Yang v Zou[2024] QCA 183

SUPREME COURT OF QUEENSLAND

1. [1]
   DALTON JA:  These are two appeals heard together after judgments were delivered after trial in two District Court proceedings, also heard together.  In each case the District Court judge gave judgment for the plaintiff.  The appellants say the judgments ought to have been in their favour.  The appeal concerning Zou seeks to overturn the trial judge’s factual findings which were, to a large extent, based on credit.  The appellant did not present even an arguable case that the trial judge had erred in a way which would allow this Court to overturn his factual findings.  This appeal must be dismissed.  The Wei appeal contends that the trial judge made errors in construing Chinese law, which it was accepted governed the transactions between Mr Yang and Ms Wei.  These matters are necessarily somewhat more complex than those involved in the Zou appeal.  Nevertheless, in my view that appeal must also be dismissed.  I explain my reasoning.

Factual Matters giving rise to Litigation

2. [2]
   There were three proceedings heard together in the District Court.  One of those proceedings is not the subject of appeal.  The two judgments which are the subject of appeal were judgments that Ms Zou and Ms Wei were entitled to recover debts from Mr Yang.  The judge below began his judgment with a summary:

2. “[1]
   The plaintiff in 3972/18 is Jiangmin Zou (Ms Zou).  She is the wife of the defendant in 2771/19 (Mr Zheng).  The plaintiff in 3973/18 is Guirong Wei (Ms Wei).  She is Mr Zheng’s mother. Mr Zheng is her litigation guardian in that proceeding.  She took no part in the trial.  The defendant in the claims by Ms Zou and Ms Wei, … is Jun Yang (Mr Yang).
3. [2]
   For some years prior to the events the subject of this trial, Mr Zheng and Mr Yang were business associates and friends.  From about 2010, they had several business and personal dealings.  Amongst those dealings, Ms Zou lent RMB 2m to Mr Yang (the Zou loan), and Ms Wei lent RMB 2.5m to Mr Yang (the Wei loan).  By proceedings 3972/18, Ms Zou seeks to recover the Zou loan with contractual interest at 24% per annum.  By proceedings 3973/18, Ms Wei by her litigation guardian Mr Zheng, seeks to recover the Wei loan with contractual interest limited to 24% per annum.

…

2. [4]
   At trial, four principal issues arose:

1. (a)
   Whether the Zou loan was discharged by a payment of RMB 2m on 16 April 2014;
2. (b)
   Whether the Ms Wei loan was discharged by entry into agreements for the transfer of certain car spaces located in a building in Guilin, China;

…

2. [5]
   For the reasons which follow I find:

1. (a)
   The Zou loan has not been repaid;
2. (b)
   The Wei loan has not been discharged;

…

2. [6]
   Accordingly, I conclude:

1. (a)
   Ms Zou is entitled to judgment against Mr Yang in 3972/18, including contractual interest at 20%;
2. (b)
   Ms Wei is entitled to judgment against Mr Yang in 3973/18, including contractual interest limited at 20% …”

3. [3]
   Ms Zou and Mr Zheng were born in China but are now Australian citizens.  They are married and carry on businesses together in Brisbane.  One business is conducted through a company Australian Olin Pty Ltd, an immigration business.  Another is carried on through Olin Realty Pty Ltd, which carries on a real estate business.  Mr Yang now lives in Australia, although he was also born in China.  At all material times he was the sole shareholder and director of a company called Lingui County Yijiang Tourism Development Pty Ltd (Lingui), which operated in China.  Another of Mr Yang’s business interests in China was the Feiyang Project.  That was a joint venture between two companies named Xincheng and Liangchung.  The Feiyang Project is a large residential unit development in China.
4. [4]
   Mr Yang and Mr Zheng met in about 2009.  In 2010 and 2011 Olin assisted Mr Yang with his desire to obtain a visa to live in Australia; Mr Zheng attempted to assist Mr Yang in purchasing a house, and Mr Zheng and Ms Zou bought shares in Lingui for RMB 6,135,000.^[1]  Then in March 2013 Mr Zheng and Mr Yang agreed that Ms Zou would lend Mr Yang RMB 2 million, repayable on demand at an interest rate of 24 per cent per annum.  Ms Zou must have agreed too, because she transferred the funds to Mr Yang’s account in China on 3 April 2013.  That loan was the subject of the Zou proceeding below, and the Zou appeal.  The parties agreed that the proper law in relation to the loan was the law of the People’s Republic of China, although questions of Chinese law do not intrude into the resolution of this proceeding.

