Zou v Yang[2024] QDC 21

Contents

Summary 6

CHRONOLOGICAL OVERVIEW7

Ms Zou and Mr Zheng8

Mr Yang 9

Initial dealings10

The Yang visa applications10

The Zou loan 13

The 161 visa is approved 13

The unit 14

The payments to Ms Zou 15

The Feiyang loan17

The Wei loan 17

Mr Zheng working for Feiyang?18

Sale of the unit19

The car space transfer agreements 20

Awkward communications 25

The Feiyang litigation in China 29

The litigation in Queensland 30

THE PRINCIPAL WITNESSES 30

Mr Yang31

Mr Zheng 39

Ms Zou 41

CONFLICTS OBSERVATIONS 42

Sources of Chinese law 42

Construction and performance 43

Limits on scope of expert evidence 44

The experts 44

THE ZOU LOAN 45

Repayment or Dividend? 45

Dividend under Chinese law 48

Dividend issue irrelevant48

The dividend issue49

Conclusion on the Zou loan 49

THE WEI LOAN49

The issues in dispute 49

Conditional or immediate discharge? 50

The parties’ submissions50

General observations on construction51

The Offset agreement granted a conditional discharge 52

Have the car spaces been transferred? 54

Nature of property rights to be transferred54

No transfer of rights of has occurred57

Conclusion on the Wei loan 59

THE WEI SECURITY 60

Proper construction 60

Proper law of validity of security 61

Parties submissions 61

Characterisation for Queensland conflict of laws purposes 62

The proper law of substantive validity 64

Application of Chinese domestic law 68

To renvoi or not to renvoi? That is the question 69

Conclusion on proper law issue 71

A claim for equitable relief? 71

Conclusion on the Wei security 71

THE MISREPRESENTATION CLAIM 71

Introductory comments 71

The alleged representations not proved 72

The direct evidence 72

Other evidence 73

Other issues 75

Conclusion on the misrepresentation claim 77

Loss 77

FINAL OBSERVATIONS 77

Summary

1. [1]
   The plaintiff in 3972/18 is Jiangmin Zou^[1] (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, and the plaintiff in the claim against Mr Zheng, is Jun Yang (Mr Yang).
2. [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^[2] 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.
3. [3]
   Also during their dealings, with the assistance of Mr Zheng, Mr Yang purchased a unit at 23001/5 Lawson Street Southport (the unit) from Ning Yang (Ms Ning) in August 2013. Mr Yang claims by proceedings 2771/19 that he purchased that unit in reliance on misrepresentations as to value and price by Mr Zheng. The three proceedings were heard together.
4. [4]
   At trial, four principal issues arose:

   1. Whether the Zou loan was discharged by a payment of RMB 2m on 16 April 2014;
   2. 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;
   3. If not, whether the Wei loan was secured by a charge over a property owned by Mr Yang at Logan in Queensland; and
   4. Whether Mr Zheng made the representations alleged and if so, whether Mr Yang relied on them in purchasing Ms Ning’s unit.
5. [5]
   For the reasons which follow I find:

   1. The Zou loan has not been repaid;
   2. The Wei loan has not been discharged;
   3. There is no charge over Mr Yang’s Logan property which secures the Wei loan; and
   4. Mr Yang has not established that Mr Zheng made any representations in relation to Mr Yang’s purchase of the unit.
6. [6]
   Accordingly, I conclude:

   1. Ms Zou is entitled to judgment against Mr Yang in 3972/18, including contractual interest at 20%;
   2. Ms Wei is entitled to judgment against Mr Yang in 3973/18, including contractual interest limited at 20% but her claim for orders for sale of Mr Yang’s Logan property must be dismissed; and
   3. Mr Yang’s claim in proceedings 2771/19 must be dismissed.
7. [7]
   I will hear the parties as to the proper form of orders to give effect to these conclusions, along with issues of costs.

8. chronological overview

8. [8]
   The three separate proceedings were the subject of separate pleadings, witness summaries and submissions. However, the events relevant to each proceeding arose from the relationship between the parties, particularly the relationship between Mr Zheng and Mr Yang. Further, there is an overlap in the chronology of events directly relevant to each proceeding. Understanding the specific events and assessing the likelihood and consistency of the disparate evidence on key issues requires a consolidated, chronological narrative. Although there are occasional references to conflicting evidence, the following overview is based on facts which were either accepted by all parties or were not materially challenged at the trial.

8. Ms Zou and Mr Zheng

9. [9]
   Ms Zou was born in China. She moved to Queensland in about February 2000. She is an Australian citizen. She can read and speak English fluently. She also speaks Mandarin. 
10. [10]
    Mr Zheng was born in Guangxi Province in China. He moved to Australia in February 2000. He is an Australian citizen. He speaks Mandarin fluently. He is not fluent in English. Observing him in the witness box, I formed the view he has only limited facility in English. He gave evidence that he reads English. While it is not unknown for a person to have much greater capacity in reading a language than in speaking it, I was unable to assess the extent to which Mr Zheng read English.
11. [11]
    Ms Zheng and Ms Zou are married. They live at Sunnybank Hills. The couple have been involved together in two businesses for many years.
12. [12]
    The first is Australia Olin Pty Ltd (Olin) trading as Olin Migration and Education, which carries on the business of assisting migrants to obtain visas to study in, or migrate to, Australia. It appears to have operated continuously since about 2001. Most of its clients are Chinese. Mr Zheng and Ms Zou were and are the directors of Olin, though Mr Zheng ceased to be a director between 2007 and 2013. Ms Zou is a licensed immigration agent. Mr Zheng is not. Mr Zheng’s role was described by him as responsibility for the business administration of Olin. He also described himself as an employee of Olin. Ms Zou described his role as marketing manager.  My impression from the evidence overall was that his role in Olin is not formally defined, and that he assists in the activities of the business as and when he can do so.
13. [13]
    Olin Realty Pty Ltd (Olin Realty) carries on a real estate business. Again, Ms Zou is a director of that company, with Mr Zheng being a director from time to time. Ms Zou is the licensee of Olin Realty. Mr Zheng said he was an employee of Olin Realty and that he held a real estate agent sales licence, but again his role appeared to be rather fluid.
14. [14]
    Although Mr Zheng is not a plaintiff in either of the claims against Mr Yang, he is the principal protagonist on his family’s side of the record in all three proceedings. He was for a time close friends with Mr Yang. He had all relevant conversations with Mr Yang; he was responsible for the commercial dealings with Mr Yang; and caused at least his mother, Ms Wei, to make the Wei loan. For convenience, I sometimes refer to the Zheng parties to include Mr Zheng, Ms Zou and Ms Wei.

8. Mr Yang

15. [15]
    Mr Yang was also born in China. While in China, he was involved with business in Guilin City in Guangxi Province. In 2005 he incorporated a company named Lingui County Yijang Tourism Development Pty Ltd (Lingui, sometimes referred to at trial also as Yijang). Lingui owns a tourism site in Lingui County. Lingui County is a popular tourism area in Guangxi region. It is close to the city of Guilin, which is frequently mentioned in these reasons. The precise nature of the enterprise carried on by Lingui was not fully explained. At the least, however, it seem to involve some form of tourism or leisure site for which an entrance fee is paid.
16. [16]
    Mr Yang is also involved in at least one further property business, called the Feiyang Project. The Feiyang Project was commenced in about October 2012 as a joint venture between two companies, sufficiently identified as Xincheng and Liangchung (and together, the joint venturers or Feiyang). Mr Yang owns 49% of Liangchung, and the majority shareholding in that company is held by Xincheng, which is in turn owned by two other persons. In broad terms, the venture was originally one pursued by Mr Yang and the two persons who own Xincheng, though ultimately Mr Yang came to control the whole project, as we shall see.
17. [17]
    The Feiyang Project is a large residential and property development project on 36 acres of land located in Guilin (as I understood it, anyway). It comprises six buildings (designated T1 to T6) around a large, elevated courtyard area or atrium. Xincheng was the main developer and Liangchung was said to deal with investment. My impression was that Liangchung’s role was marketing and sales, though the matter was never fully explained.
18. [18]
    There are photographs of the Feiyang Project taken in or about early 2015 and it appears that all the six buildings had been constructed at least to a substantial degree by then,^[3] (though there is a dispute on the evidence as to whether, at least as at that time, all six buildings were complete and able lawfully to be used^[4]). There are also photographs in evidence taken around the time of trial showing all but T5 apparently completed (T5 did not appear clearly in those photographs).
19. [19]
    The layout of the car park for the Feiyang Project is relevant to the Wei loan because Mr Yang contends that that loan was discharged by the transfer of ownership of some car spaces in the Feiyang Project car park in lieu of repayment of the sum due. There are photographs taken recently showing the entrance to the car park for the Feiyang Project and showing numbered car spaces in the car park. There is also in evidence a plan of the car park which was attached to the car space transfer agreements relied upon by Mr Yang.^[5] I accept that those photographs are accurate and depict the car park entrance and the car park for the Feiyang Project as it was at the end of 2015. I further accept that the car park plan is a plan of the Feiyang Project car park (or at least, one level of it) as built as at the end of 2015.^[6]

8. Initial dealings

20. [20]
    Mr Yang met Mr Zheng (and presumably Ms Zou) in about 2009 or 2010. They were introduced by an immigration client of Olin, who was a friend of Mr Yang’s. The meeting most likely occurred in Guilin. Mr Zheng and Ms Zou were frequently visitors to China and, specifically, Guilin. I infer that Mr Yang was at that time considering his options for living in Australia.
21. [21]
    Several events then occurred in relatively quick succession in the commercial relationship of the three people. The details and order of the events are a little uncertain, but the overall picture is clear.
22. [22]
    In 2010 or perhaps 2011, Mr Yang came to Brisbane, either at the invitation of Mr Zheng and Ms Zou or by arrangement with them, seemingly with the intention of buying a residential property. Mr Zheng had properties to show Mr Yang, none of which he liked. However, at the end of his inspections, Mr Yang saw a house he liked at 8 Hawthorn Circuit, Stretton (the Stretton house). Mr Zheng knocked on the door and spoke to the owners (who I infer were Chinese) and ultimately Mr Yang purchased that property.
23. [23]
    Also in 2011, Lingui purchased land with the intention of expanding its existing site and developing a project called the Yijiangyuan Leisure Villa. Mr Zheng and Ms Zou agreed to invest in Lingui. They acquired shares in Lingui for RMB 6,135,000 (about AUD 1.2m). It appears that these shares were purchased rather than issued. Although the details are not agreed, it is uncontentious that once those share had been acquired:

    1. Initially, the shares in Lingui were held by the Yang, Zheng, Zou and a Mr Liu; and
    2. Thereafter, Mr Liu departed as a shareholder in about March 2012, leaving Mr Yang the majority shareholder with 67% and Mr Zheng and Ms Zou together holding the balance, seemingly 13% and 20% respectively.

8. The Yang visa applications

24. [24]
    At around the same time as their commercial relationship was blossoming, Mr Yang also seemingly decided to seek Mr Zheng and Ms Zou’s help to obtain Australian residency. He retained Olin to assist him to obtain a visa.^[7] Olin lodged two visa applications for Mr Yang. In January 2011, Olin applied on Mr Yang’s behalf for a subclass 163 visa. This is a visa designed to facilitate residence in Australia by a foreign passport holder for the purpose of establishing a business. It does not lead directly to permanent residency.
25. [25]
    While the precise circumstances are not agreed,^[8] all parties accept that pending the determination of the 163 visa, it was decided to seek a subclass 121 visa. A 121 visa is a visa based on employment of the applicant in a specialist area of work by a sponsoring Australian employer. An employer was required to employ Mr Yang and to sponsor his visa application. For that purpose, Mr Zheng introduced Mr Yang to Ms Ning, who was an old classmate of Ms Zou and who ran a real estate business called Antaeus Property Group (Antaeus) through a company called UQIE Services Pty Ltd (UQIE).^[9] There is no evidence Mr Yang knew Ms Ning before he was introduced to her, nor that he ever communicated directly with her until August 2013. Communications between potential employer and potential employee appear to have been through Mr Zheng and Olin.^[10]
26. [26]
    In May 2012, Olin applied on Mr Yang’s behalf for the 121 visa. The application form stated that Mr Yang was to be employed by Antaeus for three years on a salary of some $250,000 as a marketing manager. These terms appear to have met the requirements for the 121 visa, which was concerned with facilitating the employment of foreign persons with specialist skills. It appears an employment contract was signed by Mr Yang on 21 May 2012. The application was premised on Mr Yang working substantially in China,^[11] rather than in Australia, which would prove problematic.
27. [27]
    After the 121 visa application was lodged, Mr Zheng sent an email with two attachments to Mr Yang. The email was dated 1 June 2012 and was in Chinese characters, as were its attachments. The covering email provided (in translation):^[12]

Mr. Yang, Hou,

Greetings! I am now sending you the questions that the Department of Immigration (Department of Home Affairs) may investigate. These are simply based on our speculation and for your reference only. Wish you all the best! Have a good weekend!

Zheng

28. [28]
    The “questions” attachment provides draft answers to specific questions. Much of the content of the answers is wrong. It is sufficient to set out questions 1 and 2 and the proposed answers:^[13]

3. 1.
   Who is your sponsor?

3. (1)
   Ning Yang, female, 41 years old (English name: Nina Yang)

3. (2)
   Trading name: Antaeus Property Group

3. (3)
   Company name: EQIE Services Pty Ltd

3. (4)
   Telephone: 0408778308 (we usually contact each other by mobile phone)

3. (5)
   …

3. 2.
   How did you get to know each other?

3. During the Real Estate Expo in Guilin, Guangxi Zhuang Autonomous Region, China, in later September 2010, Ms. Yang was promoting properties and businesses in Australia and I came to know her at the exhibition. After getting to know each other, we engaged in a very cordial conversation and established consensus on property development and marketing. Ms. Yang hoped that I could recommend more clients to her to purchase properties in Australia. From then onwards, we kept in touch with each other frequently and exchanged information on the property markets in China and Australia. At the same time, I used my connections with tour agencies, business survey groups, tour groups for visiting friends and relatives, golf tours to Australia, etc. to recommend clients with the intent to buy properties in Australia to Ms. Yang. Since the end of 2010 until now, I have recommended more than 50 individuals to Ms. Yang and all of them from Guangxi. As far as I understand, some of the people that I recommended have purchased properties in Australia through Ms. Yang and they include Chunsu Wang, Yibiao Lu, Hingxius Jin, Qing Wan, Jialin Jin, Ruiqi Liu, Jinmei Zhang, etc. They have already purchased shopping centres, land and residential properties.

3. On 19 August 2011 and 17 October 2011, I travelled to Brisbane, Australia, to meet up with Ms. Yang, mainly to discuss about how to collaborate together in promoting Australian properties. I held the opinion that the development of the property market in China had been impeded by the restrictions imposed on property purchase and loan approval, whereas the property market in Australia was relatively stable. The Australian properties also had the advantage of very steady return on investment and freehold ownership. As such, there was huge potential in developing the Australian property market in China. Therefore, I proposed to Ms. Yang to work for her company and she was very willing to act as my sponsor so that I could work at her company.

29. [29]
    The answer in parenthesis in point (4) in question 1 is wrong. There is no basis to conclude Mr Yang and Ms Ning ever contacted each other by mobile phone at that time. Further, almost everything in the draft answer to question 2 is wrong. Mr Yang was introduced to Ms Ning as a possible 121 visa sponsor through Mr Zheng in 2012, and had no direct dealings with her until, at the earliest, August 2013. These statements were written by a novelist, not a journalist. Someone wrote this piece of fiction. Mr Zheng and Ms Zou were challenged extensively about this document in cross examination and each claimed ignorance of its preparation and content. Whatever about that, it is not in dispute that the document was sent to Mr Yang by Mr Zheng under the cover of Mr Zheng’s email.
30. [30]
    Although the details are contentious, it is common ground that in about mid-2012, Mr Yang paid $250,000 in relation to the 121 visa application. Both Mr Zheng and Mr Yang also agree that:

    1. The purpose of the payment was to fund, at least in part, the set up of an office of Antaeus in Shanghai;
    2. The payment was conditional on the success of the 121 visa application; and
    3. The payment was paid directly to Antaeus (though Mr Yang says without his knowledge or consent).
31. [31]
    Mr Zheng was the middleman between Mr Yang and Ms Ning in relation to this payment. Both Mr Zheng and Mr Yang agree that Mr Yang did not speak directly to Ms Ning about the matter. It was negotiated through Mr Zheng.^[14]
32. [32]
    The 121 visa was refused by the Department on 25 September 2012 because the position proposed would not be based substantially in Australia. There was no appeal. Although the particulars of when and how the demand for repayment of the $250,000 was made are contentious, it is common ground that it was not paid back by Ms Ning or Antaeus at that time.

35. The Zou loan

33. [33]
    The next significant event was the making of the Zou loan. It is uncontentious that:

    1. An oral agreement was reached between Mr Zheng, on behalf Ms Zou, and Mr Yang for Ms Zou to lend Mr Yang RMB 2,000,000, repayable on demand, at an interest rate of 24% per annum;
    2. The oral agreement was reached between the two men in Guilin in March 2013; and
    3. Ms Zou caused the funds to be transferred to Mr Yang’s account in China pursuant to that oral agreement, with the funds being received into Mr Yang’s personal account on 3 April 2013.
34. [34]
    By his defence, Mr Yang disputed his liability inter alia on the basis that the borrower was Lingui, not him personally. He gave evidence in support of that contention, explaining that the discussions with Mr Zheng leading to the loan were about Lingui’s need for capital. However, in final submissions Mr Yang accepted that the loan was made to him personally.^[15] The parties also agree that the proper law of the Zou loan is the law of the People’s Republic of China. In the absence of some agreement to the contrary, that must be correct. The agreement is an oral agreement, to lend money in Chinese currency, reached in China, between persons speaking Mandarin, with the loan to be advanced by payment to a Chinese bank account located (presumably) in China. Chinese law is plainly the system of law most closely connected to the loan agreement.^[16]

35. The 161 visa is approved

35. [35]
    Not long after the Zou loan was advanced, Mr Yang’s 161 visa application was successful. Mr Zheng was in Guilin with Mr Yang at that time. He gave Mr Yang the good news on 20 May 2013. On 28 May 2013, Mr Zheng and Mr Yang went out to celebrate. About that time, Mr Zheng told Mr Yang that he could stay in Australia for four years under the 163 visa, and that he had to establish his business in that time.

