the foot of the table read as follows (with the hand written addition made by Mr Wang in italics):

206. [220]

     Whether or not Mr Liu signed this document, he agreed that in November 2017 he had a meeting with Mr Wang and Mr Li in which a document “like” the “acknowledgment” was given to him.

207. [221]

     Mr Liu said he had this conversation with Mr Wang:

208. [222]

     The emphasised passages show that, on his own account of it, Mr Liu acknowledged that he owed Mr Wang “the amounts you want”. His point was, he said, that Mr Wang should wait for the sale of the Airlie Beach property “before seeking repayment of the balance”.

Was the 13 April 2016 Document void for uncertainty?

1. [223]

   Mr Insall contended that the 13 April 2016 Document was, nonetheless, void for uncertainty because of what he submitted was a tension between the provisions in Article 5(2) and Article 3(1).

2. [224]

   As I have set out above, I see no tension between these provisions.

3. [225]

   Article 3(1) was directed to implementing the agreement that Mr Liu had entered into with Mr Wang in May 2015 to pay, as a debt between he and Mr Wang, the amount of Mr Wang’s investment in GR Capital. Article 5(2) is directed to the different question of the changes that Mr Liu could make to the “register of shareholders” once he had discharged his personal obligation to pay Mr Wang the $7 million.

4. [226]

   Mr Insall also submitted that there was uncertainty as to what was meant by the reference in Article 3(1) to the payment of an “outstanding compensation fee for the use of fund[s]”.

5. [227]

   As I have set out above, in my opinion, on the proper construction of the 13 April 2016 Document, the “compensation” payable was the amount of 2% per month referred to earlier in the document.

The cross-claim

1. [228]

   By the cross-claim, Mr Liu contends that the money he paid Mr Wang was paid under a mistake of fact or law.

2. [229]

   The mistake alleged is Mr Liu’s alleged “mistaken belief” that the 13 April 2016 Document “gave rise to binding obligations” on Mr Liu to make the payments to Mr Wang.

3. [230]

   For the reasons I have set out, there was no mistake. The cross-claim must fail for that reason.

Conclusion

1. [231]

   For these reasons, Mr Wang’s claim against Mr Liu succeeds. Mr Liu’s cross-claim should be dismissed.

2. [232]

   The parties should bring in short minutes to give effect to these reasons. The parties should also provide any submissions as to the matter at [47] above.