The Zou Loan

5. [5]
   I am grateful to continue the narrative by using part of the judgment below, which begins with a description of Mr Yang’s paying interest on the Zou loan:

2. “[45]
   Mr Yang transferred payments to an account of Ms Zou held with a bank in China on account of monthly interest due on the Zou loan in the amount of RMB 40,000 starting on 2 May 2013. Those payments continued, more or less monthly, until April 2014. Each of those payments were recorded in the translation of Ms Zou’s bank statement as being made by (or perhaps related to) Mr Yang, who is identified as the ‘other person’ in the translated account statement. Each payment also contained the odd description ‘payment for goods’. Each identified the account number related to the payment (presumably this records a transfer from that account). Four different account numbers are recorded. Ms Zou gave unchallenged evidence that the description included for the payment was entered by the payer, not by her. It is reasonable to infer that the account number and payer details are also sourced from the payer rather than Ms Zou.
3. [46]
   On 16 April 2014, there was a payment to Ms Zou’s Chinese account of RMB 2,000,000. It is again recorded as being ‘payment for goods’ and Mr Yang is identified as the ‘other person’. This is of course the same amount as the Zou loan. Ms Zou contends however that it was a dividend paid on her investment in Lingui. Mr Yang contends it was repayment of the loan. Whether it was or not is the central issue in Ms Zou’s proceedings.
4. [47]
   There are uncontentious text exchanges between Ms Zou and Mr Yang which are relevant to this issue. ...
5. [48]
   They proceed as follows, with some factual observations added to give context:

1. (a)
   On 9 March 2014, Ms Zou sent to Mr Yang the [text]:

Excuse me Yang Zong, the money for this month hasn’t been credited to the account

1. (b)
   Some time later, Mr Yang responded:

Apologies Saozi, I’ve been too busy these days and just forgot. Will arrange within a couple of days. All the best!

1. (c)
   Ms Zou responded “Thanks!”;
2. (d)
   On 17 March 2014, an interest instalment was paid in the amount of RMB 40,000;
3. (e)
   On 11 April 2014, Ms Zou texted:

Yang Zong, the interest for this month hasn’t been received, sorry for bothering you.

1. (f)
   There was no response but an interest instalment was paid on that date;
2. (g)
   On 16 April 2014, the RMB 2m payment was made;
3. (h)
   On 17 April 2014, the following texts were exchanged:

Zou: Greetings Yang Zong, the 2 million Yuan of company dividend has been received. Thanks a lot! It’s been a correct move to invest on you!

Yang: My pleasure!

Zou: Thanks again. Youlin Zheng mentioned that you planned to come on 23rd. Have you decided?

Yang: Yes, looking forward to meeting you!

2. [49]
   Despite Mr Yang’s contention that that payment comprised repayment of the Zou loan, payments continued to be made to Ms Zou’s account consistent with a monthly interest obligation of RMB 40,000; however, on occasions months were missed, then several payments were made at once. So for example, there was a payment of RMB 40,000 on 8 May 2014 (about a month after the last such payment), then no payments for three months. On 18 June 2014, Ms Zou texted Mr Yang pointing out that the interest for that month had not been paid. There was no text reply. However, there was a payment of RMB 120,000 on 28 August 2014, and another 80,000 Yuan payment on 14 October 2014. All the payments made after 17 April 2014 are recorded as being made by Wen Haolin, who is Mr Yang’s brother‑in‑law and was at that time involved in Mr Yang’s affairs. Those payments stopped after 14 October 2014.”

The Wei Loan

6. [6]
   Again I am grateful to adopt the trial judge’s recitation of the facts:

2. “[51]
   The next significant event was the Wei loan. In about mid-December 2014 at a meeting in China … an oral agreement was reached between Mr Zheng on behalf of his mother Ms Wei and Mr Yang for Ms Wei to lend Mr Yang RMB 2,500,000, for one month at an annualised interest rate of 36% per annum. It was also agreed that the sum would be repaid a month after the advance was made. …
3. [52]
   In contrast with the Zou loan, there is a written memorandum of the loan terms. On 19 December 2014, Mr Yang and Mr Zheng signed a document written in Chinese with the translated heading ‘Debt Receipt’ (the Debt Receipt). It stated:

I, Yang Jun, now borrow RMB2,500,000 from Wei Guirong only. The loan period is one month starting from the date when Wei Guirong’s final loan amount being transferred into my personal account. I promise to pay interest at 3% per month (RMB75,000). If I cannot repay the loan within the time limit, I am willing to use the assets or ownership equivalent to the loan under my name as collateral in addition to the interests calculated according to the actual daily occurrence.

2. [53]
   … The Wei loan was made in five instalments of RMB 500,000 starting on 19 December and ending on 23 December 2014.
3. [54]
   Again, it is common ground that the proper law of the Wei loan and the Debt Receipt is Chinese law …
4. [55]
   Mr Yang did not repay the Wei loan one month after 23 December 2014. He paid the monthly interest amount of RMB 75,000 on 23 January 2015 and paid the interest for February 2015 by two instalments, and then paid no further interest on the Wei loan, nor did he repay the principal. ...”