35. The unit

36. [36]
    Hot on the heal of his successful 161 visa application, Mr Yang travelled to Queensland. He arrived in Brisbane on 6 August 2013 and was picked up by Mr Zheng. At this time the $250,000 in relation to the 121 visa remained outstanding. Mr Yang’s purpose for travelling on that occasion is not entirely agreed. However, it is agreed that at least one matter he informed Mr Zheng about was that he wanted to resolve the issues of the outstanding $250,000. Mr Yang said that was his primary concern. Mr Zheng said Mr Yang also said his purpose was to plan his steps to comply with the business requirements of the 163 visa. That seems both logical in the circumstances, and likely.
37. [37]
    Oddly, neither witness said that Mr Yang foreshadowed buying a unit on the Gold Coast with an ocean view when he first arrived. However, by about 12 August 2013, Mr Yang was at Southport inspecting two units with ocean views owned by Ms Ning. How that situation came about, and what happened in the subsequent brief negotiations, is disputed. For present purposes it is sufficient to focus on the uncontentious events.
38. [38]
    Prior to about 12 August 2013, Mr Zheng had arranged with Ms Ning for Mr Yang to inspect two apartments owned by Ms Ning in Lawson Street Southport with ocean views. On or around 12 August 2013, at least Mr Zheng and Mr Yang travelled down to inspect those units. Mr Yang negotiated through Mr Zheng with Ms Ning to buy one of the units over the next day or so.
39. [39]
    On 15 August 2013, Mr Yang entered a contract to buy the unit for $808,000.^[17] The contract was not subject to finance. It also appears that Foreign Investment Review Board approval was required but not obtained.)^[18] 
40. [40]
    Ms Ning bought the unit in November 2005 for $680,000 and it is common ground that the market value of the unit as of August 2013 was $430,000. Yang’s case is that he was misled by Mr Zheng into believing that the unit was worth the price he paid by overstating the market value of the unit (though that surely was a matter of opinion, rather than a representation of fact) and overstating the price paid by Ms Ning to acquire the unit.
41. [41]
    The contract recorded a deposit of $208,700. Next to this handwritten figure, appears the notation “Paid N Y”.^[19] No funds were actually paid by Mr Yang as a deposit. Rather, the funds paid by Mr Yang for the 121 visa were credited by Ms Ning as the deposit. The difference between the deposit and the $250,000 advance is $41,300. Mr Yang said he permitted this deduction because Mr Zheng had told him costs of the 121 visa application amounted to that sum.^[20] Mr Zheng was not asked about this.
42. [42]
    The contract provided for settlement on 21 August 2013.^[21] It therefore required Mr Yang to pay some $600,000 plus stamp duty of about $30,000 at short notice. The contract apparently settled on or about the settlement date, given that Ms Ning signed the transfer on 21 August 2013 and it was lodged by 4 September 2013.  It seems Mr Yang was able to pay $630,000 on barely one week’s notice,^[22] and he did so while owing Ms Zou RMB 2m and paying interest at 24%, as we will now see. 
43. [43]
    There is a peculiar incident alleged following settlement. Mr Yang gave evidence that around the time of settlement of the contract, Mr Zheng came to Mr Yang’s home and offered him $8000 in cash which he told Mr Yang was a commission Ms Ning had paid Mr Zheng for the sale of her unit. He said Mr Zheng told him he “was unable to receive the money” and seemingly offered it to Mr Yang.  Mr Yang said that he could not receive the money either and came up with the solution of using the money for a vacation. He said he used the money to pay for a vacation at the Versace hotel for both families from the 30^th to the 31^st of August 2013.^[23]
44. [44]
    Each of Mr Zheng and Ms Zou denied that they and their daughter went on a holiday to Versace with Mr Yang and his family. A receipt in Ms Zou’s name, issued by the Versace Hotel for two rooms on the night of 30 August 2013 was tendered. Ms Zou accepted in cross examination when shown the document that she had probably been there that night, but maintained it was not to stay with Mr Yang’s family.

35. The payments to Ms Zou

45. [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.^[24] Ms Zou gave unchallenged evidence that the description included for the payment was entered by the payer, not by her.^[25] It is reasonable to infer that the account number and payer details are also sourced from the payer rather than Ms Zou.
46. [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.
47. [47]
    There are uncontentious text exchanges between Ms Zou and Mr Yang which are relevant to this issue. They are notable as direct contemporaneous communications between Ms Zou and Mr Yang and are a contrast with the usual course in these events where communications were between Mr Zheng and Mr Yang.
48. [48]
    They proceed as follows, with some factual observations added to give context:^[26]

3. (a)
   On 9 March 2014, Ms Zou sent to Mr Yang the:

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

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

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

3. (c)
   Ms Zou responded “Thanks!”;

3. (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:

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

3. (f)
   There was no response but an interest instalment was paid on that date;

3. (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 23^rd. Have you decided?

Yang: Yes, looking forward to meeting you!

49. [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.

50. The Feiyang loan

50. [50]
    At some stage, probably around December 2013 or January 2014, Mr Zheng and Ms Zou became involved in the affairs of the Feiyang Project. Although it was not much explored at trial, the unchallenged (and credible) evidence is that over that period, Mr Zheng and Ms Zou lent RMB 10,390,000 to the joint venturers (the Feiyang loan) repayable after one month, in February 2015.^[27]

50. The Wei loan

51. [51]
    The next significant event was the Wei loan. In about mid-December 2014 at a meeting in China, probably in Guilin, 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. Although not formally conceded by Mr Yang, it is very likely Mr Yang also made some form of oral offer of security.
52. [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:^[28]

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.

53. [53]
    The original document has a handwritten note which provides Mr Yang’s account details. The account number is one of those from which payments of interest were made to Ms Zou (the account number ending 5951). The translation includes a further handwritten note that is translated to “each payment of RMB500,000 was made, and the last payment was made on 23 December 2014”. It is unclear when that note was added and by whom. However, what it records is uncontentious. The Wei loan was made in five instalments of RMB 500,000 starting on 19 December and ending on 23 December 2014.
54. [54]
    Again, it is common ground that the proper law of the Wei loan and the Debt Receipt is Chinese law, and as with the Zou loan, that position seems, respectfully, to be correct.  Whether that choice of law applies to the alleged security in the debt receipt and whether that choice of law includes Chinese choice of law rules is another matter. Those issues are dealt with below.
55. [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. Notably, at about this time the joint venturers were due to repay the Feiyang loan as well. They did not.

50. Mr Zheng working for Feiyang?

56. [56]
    Mr Yang said that Mr Zheng acted in an executive role in management of the Feiyang Project from April 2015 to April 2016. He relies on a single meeting minute from 23 November 2015 as corroboration. That was a minute of a meeting of representatives of the joint venturers, the builder and the financing bank for the Feiyang Project to discuss the cashflow problems facing the project at that time.^[29] Mr Zheng accepts he was at that meeting but denies any formal role in management of the Feiyang Project. He says he attended that meeting at the request of Mr Yang as a favour to listen to what occurred. He said Mr Yang was not in Guilin at the time but Mr Zheng was, and that is why he attended.^[30] I deal further with this below.
57. [57]
    What is uncontentious (and is confirmed by the minute), is that the Feiyang Project was in significant financial difficulty at the time, consistent with Mr Zheng’s evidence of a call he had with Mr Yang on 11 November 2015, just prior to the meeting.^[31] Mr Yang was in turn under financial pressure, not only because he owed money to the Zheng parties accruing interest at a high rate, but also because he was a creditor of Feiyang for very substantial sums (some RMB 20m, at least).
58. [58]
    One would assume unequivocal evidence would exist if Mr Zheng acted as a senior officer of the Feiyang Project for any period. On the other hand, the meeting in question was a crucial one in the life of the development, seemingly attended by very senior people from all parties. It might seem odd that Mr Zheng showed up just to listen to the discussion solely based on his friendship with Mr Yang.  However, such an act by Mr Zheng is in my view broadly consistent with the seemingly close relationship, personal and financial, between he and Mr Yang at that time. And of course, the Zheng parties had a financial interest in the Feiyang Project’s ability to generate funds to repay the loan they had made (whether directly or indirectly) to the joint venturers. For these reasons (and for the other reasons dealing with Mr Yang’s reliability set out below), I accept Mr Zheng’s evidence on this issue.

50. Sale of the unit

59. [59]
    It was presumably the financial pressure on the Feijang Project which led Mr Yang to try to mortgage the unit and, when that was not possible (because the bank would not advance a loan secured by the unit unless FIRB approval was obtained), to sell the unit. That process was started well before November 2015. But then financial pressures do not appear without warning. In any event, Mr Yang had decided to sell the unit at the latest by mid to late September 2015. This can be inferred from his appointment of an agent to sell the unit by a Form 6 Appointment of Agent dated 24 September 2015.
60. [60]
    Mr Yang sold the unit on 23 December 2015 for $468,000. This is some $340,000 below the price he paid Ms Ning just over two years earlier. It is accepted that the market price of the unit at the time he purchased it from Ms Ning (August 2013) was $430,000,^[32] so the contract price in December 2015 reflected market value. There was no suggestion to the contrary.
61. [61]
    Mr Yang consulted with three different agents before accepting a sale at that price. He said once he discovered the likely true value of the unit, he understood he had been deceived by Mr Zheng as to the value of the unit. It is unclear exactly when he says he made that discovery.^[33] However, by reference to the Form 6, I can infer that it was at the latest by 24 September 2015. That inference flows from the price of $480,000 inserted in Part 4 Section 3.^[34] Given there would have been some lead time prior to final acceptance of that figure as reflecting a realistic market price, it can be inferred that, if Mr Yang had indeed been misled by Mr Zheng, he knew that by about mid-September 2015, just over 2 years after the alleged misleading conduct. He says he did nothing about discovering the deception because of his on-going relationship with Mr Zheng.
62. [62]
    At about the same time as the sale of the unit, Mr Zheng and Mr Yang were involved in another property transaction. In late 2015, Mr Yang sold the Stretton Road property (see paragraph [22] above) and acquired a residence at 599 Logan Reserve Road, Logan Reserve (the Logan property). Mr Yang said that in December 2015 he inspected the Logan property with Mr Zheng and sought his opinion, and that he purchased the property just after Christmas (though the transfer was registered in February 2016^[35]).^[36] It is odd that Mr Yang would seek Mr Zheng’s opinion on value if he believed he had been misled over the unit, though perhaps he thought that was a one-off piece of deception.
63. [63]
    The Logan property is the subject of a caveat arising out of the charge alleged by Ms Wei to arise from the Debt Receipt set out in [52] above.

50. The car space transfer agreements

64. [64]
    As at late 2015, the Wei and Feiyang loans were well overdue. It also appears (despite Mr Yang’s contrary oral evidence^[37]) that he recognised that Feiyang Project owed the Feiyang loan.^[38] By this time Mr Yang was no longer the junior partner in the Project. During the financial crisis which overtook the Project in late 2015, Mr Yang’s partners appear to have effectively handed over control of the Feiyang Project and its assets to him.^[39] This appears to have given him control over, inter alia, some car spaces in the Feiyang Project.
65. [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.^[40]  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.
66. [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:^[41]

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^[42] the debt.

67. [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.
68. [68]
    The second document deals with the transfer of the car spaces (the Transfer agreement). It relevantly provides:^[43]

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”.

3. 1.
   Party A hereby transfer to Party B the right to use parking spaces from no. 050 to 058 and

3. 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.

3. 2.
   The above parking spaces are calculated at Renminbi two hundred and eight thousand

3. yuan each. The total price for the above parking spaces is exactly Renminbi two million and five hundred thousand yuan (¥2500000).

3. 3.
   Payment

3. 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 (¥   ).

3. 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.

3. 4.
   Handover

3. 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).

3. 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.

3. 5.
   Period of Use

3. 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.

3. 6.
   Other relevant matters

3. a.
   The sale price does not include property management and service fees for carpark access.

3. 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.

3. 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

3. parking spaces for service or maintenance work of ducts, Party B must cooperate unconditionally.

3. 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.

3. 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.  

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

69. [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.^[44] An enlarged and legible version of that plan is Exhibit 4.^[45] Both parties acted on the basis that the proper law of both agreements was Chinese Law. That was plainly a correct approach.
70. [70]
    There were other similar agreements entered into at the same time with the Zheng parties. The most directly relevant is in favour of Mr Zheng and Ms Zou and relates to the Feiyang loan. Once again it comprises two documents, a repayment agreement, and a contemporaneous transfer agreement. The Feiyang repayment agreement provides:^[46]

Agreement

Due to capital shortage for the Feiyang International real estate project, a total amount of RMB 31,500,000 was borrowed from Lingui County Yijiang Tourism Development Co., Ltd. on separate occasions from the end of Dec 2013 to the end of Jan 2014. Among the loans, shareholder Youlin Zheng and Jiangming Zou lent RMB 10,390,000 to the Feiyang International Real Estate project.

At present, the sales of the Feiyang International real estate project are difficult, and the loans cannot be rapid. After mutual agreement by the two parties, they agree that 60/80 (Translator’s note: this may be a typo for the number of 68 in the original document) parking bays of Feiyang International real estate project are used to repay Youlin Zheng and Jiangming Zou.

71. [71]
    The transfer agreement (the Feiyang transfer agreement) provides:^[47]

Agreement on Transfer of Use of Right Parking Bays in [Lianchuang Feiyang International]

3. Party A: Guilin Xincheng Property Development Co., Ltd.; Guilin Lianchuang Industrial and Trading Co., Ltd.

3. Party B: Youlin Zheng, Jiangming Zou; ID No.: 450102195810181013, 310107196903241244

3. In accordance with Contract Law and other relevant laws and regulations and based on the principle of friendly, voluntary, and equal negotiation, Party A and party B have reached the following agreement on the purchase of the use of parking bays by Party B from Party A.

3. Party A acquires the land use right of the land parcel, Lin Gui Yong 2008 No.718, located at the intersection of Xicheng Avenue and Shiji Avenue in Lingui Country through land transfer. The No. of the contract for transfer of land use right is Lin Guo Tu Zi Ran g [2007] No.3. The planned usage of the land parcel is for commercial and residential purposes; through approval, Party A has developed commodity property project on the above-mentioned land, which is now name [Lichuang Feiyang International].

3. 1.
   Party A now transfers Party B the use rights of the 30 parking bays which include No.070-086 & No.090-No.102 in the car park under the raised ground floor of Lianchuang Feiyang International (Stage 1) which independently developed and constructed by Party A. The above parking bays purchased by Party B can only be used for vehicle parking and shall not be used for other purposes. The nature, appearance, structure and various facilities of the parking bays shall not be arbitrarily changes, if Party B’s violation of the aforesaid causes damage or accidents, Party B should compensate for the losses caused to others and bear the consequences in addition to the expenses to recover the condition to the original. The daily use should be in line with the property management convention and the parking bay management system with payment of the corresponding management fees.

3. 2.
   The price of the parking pays is RMB 152,000 each and the total price of the parking bays is RMB 4,560,000.00

3. 3.
   Payment

3. Party B should pay off the amount for the parking bays RMB /by/.

3. If Party B fails to pay the full amount within the time stipulated in the agreement, Party A has the right to unilaterally terminate this agreement and sell the parking bays otherwise without prior notice to Party B where all the interest of the parking bays arising from the transfer belongs to Party A. If Party B has paid the deposit, the deposit will not be refunded.

3. 4.
   Handover

3. After Party B pays off the full amount of the parking bays, Party A transfers the use rights of the parking bays to Party B on 9 Nov 2015 and Party B then owns the use rights of the parking bays (no transfer of ownership).

3. Both parties agree Party A may hand over the parking bays within 30 days of the above-mentioned handover date before or after, any date of which is deemed within the handover period stipulated in the contract.

3. 5.
   Period of use

3. The use right of the parking bays transferred to Party B lasts for the period same as the remaining years of the land parcel, and Party B promises not to have any disputes with Party A over the rights of the parking bays in the future; The period of the use right of the parking bays shall be in line with the provisions of the state laws and policies.

3. 6.
   Other relevant issues

3. 1)
   The sales price does not include the property management service fee for the car parking bays. After Party B obtains the use right of the parking bays, Party B promises to abide by the relevant regulations by the “Feiyang International” compound’s property management company and use it in a civilized manner and to pay the property management fee and the apportioned water and electricity fee for the parking bays. If the property management service fees are adjusted according to the market conditions, Party B shall also pay the property management service fee and the apportioned public water and electricity fee for the parking bays on time based on the adjusted charging standard.

3. 2)
   The parking bays can only be used for vehicles of eligible models, and Party B shall not change the structure and purpose of the parking bays without authorization.

3. 3)
   Party B must cooperate unconditionally when Party A and the property management company need to use Party B’s parking for overhauling and maintaining pipelines.

3. 7.
   When signing this agreement, Party B has been to the site for investigation, and clearly knows the locations, sizes, and other conditions of the parking bays.

3. 8.
   This contract is made in triplicate, two for Party A and one for Party B, which will become effective after signed by Party B and sealed by Party A with its official stamp.

72. [72]
    There was another such purported transfer of two car spaces to Mr Zheng personally, though I do not consider this transaction sufficiently important to rate further mention.  
73. [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.
74. [74]
    It is common ground that Mr Yang was not in Guilin at the time these car space agreements were signed. However, Mr Yang’s sister was a senior officer of the Feiyang Project, and she produced the agreements and caused them to be executed by the two joint venturers.
75. [75]
    Whether and to what extent Mr Zheng and Ms Zou inspected the car spaces identified in the Wei and Feiyang agreements, and whether and to what extent they obtained or could have obtained ‘title’ to them, is in dispute. It is sufficient at present to note that by April 2016, the Zheng parties were suing in China to enforce the Feiyang transfer agreement, alleging the car spaces had never been made available, and that the Feiyang transfer agreement had not been performed.

72. Awkward communications

76. [76]
    Before those proceedings were commenced, there were two awkward conversations between Mr Zheng and Mr Yang. Awkward because, up to about the end of 2015, Mr Zheng and Mr Yang dealt with each other in an informal and friendly way characterised (seemingly) by trust on both sides. By early 2016, however, Mr Zheng and Ms Zou were in a position where, at least on their version of events, Mr Yang and his entities were significantly in debt to them and not performing their obligations, either to pay the debts or perform the car space agreements.
77. [77]
    There were two telephone calls which occurred on 31 March 2016 and then on 1 April 2016 respectively. The loss of trust by this time, on at least Mr Zheng’s side, is reflected in the fact that he recorded the conversations. The first conversation occurred late in the evening on 31 March.^[48] The first part of the conversation was concerned with a possible sale of the Feiyang Project and how much might be left over after the bank was paid. The gravamen of the conversation was that it was not likely to be enough to repay all the money owed to the Zheng interests and owed to Mr Yang personally by the joint venturers.
78. [78]
    The conversation then turned in some detail to how the car spaces the subject of the transfer agreements would be dealt with in a sale. The details of the conversation on this topic are difficult to understand as the conversation takes place against a background of facts, the details of which were known to the participants but not to the Court. However, the tenor of the discussion is that Mr Zheng is expressing concern about recovering the Feiyang loan, whether through the sale of the car spaces or from the proceeds of sale of the project.
79. [79]
    Then, importantly, the conversation moves to the Zou loan:^[49]

[…]

B: Moreover, Jiangmin ZOU always lost her temper with me. She said that when she lent you the 2 million, you didn’t write an IOU. She thought I had asked you for an IOU, but she didn’t know, still she transferred the money to you.

A: Okay.