7. [7]
   The trial judge goes on to record that during 2015 the Feiyang Project was in significant financial difficulty, and Mr Yang in turn was under great financial pressure.  He owed money to the Feiyang Project and his joint venture partners appear to have abandoned the project, effectively handing control of the project to him which, as the trial judge noted, appeared to have given him control over car parking spaces in the Feiyang Project.  I resume the trial judge’s narrative:

2. “[65]
   Mr Yang sought to discharge his liability under the Wei loan by transferring the ‘rights’ (exactly what those rights comprised is contested) to 12 car spaces in the Feiyang Project to Ms Wei. The genesis of this idea, and the way it came to be documented, is disputed. However, it is not disputed that Mr Zheng agreed to this proposal on his mother’s behalf. There were two documents executed on 9 November 2015 which documented the transaction. The first set out the agreement to offset the loan by the transfer of the car spaces and the second provided for the ‘transfer’. The meaning and effect in Chinese law of both documents is hotly contested. However, the text is not.
3. [66]
   The first document is headed ‘Agreement’ and records the agreement to accept car spaces to offset the Wei loan (the Offset agreement). It provides:

WEI Guirong has lent money to Feiyang International Property Project totalling two million and five hundred thousand RMB, which was advanced in 5 transactions made between 19 December 2014 and 23 December 2014.

Given that it is now difficult for [Feiyang] to sell its properties, it has become unable to repay the loan. After negotiations between the parties, [Feiyang] has agreed to give Wei Guirong twelve parking spaces to offset the debt.

2. [67]
   The Wei offset agreement has the seals of both the joint venturers. It is signed by Wei Guirong but it is uncontentious that it was so executed by Mr Zheng on his mother’s behalf.
3. [68]
   The second document deals with the transfer of the car spaces (the Transfer agreement). It relevantly provides:

Lianchuang Feiyang International

Agreement for Transfer of Right to Use Parking Space

Party A: Guilin Xincheng Property Development Co., Ltd.

Guilin Lianchuang Industry & Trade Co., Ltd.

Party B: WEI Guirong         ID Card No.:45213193308123429

With regard to the matter of Party B purchasing from Party A the right to use parking spaces, Parties A and B have unanimously reached the following agreement in accordance with the Contract Law and other relevant laws and regulations, as well as on the basis of amity, voluntariness and equality, which are the principles of negotiation:

Party A has obtained via transfer the right to use the plot at the intersection of Xicheng Boulevard and Shiji Boulevard in Lingui County, which has been numbered as Lin Guo Yong 2008 No. 718. The contract for the aforementioned transfer of right to use is numbered as Lin Guotu Zirang [2007] No. 3. The planned usage for this plot of land is commercial and residential. Party A has obtained approval for and has constructed commercial housing on the aforementioned plot, which is currently named ‘Lianchuang-Feiyang International’.

1. 1.Party A hereby transfer to Party B the right to use parking spaces from no. 050 to 058 and those from no. 061 to 063, which are 12 (twelve) parking spaces in total, in the carpark on Level B1 of Stage 1 of Lianchuang-Feiyang International, which has been independently developed and constructed by Party A. The above parking spaces as purchased by Party B can only be used for the parking of vehicles and cannot be used for other purposes. Party B cannot change the nature, appearance, structure and various facilities of the above parking spaces at will. Should there be damage to the above parking spaces, or accidents resulting from this, Party B shall compensate for the loss suffered by other people and bear the consequences, in addition to paying the cost of restoration. Usage of the parking spaces must be in compliance with rules imposed by property management as well as the parking management system. Relevant management fees must also be paid.
2. 2.The above parking spaces are calculated at Renminbi two hundred and eight thousand yuan each. The total price for the above parking spaces is exactly Renminbi two million and five hundred thousand yuan (¥2500000).
3. 3.Payment

The total price that is to be paid by Party B on ––(year) __(month)–(day) for the purchase of the parking spaces is exactly Renminbi––yuan (¥ - ).

Should Party B fail to pay the price in full within the time prescribed by this Agreement, Party A has the right to unilaterally terminate this agreement and sell the abovementioned parking spaces without having to notify Party B. Any interesting arising out of the transfer of the parking spaces belongs to Party A. If Party B has paid a deposit, it will not be refunded.

1. 4.Handover

Once Party B has paid the price for the parking spaces in full, Party A shall transfer the right to use the abovementioned parking spaces to Party B on 3 November 2015, and Party B shall have the right to use the abovementioned parking spaces (property) rights are not transferred). Both parties agree that Party A has, on the basis of the above handover date, an extension period of 30 days to perform the handover, i.e. the handover would be deemed to have been performed within the time limit prescribed by this Agreement whether it is performed 30 days ahead of or after the above date.

1. 5.Period of Use

The number of years available to use the parking spaces transferred to Party B is the time remaining in the right to use the above plot. Party B promises that they will not enter a dispute with Party A in the future over the issue of ownership of the above parking spaces. In the event that the laws or policies of China have specific regulations governing the amount of time available for rights to use parking spaces, the number of years available for using the parking spaces transferred to Party B will be the period as provided in the laws and policies of China.