B: So, she asked you for an IOU. Can you do that? She always, I have no say in the house now. Well, the 2 million, it came out of her account, she made it clear. She said you don’t even have an IOU, what do you want me to…

A: There is an IOU. It seems to have been mentioned in the agreement when the 82 parking spaces were taken. Borrowed from Jiangming ZOU 2 million, Guirong WEI 2.5 million.

B: No, it’s not in the agreement. What’s in the agreement is what we discussed, that is, we help you to secure the loan of 26 million, plus the 5.5 million you can get from the 30-million loan from YIJIANG company, so it’s 31.5 million in total, multiplied by 33%, and we get 10.39 million. So how many parking spaces are worth 10.39 million? 68 parking spaces. For Guirong WEI, it’s 12 parking spaces. It is written in the agreement.

A: Yes.

B: So, the 2 million is not included in it. I am sure about this, and it is clearly written on it. So, she said, YANG, since you two are brothers, and lend you money, she said you should write an IOU, at least there should be an amount for the record, right? She said it doesn’t matter if you don’t have money now, there should be an amount for the record. So, I don’t know what to say, what do you think? The IOU, you…

A: These days, it feels a little strange. ZHENG, when you asked me to write an entrustment or whatever, I wrote it without hesitation, and I didn’t care about the content. We are brothers, if we are going to trust, we are going to trust completely, right? It feels a bit strange recently. Entrusting and signing here and there. It feels strange.

B: Well, don’t write the entrustment. It can’t be done. Right? We had a deal and we do it this way.

[…]

A: Well, it is useless, ZHENG. I had to sign the thing you gave me, you know, it’s from a friend, it’s a comfort for you, that is, I will sign whatever you asked me to sign, ZHENG. And the entrustment, how could I have the authority to entrust to sell your stuff? It was already a problem, you know. I wanted to say it, but I didn’t.

B: But you can’t come back to sign the other two entrustments. The intermediary needs to sign the contract. For example, Dean HUANG. I went to Suqiao today and saw Dean HUANG and TANG, he said…

A: So, I will sign whatever you ask me to sign, and I fully trust you.

B: Don’t sign things that are not necessary. This one is useful, but you are not able to sign, so this is the only way. This is completely normal, and there are no unnecessary requirements. Don’t think ill of it. And like I said earlier, you borrowed Jiangming ZOU 2 million without even writing a note, what would she think? Can’t blame her for this, right?

B: So, what worries do we have? We can talk about it openly, right? It does feel strange recently, it feels like, if there’s no trust between us anymore, then we have a big trouble.

A: You don’t even want to go through the formalities, she gets angry with me every day, how do we build trust?

B: It’s been so many years, 3 or 4, have I ever denied a debt? Right? I don’t know what it means to add an IOU at this particular point in time. I’m saying… have I ever denied a debt? What do you say?

A: Well, she told me that you bought a Land Rover and did this and that, and you still owe us money. We are not very rich, YANG, right? You know this is the money we have worked hard for in Australia for more than ten years, so I figure this is not too much to ask. You know that’s true, right? So, tell me what I’m supposed to do? I don’t even know what I’m supposed to do. Anyway, she told me about this many times. She told me she could step in, and I said you don’t have to do this. I just need to communicate with YANG. All right, it is what it is. Well, you get some rest. What time is it over there? Probably two o’clock.

[…]

80. [80]
    The transcript reveals Mr Yang is working hard to persuade Mr Zheng to keep trusting him, using quite emotional appeals, reiterating their close friendship. He also acknowledges the Zou debt, despite attempting to lump it in with the transfer agreements for the Wei and Feiyang loans. Mr Zheng’s rebuttal of that proposition is consistent with the documents.
81. [81]
    The following morning on 1 April 2016 there was a further shorter conversation:^[50]

Yang: hello, Zheng Zhong (polite way to address the leader of a company; here it refers to Youlin Zheng)

Zheng: morning, Yang Zong. I just got up.

Yang: morning!

Zheng: how are you? (sigh)

Yang: stayed up the whole night. (Sigh) too much thought and it felt bad.

Zheng: yes, I also couldn’t sleep.

Yang: I was thinking, do you think it’d be better I go talk with Jiangming Zou about this? So that you don’t get too much stressed.

Zheng: you won’t make it right through talking. You two are similar and it’ll be difficult to talk together. I think it’d probably be better with [my] presence. What do you think?

Yang: ah, yes.

Zheng: I’ll ask her and see if she wants to talk. She is a quite straight-forward person. You know [her]. [She] doesn’t give room for manoeuvre, does she?

Yang: understood. So it’s like this. I need to talk with her about the current situation, that is, to gain her understanding. OK? 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, OK? I feel really sad for that I don’t even deserve this bit of trust, OK? This is how I feel about these issues. I just hope that we could still trust each other and get each other’s moral support to pass the difficult time, what do you say? There’s definitely difficulties, isn’t there? Well, let me say this, I am here now, Zheng Zong, to be frank, I work this hard, [because] I want to make a comeback. I will also turn this business into a big one and work really hard to pay you back the money. Even if I really ended up there, I’ll do everything I could to pay you back the money.

82. [82]
    Reading that text in the light of the tense and emotional discussions of the night before, it is hard to avoid the conclusion that both men knew the bromance was over. More directly relevant, however, is Mr Yang’s comments about the Zou loan. It is difficult to construe the words “I definitely acknowledge the debt” as meaning anything but what they say.
83. [83]
    Mr Yang correctly perceived a loss of trust in him by Mr Zheng. Within a week of this conversation, Mr Zheng and Ms Zou commenced proceedings in Guilin to enforce the Feiyang transfer agreement (see paragraph [89] below). There are thereafter communications in which the parties began to argue their positions.
84. [84]
    On 26 April 2016, Yang sent Zheng and Zou a text saying relevantly:^[51]

In 2011, Director Zheng proposed by himself to invest in Yijiangyuan, 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!

[…]

Due to the continuous downturn in the tourism and real estate markets in the past two years, I have voluntarily offered to provide some parking bays to ensure that your original investment would not be compromised, effectively providing double insurance for your investment. Before Director Zheng returned to Guangxi, I proposed whether to use litigation preservation to secure the parking bays to reassure you (this matter can be verified by Luping Chen, as I also mentioned it to her at the same time). However, you resorted to the court just because you needed to get issued a certificate of authorisation to Feiyang to help you buy parking bays

[…]

Because the issuance of our 163 visa had been delayed, Director Zheng asked me to transfer 250,000 Australian dollars to a woman named Lina Yang [Nina], saying that she would sponsor my immigration. However, this was not successful, and the money was not refunded. Moreover, I was asked to buy an overpriced apartment of hers to offset the debt. I bought it for over 800,000 and sold it for over 400,000, losing several million RMB in one deal. Can this matter be understood as a conspiracy? Have I ever complained about it?

You treated me like this when your investments in China had some risks. How should I understand my investment losses like this in Australia?

As I have always said, friends should be grateful to each other, and all understandings are not my true intention (Translator’s notes: this is a word-for-word translation of the original text as the meaning is obscure). United we live and we die if we resort to revenge. If it’s just for confirmation of rights, I won’t hesitate to sign. However, if this is just the beginning and you have more plans, it won’t be that simple! It’s okay that you throw all the shits on me to achieve your goals; I will consider it as repayment for any debts I have owed you over the years!

The above is my personal understanding of the events that have occurred between us throughout these years. If there are no objections, I will post this on my Moments to clear my name.

[underlining added]

85. [85]
    The underlined sections will be discussed further below.
86. [86]
    On 30 April 2016, Mr Zheng sent Mr Yang a text message. It is not clear whether it responds to the above message, or a later one. In any event, it relevantly stated:^[52]

You have explicitly said that you owed us over 10 million yuan and that you would repay us with the 68 parking bays […] You also wrote a power of attorney to grant me full power to dispose of the parking bays. You mentioned multiple times in phone conversations that these parking spaces had been ours and already been offset to us. You sent a text message saying that you initially wanted to handle this matter through litigation preservation but didn't have enough time to do so. Furthermore, you told us through Luping Chen of your company that you fully supported the confirmation of rights of the parking bays and so on, all of which is evidenced in black and white. However, you are now going back on your word and refusing to comply, ultimately disagreeing with the court mediation proposal.

87. [87]
    On 1 May 2016 at 12:08am, Yang responded stating, inter alia:^[53]

Director Zheng! From the beginning, resolving this issue through litigation and ruling was not the right approach. Firstly, the money was lent by Yijang to Feiyang, and if we were to handle this matter officially, the repayment should go to Yijang or the bank. Secondly, the regulations of the new property law have a series of provisions for parking bays, and no court would rule they belong to you. Even if they ruled in such a way, would you still be able to secure it if the property owners caused a commotion? What I mean by internal resolution was that I didn’t want lawyers to get involved, and we brothers could discuss and handle the matter ourselves. At the time, providing the parking bays for you was meant to protect your initial investment. We could settle the accounts later when Yijiang^[54] was able to liquidate or sell their assets. However, I cannot accept being pressured by you using this method, and whether your intentions were solely for confirmation of rights, only you would know. To be honest, since receiving the court's notice, I have been utterly disheartened. This immigration no longer holds any meaning for me, and I will definitely pursue the matter of Lina Yang selling the house to me.

[underlining added]

88. [88]
    On 1 May 2016 at 6:44pm, Yang sent Zheng a further text message stating:^[55]

The situation is quite simple. You invested 6.15 million in Yijiangyuan, and to ensure the safety of your investment, I provided you with parking bays as a guarantee, based on our emotional bond. Investments come with risks; please tell me, which partner in the world would provide such a guarantee for you? Of course, this was also to thank you for agreeing Yijiang to give excuse to [translator’s note: this may mean “lend to” as it looks like a typo] Feiyang. This was originally a beautiful story, but now it has led to a court dispute. My bottom line is that I will definitely give you the parking bays, but not in the courtroom!

[underlining added]

89. The Feiyang litigation in China

89. [89]
    On 7 April 2016, Mr Zheng and Ms Zou commenced proceedings against the joint venturers. Reading the translation of the reasons for judgment, they sued to compel performance of the Feiyang transfer agreement. Mr Zheng and Ms Zou commenced their proceedings in the Lingui District Court. The matter was transferred to the (superior) Intermediate People’s Court, seemingly because the plaintiffs were foreign citizens. Judgment was delivered in April 2019.
90. [90]
    The judgment is of interest to the issues which arise in the Wei loan because, although it is concerned with the Feiyang loan, the documents are in materially similar terms. The Court makes several findings along the way, but its key reasoning appears in the following passage:^[56]

The time for repaying the debt of this Case was already due, and the amount of creditor’s right to which the plaintiffs were entitled was defined and clear to both parties. On such basis, the two parties achieved the agreement to expiate the debt using carpark spaces through consultations and this was a juristic act to terminate the contract relationship through repayment using other payment methods instead of the original method. The nature of such act is datio in solutum. According to the principles of law of obligations, repayment is the primary method to settle a debt, yet it relies not only on the payment behaviour of the debtor, but also on the creditor to receive the payment and realize its ownership and right of possession in order to achieve the result of payment. Datio in solutum is just a change of the subject matter of the payment, and in order to achieve the repayment objective, datio in solutum should be implemented in reality to achieve the result of repayment. Debt-in-kind works in a similar manner. Debt-in-kind is a practical juristic act and takes effect subject to the condition that the entitled recipient such as the creditor must receive the payment in reality. Although the two parties of this Case signed the debt-in-kind agreement and agreed that the two respondents should have expatiated the original debt using the 68 carpark spaces, the two respondents breached the contract after signing and failing to deliver the carpark spaces to the plaintiffs in reality and the plaintiffs as the creditor did not receive the expatiated 68 carpark spaces in reality. The Agreement involved in this Case did not fulfil the conditions to exert its effect, thus was established but not effective. Therefore, in accordance with law, the court does not support the claim of the plaintiffs to request the two respondents to continue to perform the obligations of the debt-in-kind agreement to deliver the 68 carpark spaces and confirm the plaintiffs’ entitlement to the right to use these carpark spaces.

In summary, the plaintiffs, Youlin Zheng and Jiangming Zou, made the claim on the two respondents to continue to perform the obligations of the Agreement and deliver the 68 carpark spaces at the Feiyang International Development Plan valued at 10,390,000 Yuan to the two plaintiffs as well as to confirm the plaintiffs’ entitlement to the right of use. This claim lacks the legal basis and is not supported by this court pursuant to law.

[underlining added]

91. [91]
    The essence of the reasoning seems to be that unless the substitute obligation is performed, the creditor is left to its primary remedy of repayment in money, although I do not rely on the judgment as conclusive evidence of Chinese law, though it is probably admissible as ‘an opinion of an expert to be treated with respect’.^[57] The underlined remark is of particular interest. The Court concludes that Feiyang had not performed the obligation to deliver the car spaces. However, I cannot find anything in the reasons which explains how this conclusion was reached, so I do not rely on that either as a finding of fact or a conclusion of law which is conclusive of itself on that question, even in relation to the Feiyang transfer agreement.

91. The litigation in Queensland

92. [92]
    In the meantime, these proceedings were commenced. The Zou proceeding and the Wei proceeding were commenced together in December 2018. The Yang proceeding was commenced in August 2019. The Yang proceeding was brought initially against Ms Ning and Mr Zheng only. Later UQIE was added as a party.
93. [93]
    As initially pleaded, Yang alleged that the $250,000 was paid to Zheng and was impressed with a trust that it not be paid over to Ning until the 121 visa was approved. It was alleged that Zheng breached that trust by paying the funds to UQIE, and that Ning knowingly participated in that breach of trust.^[58] On 23 December 2022, Mr Yang settled with Ms Ning. He released her from all claims for a payment of $100,000.^[59] The settlement was performed.

91. The principal Witnesses

94. [94]
    Before turning to analysing the issues, it is convenient to make some general observations about the credibility and reliability of the witnesses.

91. Mr Yang

95. [95]
    Mr Yang’s demeanour in the witness box was decisive and direct. However, care must be exercised in relying too heavily on demeanour. Some people can be poor at the process of giving evidence, but nonetheless the evidence they give can be reliable. And the contrary can be true. And so it is with Mr Yang. Although Mr Yang was a decisive and direct witness, he decisively and directly gave evidence which was inconsistent in a material way with his own previous statements and with objectively reliable evidence. When the whole of his evidence is considered, he revealed himself to be a person who, at least in relation to the matters before this Court, reconstructs events in the manner which suits his needs at the time. I give some examples of problematic parts of his evidence.
96. [96]
    First, on 21 December 2018, Mr Yang swore an affidavit in the Zou proceedings (the 2018 affidavit). The 2018 affidavit was sworn in support of Mr Yang’s resistance to an application to enforce a default judgment for the Zou loan which had been obtained in China. There are several statements in that affidavit of interest, but of present importance is the following:

FRAUDULENT CLAIM

26. Zou claimed that I borrowed RMB 2 million (approximately AUD$400,000) from her on 3 April 2013 and that I have not yet repaid the loan. There was no IOU nor any documentation to evidence the loan, only a bank transfer receipt was provided to the court for such a large sum of money.

27. I have had some financial dealings with Zou between 2011 and 2016 in relation to investment of funds in the Lingui County Yijian Tourism Development Pty Ltd (“Yijiang”) and my visa application cost. I have not personally borrowed money from Zou.

28. To my understanding Zou transferred RMB 2 million to further invest in Yijiang as a shareholder in April 2013. Zou became a shareholder of Yijiang in 2011 to develop a tourism project; Zheng and myself were the two other shareholders.

29. In or about 2014 I transferred the investment fund of RMB 2 million to Zou as she informed she was short of funds. I have a bank transfer receipt dates 16 April 2014 transferring RMB 2 million to Zou. Exhibited marked “JY 6” is a true copy of the transfer receipt.

30. It appears from the Judgment that the Court was not informed of the transfer of RMB 2,000,000 when the Plaintiff would have been aware of the transfer on 16 April 2016.

97. [97]
    The statements in those paragraphs contrast with the position Mr Yang himself takes in respect of the Zou loan in these proceedings. Those paragraphs assert that there is no loan by Ms Zou, but rather an investment of RMB 2m in “Yijiang” (which is Lingui). It was admitted in this proceeding that there was a loan on specific terms agreed orally with Ms Zou. Mr Yang’s statement in the 2018 affidavit is wrong on that point.
98. [98]
    Of course, mistakes can be made, but it is difficult to see how he could have been genuinely mistaken about such a fundamental matter, especially given the contemporaneous texts from Ms Zou in early 2014 prompting him to pay interest on her loan. If it be thought that this concession was a recent position, it also is inconsistent with his statements to Mr Zheng on 1 April 2016 that he “definitely acknowledged” the Zou debt: see paragraph [82] above.
99. [99]
    Either Mr Yang consciously deceived the Court in those paragraphs of the 2018 affidavit, or he reconstructed what occurred in a way which served his interests at the time. Those interests were, of course, to prevent the Court enforcing the judgment obtained in China. This evidence was likely relied upon to engage the principal that a foreign judgment obtained by fraud will not be enforced. That inference is reinforced by the prejudicial heading “Fraudulent Claim” used in the affidavit.
100. [100]
     Second, when taken to his frank admissions of the existence of the Zou loan in the 30 March and 1 April conversations set out above, Mr Yang gave evidence that he was not admitting the debts in those conversations. His evidence in that regard was not credible, though Mr Yang might have believed it when he said it. There is no reasonable interpretation of his statements in those conversations other than that he was admitting RMB 2m was still owing to Ms Zou.^[60]
101. [101]
     Third, paragraph 18 of the 2018 affidavit stated:

In April 2016 I called Zheng and Zou and had a phone conversation asking them why they sued my Chinese companies. They told me they had no comment and their case is with their legal representatives.

102. [102]
     If that statement is based on any actual event, it is likely it was the 30 March and 1 April telephone conversations. Whether it was or not, those conversations did occur, and demonstrate that a full discussion was had about all the disputed issues. At the least, the statement in paragraph 18 is misleading. That is more so given that the tenor of that part of the 2018 affidavit is that Mr Yang had had no meaningful interaction with the Zheng parties, as a way of supporting the contention that the default judgment was improperly obtained. That implication was wrong.
103. [103]
     Fourth, there was the complicated story Mr Yang told about the Zou loan in his 26 April 2016 text to Mr Zheng: see [84] above. This is Mr Yang’s comprehensive attempt to set out his view of the contentious dealings with the Zheng parties in the context of the proceedings to enforce the Feiyang transfer agreement brought in China. The first paragraph relates to the Zou loan. The underlined statements are nonsense. Mr Yang has simply asserted whatever suited him at that time. While on that text, the italicised passage is consistent with Mr Zheng’s evidence as to the genesis of the payment and inconsistent with Mr Yang’s version (in which he said there was no request for a dividend): see [160] and [161] below.
104. [104]
     Fifth, also on 21 December 2018, Mr Yang swore an affidavit in the Wei proceedings. This affidavit was sworn in support of Mr Yang’s resistance to an application to enforce a default judgment for the Wei loan which had been obtained in China. Again, one of the arguments plainly intended was that the default judgment had been obtained by fraud because the Feiyang car space agreements were assumed not to have been put before the Chinese Court (see paragraphs 14 and 15). At paragraph 11 of the Wei affidavit, Mr Yang swore that:

Zheng had negotiated the agreements. I saw him sign the agreement and the transfer contract on Wei’s behalf with his thumb print on the document and not that of Wei.

105. [105]
     Again, this statement was wrong. It was Mr Yang’s evidence at trial that he was not in China at the time these agreements were signed. There was no hint of any contrary position in the evidence. Mr Yang’s evidence when cross examined on this glaring inconsistency was successively evasive, and then avoidant,^[61] though he freely admitted he was not in China earlier when not being challenged.^[62] It cannot be explained away as an innocent mistake on an irrelevant point of detail. The assertion in paragraph 11 was made to enhance the credibility of the contention that the Feiyang transfer agreement was binding and therefore the claim on the Wei loan was a fraud. 
106. [106]
     Sixth, on Mr Yang’s evidence at trial that the liability which the transfer of the 68 car spaces was to meet was inconsistent with the documents which recorded it. As explained in paragraphs [23] and [50] above, Mr Zheng and Ms Zou put money into Lingui in two ways. The first was the acquisition of shares in Lingui for RMB 6,135,000 in 2011. They also lent RMB10,300,000 to Lingui which was in turn lent to the joint venturers in about December 2013. The Feiyang offset agreement and transfer agreement related to the 68 shares were in relation to the latter advance. Ms Zou and Mr Zheng are generally consistent in their statements from time to time both prior to and at trial about their distinct interests and which of those interests related to the Feiyang agreements. The exchanges in 2016 are also on that basis.
107. [107]
     At trial, when asked about the car space agreements, Mr Yang said:^[63]

MR TRUONG: Now, in November 2015, do you recall a conversation with Mr Zheng about the Wei loan?

WITNESS: Yes.

MR TRUONG: Yes. Where was that conversation?

INTERPRETER: We had multiple discussions regarding that issue. However, the most impressive one - or I should say, the most decisive one - was - happened at a place near my home in Brisbane.

MR TRUONG: Yes. And what was discussed in that conversation?

INTERPRETER: I told Mr Zheng that I am willing to - I am willing to offer 80 parking spaces from Feiyang - Feiyang International Project. This - this is to solve two problems. The first one is to ensure the safety of their investment, I mean the 6.15 million investment into the shares. The second was to solve the Wei debt issue.

MR TRUONG: Yes. And what was discussed in relation to the Wei debt?

INTERPRETER: As I mentioned before, I offer 80 parking spaces to solve the two problems. So I told Mr Zheng that he could decide how many parking spaces could be used to solve the two issues separately. So Mr Zheng decided to use 80 - sorry, 68 parking spaces to ensure the safety of their investment. Twelve parking spaces to solve the 2.5 million debt.             

108. [108]
     Now it is easy to make a mistake or get mixed up when giving evidence, even on a point as fundamental as what liability the 68 car spaces were to address. However, given an opportunity to reflect on the matter, Mr Yang said:^[64]

HIS HONOUR: Can I just ask this question? The Feiyang Project was not a project of Lingui, was it?

WITNESS: Yes. Yes. Yes.

INTERPRETER: That’s correct. Feiyang Project is not a project of Lingui, but they are my business.

HIS HONOUR: I understand that. So why would you use assets of the Feiyang Project to repay an investment by Mr Zheng in Lingui?

INTERPRETER: Your Honour, can you repeat the last part of the question?

HIS HONOUR: So why would you use assets of Fei - - -

WITNESS: Feiyang.

HIS HONOUR: Feiyang - why would you use assets of the Feiyang Project to repay an investment by Mr Zheng in Lingui?

INTERPRETER: It’s - actually it’s not a repayment, so Mr Zheng requested me to ensure the safety of their investment of 6.15 million, so actually this is an acceptable demand as they did not want to bear the risk of investment.

[underlining added]

109. [109]
     That explanation is inconsistent with Mr Yang’s own written evidence, Mr Zheng’s evidence, the conversations in March and April 2016, the matters recited in the Guilin Court judgment and the terms of the Feiyang offset and transfer agreements. It makes no commercial sense.
110. [110]
     I recognise that the Feiyang loan is not sued on in these proceedings. However, it was a fundamental and important component of the dealings between the parties. It is covered extensively in the evidence, including in Mr Yang’s own written evidence. In my view, Mr Yang made up the underlined explanation in the witness box to explain away an awkward question. He might well have believed it was true when he said it, but that is no recommendation as to his reliability for accurate evidence.
111. [111]
     Seventh, there are glaring inconsistencies between Mr Yang’s evidence at trial and the case he pleaded in the misleading conduct case. Mr Yang’s principal allegations in relation to the alleged misrepresentations have remained consistent since the filing of the original statement of claim. The Third Further Amended Statement of Claim (the statement of claim) alleges relevantly:

3. VI
   Purchase of the Property

3. 26.
   On 13 August 2013, Zheng told Yang that:

3. (a)
   the Property had a value of approximately $800,000 (Zheng’s First Value Representation);

3. (b)
   the Property would be available for inspection the following day.

Particulars

3. Telephone conversation between Zheng and Yang on 13 August 2013.

3. 27.
   On 13 August 2013, Zheng further told Yang that:

3. (a)
   Ning had paid $828,000 when she purchased the Property (the Purchase Price Representation);

3. (b)
   the market value of the property was $828,000 (Zheng’s Second Value Representation);

3. (c)
   Ning was willing to sell the Property to Yang for the same price she paid for it.

Particulars

3. Conversation between Zheng and Yang at Yang’s home on 13 August 2013.

3. 28.
   In response to the matters pleaded in paragraph 26 above, Yang asked Zheng what the lowest price Ning would be willing to accept for the Property would be.

3. 29.
   Zheng told Yang that Ning would accept the sum of $808,000 for the Property but

3. would not consider any further reduction in the price.

3. VII.
   INSPECTION OF THE PROPERTY

3. 30.
   On 14 August 2013, Zheng took Yang to inspect the property.

3. 31.
   Ning was present during the inspection.

3. 32.
   During the inspection, Ning told Yang:

(a) she was a real estate agent of many years’ experience;

(b) in her opinion, the property was a good investment because of its spectacular views, location and considerable rental income;

(c) the market value of the unit was considerably more than $808,000 (Ning’s Value Representation); and

(d) she was willing to sell the Property for $808,000 because Yang was a friend of Zheng’s.

3. VIII.
   RELIANCE

3. 33.
   In reliance on Zheng’s First and Second Value Representations, Ning’s Value Representation (collectively, the Value Representations) and the Purchase Price Representation, Yang executed a contract for the purchase of the Property for $808,00 on or about 15 August 2013.

3. 34.
   But for the Value Representations and the Purchase Price Representation (the Representations), Yang:

3. (a)
   would not have purchased the Property at all; or

3. (b)
   in the alternative, would have purchased it for its true market value.

3. IX.
   MISREPRESENTATIONS

3. 35.
   In fact:

3. (a)
   the Value Representations were false because, having regard to the sales of other properties in the same block as the Property on or about August 2013, the value of the Property was no more than $480,000; and

3. (b)
   the Purchase Price Representation was false because Ning paid $680,000 when she purchased the Property.

35A. On 13 August 2013, Zheng instructed Jake Chen of Olin Realty Pty Ltd to conduct a search on RP Data for the Property (the Search).

35B. The search disclosed that Ning had purchased the Property for $680,000.

35C. In the premises of the matters pleaded in paragraphs 35A and 35B, Zheng knew, or ought to have known, that the Purchase Price Representation was false.

112. [112]
     The following matters emerge from these allegations:

     1. All the representations by Mr Zheng were made before the inspection of the unit, in a telephone call or in a person-to-person conversation at Mr Yang’s home;
     2. Mr Yang inspected the unit the day after the representations were made; and
     3. Mr Yang relied on each of the representations.
113. [113]
     The only evidence Mr Yang gave as to events before the inspection was:^[65]

INTERPRETER: In September 2012, that was my - that was the first time I mentioned the topic of recovering the fund. And until the August of 2013, so before August 2013, I also brought up this topic several times. I requested to - I requested Mr Zheng to help me recover the fund. On 6 of August, I arrived in Brisbane. And we, actually, we had some private discussions regarding to that issue. So Mr Zheng is very clear that that is the purpose of my travel. I’m here to solve this issue.

HIS HONOUR: All right.

MR TRUONG: Now, after the face-to-face discussion with Mr Zheng on 10 August, did you take steps to inspect Ning’s properties?

INTERPRETER: After that, I asked Mr Zheng to set the date so that we can check - we can inspect the property. And after that, I didn’t - I can’t remember the date correctly. I’m not sure whether it’s on the 12^th or 13^th of August. We were scheduled to inspect the property on that date.

MR TRUONG: Yes. And on - do you recall the inspection, Mr Yang?

INTERPRETER: I can recollect some of them.

MR TRUONG: Yes. Now, do you recall Mr Zheng saying that the apartment was ready for inspection?

INTERPRETER: He said he has already talked with Ms Ning, and also made an appointment with her. We are all good to go to inspect the property for 12^th or 13^th.

MR TRUONG: Yes. Now, on the morning - on the morning of inspection, did you have a discussion with Mr Zheng about Ms Ning’s property?

INTERPRETER: Before the inspection, Mr Zheng told me that Ms Yung had two apartments in that building. And one - one is around 800,000 something, and one is around 1 million something. So he asked me which one do I want to inspect. I replied let’s go with the cheaper one because at that time, I only wanted to solve my problem. I don’t actually like the apartments.

MR TRUONG: Now, when you had that discussion with Mr Zheng, who else was there? Was anyone else there or just the two of you?

INTERPRETER: Basically, just two of us were there.

[underlining added]

114. [114]
     As to the inspection, Mr Yang said that he could not recall Ms Zou being present but was confident that Mr Chen was not there. He recalled Mr Zheng and Ms Ning being present. As to discussions about price, Mr Yang said:^[66]

MR TRUONG: Now, were there any discussions between you and Zheng at the inspection?

INTERPRETER: I can’t recall it very vividly, however as far as I can recall, there was few discussions and Mr Zheng would just mention that how good this property was.

MR TRUONG: Yes. And were there any discussions concerning price during the inspection?

INTERPRETER: Well, there was no discussion regard- there was no discussion regarding the prices. The price. Only Ning mentioned that her property was quite good and the value was around 90 - 900,000.

MR TRUONG: That was Ning, was it?

WITNESS: Yes.

115. [115]
     After the inspection Mr Yang said:^[67]

MR TRUONG: Now, that evening, did you have a face to face conversation at your house with Mr Zheng?

WITNESS: Yes.

MR TRUONG: To the best that you can recall, what was discussed with Mr Zheng at your house?

INTERPRETER: At that evening, Mr Zheng brought a bunch of documents to my property. First he let me review these documents. One of the document was a res- a research report of the property and I was also shown - - -

[underlining added]

116. [116]
     Mr O'Brien KC (who appeared with Ms Yates for the Zheng parties) objected. Later Mr Yang continued:^[68]

MR TRUONG: And so can you tell his Honour what was discussed with Mr Zheng, please?

INTERPRETER: We discussed the price for Ning’s property.

MR TRUONG: Yes. And what was discussed?

WITNESS: Okay.

INTERPRETER: Mr Zheng came to my property and showed me a document. Mr Zheng claimed that this is research pro - report on the price of the property. Because the document was in English, so I could only read the numbers on the document, I could only see the figure 828,000.

MR TRUONG: And what did he say about - - -

MR O'BRIEN: Sorry, I call for that document - I formally call for that document.

HIS HONOUR: Yes.

MR TRUONG: Yes. Good call. So what did Mr Zheng say about the value of the property?

INTERPRETER: I asked Mr Zheng, what is the current value of the property. Mr Zheng said the current value of this property is 828,000.

MR TRUONG: And what did - what did he - Mr Zheng say about what Mr - Ms Ning had paid for the property?

INTERPRETER: He showed me the document and told me that that was the price when Ms Ning purchased the property - to 828,000.

[underlining added]

117. [117]
     The inconsistencies between this account, the pleaded case and Mr Yang’s witness summaries are significant, as follows:

     1. There is a confusion of dates. Frequently that is not of itself material. However, Mr Yang’s oral evidence fundamentally changes the order of events from the pleaded case. The pleading has all the representations by Mr Zheng occurring the day before the inspection. The oral evidence has them occurring on and after the inspection. This is no mere point of detail. The change is also inconsistent with his first witness summary. That summary was overtaken by a supplementary witness summary which was more consistent with his oral evidence. However, the supplementary summary was provided on 12 April 2022,^[69] nearly nine years after the events and four years after the statement of claim;
     2. Mr Yang’s oral evidence does not make out the representation alleged in paragraph 26(a) of the statement of claim. Mr Yang does not give evidence that Mr Zheng told him the value of the units was $800,000 and $1m but that there were two units ‘around’ those amounts. At best, that is ambiguous as to what the numbers represent. It provides no basis for the positive allegation in the pleading;
     3. In his oral evidence Mr Yang says for the first time that during the inspection Ms Ning said that the value of the unit was around $900,000. That number never appears in any pleading or witness summary of Mr Yang’s, not even his last-minute revision of his evidence provided on 12 April 2022. It is also inconsistent with the deleted allegation in paragraph 32 of the statement of claim. Mr O'Brien and Ms Yates credibly suggest that Mr Yang adopted that figure because he remained in Court while Mr Zheng gave evidence and Mr Zheng referred to that figure.^[70] That submission draws strength from the fact that when Mr O'Brien squarely put that proposition to Mr Yang, Mr Yang gave yet another version in which he said the figure was mentioned multiple times.^[71]
     4. Perhaps most notable, Mr Yang mentioned in his oral evidence for the first time ever that Mr Zheng showed him a search showing the figure $828,000. That is not referred to in his pleading, and his initial witness statement nor in his supplementary witness summary. It is fundamentally important. It might have been prompted by Mr Chen’s evidence that at some stage he did such a search. Whatever the reason, in my opinion that evidence was fabricated in the witness box.
118. [118]
     A further inconsistency with his pleaded case was his evidence in cross examination that he does not care about historical purchase prices of property and that it is not a factor he considers in assessing market value.^[72] That is directly inconsistent with his reliance on the alleged purchase price representation. It also makes his evidence about Mr Zheng showing him a document showing the figure seemingly irrelevant, as Mr Yang said he was told the document was a report on the price of the property.
119. [119]
     There are other improbabilities and inconsistencies in Mr Yang’s evidence which will be covered when I make specific findings. However, for the above reasons alone, I do not consider his evidence to be reliable and will not accept it unless corroborated by other evidence I accept.

120. Mr Zheng

120. [120]
     Mr Yang submitted that Mr Zheng was not a credible or reliable witness based on two principal matters. The first related to his demeanour and manner of giving his evidence. The second related to his evidence on two matters: the Q&A document and the Versace stay. Mr Truong KC (who appeared with Mr Leung for Mr Yang) submitted that he was not a credible or reliable witness.
121. [121]
     I want to deal with the Q&A document and the Versace stay first including, for convenience, Ms Zou’s evidence on these two matters.
122. [122]
     As explained from paragraph [27] above, the Q&A document was prepared in Olin’s office, it was sent with a covering email from Mr Zheng to Mr Yang, and it contained statements which would have been known by Mr Zheng and Ms Zou to be untrue. The most egregious part of the Q&A sets out the fictional history of a close professional relationship between Mr Yang and Ms Ning. There was no pre-existing relationship of any kind. Ms Ning was introduced to Mr Yang as a sponsor by Mr Zheng, and Mr Yang at that time had had no direct dealings at all with Ms Ning. All dealings were through Mr Zheng.
123. [123]
     When cross examined about this document, Mr Zheng avoided addressing questions designed to extract a concession that relevant parts of the document were wrong. He further asserted that he had not read the document but had just forwarded it to Mr Yang. He said that it would have been prepared by an employee of Olin and that he had no input into it. At first blush, that evidence seems improbable.
124. [124]
     It is useful at this point to consider Ms Zou’s evidence about the Q&A. In chief, she said that she was unwell around the time the document was drafted and did not see it at the time.^[73] She maintained that position in cross examination. She was also careful in how she answered questions about the truth or otherwise of some of the statements in the letter.
125. [125]
     The purpose of the Q&A letter was to prepare Mr Yang to answer questions from the Department on his 121 visa application. If the Q&A had been prepared with the knowledge of Ms Zou or Mr Zheng, it shows a willingness to deceive the immigration authorities. It is such a serious matter that care must be taken in reaching the conclusion that they did have such knowledge. More so given that matter was not fully examined at trial.  It is a collateral issue. In those circumstances, I am unwilling to reach the conclusion that Ms Zou or Mr Zheng actually knew of the false statements in the Q&A.
126. [126]
     Ms Zou’s explanation for her claimed ignorance of the contents is not improbable (even if her apparent neglect of her duties as a migration agent during her illness, which permitted such a document to be sent to Mr Yang, might reflect poorly on her as a migration agent).
127. [127]
     Mr Zheng’s explanation seems less credible, except for this. Mr Zheng is an unusual and idiosyncratic person. His role in the Olin businesses is fluid and ambiguous. His principal activity seems to have been facilitating communications between people. His contributions rarely seem to go to the substance of events. It is possible he was fulfilling this role when forwarding the Q&A; personalising it, so to speak. On the other hand, Mr Zheng was the go between for Mr Yang and Ms Ning. The ideas included in the Q&A must have come from somewhere.
128. [128]
     The evidence about the Q&A does raise the possibility that Ms Zheng or Ms Zou are willing to mislead when it suits their interests. And the evasiveness of Ms Zou and Mr Zheng in addressing questions about the misleading content do reflect a willingness to avoid giving answers which they perceive might harm their case.  It provides a basis for caution in assessing their evidence.
129. [129]
     A similar analysis applies to their evidence about the holiday at Versace. Both gave evidence that there was no such visit. The evidence suggests that there was. In cross examination on the issue Ms Zou ultimately fell back on the refrain that she did not remember, a cant invoked on several occasions. Again, the evidence of both witnesses on this subject reflects a willingness to avoid giving answers which they perceive might harm their case.
130. [130]
     However, I am not satisfied that they are being deliberately misleading about this issue to avoid conceding that the true events were as Mr Yang says, because I do not accept Mr Yang’s version.
131. [131]
     I am not persuaded that Mr Zheng arrived at Mr Yang’s house and purported to give him an $8000 commission he had been given by Ms Ning. The only evidence for that is Mr Yang’s assertion, and his evidence is uncorroborated and for the reasons I have given, do not persuade me. Further, even if (as appears the case) the two families stayed overnight at Versace, that does not prove that the visit was to spend the $8000. Indeed, there are considerations which tell against that: the invoices are in Ms Zou’s name, not Mr Yang’s, and the amount paid is only about $1800. It is left unexplained by Mr Yang how taking the Zhengs on this holiday was a way of utilising the $8000 for the benefit of both families, given that Mr Yang appears to have kept $6200 of the money. Indeed, the invoices do not even show that the Yang family was present, just that two rooms were booked.  The photographs tendered were in my view equivocal.
132. [132]
     Accordingly, I am not persuaded that Ms Zou and Mr Zheng deliberately misled the Court over the Versace trip and its purpose. I do accept, however, that their evidence on this issue again showed a tendency to try to avoid giving evidence unhelpful to their case, and that needs to be kept in mind when assessing their evidence.
133. [133]
     Turning to Mr Zheng’s evidence more generally, I accept his manner and mode of giving evidence was unhelpful. He tended to make speeches in which he determinedly gave the evidence in his various witness statements, and therefore was frequently unresponsive to questions asked, both in chief and in cross examination. He was a frustrating witness for both senior counsel to examine, not to mention the challenges he posed for the diligent and long-suffering interpreter. However, his manner and mode of giving evidence must be considered in the light of the content of the evidence. Generally, his evidence was broadly consistent with the contemporaneous documents and the likely inferences which flow from those documents and other evidence I accepted. This was confirmed on numerous points of detail, some of which are referred to in the reasons below.
134. [134]
     As Mr O'Brien submitted, the mere fact that someone is determined to give evidence consistent with their witness statement does not of itself undermine their reliability if that evidence is otherwise shown to be reliable. It must also be considered in the light of Mr Zheng’s rather idiosyncratic character and role in Olin’s business as explained in paragraph [127] above. In my assessment of watching him in evidence, Mr Zheng does things differently from the ordinary run of business person, and that sometimes explains oddities in his evidence.
135. [135]
     For all these reasons, I approach Mr Zheng’s evidence with care when it is not consistent with other contemporaneous documents or other reliable evidence. However, I do not consider him to be a consistently unreliable witness overall.