1. 6.Other relevant matters

1. a.The sale price does not include property management and service fees for carpark access. Upon obtaining the right to use the above parking spaces, Party B promises to do the following: to adhere to relevant rules imposed by the property management company for the ‘Feiyang International’ neighbourhood; to use the parking spaces in a civilised manner; and to pay property management fees and their share of electricity and water charges for the above parking spaces as prescribed. Should property management fees be adjusted to market conditions, Party B needs to pay management fees and their share of electricity and water charges for the above parking spaces as adjusted and on time.
2. b.The above parking spaces can only be used for parking by vehicles of relevant models. Party B must not change the structure or use of the parking spaces at will.
3. c.In the event of Part A or the property management company requiring access to Party B’s parking spaces for service or maintenance work of ducts, Party B must cooperate unconditionally.

1. 7.At the time of signing this Agreement, Party B has already personally inspected the premises on-site and is clear about the location, size and other relevant circumstances of the parking spaces.
2. 8.This Agreement is signed in triplicates – two copies for Party A and one copy for Party B, which will into effect once Party B has signed and Party A has affixed company seals to the documents.

[underlining and interlineation included; blank spaces are blank in original]

2. [69]
   The Wei transfer agreement is executed in the same manner as the Wei offset agreement and dated on the same date as the Wei agreement. It had attached to it the plan of the Feiyang Project car park. An enlarged and legible version of that plan is Exhibit 4. Both parties acted on the basis that the proper law of both agreements was Chinese Law. ...

…

2. [73]
   Whether, and to what extent, the Offset agreement and Transfer agreement together are sufficient, in the circumstances as I find occurred, to extinguish the obligation to repay the Wei loan is the central issue in the Wei proceeding.”

Admissions by Mr Yang

8. [8]
   By March 2016 relations between Mr Zheng and Mr Yang were no longer friendly.  They had a telephone conversation on 31 March 2016 which Mr Zheng recorded.  It was acknowledged in that conversation that the Feiyang Project was a financial failure and not likely to be able to repay money owed to the Zheng interests, or to Mr Yang.  The conversation turned to the Zou loan.  Mr Zheng said Ms Zou was angry because there was no written documentation of the loan.  Mr Yang first asserts that there was a written “IOU” and that another document concerning the Zheng interests recorded “borrowed from Jiangming ZOU 2 million”.  Mr Zheng expresses his dissatisfaction.  Mr Yang expresses his dissatisfaction with the fact that Mr Zheng does not trust him without a written agreement, but then says, “I will sign whatever you ask me to sign”.  The primary judge found that this was an acknowledgement of the Zou debt – [80] below.  In my view it is a correct inference having regard to the content of the telephone conversation. 
9. [9]
   There was a further conversation which Mr Zheng recorded on 1 April 2016 to similar effect concerning the Zou loan.  Mr Yang is clearer in acknowledging the debts:

“Okay?  I definitely acknowledge the debt, but now you want me to sign [this].  It’s been so many years and I’m now asked to make up the receipt.  I just feel hurt emotionally, okay?  I feel really sad for that.  I don’t even deserve this bit of trust, okay? … I’ll do everything I could to pay you back the money.”

10. [10]
    Again, my view is that the trial judge was correct in finding that this was an acknowledgement of the Zou loan – [82] below.
11. [11]
    As noted above, the central issue in relation to the Zou loan was whether or not the RMB 2 million paid on 16 April 2014 was a repayment of that loan, or a payment of a dividend from Lingui to Ms Zou as a dividend.  On 26 April 2016 Mr Yang sent Mr Zheng and Ms Zou a text, which is relevant to this issue.  The relevant part read:

“In 2011, Director Zheng proposed by himself to invest in [Lingui], taking a 33% equity at that time. The cooperation agreement clearly stated that from the date of equity investment, management and subsequent investment would be your responsibility, and I would not invest any more money. In the second year, Director Zheng proposed to distribute 2 million to Director Zou for reassurance. Do you think there would be money to distribute in just the second year? Moreover, while still raising money to buy land, I personally gave you 2 million from my own pocket, and then this money was lent to me with 2% interest per month. Only I could do such a thing, taking my own money and paying interest!”

12. [12]
    This seems to me to be a clear admission by Mr Yang that the RMB 2 million was not a repayment of the Zou loan.

Credibility of the Witnesses

13. [13]
    The judge below made considerable assessments of the credit of the three main witnesses in the proceedings before him: Mr Yang, Mr Zheng and Ms Zou.  The findings he made are detailed and nuanced.  There is no need to repeat the detail here.  His conclusions were that he would not accept Mr Yang’s evidence as reliable unless corroborated.  He approached Mr Zheng’s evidence with care when it was not consistent with contemporary documents or other reliable evidence, but did not consider him to be “a consistently unreliable witness overall”.  He considered Ms Zou to be “broadly reliable”, although noted that her evidence required care when uncorroborated.