120. Ms Zou

136. [136]
     Ms Zou presented as a disciplined, no-nonsense businesswoman of strong character. She created the Olin businesses and is responsible for their day-to-day operations. In my view, she is well suited to the task.
137. [137]
     As I have explained, her evidence was challenged on the Q&A document and the Versace visit. For the reasons given, while I do not conclude Ms Zou was being deliberately deceptive on those issues, her evidence did indicate a tendency to try to avoid giving evidence unhelpful to their case, and I take that into account when considering her evidence. Outside those areas, I found her evidence to be direct and broadly consistent with the documents and the likely run of events. Certainly, she was not able to be effectively challenged on any matter which went to the issues in dispute in the proceedings.
138. [138]
     For all these reasons, I consider her evidence to be broadly reliable, though it requires some care where she is giving uncorroborated evidence in relation to matters which she might think are disadvantageous to her family’s position in the proceedings.

120. conflicts Observations

139. [139]
     Questions of conflict of laws come up from time to time. Evidence was given by two experts in Chinese law: Professor Liu and Associate Professor Hawes. I make the following preliminary observations.

120. Sources of Chinese law

140. [140]
     Analysis of expert evidence on Chinese law requires an understanding of the sources of law in China. Chinese law has a hierarchy of authoritative sources of law.^[74] At the top of the hierarchy is the Constitution, though it plays a minor part in this proceeding.
141. [141]
     Next comes codes legislated by the National People’s Congress dealing with specific subject areas, which are designated by the word “Law” in the name of the statute. Relevant examples are the Contract Law and the Property Law. Those Codes are somewhat analogous to European and Japanese civil codes upon which the Chinese Law statutes are loosely based, though the Contract Law incorporates some common law concepts. Below the Laws come other specific binding statutory instruments such as administrative regulations. Neither expert relied on such instruments.
142. [142]
     The Laws frequently contain broad statements of principle. Authoritative interpretations of the Laws is provided by judiciary interpretations given by the Supreme People’s Court. Those interpretations are binding on all Chinese Courts. They are more useful to litigants because they contain detailed principles derived from judicial practice and application of the broad statements in the headline statutes.
143. [143]
     Below that are non-binding publications, conference minutes and judgments of the Supreme People’s Court. These are not formally binding but are usually followed by other Courts in China as considered statements of the highest Court. Professor Liu went so far as to suggest they are de facto binding. There is no evidence that there is any system of precedent which flows down to lower Courts in the Chinese court hierarchy. A statement of principle in a lower Court in the Chinese hierarchy does not appear to have any binding or authoritative status.

120. Construction and performance

144. [144]
     It is common ground between the parties that Chinese law is the proper law of the Zou and Wei loans and the Debt Receipt. The Debt Receipt gives rise to issues of construction. The relevant principles for construction of the contracts will be Chinese principles of construction of contracts. That will include both general principles of construction and any specific principles applicable to contracts of the kind before the Court.
145. [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:^[75]

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.

146. [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.^[76] 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.
147. [147]
     The Wei offset agreement raises another distinct issue (see [178](a) below), one of performance. In particular, what is required by way of performance under Chinese law “to give Ms Wei 12 parking spaces…”. This is not necessarily just a question of construction. In some cases involving choice of law, a distinction is drawn between the substance of an obligation to perform and the mode of performance, with the law of the contract applying to the former and the law of the place of performance applying to the latter.^[77] Fortunately, that subtle distinction does not have to be applied to different systems of foreign law in this case, as performance was plainly contemplated to occur China.
148. [148]
     However, the above analysis serves as a reminder that it is the principles of Chinese law which inform what acts of performance are required to comprise giving Ms Wei 12 car spaces which must be applied. Those will involve not only principles of Contract Law regulating the substantive obligation, but also considering the Chinese law principles which define the mode of performance of the promise, as construed. That will include, for example, Chinese law which regulates the transfer of property generally and car spaces in multistorey developments, in particular. That is not a question of the content of Chinese contract law, it is a question of Chinese domestic law affecting performance of the obligation, though issues of construction and mode of performance might tend to overlap.

120. Limits on scope of expert evidence

149. [149]
     In Australian Courts, foreign law is a matter of fact. Accordingly, it must be pleaded. It is proved by persons expert in the law of that foreign jurisdiction giving evidence of the content of the foreign law relevant to the proceeding. However, there are limits on the scope of expert evidence of foreign law. One limitation which is important here is explained as follows (footnotes omitted):^[78]

Fourth, a distinction must also be drawn between the content of foreign law, which is a question of fact on which evidence is receivable, and the application of that foreign law, once its content has been ascertained, to the facts of the instant case. The latter is a matter for the forum to determine. As it has been succinctly put: “Content evidence” is admissible. “Application evidence” is not. The principles often associated with this view is that, while expert evidence of foreign law may be given, such evidence is not admissible to the extent that it extends to an expression of opinion as to how the foreign law would be applied to the facts of the instant case. If the foreign law confers a discretion upon its courts, evidence is receivable as to the manner in which that discretion is exercised, with reference to any pattern or course of decision, but not with respect to how it would be exercised on the facts of the case at hand. So also, it is suggested, evidence as to foreign law principles of statutory construction or contractual interpretation (as the case may be) should be admissible to inform an understanding of the content of the applicable foreign law.

150. [150]
     The written and oral expert evidence given by Professor Liu and Associate Professor Hawes frequently trespassed into “application evidence”. That caused difficulties in two respects. In the first place, such evidence is inadmissible and irrelevant. In the second place, it meant principles of Chinese law - which might have informed the application evidence and could have been the subject of admissible expert evidence, was not expressly stated.
151. [151]
     A clear example is the evidence of both scholars directly addressing the question of whether, on its proper construction, the Wei offset agreement gave rise to immediate or deferred discharge of the Wei loan: see from [180] below.^[79] However the problem is endemic in their written and oral evidence. I do not say this critically of either witness. It is the responsibility of legal practitioners to ensure that expert evidence is relevant and admissible.^[80]

152. The experts

152. [152]
     Two experts were called to give expert evidence of Chinese law: Professor Liu and Associate Professor Hawes. Mr Yang’s trial submissions suggested that the two experts had equivalent expertise. With respect to Associate Professor Hawes, I disagree, at least in respect of the issues of Chinese law before this Court.
153. [153]
     Professor Liu has published textbooks on both Chinese and Australian law, translated Peter Birks ‘Unjust Enrichment’ (OUP 2005), and he has been a Professor of Chinese law at Chinese Universities for over a decade.^[81] Currently Professor Liu is employed as a Full Professor at the School of Law, City University of Hong Kong. He is also Honorary Professor at the TC Beirne School of Law at the University of Queensland, and has been since 2020.^[82] Moreover, Professor Liu is a qualified Chinese attorney, attaining an LLB (Distinction), from the Shanghai University of Finance & Economics as well as a Master of Laws (Distinction) from the School of Law, Xiamen University in July 2001.^[83] These matters mark out Professor Liu as a scholar with a focus on substantive Chinese civil law, and with expertise in that area recognised by appointments in universities in both the Chinese speaking world and in Australia, who has met the education and training requirements in applying Chinese law to qualify as a practitioner.
154. [154]
     Associate Professor Hawes has never held a permanent position as a lecturer of Chinese law at a Chinese University. The extent of his experience in China is as a visiting scholar at Chinese or Taiwanese Universities for a month or two at a time. His PhD is in Asian studies, not in law. The focus of his academic works and publications has been substantially on Chinese Corporate culture and corporate law, rather substantive Chinese civil law more broadly. He is undoubtedly expert in areas of comparative law and corporate culture. I also recognise that he has a working knowledge of Chinese law and has published journal articles on discrete issues of corporations law in China. However, his expertise in the practical application of Chinese law did not appear to me to be as broad or deep as Professor Lui’s. He has not made the law and practice of domestic Chinese law his particular focus. 
155. [155]
     In my respectful view, there is a significant difference in the kind of scholarship and experience which the two gentleman possess. It is a difference which inclines me to prefer Professor Liu’s views where opinions diverge, other things being equal. That is not intended to impugn Associate Professor Hawes’ expertise in his specific areas of scholarship.

152. The Zou Loan

152. Repayment or Dividend?

156. [156]
     There is one substantive issue to be resolved in respect of the Zou loan: was it repaid by the transfer into Ms Zou’s account by Mr Yang of RMB 2m on 16 April 2014 (the April payment)? Mr Yang submits that that payment should be characterised as repayment of the Zou loan.  He relies on his version as to the payment; that Mr Zheng asked for the money because they needed it and Mr Yang repaid it in response to that request.
157. [157]
     Ms Zou submits that the April payment cannot be characterised as repayment of the loan because it should be characterised as payment of a dividend to Ms Zou as a shareholder in Lingui. She relies on her version: that she asked Mr Zheng to get a dividend, a payment was made, and Mr Yang told her it was in response to her request.
158. [158]
     I am satisfied that Mr Yang has not made out his version and that Ms Zou’s version is correct. I explain my reasons.
159. [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.
160. [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.)
161. [161]
     Mr Yang’s explanation for the genesis of the April payment is much less likely. He said that “I was advised that they were in a difficult position financially and Mr Zheng requested me to repay the loan as soon as possible.”^[84] There is no independent evidence that the Zheng parties were in a difficult financial position in April 2014. Such evidence, as there is, suggests the contrary. Just nine or so months later they lent some RMB 10m to Lingui: see [50] above. And in the meantime, Ms Zou continued to receive payments in multiples of RMB 40,000 paid into her account by Mr Yang’s brother in law. (This is yet another example of Mr Yang giving highly improbable evidence, inconsistent with other reliable evidence.)
162. [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.
163. [163]
     Second, there is no persuasive basis for the payments by Mr Yang’s brother in law, Mr Wen, referred to in [49] above, other than that they were interest payments on the Zou loan. Ms Zou denied having any dealings with Mr Wen and no credible suggestion was made that she did. Mr Yang, on the other hand, gave evidence that his sister and Mr Wen acted on his behalf in relation to the affairs of Feiyang, so it would not be surprising that Mr Wen would make payments on Mr Yang’s behalf in respect of other aspects of his affairs.
164. [164]
     The fact that Mr Wen made payments seemingly from different accounts to those used by Mr Yang is also not a factor favouring Mr Yang’s version.^[85] Mr Yang gave rather surprising evidence that he was in the habit of using other people’s bank accounts (even employee bank accounts) to do banking in China so as to avoid administrative inconvenience.^[86] And further, the payments made by Mr Wen continued to use the conventional description of “payment for goods” which had previously been applied to the interest payments.  No explanation for this co-incidence was given by Mr Yang. 
165. [165]
     Third, events after the April payment strongly favour Ms Zou and Mr Zheng’s version:

     1. There was the further direct demand by Ms Zou to Mr Yang on 18 June 2014 for payment of interest, which was not met with a response from Mr Yang asserting no interest was payable because the loan was repaid by the April payment;
     2. There was Mr Yang’s acceptance of Ms Zou’s description of the payment as a dividend in the text exchange at [48](h) above. This is a compelling consideration by itself; and
     3. There was the acknowledgment by Mr Yang of the Zou loan in April 2016: see [82] above.
     4. Added to those matters, there was the misleading and improbable nature of Mr Yang’s subsequent statements about the Zou loan in 2016: see paragraphs [97] and [103], which do not coherently support his version in relation to the payment.
166. [166]
     I should say more about the matter in [165](b). Mr Yang sought to explain away this text exchange on the basis that he told Mr Zheng that the money was repayment of the Zou debt but that they agreed that they would tell Ms Zou it was a dividend. The first thing to note about this explanation is that it accepts that Ms Zou was demanding a dividend (inconsistently with many of Mr Yang’s other evidence to the effect that Mr Zheng asked for the repayment of the loan because they needed the money). But in any event, there is no hint of any such discussion in Mr Zheng’s subsequent communications about the Zou loan, nor is it raised by Mr Yang in his. I consider Mr Yang’s evidence on this point to be another example of his reconstruction of events to suit his case.
167. [167]
     Fourth, it has not been established that Lingui was not able to pay a dividend, much less that Ms Zou knew that. Mr Yang became the controlling mind of Lingui after Mr Liu sold out. I accept Ms Zou’s evidence that she tried to get information about Lingui from time to time and could not. As to Mr Zheng, his relationship with Mr Yang around this time was one of trust. He would have accepted whatever he was told by Mr Yang. It is entirely within character for Mr Yang to have told Mr Zheng a dividend could be paid, even if at the time he thought it could not, if he thought it in his interests at the time to do so.
168. [168]
     Fifth, I do not think it assists Mr Yang that the dividend was paid only to Ms Zou and not to Mr Zheng (who was also a shareholder of Lingui). It is consistent with Mr Yang’s informal style of conducting business affairs to have caused a payment only to Ms Zou to address her demand, while relying on his close relationship with Mr Zheng to avoid paying any more money out.
169. [169]
     For those reasons, I find that the April payment was made by Mr Yang (whether from his own funds or ultimately from Lingui’s funds) in response to a demand by Ms Zou for a dividend from Lingui and communicated to both Mr Zheng and Ms Zou as being a dividend. It cannot be objectively characterised as repayment of the Zou loan. I also find (to the extent it is relevant) that at the time Mr Yang made the payment, he subjectively intended it to be paid as, and accepted by Ms Zou as, a dividend from Lingui, not a repayment of the Zou loan. His evidence to the contrary was reconstructed some years later, when it suited him to allege the Zou loan had been repaid.

170. Dividend under Chinese law

170. Dividend issue irrelevant

170. [170]
     There was extensive expert opinion on the requirements of Chinese law for a valid dividend to be paid by a company. I intend briefly to address that evidence. However, given my findings, I cannot see how it makes any difference whether Lingui could lawfully have paid a dividend of RMB 2m in April 2014 on the facts before the Court, or not.
171. [171]
     First, I have found that both the payer (Mr Yang) and the payee (Ms Zou) did not subjectively or objectively intend the April payment to comprise repayment of the Zou loan. They intended it to be paid and received as a dividend to Ms Zou as shareholder in Lingui. 
172. [172]
     Second, even if the payment was not a “dividend” under Chinese law or, alternatively, was a dividend which was recoverable for failure to meet necessary statutory or legal threshold conditions, it would still not be a repayment of the Zou loan. Rather, it might give rise to an entitlement to restitution of the payment as a payment under a mistake, or it might give rise to some other basis for recovery, such as a payment made in breach of some duty. Or it might give rise to a right to recover the payment by the company pursuant to Article 166 of the Company Law, as both experts agree could arise.
173. [173]
     Such claims might give rise to a counterclaim or set off which could answer the Zou debt claim. However, Mr Yang’s submissions did not explain how that would result in the putative “dividend” being converted into a repayment of the Zou loan. Further, any such counterclaim or set off would further have had to be pleaded. None was. Chinese law might deal with this issue in a different manner, but prima facie this issue would be procedural, and therefore determined by the lex fori. In any event, no evidence was led of any Chinese law which would impact on the status of such a recovery action as an answer to the debt claim, and accordingly this Court assumes Chinese law follows the lex fori.
174. [174]
     Accordingly, even if it was concluded that the April payment was not a lawfully paid dividend under the Company Law of China, I cannot see how this assists Mr Yang in defending the claim by Ms Zou for repayment of the loan on the pleadings in this case.

152. The dividend issue

175. [175]
     I do not intend exhaustively to analyse this issue, given its irrelevance to the outcome of the proceedings. However, Professor Liu’s opinion was that a payment out of company funds intended by payer and payee to be a dividend will comprise a dividend (in the sense of a payment to a shareholder as a return on investment by a company) even if the formal requirements for a valid dividend are not met. That seems correct to me. As Professor Liu persuasively opined, such a payment might be recoverable under Article 166 because it was paid contrary to the statutory conditions for valid payment out of company funds to shareholders provide in the Company Law, but that would not mean that it was not a dividend as such.   

152. Conclusion on the Zou loan

176. [176]
     Ms Zou is entitled to judgment for the sum of RMB 2,000,000 along with interest at 24%. She is entitled to that interest to the date of judgment.  I assume that the judgment should be for an amount of Renminbi yuan, though I invite submissions from the parties on the proper form of judgment, along with submissions on the question of calculation of interest and costs.

152. The Wei loan

152. The issues in dispute

177. [177]
     As with the Zou loan, there is a good deal not in dispute about the Wei loan: see [51] to [55] and [64] to [69] above. It is convenient briefly to summarise:

     1. The Wei loan was advanced in late December 2014 on terms orally agreed and then recorded in the Debt Receipt;
     2. 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. The loan was not repaid on time and Mr Yang paid two interest instalments, then ceased paying interest;
     4. 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. 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. 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.
178. [178]
     The issues that arise for determination are:

     1. 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. Second, if discharge is conditional on performance, has that promise been performed?
179. [179]
     The parties agree that in determining those issues, particularly the first, the Offset agreement and the Transfer agreement need to be read together.

152. Conditional or immediate discharge?

152. The parties’ submissions

180. [180]
     Mr Truong and Mr Leung advanced three principal submissions.
181. [181]
     First, they submitted that the Offset agreement did not contain any words expressly preserving the rights under the Wei loan.
182. [182]
     Second, they relied on the text which recited that Feiyang “has become unable to repay the loan”. As I understood it, they submitted that supported an immediate discharge because if the debt is unable to be paid, there is little commercial reason why the parties would be taken to intend to retain any right to recover on the debt in the alternative to receiving the car spaces.
183. [183]
     Third, they submitted that on its proper construction, the effect of the Transfer agreement was immediate on execution to bring about the transfer of the car spaces by force of the terms of that agreement alone. They relied on clause 1 as having that effect. They submitted that that supported an immediate discharge construction because the parties executed the Offset agreement together with another agreement, which provided by its own terms for the immediate performance of the promise to give 12 car spaces.
184. [184]
     They also drew some analogies with some Australian authorities on accord and satisfaction.
185. [185]
     Mr O'Brien KC and Ms Yates submitted as follows.
186. [186]
     First, they submitted (based on views expressed by both experts)^[87] that in Chinese law clear words would be required for the Court to conclude that the extant debt claim against Mr Yang was immediately discharged on entry into the Offset agreement, and no such words appear.
187. [187]
     Second, they emphasised that the text of the Offset agreement provides for Feiyang “to give” 12 car spaces. They submitted those words contemplate something which is yet to occur. In that circumstance, they submit one would not ordinarily discharge a present right to repayment from Mr Yang in exchange for a mere promise to provide alternative consideration by another party.
188. [188]
     Third, they relied on the ordinary meaning of the word “offset”, relying on the definition in the Cambridge Dictionary as “a payment that is used to reduce the effect of another payment”. So, the Offset agreement provided that giving the 12 car spaces was to be used to reduce the Wei loan to nil. That is, it is the actual transfer of the car spaces, which reduces the debt to nil.
189. [189]
     Fourth, they submitted that on its proper construction, the Transfer agreement did not immediately bring about the transfer of the car spaces. Rather, they submitted that the Transfer agreement was just that, an executory agreement for the transfer of the identified car spaces for which steps were required for performance. They submitted that that supported a conditional discharge because it is improbable it would have meant that Ms Wei gave up her claim against Mr Yang, but in its place would have only a claim in damages against Feiyang if it did not perform the agreement to transfer. Particularly so where Feiyang represented it was unable to pay the debt.

152. General observations on construction

152. Offset and Transfer agreements read together

190. [190]
     In construing the Offset agreement, the Court must apply Article 125. As observed, that article is in broad terms which are not explained by the Supreme People’s Court interpretations or judgments before me. One important question which arises is whether the Transfer agreement can be used to assist in the construction of the obligation under the Wei offset agreement to give Ms Wei 12 parking spaces. Both parties made submissions on the basis that it can. That is probably enough by itself to permit me to do the same.
191. [191]
     That is an approach which would be justified under Australia law, because the two agreements form two parts of the same underlying transaction.^[88] The two documents were signed at the same time, by the same persons, between the same parties, and in circumstances where the Transfer agreement was both to define the car spaces to be transferred and to provide the mechanism for that to occur.
192. [192]
     On the evidence of Chinese law before me, that approach to construction seemingly must be brought within the scope of Article 125. As Professor Liu observed, provisions in Law statutes are broad. At the least, the Transfer agreement can be considered in construing the obligation under the Offset Agreement because it informs the meaning of the phrase “to give 12 car spaces”.

152. Limits on expert evidence

193. [193]
     It was in this part of the proceedings that the problem of experts giving application evidence loomed large. Both experts gave evidence in writing and orally which amounted to their own opinion about the proper construction of the Offset and Transfer agreements. I even harboured doubts about the evidence referred to in [186] above (because it was not linked to any authoritative source of Chinese law), though in form it was articulated as a Chinese principle of construction, and I will accept it as such.
194. [194]
     An additional difficulty with the way opinion was led on construction of the agreements, is that there was no articulation of authoritative principles of construction (contractual or statutory) beyond the very broad terms of Article 125. Mr Truong submitted that in those circumstances I can rely on the principle that where foreign law is not proved, the Court presumes it is the same as the lex fori.^[89] Respectfully, I do not think that is a correct application of the presumption (or default rule). However, Australian cases might provide instructive modes of reasoning in particular circumstances, which might assist in construing the contract according to the broad guidance in Article 125.

152. The Offset agreement granted a conditional discharge

195. [195]
     Mr Yang’s liability under the Wei loan was not immediately discharged on entry into the Offset agreement.  I reach that conclusion for the following reasons.
196. [196]
     First, it was uncontroversial at trial that the Offset agreement was intended by the parties to that agreement to discharge the Wei loan. However, Mr Yang was not a party to the Offset agreement and Transfer agreement. Rather, the effect of the Offset agreement was (impliedly) to novate Mr Yang’s obligation to Feiyang, then to provide for that obligation to be met from Feiyang’s car park assets.  In my view, it is unlikely, in that context, that by the words used in a third-party agreement, Ms Wei would be impliedly taken immediately to release her extant personal claim against Mr Yang. A fortiori, in circumstances where Feiyang recites that it is unable to repay the loan. It follows that I do not accept Mr Yang’s submission that those words in the Offset agreement support immediate discharge. That conclusion is reinforced by the consideration that if Ms Wei was taken to have impliedly accepted Feiyang’s promise to transfer the car spaces as a discharge of Mr Yang’s loan, then she would be in the position of having to rely on Feiyang to make good that promise in circumstances where, if it was not performed, she would be left a with damages claim against parties which recites that they are unable to pay.
197. [197]
     Second, there are no express words of immediate discharge of Mr Yang’s liability in debt. Clear words can include words which necessarily imply immediate discharge. However, I do not think the words of the Offset agreement support that implication. The operative part of the Offset agreement is the promise by Feiyang to give Ms Wei 12 car spaces to offset the debt. In my view, the critical word in this promise is “offset”. Mr O'Brien and Ms Yates relied on a definition from the Cambridge Dictionary. That is not a referenced work on English definitions with which I am familiar. The definition of “offset” in the Macquarie Dictionary is, relevantly:^[90]

     1. To balance by something else as an equivalent: to offset one thing by another
     2. To counterbalance as an equivalent does; compensate for; the gains offset the losses

198. [198]
     The Oxford English Dictionary has similar definitions.
199. [199]
     In my view, where a party promises to give car spaces to offset debt, it is more consistent with those meanings that it is the receipt of the car spaces which balances or compensates, not the promise to do so. (I am conscious this involves applying English definitions to a word translated from Chinese but it is that translation which is the evidence before the Court of the words in the contract, and which must be interpreted accordingly as an English word). That conclusion is reinforced by clause 2 in the Transfer agreement. That clause equates the value of individual car spaces to an individual price. To my mind that communicates that the debt will be offset by the value of each car space. Such value is not received until the car space is transferred.
200. [200]
     Third, I disagree with Mr Yang’s submission that the effect in law of the Transfer agreement is immediately and by its own force to transfer the car spaces. There are two matters which inform my conclusion:

     1. The language of the Transfer agreement itself; and
     2. The evidence as to issues of Chinese property law which inform the mode of performance of the transfer of car spaces.
201. [201]
     As to the former, the language is equivocal at best for Mr Yang. While clause 1 uses the language of immediate transfer (i.e. “Party A hereby transfer to Party B the right to use…”), clause 4 contemplates that steps must be taken “to perform the handover”. If clause 1 was effective in its own terms, I can see no reason for clause 4 to be included.
202. [202]
     The latter raises fundamental questions about the content of the obligation to transfer car spaces in Chinese law which I address below. However, as I conclude there, in my view the rights transferred were real rights in real property under Chinese law and I am not satisfied that the steps necessary to transfer those rights were taken.

152. Have the car spaces been transferred?

152. Nature of property rights to be transferred

152. Technical meaning of “right to use”

203. [203]
     The first issue is what kind of right is being transferred under the Transfer agreement. Mr Truong submits that it is a personal right to make use of the car spaces rather than an ownership right (in Chinese law, a “real right in real property”, explained below). Mr O'Brien submits to the contrary. That is the first matter to be resolved. 
204. [204]
     The Transfer agreement consistently describes the interest being transferred to Ms Wei as the “right to use” the car spaces. Ms Wei submits that the expression “right to use” has a technical meaning in Chinese property law and describes full ownership rights in property so far as is possible under Chinese law. 
205. [205]
     It is uncontentious that the phrase can have a technical meaning.^[91] Under the Chinese Constitution, all land is owned by the State and cannot be alienated. An amendment to the Constitution in 1988 provided for land use rights. The consequence is that real property (or “immovable property” in the Property Law, Article 2) can only be held pursuant to a right to use for some specified period. That period can vary upwards from 30 years. The “right to use” real property therefore is the highest form of title which can be obtained in China. It is equivalent of ownership of real property so far as that is possible in China and seems to be characterised as such in the opening articles of the Property Law.^[92]
206. [206]
     It seems to me to be within the scope of Article 125 to give those words the technical meaning that they can bear in Chinese property law. That is, in a broad sense, evidence which goes to the meaning of the words used.

152. The Transfer agreement adopts the technical meaning

207. [207]
     The next question is whether on its proper construction, the Transfer agreement adopts that meaning when using the phrase “right to use”. In my view, it does.
208. [208]
     First, the meaning of the expression is central to the identification of ownership rights for real property rights in China. The phrase is used consistently in all operative parts of the Transfer agreement. It seems extremely improbable that it was used in some other sense without a clear explanation. Mr Yang submitted a contrary intention appears from the phrase in clause 4 in parenthesis: “property rights are not transferred”. As Professor Liu pointed out, that phrase could have been used merely to state expressly that which is orthodox.
209. [209]
     Further, no such comment is appended to clause 1, which is the operative clause, and which mirrors the orthodox statement of the basis of Feiyang’s title in preceding paragraph. And further, the purpose of the transfer of the car spaces is to discharge an obligation in debt. It seems objectively improbable that a right short of ownership would be accepted in discharge of that debt. Finally, the transfer of a licence to use the car spaces seems to me not to sit comfortably with the principal promise in the offset agreement to ‘give’ the car spaces to Ms Wei.
210. [210]
     Second, it might be argued that the technical meaning is not adopted if either:

     1. Car spaces generally cannot be the subject of ‘right to use’ title or
     2. The particular car spaces to be transferred under the Transfer agreement could not be the subject of that form of title.
211. [211]
     As to the first point, it was common ground between the experts that car spaces can be the subject of separate ownership (i.e. a separate ‘right to use’).^[93] This is consistent with the article referred to by Associate Professor Hawes which involves an analysis of car space ownership specifically.^[94]
212. [212]
     Associate Professor Hawes questioned whether those provisions applied to the car spaces in this case. He said that while car spaces can be the subject of a distinct ‘right to use’, not all car spaces are. Car spaces which are part of community title might or might not have separate titles. Those that are not part of the common property are held initially by the developer who holds the right to use for the whole development.^[95]In such cases separate ownership of the car spaces is not possible, though they can be licensed to members of the body corporate or seemingly to third parties. Associate Professor Hawes’ comments were in a responsive report to a further report of Professor Liu. Professor Liu did not address this point further (by report or oral evidence) and was not cross examined on this issue.
213. [213]
     The contention open to Mr Yang might be that there is no separate title (i.e. right to use in its technical sense) for the car spaces identified in the Transfer agreement. It could then be argued that the Transfer agreement might be construed as referring to only a form of licence of the car spaces, rather than formal title.
214. [214]
     The fact that there is no direct evidence that a separate title existed for the car spaces referred to in the Transfer agreement is not conclusive on the issue of construction. In my view, the promise made in the Transfer agreement was to confer ownership (in the Chinese sense) on Ms Wei of the car spaces, regardless of whether this was possible or not. I hold that view because:

     1. The phrase appears so well established and so fundamental to the character of property rights, as to attract the technical meaning unless there is a compelling reason to reach a contrary conclusion;
     2. It is established in Chinese law that car spaces can be the subject of right to use title; and
     3. As I find in [221] to [226] below, I do not accept that, looked at objectively, the parties (and Mr Zheng in particular) knew, or would be taken to have known, that there was no separate ‘right to use’ in existence for the specific car spaces.
215. [215]
     There is nothing inherently impossible about a commercial debtor under pressure promising to transfer a title that it does not have or could not provide.

152. Transfer of ‘right to use’ not established

216. [216]
     I have found that the Transfer agreement called for transfer of title to the car spaces in the sense that it is understood in Chinese law. What is required for such a transfer?
217. [217]
     Professor Liu gave evidence that to transfer a ‘right to use’ in the sense of a real right in real property, transfer of ownership required registration to be effective. He referred to Articles 9 and 14 of the Property Law which provides:

Article 9: The creation, charge, transfer or elimination of the real right of real property shall become effective after it is registered according to law; it shall have no effect if it is not registered according to law, except it is otherwise prescribed by any law…

[…]

Article 14: The creation, charge, transfer or elimination of the real right of a real property shall, in case it shall be registered as required by law, become effective since the date when it is recorded in the real property register.

218. [218]
     On that evidence, registration on the relevant real property register is a requirement to transfer title to the car spaces. I can see no reason to construe the word transfer in any other manner. However, Associate Professor Hawes gave evidence that there is no single unified property register in China, and that different regions and cities have their own registers. He did not know what, if any, real property register existed in Guilin.
219. [219]
     However, that evidential difficulty is one which in my view lies with Mr Yang on the pleadings in the Wei proceeding. I refer in that respect to submissions by Mr O'Brien and Ms Yates with which I agree:^[96]

3. 185.
   Mr Yang’s pleaded case in defence does not attempt to assert that the transfer of the right to use the 12 Car Parks has been effective as a matter of Chinese Property Law, nor that the transfer has been registered on the real property register.

3. 186.
   Mr Yang’s entire defence in respect of this issue hinges upon the fact that Ms Wei entered into the Car Park Agreement and the Transfer Agreement. Mr Yang’s Further Amended Defence pleads, relevantly, at [10]-[12]:

3. 10.
   In furtherance of the Discharge Agreement, on 9 November 2015, Xincheng and Lianchuang on the one hand and the plaintiff on the other entered into an Agreement for the Transfer of the Right to Use Parking Spaces (Transfer Agreement).

3. 11.
   By the Transfer Agreement:

3. a.
   in paragraph 1, Xincheng and Lianchuang transferred the right to use parking spaces 50 to 58 in the carpark on level B1 of Stage 1 of Lianchuang-Feiyang International; and

3. b.
   in paragraph 2, the parties agreed that the price for the above mentioned parking spaces was exactly RMB 2,500,000.

3. 12.
   In the premises of the matters pleaded in paragraphs 7 to 11 above:

3. a.
   the plaintiff agreed to discharge the defendant’s indebtedness to her as and from 9 November 2015; or

3. b.
   the defendant is estopped from denying that the defendant is no longer indebted to her in respect of the Loaned Sum.

3. [pleading amendment notations omitted]

3. 187.
   There is otherwise a complete lack of evidence upon which Mr Yang relies to assert that the transfer of the right to use the 12 Car Parks has been registered and is effective in satisfaction of the Chinese Property Law Code. The onus is on Mr Yang to establish that the Wei Loan has been discharged. That onus can only be discharged if it established on the balance of probabilities that the 12 Car Parks have in fact been transferred to Ms Wei. The Court cannot be satisfied on the evidence before it that has occurred.

152. No transfer of rights of has occurred

220. [220]
     Although, on my findings, it is unnecessary for Ms Wei to establish that the right to use the car spaces was not transferred, it is worth addressing that issue. In my view, the inference which flows from such evidence as there is on the subject, is that no right to use the car spaces were ever effectively transferred to Ms Wei.

152. Absence of Mr Yang’s evidence

221. [221]
     First, Mr Yang had been involved with the Feiyang Project from its beginning and was the guiding mind and will of Feiyang in November 2015. He was in the best position to give evidence as to whether there was or was not a separate title for the car spaces listed in the Transfer agreement. He was, after all, in direct control of the developer of the Feiyang Project. And on the evidence before the Court, it is the developer who is likely to hold the right to use which covers car spaces in a community titles scheme if there is no separate title. His failure to give any direct evidence about this central consideration provides a basis to infer that he could not have given evidence which would have assisted his case.

152. Mr Zheng’s evidence on transfer persuasive

222. [222]
     Second, Mr Zheng gave evidence which is consistent with a failure of Feiyang effectively to transfer the car spaces to Ms Wei. He said:^[97]

INTERPRETER: In order to use these carparks, I, firstly, requested Mr Yang to complete the transfer procedure. Secondly, I would register at the relevant department before I can use these carparks.

MR TRUONG: What transfer procedure are you talking about?

INTERPRETER: Firstly, because these carparks only have the right to use, so I need to register at the housing department before these rights are legally binding or, alternatively, we need to go to the court and ask the court to confirm that Wei is able to use the carparks. That would - then that will be legally binding.

223. [223]
     He was cross examined about this evidence and maintained his position. When pressed, he described the document which he understood had to be registered.^[98] This was evidence which was specific and open to direct challenge. Mr Yang was in the court room when this evidence was given. He did not give evidence until some three days later. Despite all that, no evidence was led to contradict what Mr Zheng had said, despite the importance of the issue being particularly highlighted in discussions with Counsel.^[99]
224. [224]
     I consider this evidence reliable. It is broadly consistent with Associate Professor Hawes’ evidence about the variation in local registers. Mr Yang gave evidence after Mr Zheng and did not dispute Mr Zheng’s version. And it is generally consistent with evidence from both Mr Yang and Mr Zheng in relation to the related dispute over the transfer of the car spaces under the Feiyang Transfer agreement.
225. [225]
     Further, I do not accept the suggestion that Mr Zheng was involved in the Feiyang Project and asked for and got exactly what he wanted in relation to car spaces. I have already found that I do not accept that Mr Zheng was involved in running the Feiyang Project: see [58] above.
226. [226]
     Further on that subject, I do not accept Mr Yang’s account of how the car spaces for debt agreement was reached. His evidence was that the car spaces idea was discussed in multiple discussions and he implied that Mr Zheng had the same solution in mind.^[100] Mr Zheng’s evidence was that the car spaces proposal was put forward in a sudden and fraught telephone call from Mr Yang around the time that the car space agreements were all signed, and that the deal was put to him as the only way to get repaid.^[101] Once again, Mr Zheng’s account is far more consistent with the other evidence in the proceedings, including the state of the Feiyang Project at the time and the sudden way that the various agreements were produced and executed. I am also not persuaded that Mr Zheng inspected the car spaces. He denied that he did and yet again, his evidence is more consistent with the sudden way the various car space agreements were made and the apparent position in the proceedings to enforce the Feiyang transfer agreement, as explained below.  No-one who was present in Guilin at the time was called to contradict Mr Zheng’s version.