Appeal determination as to the Zou Loan

14. [14]
    The trial judge found that the payment of RMB 2 million on 16 April 2014 was the payment of a dividend to Ms Zou in respect of her shareholding in Lingui. 
15. [15]
    In coming to his conclusions the trial judge rejected Mr Yang’s evidence, consistently with his findings about Mr Yang’s credit.  The payment was the same amount as the Zou loan (RMB 2 million).  The Zou loan was repayable on demand.  Mr Yang said that there had been an oral demand by Mr Zheng on behalf of Ms Zou.  However the judge rejected that evidence.  There was no corroboration of it.  The judge noted that Mr Yang said that Mr Zheng told him that he and his wife were in a difficult financial position and therefore needed Mr Yang to repay the loan as soon as possible.  The judge found this unlikely as there was no independent evidence that Mr Zheng or Ms Zou were in a difficult financial position in April 2014.
16. [16]
    The judge found that Ms Zou demanded a dividend in relation to her investment in Lingui and that was communicated to Mr Yang by Mr Zheng.  He said:

2. “[159]
   First, as a shareholder, Ms Zou had a proper basis to be seeking a dividend be paid to her from Lingui, and to receive a dividend. I accept Ms Zou’s evidence that she sought a dividend be paid on her investment in Lingui. As I have observed, Ms Zou is an effective businesswoman who brings determination to her commercial activities. I think it in character for her to demand a dividend on the investment in Lingui and to pressure her husband to obtain one from Mr Yang. She struck me as considerably less impressed by Mr Yang than her husband was and would not have hesitated to apply pressure to Mr Yang (as she did over late interest payments). She was receiving a high return on the Zou loan. She had good reason to expect some return on the much larger investment in Lingui. I accept that, even if it be true that Lingui was not able to pay a dividend strictly in accordance with Chinese company law, she did not know that at the time.
3. [160]
   Once it is found that Ms Zou demanded a dividend, it becomes likely that Mr Zheng took that up with Mr Yang, given his close relationship with Mr Yang at the time, and with Mr Yang’s then dominance of the affairs of Lingui. It is very likely therefore, that Mr Yang was asked by Mr Zheng for a dividend on behalf of his wife. (This is an example of Mr Zheng’s evidence being consistent with other evidence which is uncontentious or which I accept as likely.)

…

2. [162]
   I find that Mr Zheng communicated a demand from his wife to Mr Yang for a dividend from Lingui in the lead up to April 2014.”

17. [17]
    The trial judge relied on the contemporary documentary evidence which supported Ms Zou’s case.  First, after 16 April 2014 it appeared that interest payments were still made to Ms Zou.  It is true that these were less regular than they had been before, and that they came from the account of Mr Yang’s brother-in-law, rather than Mr Yang’s own account.  Having said that, Mr Yang was someone who conducted his affairs irregularly and was in financial difficulty.  The amounts of the payments – RMB 40,000 per month – and the fact that they were made in response to requests by Ms Zou for interest – were both significant factors in favour of Ms Zou’s case.  The judge noted there was no other credible explanation given as to why the payments would be made to Ms Zou from Mr Yang’s brother-in-law.  He also noted that at least in relation to the affairs of Feiyang, Mr Yang’s evidence was that his brother-in-law sometimes acted on his behalf.  The descriptor “payment for goods” continued in relation to the payments made after 16 April 2014.
18. [18]
    When Ms Zou thanked Mr Yang for the 16 April 2014 payment of a dividend, he did not contradict her.  When she asked for payments of interest after 16 April 2014, he did not protest that he had repaid the loan.  In the recorded telephone conversations of March and April 2016, Mr Yang acknowledged the loan as owing and in his text of April 2016, he referred to having made a dividend payment from his own money in order to satisfy Ms Zou and Mr Zheng.
19. [19]
    For all these reasons I think the judge was correct to find that the payment of RMB 2 million on 16 April 2014 was not a repayment of the Zou loan.  That is all that Ms Zou had to prove to succeed in her proceeding.
20. [20]
    In fact, Ms Zou’s pleaded case was that the RMB 2 million payment was a dividend.  That is certainly how both she and Mr Yang characterised it at the time.  Below, and on appeal, Mr Yang’s lawyers asserted that in truth the payment could not have been a payment of a dividend from Lingui.  It was said that under Chinese law there could not have been a valid dividend payment; that Lingui had not made a profit, so there could not be any payment of dividend, and lastly, that the payment came from Mr Yang, not from Lingui.  The judge below regarded these issues as being irrelevant, see [170] and following below.  In my view he was right to do so.  Furthermore, on this appeal the appellant relied upon rules of law relevant to appropriation as between competing debts.  This was simply irrelevant to the factual and legal questions to be determined in relation to the Zou debt.
21. [21]
    The dealings between Ms Zou, Mr Zheng and Mr Yang were, in many respects, informal and irregular.  Mr Yang was the sole director and shareholder of Lingui and did not observe any formal distinction between his money and the company’s money.  He said “… There was no difference between me and Lingui.  At that time, I was Lingui.  Lingui company was me.” – t 7-36.  The extent of this confusion between Mr Yang and Lingui is illustrated by Mr Yang’s pleading below: at paragraph 9(b) it is pleaded that it was Lingui which made the transfer of RMB 2 million to Ms Zou in full and final discharge of the loan agreement between Ms Zou or Lingui on or about 16 April 2014.
22. [22]
    If the informality and irregularity of Mr Yang’s dealings with Lingui’s money mean that technically the RMB 2 million payment of 16 April 2014 did not amount to a payment of a dividend by that company, it does not mean that the payment was a repayment of the Zou loan.  It is very clear from the contemporary evidence, and the acknowledgments of Mr Yang in March and April 2016 that it was not.  That loan remained outstanding.  I cannot see that the primary judge made any error in giving judgment for Ms Zou in relation to it, along with interest.