152. The Feiyang Transfer and the Guilin proceedings

227. [227]
     Third, Ms Wei relied on the conduct of Feiyang in the Guilin proceedings as providing a foundation for an inference that, whatever the requirements for transfer of the particular car spaces are, they had not been met as of April 2019 in relation to the car spaces in the Feiyang transfer agreement. In my view, it can be so utilised.
228. [228]
     The Feiyang transfer was executed on the same day as the Wei Transfer agreement, in materially identical terms, and in relation to car spaces located in the same part of the Feiyang development as the Wei car spaces. There is no basis to distinguish between them.
229. [229]
     Further, the conduct of Feiyang in those proceedings is conduct for which it is correct to infer Mr Yang bears responsibility. He was the guiding mind and will of Feiyang at the time. He was the person who had dealt with Mr Zheng. His attempt to avoid responsibility for instructions to Feiyang’s lawyers in respect of the primary basis upon which the case was conducted was not credible.
230. [230]
     Feiyang conducted the Guilin proceedings on the basis that the car spaces had not been transferred and was refusing to transfer them. That is consistent with the threats by Mr Yang in the 1 May 2016 email in [88] above. I find that this strongly supports an inference that whatever formalities might have been required effectively to transfer the Feiyang shares, they were not taken by Feiyang on Mr Yang’s direction. In the circumstances, it is reasonable to infer the same situation applied to the Wei car spaces.

152. Later evidence of “performance”

231. [231]
     Fourth, various items of evidence were relied upon by Mr Yang as suggesting performance of the Wei Transfer agreement. I was not persuaded that any of those items demonstrated any such thing. The alleged photographs of Mr Zheng’s car spaces with his name on them were never properly proved. I have serious reservations about their authenticity. The evidence of some kind of resolution in April 2022 was also unpersuasive. And in any event, by that time Ms Wei had terminated the Offset agreement and Transfer agreement by, if nothing else, electing to sue on the Wei loan agreement in 2018. Further, nothing was pleaded on this issue by Mr Yang, nor pursued in submissions.

152. Conclusion on the Wei loan

232. [232]
     For the above reasons, I conclude:

     1. On the proper construction of the Offset agreement, Ms Wei could sue Mr Yang on the Wei loan unless the promise to give 12 car spaces was performed as contemplated by the Transfer agreement;
     2. As the case was pleaded, Mr Yang bore the onus to establish that the Transfer agreement had been performed, and he failed to discharge that onus;
     3. Even if Ms Wei bore that onus, I am satisfied that the Wei Transfer agreement was not performed by Feiyang; and
     4. Accordingly, Ms Wei can sue Mr Yang on the Wei loan.
233. [233]
     Ms Wei is entitled to judgment for the sum of RMB 2,500,000 along with interest. It was common ground that annual interest over 24% is unrecoverable under Chinese law. Accordingly, Ms Wei only sues for interest at 24%. She is entitled to that interest to the date of judgment.  I assume that the judgment should be for an amount of Renminbi yuan, though I invite submissions from the parties on the proper form of judgment, along with submissions on the question of calculation of interest and costs.

152. The Wei Security

152. Proper construction

234. [234]
     The Debt Receipt provides by its second sentence:^[102]

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.

[underlining added]

235. [235]
     Ms Wei alleges that those words create an equitable mortgage or charge over Mr Yang’s Logan property securing the capital sum advanced (the alleged security) (not the interest) and seeks an order under s. 99(2) Property Law Act for the sale of the Logan property.
236. [236]
     The alleged security did not create an immediate security interest in Mr Yang’s property. The security was subject to the condition encapsulated in the words “if I cannot repay the loan within the time limit”. The “time limit” at the time of the provision of the Debt Receipt was one month in the future. That indicates the obligation to provide the security arose at that time. That construction is supported by the phrase “I am willing”. Again, that speaks to the obligation arising at a future time, being the time identified in the Debt Receipt when repayment was called for.
237. [237]
     It is in that context that Mr Yang makes the promise to use his assets equivalent to the loan as collateral. To my mind, those words objectively communicate that he promises to give the assets that are under his name at that time as collateral. There is nothing in the text to suggest any further or broader scope to the promise.  Accordingly, the promise to give security over Mr Yang’s assets applies to those assets he held at the time the loan fell to be repaid, which was the end of February 2015. He did not own the Logan property at that time. It therefore fell outside the scope of the promise to give security.
238. [238]
     Mr O'Brien and Ms Yates submit that the proposition that the parties would not have contemplated the promise in the Debt Receipt would apply to Mr Yang’s Australian assets including future property defies commercial logic and rely on the fact that Mr Zheng knew about Mr Yang’s Brisbane assets. The difficulty with that submission is that it can just as easily be turned against Mr Zheng in this way.  Given those matters were known, it could be equally argued that it would be expected that the parties use words which are apt to apply to future property if they intended to include future property, and such words were not used. 
239. [239]
     A fortiori where it was common ground that future property could not be charged under Chinese law (at least in this context).  That is a countervailing objective consideration which tells strongly against any such inference, particularly where one is dealing with persons primarily involved in commercial affairs in China.  
240. [240]
     The adopting the plain meaning of the words used is the best way to navigate these different currents and to my mind, those words are not apt to include future property.
241. [241]
     Ms Wei’s claim against the Logan property must fail.

152. Proper law of validity of security

152. Parties submissions

242. [242]
     If I am wrong on the proper construction of the Debt Receipt and the words used are capable on their proper construction of applying to the Logan property, then choice of law issues become important.
243. [243]
     It is common ground that under Chinese domestic law, the Debt Receipt would be ineffective to create a security interest in the Logan property (even if on its proper construction it applied to future property), although the experts differ about the reasons. Under Queensland law, a promise supported by consideration to give security over future property is effective to create such an interest. Unsurprisingly, Ms Wei submits that Queensland law applies and Mr Yang submits that Chinese domestic law applies.^[103]
244. [244]
     Ms Wei first submitted that Queensland law was the proper law because the effectiveness of the Debt Receipt to create a security interest in the Logan property was properly characterised as relating to an interest in land, and accordingly the proper law is the law of the lex situs. For the Logan property, that is of course Queensland.
245. [245]
     She next submitted that if the proper law was Chinese law, it was Chinese law including its choice of law rules. Applying those rules, she submitted the alleged security would be characterised under Chinese law as concerning a right to immovables and that, therefore, the connecting factor in Article 36 of the Law of the People’s Republic of China on Application of Law for Foreign-related Civil Relationships (the LAL) would apply. That connecting factor directs the Chinese court to the law of the locality of the immovable property: which in respect of the Logan property, is again Queensland law. Ms Wei relied on the opinion of Professor Liu to support that submission.
246. [246]
     Mr Yang submitted that Ms Wei’s characterisation of the issue as one directing the choice of law as the lex situs was wrong because the issue to be characterised was a question relating to a secured debt, analogous to a mortgage debt. He relied on Haque v Haque (No 2) (1965) 114 CLR 98. Accordingly, the choice of law rule for a debt should apply, which is generally the law of the place where the debtor resides or, if more than one residence, where there is a promise to pay the debt or where it would be paid in the ordinary course of business. Mr Yang submits that the proper law of the mortgage debt, applying that test to the Wei loan and to Mr Yang’s personal circumstances, is Chinese law.
247. [247]
     Alternatively, he submitted that whether and on what terms the Debt Receipt created a security interest should be characterised as a matter of contract law. He relied on British South Africa Co v De Beers Consolidated Mines Ltd [1910] 2 Ch 502 and Murakami v Wiryadi (2010) 109 NSWLR 39. Characterised as a question of contract law, whether the Debt Receipt creates a security interest should be resolved according to the proper law of the Wei loan agreement: Chinese law.
248. [248]
     Next, he submitted that the Court should reject Professor Liu’s evidence that under Chinese choice of law rules, Queensland law would apply because the issue before the Court is whether the agreement to give security is valid, and Professor Liu himself states that is a matter of Chinese law.
249. [249]
     Ms Wei responded to those submissions by her supplementary submissions.
250. [250]
     She cavilled with Mr Yang’s characterisation of the issues raised by the Debt Receipt as being analogous to a mortgage debt. She submits that there is a distinction between the question of the validity and enforceability of an obligation to pay and the validity and enforceability of the security which secures the obligation. She submits the latter is the issue raised in this case, and that that latter issue is one which concerns rights in relation to land. Accordingly the lex situs of Queensland applies.
251. [251]
     She further contends that if the Debt Receipt is categorised as movable property by analogy with mortgage debts, the proper law of the Debt Receipt remains Queensland law, because the secured debt is located in Queensland. This arises from the submission that the Court should find that Mr Yang resides in Queensland.
252. [252]
     She expanded upon her submission in [245] above and responds to the analysis of Professor Liu’s evidence and relies on Neilson v Overseas Projects Corporations of Victoria Ltd (2005) 223 CLR 331 as supporting the application of the doctrine of renvoi in this context.
253. [253]
     Finally, adding a new characterisation, Ms Wei submitted that the proper characterisation of the issue was as one of an equitable proprietary interest in land in Queensland.

152. Characterisation for Queensland conflict of laws purposes

254. [254]
     A choice of law rule is comprised of a legal category and a connecting factor. So, for example, questions of construction of a contract (legal category) are determined by the proper law of the contract (the connecting factor). Choice of law rules are indicative. They do not resolve any issue in dispute, they merely indicate the substantive system of law which must be applied. The system of law identified by the connecting factor (Chinese law for example) is the dispositive law.
255. [255]
     The first step is to characterise the issue before the Court for the purpose of selecting a legal category. Sometimes categorisation is straight forward because an issue corresponds directly with an established legal category or because there is authority which links a particular issue to an established legal category, or indeed the issue is recognised as a specific legal category.^[104] However, in some cases the Court must resolve a novel characterisation problem thrown up by the issue before it. That process can be multi-staged and iterative.^[105]
256. [256]
     It is necessary to keep in mind what is being characterised. There are competing answers to this question: the facts before the Court, the issue before the Court, or the dispositive rule which would be applied to that issue by the Court hearing the matter. The leading Australian text accepts as correct that the analysis must be of the issue to be determined by the Court.^[106] The principle has been recently restated in Australia:^[107]

3. [67]
   As Millett J (as his Lordship then was) said in Macmillan Inc v Bishopsgate Investment Trust Plc (No 3) [1995] 3 All ER 747 at 757 ; [1995] 1 WLR 978 at 988 (Macmillan [1995]):

3. … In order to ascertain the applicable law under English conflict of laws, it is not sufficient to characterise the nature of the claim: it is necessary to identify the question in issue.

3. [68]
   This approach was approved on appeal: see Macmillan Inc v Bishopsgate Investment Trust Plc (No 3) [1996] 1 All ER 585 at 596, 604 and 614 ; [1996] 1 WLR 387 at 399C, 407B-C and 418A-B (Macmillan [1996]). Lord Justice Aldous added the following to Millett J’s observations at All ER 614 ; WLR 418 :

3. Any claim … may involve a number of issues which may have to be decided according to different systems of law. Thus it is necessary for the court to look at each issue and to decide the appropriate law to apply to the resolution of that dispute.

3. (See also at All ER 603–4 ; WLR 407 , per Auld LJ)

3. [69]
   Furthermore as Staughton LJ said in Macmillan [1996] at All ER 596 ; WLR 399:

3. [T]he rules of conflict of laws must be directed at the particular issue of law which is in dispute, rather than at the cause of action on which the plaintiff relies. We should translate lex causae as the law applicable to the issue, rather than the suit.

3. …

257. [257]
     The starting point is to identify the precise issue for determination before the Court.
258. [258]
     In my view, once the issue of proper construction of the promise to provide security is resolved (and for this part of the judgment I am assuming that on its proper construction there is a security interest created over the Logan property), the remaining issue is whether the Debt Receipt creates a security interest in the Logan property which is substantively valid. That issue can itself be articulated as a legal category for conflict of law purposes, in my opinion. The question being: which system of law applies for determining the substantive validity of a security over land in Queensland created by a contract, the proper law of which is Chinese law?

152. The proper law of substantive validity

259. [259]
     In Haque v Haque (No 2) (1965) CLR 114 at 136, Windeyer J held:

If the thing be land, the question of course admits of only on answer. Land is where it lies. It can never be moved. And any interest in or over the land must, it seems, also be considered as a thing having its situs where the land is.

260. [260]
     More recently, in Commonwealth v Yarmirr (2001) 208 CLR 1 at 207, McHugh J observed:

Furthermore, under the common law rules of private international law or choice of law, ownership, possession or occupation of land depends on the lex situs. In Lewis v Balshaw, Rich, Dixon, Evatt and McTiernan said that “no law but the lex situs can govern title to the land”. Land is an immovable. Rights and liabilities in respect of land are governed by the legal system operating in the country where the land is situated.

[footnotes omitted]

261. [261]
     The purpose for such a choice of law rule is obvious: ^[108]

As a general rule, all questions that arise concerning rights over immovables (land) are governed by the law of the place where the immovable is situate (lex situs). The general principle is beyond dispute, an applies to rights of every description. It is based upon obvious considerations of convenience and expediency. Any other rule would be ineffective, because in the last resort land can only be dealt with in a manner which the lex situs allows.

[footnotes omitted]

262. [262]
     However, there a distinction which can arise in the conflict of laws between rights and liabilities in respect of land, on the one hand, and inter partes rights and liabilities which concern land arising from a contract or mortgage between those parties on the other. Drawing the dividing line can be difficult in marginal cases, and even issues which arise inter partes can be regulated by the lex situs. An example is the content of the obligation of a vendor to convey title to property sold under a contract of sale.^[109]
263. [263]
     Mr Yang’s submissions rely on this distinction. He submits that the substantive validity of the security over the Logan property should be characterised as incidental to the loan obligation secured, or alternatively should be characterised as an issue for the proper law of the contract of which the security is a part.
264. [264]
     Mr Yang’s first argument is that it is the debt secured, rather than the security, which is the relevant issue to be characterised. His argument depends on the proposition that the alleged security is analogous to a mortgage securing a debt. The argument is summarised in Nygh as follows:^[110]

However, … a majority of the High Court in Haque v Haque (No 2) has come to accept a test that stresses the nature of the right itself rather than the subject matter of the right. According to this test, where the court has to classify a chose in action which relates to land it is not enough to establish a relation to the land in order to classify it as an immovable, but the right itself must be analysed in order to see which is the primary characteristic: the debt or the relationship to the land.

Since there is no lack of authority at common law that the primary aspect of a mortgage debt is the debt and not the security over the land, it follows that a mortgage debt on this view must be classified as movable. This approach was not new; it had been adopted quite consistently in a long line of the New Zealand and Victorian decisions.

265. [265]
     Haque was not concerned with whether a mortgage debt was movable or immovable property. That case concerned, relevantly,^[111] whether for the purposes of the law of succession, the right of the deceased as an unpaid vendor in the land he had sold and the balance of the purchase money was movable or immovable property. If movable, it passed according to the law of the deceased domicile, which was Islamic law (under which his next of kin inherited). If immovable, it passed according to the law of Western Australia as the location of the property (under which the beneficiaries of his will inherited). The discussion in the High Court in relation to mortgage debts arose because it was argued that the interest there to be characterised was analogous to the interest of a mortgagee in a secured debt.
266. [266]
     The High Court concluded by a majority of 3:2 that the interest in the balance of the purchase money and the lands the subject of the contracts of sale were movable property and passed according to the law of domicile. However, the Court did not determine that the interest of a mortgagee in mortgaged property was movable property. Rather, it recognised a distinction between the mortgaged debt (movable property) and the mortgagee’s interest in the security (immovable). This was expressly recognised by the majority judges, Kitto J^[112] with whom Owen J agreed and Menzies J^[113].
267. [267]
     In my respectful view, the principle in Haque does not apply to the issue before the Court here. The issue before this Court is not the terms and proper construction of the debt obligation arising under the Wei loan, but rather the substantive validity of the security which the loan contract, on its proper construction, gives rise to over the Logan property. It is unnecessary to deal with the parties submissions as to the situs of the secured debt if Haque applied, although Ms Wei’s contention that Mr Yang’s place of residence is Queensland seems compelling.  I would add that I wonder how relevant old cases on mortgages might be unless they are premised on the notion of a mortgage as understood under the Torrens system or an equitable mortgage.  They seem more applicable to an “old system” mortgage, that is a mortgage by a conveyance.  Otherwise it is difficult to see why the established authority on choice of law rules for contract do not apply.
268. [268]
     Mr Yang’s second argument is that the alleged security is part of the contract which gives rise to the Wei loan and should be determined according to the proper law of that contract. He relies on two authorities.
269. [269]
     The first is British South Africa Co v De Beers Consolidated Mines Ltd [1910] 2 Ch 502. In that case, the English Court of Appeal was dealing with a term contained in a mortgage debenture provided by the BSA (a statutory corporation) to De Beers. The term provided for a licence to De Beers for a nominal sum over all diamondiferous ground in the areas within BSA’s remit. That included Northern and Southern Rhodesia. The debentures were ultimately repaid. BSA contended that therefore, the licence term was also discharged. De Beers disagreed. De Beers argued inter alia that the proper law of the areas of land covered by the licence in Southern Rhodesia was the law of Southern Rhodesia as the lex situs. Under Roman Dutch law it was arguable that the clause was not discharged by repayment of the mortgage debt.
270. [270]
     The question before the Court was one of the proper construction of the mortgage debenture terms. The question was the proper law of the contract. The Court of Appeal concluded that the proper law of the contract was English law, seemingly as the law most closely connected. Having reached that conclusion, the Court considered whether, under English law, the security agreed to be given upon land in Southern Rhodesia should nonetheless be governed by the lex situs. Cozens-Hardy MR concluded it should not, because the mortgage debenture created no more than a personal right, rather than a real right. He applied the principle that English Courts, by virtue of their jurisdiction in personam, will apply the principles of English law to a contract or trust relating to foreign land, although the lex situs did not recognise those principles. It was in that context he made the statement^[114]  relied on by Mr Truong:

In my opinion an English contract to give a mortgage on foreign land, although the mortgage has to be perfected according to the lex situs, is a contract to give a mortgage which – inter partes – is to be treated as an English mortgage and subject to such rights of redemption and such equities as the law of England regards as necessarily incident to the mortgage.

[footnotes omitted]

271. [271]
     Properly understood, the case does not directly assist Mr Yang. The case concerns the proper law of the contract. The rules it states as flowing from the proper law being English law are English choice of law rules. In this case, where the proper law of the contract is accepted as being Chinese law, the question of how to approach the question of the substantive validity of the alleged security over the Logan property will be a matter for Chinese law.
272. [272]
     More directly relevant is Murakami v Wiryadi (2010) 109 NSWLR 39, a decision of the New South Wales Court of Appeal. A man died in Indonesia survived by four children, two of whom were born to his defacto partner, and two to an earlier marriage which ended in divorce granted by the Indonesian courts. Under Indonesian law, his property and his wife’s property were common property which was to be divided in equal shares. On his subsequent death, under Indonesian law each of the four children was entitled to a quarter of the estate.
273. [273]
     One of the de facto children brought proceedings seeking declarations that certain real property of the deceased was held on trust for her as to one quarter by reason of her rights under Indonesian law. The proceedings were stayed on forum non conveniens grounds in favour of proceedings in Indonesia. That order was the subject of the appeal. The aspect of the appeal of interest here was the identification of the proper law as a factor in the decision whether to stay the NSW proceedings. The relevant analysis by Gleeson CJ dealt with whether the common property law in Indonesia was reflective of an implied contract between the parties as to the terms of their marriage in respect of property. His Honour concluded that it did. He held:

[121] The reasonable expectation of the parties to an Indonesian marriage is that their property rights will be determined on the basis of the harta gono-gini system. Those expectations can be fulfilled by inferring, on the authority of the De Nicols cases, the existence of a matrimonial contract containing such conditions. Subject to the laws of the forum with respect to dealing with interests in land — and none were suggested to be relevant in the present case — such a contract will be enforced in New South Wales. Like any other contract, immovable property is governed by the proper law of the contract, provided that that is permitted by the lex situs.