Appeal Determination as to the Wei Loan

23. [23]
    In relation to this proceeding, the primary judge outlined the issues as follows:

2. “[177]
   As with the Zou loan, there is a good deal not in dispute about the Wei loan: … It is convenient briefly to summarise:

1. (a)
   The Wei loan was advanced in late December 2014 on terms orally agreed and then recorded in the Debt Receipt;
2. (b)
   The Wei loan was repayable in one month, but if not repaid a security over Mr Yang’s assets was promised on the terms stated in the Debt Receipt;
3. (c)
   The loan was not repaid on time and Mr Yang paid two interest instalments, then ceased paying interest;
4. (d)
   On 9 November 2015, the Wei offset and Wei transfer agreements were signed at the same time in Guilin between Mr Zheng (for Ms Wei) and the joint venturers;
5. (e)
   Although the Wei offset and transfer agreements were between Ms Wei and Feiyang, rather than Ms Wei and Mr Yang, it is accepted that the purpose of the offset agreement was to settle the Wei loan owed personally by Mr Yang; and
6. (f)
   In April 2016, Mr Zheng and Ms Zou sought to compel performance of their analogous agreements with Feiyang by proceedings in China, which were dismissed in April 2019.

2. [178]
   The issues that arise for determination are:

1. (a)
   First, has the promise to give 12 car spaces in the Offset agreement been accepted in immediate discharge of Wei loan, or is the discharge conditional on performance of that promise?
2. (b)
   Second, if discharge is conditional on performance, has that promise been performed?”

24. [24]
    Pleadings on behalf of Ms Wei took the point that Mr Yang was not a party to either the offset agreement or the transfer agreement.  That point was apparently conceded by Ms Wei at trial, see [177](e) of the reasons below.  Even if it was not conceded, there was no notice of cross-appeal or notice of contention on this appeal raising it as a separate ground as to why Mr Yang could not resist Ms Wei’s claim.  Accordingly, I do not consider this matter further, although it seems to me that it would have been an insurmountable obstacle to Mr Yang.
25. [25]
    The primary judge found that the discharge of the Wei debt was conditional on performance of the promise to transfer 12 car park spaces (his issue [178](a)), and that the car park spaces had not been transferred (his issue [178](b)).  The two grounds of appeal in the Wei appeal challenge each of those findings.  I will deal with them separately.

Immediate Discharge of Debt Created by Wei Loan?

26. [26]
    It was accepted below and on appeal that the offset agreement and the transfer agreement should be read together having regard to Article 125 of the Chinese Contract Law.  Article 125 of the Chinese Contract Law was important in construing those two agreements.  As to this the judge below said:

2. “[145]
   The principles of contractual construction under Chinese Law were not referred to by either expert in their reports, probably because of the way their respective briefing questions were framed: see [150] below. However, in oral evidence, Article 125 of the Chinese Contract Law was identified. It provides:

If any disputes arise between the parties over the understanding of any clause of the contract, true meaning thereof shall be determined according to the words and sentences used in the contract, the relevant provisions of the contract, the purpose of the contract, the transaction practices, and the principles of good faith.

2. [146]
   There was no further principled articulation of the meaning of this article in expert evidence before the Court, though it is difficult to believe that none exists. The meaning, in Chinese law, of phrases like ‘transaction practices’ and ‘principles of good faith’ were left unexplained. Further, no principles of statutory construction were identified to assist in construing that provisions of the Contract Law itself. In those circumstances, it falls to this Court to construe and apply Article 125 itself.”

27. [27]
    Both the experts in Chinese law who gave evidence at the trial agreed that to discharge a debt would require clear words – t 8-48 below.  The trial judge was not satisfied that the offset agreement and transfer agreement contained such clear words.  The only reference to the Wei debt is in the very short (one page) offset agreement.  The transfer agreement makes no reference to the debt, and in fact proceeds on a false basis that Ms Wei is purchasing the car parks for a price of RMB 208,000 each and has yet to pay the purchase price.  Thus in looking to find clear words discharging the debt created by the Wei loan, one is driven to the offset agreement and, in particular, the two sentences:

“Given that it is now difficult for [Feiyang] to sell its properties, it has become unable to repay the [Wei] loan.  After negotiations between the party [Feiyang] has agreed to give Wei Guirong 12 parking spaces to offset the debt.”

28. [28]
    The trial judge interpreted these words as meaning that the debt created by the Wei loan would not be discharged until there had been an actual transfer of the 12 car park spaces.  He did not regard the word “offset” as a clear expression of immediate discharge of the debt created by the Wei loan.
29. [29]
    The word offset is an unusual one to use if discharge was intended, at least in the context of Australian law.  Probably in the same context, it is unusual that, if the effect of this transaction was to discharge the Wei debt, that would be left as a matter of implication, rather than specifically and precisely stated.  To my mind this second consideration is significantly against the position taken by Mr Yang below and on this appeal.
30. [30]
    Both parties agreed that the primary judge’s interpretation of offset as meaning a balance, counter‑balance, equivalent or compensation was accurate enough, but both claimed that that interpretation favoured them.
31. [31]
    In addition, the appellant Yang referred to a judgment of the Intermediate Court of Guilin between Mr Zheng and Ms Zou on the one hand, and two joint venture parties to the Feiyang Project on the other hand, as shedding light on the meaning of the word offset.  The evidence was that monies lent by Mr Zheng and Ms Zou to the Feiyang Project (see [4] above) were also said to be unable to be repaid by the participants in that project.  Mr Zheng and Ms Zou agreed to take car parks to offset that debt.  The transfer document was similar, but not identical, to that in relation to the Wei loan.  The judgment of the Guilin Court was in evidence below.  Both parties disclaimed an ability to understand the result in that case, and the experts who gave evidence below expressed the view that they thought the Guilin Court had fallen into error in deciding that case.  Nonetheless, both parties claimed to extract something to their advantage from what was said by the court in that case.  Mr Yang relied upon it as showing that the word offset was interchangeable with the word “expiate” which, in turn, could be seen to mean extinguish.  The difficulty with that contention, from Mr Yang’s perspective, was that the decision of the Guilin Court was that, as the car parks there in question had not been transferred to the Zheng interests, the agreement which the Zheng interests there relied upon to establish ownership by transfer was not effective.  That is, so far as I understand the judgment in translation, it is against the notion that an agreement similar to the transfer agreement here, immediately affected the parties’ rights.  Given the uncertainty over the meaning of the judgment of the Guilin Court; that the agreements it had before it were not identical to those before this Court, and that the issues before that court were not the same as the issues before this Court, it is better to disregard the Guilin judgment in construing the offset agreement and the transfer agreement.
32. [32]
    Arguments were made as to the purpose of the two agreements which this Court must construe, and that is no doubt a legitimate matter to be taken into account, having regard to Article 125 of the Chinese Contract Law.  For Mr Yang it was said that, as the offset agreement recites that the joint venturers had no money to repay the debt, the purpose of the agreement can be seen to work an immediate substitution of the car parks for the debt.  For Ms Wei it was said that in circumstances where the original debtor, Yang, could not repay the debt, it would be most unlikely that Ms Wei would immediately give up her rights to the debt in exchange for only a promise to provide car parks from Mr Yang’s business partners who, the agreement baldly stated, had no money themselves.  It was said that it would make no commercial sense for Ms Wei to substitute an uncomplicated action in debt for an action for damages against third parties who confessed to having no money.
33. [33]
    The trial judge found the argument advanced by Ms Wei the more compelling of these two.  I agree with his conclusion in that regard, but the matter which influences me most in deciding this point is interpretation of the words of the offset agreement.  Like the trial judge, I cannot see that it contains clear words discharging the Wei debt with immediate effect.  Ground 1 of the Wei appeal therefore fails.

Property or Contractual Rights

34. [34]
    The judge below found that the car parks had not been transferred to Ms Wei – [220] below.  The expert who gave evidence on behalf of Ms Wei, Professor Liu, gave evidence that a real right, in the sense of a property right, required registration in order to effect a transfer.  The expert called for Mr Yang did not contradict this, although he said that there were many different real property registers in China and was not certain as to what particular register was appropriate in this case.
35. [35]
    There was no evidence below that the transfer of the 12 car parks to Ms Wei had been registered.  In fact the evidence was to the contrary.  Mr Zheng gave oral evidence to that effect.  He said that he had requested Mr Yang to “complete the transfer procedure” but Mr Yang refused.  In cross-examination Mr Zheng gave clear evidence that there was a need to register the transfer either with the local housing department or with the court – t 3-90 below.  No evidence was called to the contrary.
36. [36]
    As well, parts of the text message sent by Mr Yang to Mr Zheng and Ms Zou on 26 April 2016 conceded that more needed to be done to transfer car parks than simply sign the transfer agreement.^[2]  It is not entirely clear whether that text is referring to Ms Wei’s 12 car parks, or the car parks which are the subject of the litigation mentioned above.  I suspect the latter, but the evidence is still relevant to the 12 car parks now under discussion.  Similarly, in text messages exchanged between Mr Zheng and Mr Yang on 30 April 2016 and 1 May 2016, Mr Yang is clear that he has not finally transferred the 68 car parks, the subject of the Guilin judgment to the Zheng interests.  It is very clear from these emails that Mr Yang does not regard ownership of the car parks as having passed to the Zheng interests, indeed there are hints that he regards them as only having been given as some sort of security, not transferred absolutely.^[3]  Even though the subject matter of these emails is not the 12 car parking bays the subject of the Wei litigation, it seems to me to be quite compelling evidence in relation to them.  The 68 car parks were the subject of a transfer agreement very like the transfer agreement for the 12 Wei car parks.
37. [37]
    It seems to me then, that the trial judge was correct in finding that the 12 car parks promised to Ms Wei had not been effectively transferred to her.
38. [38]
    The appeal point taken is that this reasoning relies upon a finding that the car parks were real, or property, interests, when in fact they were not.  In China all property belongs to the State.  The highest level of ownership is a right to use, which is a real property right.  These propositions were rightly recognised by the primary judge, as was the relevant question for his determination: whether the transfer agreement created a right to use.
39. [39]
    Both the experts agreed that it was possible for a car parking space to be the subject of a real property interest, that is, a right to use.  A car parking space could also be the subject of a contractual, not proprietary, right.  This was a point much emphasised by Mr Yang’s counsel on this appeal, but it was not controversial on the evidence of the experts in Chinese law below, and was not controversial on this appeal.  The question is whether or not the transfer agreement created a property or contractual right.^[4]
40. [40]
    The trial judge construed the transfer agreement as one which was to create property, or real rights.  He referred to the fact that the document refers several times to the rights created as rights to use and then said, “The phrase appears so well established and so fundamental to the character of property rights, as to attract a technical meaning unless there is a compelling reason to reach a contrary conclusion” – [214] below.  As a matter of construction, this seems to me correct.
41. [41]
    The second recital in the agreement for transfer talks about the joint venture parties having “obtained via transfer the right to use the plot at the intersection of Xichen Boulevard and Shiji Boulevard in Lingui County” (my underlining).  That is a reference to the land upon which the apartment buildings (and car parks) are built.  The recital is to the effect that the joint venture parties own the land on which the apartment buildings (and car parks) are built.  It would be remarkable if the same technical term used there to denote a real property interest was used in a different sense throughout the rest of the document when referring to car parking spaces.
42. [42]
    The strongest indication to the contrary in the text of the transfer agreement was the part in round brackets at cl 4.  It was accepted that this should be read as meaning, “(Property rights are not transferred)”.  That would be a significant indication that the document created only contractual rights if it were not for the repeated use of the phrase “right to use” throughout the document.  The fact that the phrase is technical; has a technical meaning under Chinese law, and is deliberately used repeatedly in the document must overwhelm the parenthetical clause in cl 4.
43. [43]
    The appellant Yang also relied upon provisions in the transfer agreement which restricted Ms Wei’s use of the car parks; required her to compensate others for loss she caused by using them impermissibly; required her to use them in compliance with the property management entity’s rules, and required her to pay ongoing charges with respect to the car parks.  It was said that these rights were inconsistent with the transfer of proprietary rights to Ms Wei and supported the idea that the rights being transferred were only contractual.  No particular part of the Chinese Contract Law or the Chinese Property Law was relied upon to make these submissions, nor was any particular part of the expert evidence.  In my opinion, the submission is unconvincing.  The car parks were small pieces of real property, in a much bigger apartment complex.  The nature of the property itself meant that there had to be rules governing their use so as to ensure conflict free use of the car parks as between the owner of the apartment building and the owner of the car park, and as between all residents within the apartment complex.  There would no doubt have been similar restrictions on use of the apartments themselves to achieve these aims.
44. [44]
    Lastly, the appellant Yang criticised the judge below because he assumed that the term “right to use” referred to a real right, that is, he assumed it was being used in a technical sense.  This was said to be inconsistent with Article 74 of the Chinese Property Law which provided that their rights over car parks could either be proprietary or contractual.  In my view there is no inconsistency with Article 74.  The judge was correct to recognise that a technical term was used throughout a formal document creating property rights.  This ground must fail.
45. [45]
    I would order that both appeals be dismissed with costs.
46. [46]
    BROWN JA:  I agree with Dalton JA.
47. [47]
    HENRY J:  I agree with Dalton JA.