[…]

[123] I see no difficulty in saying that a matrimonial contract ought to be enforceable in accordance with the same principles as a contract between arm’s length commercial parties. If a choice of law provision in a written commercial contract — such as a partnership or joint venture arrangement — will be recognised and enforced by the lex situs of immovable property as it will be, I see no reason in principle why this approach should not be applied with respect to a contract entered into in a matrimonial context: see British South Africa Company v De Beers Consolidated Mines Ltd [1910] 2 Ch 502; Nygh and Davies at par 19.3. See also Dicey and Morris on the Conflict of Laws (11th ed, 1987, Stevens & Sons), vol 2 at 1254–1258. I refer to the 11^th edition because the 12th edition in this respect turns on the Rome Convention, which does not apply to Australian common law.

[124] It is necessary to distinguish between contract and conveyance. It is in the context of the latter that the lex situs clearly applies. As the authors of Scott on Trusts (4th ed, 1989, Little, Brown & Company), vol VA, put it at 506: “Although land is an immovable, interests in land are neither movable nor immovable.” The traditionally rigid distinction between movable and immov­able property has no sound basis in policy: see Scott on Trusts at 573–575. It does not appear to me to reflect contemporary conditions, especially the ease of cross-border investment. The location of real property remains a significant indicator of what the proper law of the contract is, but that is subject to a contrary contractual intention: see Merwin Pastoral Company Pty Ltd v Moolpa Pastoral Company Pty Ltd (1933) 48 CLR 565; [1933] HCA 31, especially at 576. A contract with respect to land, as distinct from a conveyance, is generally governed by the proper law of the contract: see Dicey, Morris and Collins (14th ed) at 1748–1751. Local law can, as the lex situs, override other dealings or expectations. However, it does not necessarily do so.

274. [274]
     There seems a preponderance of authority that the proper law of an interest in land arising from a contract will be determined by the proper law of the contract of which it forms a part, though the lex situs will apply to a conveyance. It is not entirely clear how the question of substantive validity of a security created by contract will fit into that framework. However, the gravamen of the reasoning suggests that it would also be determined by the proper law of the contract.
275. [275]
     That conclusion might encounter the kinds of sovereign difficulties which underpin the lex situs rule. Let it be assumed that a contract creates a security interest which would be valid under Chinese law as the proper law of the contract, but invalid in Queensland law as the lex situs. Would a Queensland Court, invited to exercise its power to order a sale of the property, do so even if under Chinese law the security was enforceable? I suppose the answer depends upon whether, under Queensland law, the proper law to resolve that issue is Chinese or Queensland law.
276. [276]
     Ultimately, with some reservations, I accept that under Queensland choice of law rules, the substantive validity of a promise to provide security over future property would be a matter for the proper law of that contract. It is not disputed that that is Chinese law.

152. Application of Chinese domestic law

277. [277]
     There is agreement between the experts that if the validity of the alleged security is considered by reference to Chinese domestic law (excluding its choice of law rules), it would be invalid, though their reasons differ.
278. [278]
     Associate Professor Dawes opines that the alleged security was invalid for two reasons:

     1. First, the alleged security fails to include particulars identifying the secured property which are mandatory to validity; and
     2. Second, the alleged security is not executed by both parties.
279. [279]
     Professor Liu disagrees with the second proposition. However, for the reasons he gives in his first report on this issue, I find Professor Liu’s views more persuasive. They appear to be supported by the articles to which he refers.^[115]
280. [280]
     However, he ultimately agreed with the first reason given by Associate Professor Dawes. He also expressed the view that the alleged security could not be a valid security over the Logan property because that property was not owned at the time of the granting of the alleged security. Professor Liu explained, for the reasons he gives, that Chinese law permits future property to be charged only in the specific circumstances which he identifies. This case does not fall within the scope of those exceptions.^[116]
281. [281]
     So the security over the Logan property is invalid under Chinese law.
282. [282]
     Or is it?

152. To renvoi or not to renvoi? That is the question.

283. [283]
     At its simplest, renvoi raises this question: when a choice of law rule applied by the lex fori directs a Court to the system of law of a foreign country, is the law to be applied the domestic law of that foreign country only, or the domestic law plus that foreign country’s choice of law rules? It is a question which does not have a plenary answer, nor is it one which is easily resolved.
284. [284]
     There is some guidance in the authorities as to how to approach renvoi when dealing with contracts. There is a presumption, not rebutted easily, that the proper law of the contract will apply to all issues relating to the contract arising before the Court,(excluding choice of law rules). The justification for this approach is that the parties would be taken to have intended that the whole of their contractual relationship be determined by the law they have chosen. This argument provides a compelling basis for excluding renvoi in circumstances where the parties have chosen a governing law for their contract, because parties presumably would intend to choose that law to govern, not some other law chosen by that law’s choice of law rules.^[117] However, there are exceptions in each case, and where the proper law of the contract is determined by the Court (by applying the most closely connected test) rather than by agreement of the parties, renvoi should be considered.^[118]
285. [285]
     Applied to this case, the immediate difficulty is that while the proper law of the Wei loan is admitted, the basis for that consensus is not. There is no express choice of law in the oral terms or written memorandum of the Wei loan. And implication would be artificial given the brevity of the words and writing. The proper law arises in my view, because the loan is most closely connected to Chinese law. On that basis, renvoi is a possibility to be considered.
286. [286]
     Ms Wei relied on Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331 to support the submission that the renvoi doctrine should be applied in this situation. I do not think that that case supports that submission here. That case was concerned with the question of the choice of law rule for a negligence claim. That case concluded that Chinese choice of law rules should be applied in respect of tort. It is not general authority for the proposition that renvoi should be applied in all cases generally nor contract cases in particular. However, it can be conceded that the approach in that case was to refer that renvoi point to Chinese law.
287. [287]
     The evidence on Chinese choice of law principles was limited. The key provision is Article 36 LAL, which provides:

Rights in rem in immovable property is governed by the law of the place where the immovable property locates.

288. [288]
     The evidence on this provision was limited. Professor Liu’s evidence on this issue was as follows:^[119]

The distinction between a mortgage contract and a mortgage as a proprietary right. Article 15 of the Property Law distinguishes the validity of a contract that creates an obligation to set up a security and the validity of the security itself (which is a type of proprietary right). Article 15 provides that such a contract becomes valid and enforceable at the time of conclusion unless otherwise provided by laws or the contract, irrespective of whether the security is properly registered or not. According to Article 36 of the LAL, real property is subject to the law of the place where the property is located. Therefore, in the present case, any possible mortgage or proprietary right that the plaintiff might have on the Property (the defendant’s house in Australia) is subject to the law of Australia. However, this does not affect the above conclusion that the formation and validity of the mortgage contract between the parties are matters to be determined in accordance with Chinese law.

289. [289]
     Associate Professor Hawes’ response was just as brief:^[120]

Article 36 of the LAL does state that the local law will apply to immovable property located in a locality. In other words, if a piece of real property is located in Australia, then the local Australian law would apply to that real property. However, I am not aware of any Australian law that would permit registration of a mortgage over a piece of real property when no mortgage has been created by the parties.

The Liu Report (at 3e) also states that the alleged mortgage contract took effect on 14 December 2014, at which time the plaintiff “only had a personal claim against the defendant.” I already noted that the defendant did not own the Property in 2014. Therefore, any “personal claim” against the defendant could only be for repayment of the agreed loan amount, not for registration of a mortgage against the Property.

290. [290]
     So far as I could determine, there was no oral evidence or supplementary written evidence on this matter.
291. [291]
     Mr Yang’s submission does not call for the total rejection of renvoi. Mr Yang’s argument was that the approach to Article 36 should be analogous to that adopted in BSA and Murakami: that one looks to whether the alleged security gave rise to a valid and enforceable security as a matter of the proper law of the contract first, and that one only considers Article 36 if there is a valid security as a matter of Chinese law. Ms Wei correctly responded that BSA and Murakami are common law cases and Article 36 must be construed according to its terms. While that is technically correct, there is no guidance from any authoritative source of Chinese law (as opposed to the expert’s own opinions) as to how Chinese law grapples with the difficult subtleties which arise in Haque, BSA and Murakami. I note in that respect that Article 41 contains a similar choice of law rule to the common law rule for contracts. It would be open for a similar construction to be adopted of the interrelationship of Article 41 and Article 36 as identified between proper law of the contract and lex situs for the law for determining the validity and enforceability of an agreement providing a security.
292. [292]
     There was no reference to any authoritative guidance as to how to approach the two provisions. Ultimately, I am not persuaded that there is a proper basis in the evidence before me to conclude, as a matter of fact, that the Chinese choice of law rules would result in Article 36 applying to determination of the substantive validity of the alleged security in preference to the proper law of the contract. However, even if I did apply the common law approach, on my analysis, substantive validity would fall to be determined by Chinese domestic law. Accordingly, I consider that that issue of substantive validity of the alleged security over the Logan property falls to be determined according to Chinese domestic law.

152. Conclusion on proper law issue

293. [293]
     It is common ground that under Chinese domestic law, the alleged security does not create a valid and enforceable security interest over the Logan property. So, if I am wrong in my conclusion that the Wei loan agreement does not, on its proper construction, give rise to a security over the Logan property as future property, then that conclusion follows also because the security is invalid under the proper law of the contract.  

152. A claim for equitable relief?

294. [294]
     That leaves Mr O'Brien and Ms Yates’ submission that the issue before the Court should be characterised by reference to the relief sought. On that basis, the issue for determination is submitted by them to be one of equitable relief.  I disagree.  The form of relief sought is in my respectful view is secondary. The principal issue which arises is whether the contract on its proper construction gives rise to a valid security interest over the Logan property. How that interest is enforced, if established as arising under the Debt Receipt, is undoubtedly a matter for the lex situs, whether the remedy is equitable or not. However, it is the anterior question which is the correct focus for determination of the issue before the Court.

152. Conclusion on the Wei security

295. [295]
     The Debt Receipt does not give rise to an enforceable security over the Logan property. The plaintiff’s claim for orders to give effect to that security is dismissed.

152. The misrepresentation claim

152. Introductory comments

296. [296]
     Mr Yang’s pleaded case is set out in full at [111] above. The gravamen of the allegations is that Mr Zheng misrepresented both the price Ms Ning paid for the unit and the market value of the unit. It is common ground that:

     1. The market value of the unit at the time of purchase was $430,000, as compared to a contract price of $808,000 and Mr Zheng’s alleged representations of $800,000 and $828,000;
     2. The price paid by Ms Ning was $680,000, as compared to Mr Zheng’s alleged representation that she paid $828,000.
297. [297]
     Mr Yang’s counsel relies on these discrepancies in two ways:

     1. The first is uncontentious: if Mr Zheng made the representations as to value and as to Ms Ning’s purchase price, those were incorrect as a matter of fact.
     2. The second is contentious: that the explanation for Mr Zheng’s misrepresentations was that he was embarrassed by Ms Ning’s failure to repay the $250,000 paid by Mr Yang in relation to the failed 121 visa application. It is submitted that Mr Zheng facilitated the sale at an over-value as a method of relieving his embarrassment while avoiding the need to provide actual value by way of repayment. This was said to have been achieved by Mr Zheng procuring Mr Yang to set off that debt against the purchase price.
298. [298]
     A great deal of evidence was directed at making good the latter proposition. 

152. The alleged representations not proved

152. The direct evidence

299. [299]
     The only direct evidence of the making of any of the alleged representations is that of Mr Yang. His evidence is set out in [113] to [116] above.
300. [300]
     The only direct evidence of the first value representation is that underlined in [113] above. In my view, even if Mr Yang’s evidence was accepted as accurate, that statement, in the context given by Mr Yang, does not objectively communicate to Mr Yang that, in Mr Zheng’s opinion, the market value of the two units was the figures he mentioned. Those statements are more apt to communicate that that is the order of price Ms Ning might seek, not the market value. That tends to be reinforced by the fact that, on Mr Yang’s evidence, Mr Zheng was communicating on behalf of Ms Ning, and was more likely to be stating what price Ms Ning was seeking than expressing an opinion on market value. A representation must be clearly stated, particularly an oral representation. At best, Mr Yang’s direct evidence on the first value representation is equivocal as to meaning, even were I to accept his uncorroborated evidence of the making of that representation.
301. [301]
     Mr Yang’s direct evidence on Mr Zheng’s alleged representation as to the Ning purchase price appears in paragraph [116] above. There are two problems directly affecting this evidence:

     1. First, there is the remarkable fact that seemingly for the first time, nine years after the event, Mr Yang introduces the allegation that Mr Zheng supported his purchase price representation with a document which was in English, which he could not read, but which showed the figure $828,000. That alone is a sufficient reason to be unpersuaded by Mr Yang’s evidence.
     2. Second, his evidence on this document does not make sense. Accepting that Mr Yang cannot read English, I do not accept he would be unable to tell if the document he was shown related to the unit he was buying or not. Assuming that Mr Yang could do so, where would Mr Zheng get a document which showed the figure $828,000 as the price for the unit? There is no suggestion that that price was paid by anyone for the unit, much less Ms Ning.
302. [302]
     Mr Yang’s direct evidence of the second value representation also appears in paragraph [116] above. While that evidence does not have the limitations identified for the other representations, it is burdened with the difficulty that in Mr Yang’s version, given for the first time at trial, it is linked to the purchase price representation, with which I have dealt with already.

152. Other evidence

152. The alleged conspiracy

303. [303]
     I now turn to the matter in [297](b) above. I have entitled it “the alleged conspiracy” because Mr Yang’s submission amounted to an allegation of a conspiracy between Mr Zheng and Ms Ning to solve their joint problem of the $250,000 by deceiving Mr Yang into buying one of the Ning apartments at a significant overvalue. Conspiracies usually must be proved by inference. So it is here. There is no direct evidence of the alleged conspiracy. And, in inferring a fraudulent conspiracy, one must pay regard to the Brigginshaw v Brigginshaw principle.
304. [304]
     While there are aspects of the transaction involving the unit which are unusual, I am not persuaded that Mr Yang has established the alleged conspiracy.
305. [305]
     First, it is Mr Yang’s pleaded case that he was owed $250,000, and that addressing the embarrassment of its non-repayment was the motive for Mr Zheng’s alleged deception. As with so much of Mr Yang’s evidence, however, it is inconsistent with contemporaneous, reliable evidence. In this case, that is the contract for the purchase of the unit. That contract shows that Mr Yang accepted that Ms Ning was justified in deducting amounts spent from the total sum due, with only $208,700 allocated to the deposit.^[121]
306. [306]
     That amount deducted was not minimal, it amounted to some $41,300. It is inconsistent with Mr Yang’s pleading which is premised on the basis that no disbursement of the funds was lawful: see paragraphs 16 to 22A of the statement of claim. It is inconsistent, at least in substance, with his oral evidence, which was that the money could only be treated as an investment if the 121 visa application was successful.^[122] Why, in those circumstances, he would allow a credit of over $40,000 was never explained.
307. [307]
     Second, Mr Yang’s counsel placed weight on Mr Zheng’s evidence as to how he came to suggest that Mr Yang inspect one of Ms Ning’s units. That evidence certainly was peculiar. Mr Zheng said that, once told of Mr Yang’s interest in units with an ocean view at the Gold Coast, he asked some agents and they had nothing of the kind for sale. Incredibly, that did not include contacting agents located on the Gold Coast. Rather, Mr Zheng appears only to have contacted agents that he knew. I accept that this is odd behaviour, as I thought when hearing it at trial. However, I am not persuaded that it provides a foundation for the alleged conspiracy. Mr Zheng presented to me as someone who does business almost exclusively through personal contacts. It is unusual, but consistent with his approach to commerce as I assessed it watching the whole of his evidence, that he would look to personal contacts to solve this problem. Ms Ning was a personal contact and she had two units which met Mr Yang’s requirements. That Mr Zheng would put Ms Ning and Mr Yang together is not surprising.
308. [308]
     Third, Mr Yang relied on the text messages between Mr Zheng and Ms Ning on the evening of 12 August 2013. That exchange was as follows:^[123]

12 August, 2013, 10:42

A: 8 hawthorn, Stretton

B: Received, with thanks.

12 August, 2013, 21:34

B: Sorry boss. My phone ran out of battery so the call was interrupted. Just charged the phone.

B: Please ask Yang Zong (polite way to address the head of a company) to make an offer based on the actual transaction price : )

B: Thanks for your hardwork boss : )

B: Thanks a lot : )

309. [309]
     Mr Yang submits that this shows that Mr Zheng knew what the actual transaction price was. That indeed might be so. However, Mr Zheng’s evidence about the circumstances of that text message overall is more consistent with its content than Mr Yang’s evidence. Mr Zheng said:^[124]

MR O'BRIEN: Yes. Mr Zheng, I was asking you about the discussion that you had with Ms Ning about the purchase of the unit by Mr Yang. What did Ms Ning - what can you recall Ms Ning saying about the purchase - the potential purchase of the unit by Mr Yang?

INTERPRETER: She actually said quite a lot. On the 12^th of April [sic August], in the evening, I received a text message from Ling and then I passed on the information to Mr Yang and asked the Yang to make an offer based on the valued purchase price. So the second day, I contacted Mr Yang over the phone. The second day, I passed the conversation between me and Ning to Mr Yang. First issue is that I informed Mr Yang, “Ning agrees to the property. Secondly, Ning also agrees to use the balance of the A$250,000 to - and make it as part of the purchase price for the property. And, thirdly, please ask - Mr Yang, please make an offer based on the valued purchase price.” Yang replied, “Regarding making an offer - Mr Yang said, “Regarding making an offer, yesterday, while I was inspecting the unit, Mr Chen Ling Jay searched for me and informed me that the purchase price for this unit is 68,000” - sorry “680,000.” I said, “I don’t know as I didn’t search that information myself.” Yang - Mr Yang asked me, “What’s your opinion on a suitable offer?” I said, “I don’t know. You decide.”

MR O'BRIEN: And did Mister - did Mr Yang make an offer?

INTERPRETER: Then Mr Yang told me that “please tell Ning I would make an offer of 680,000.”

MR O'BRIEN: What did you say in response?

INTERPRETER: The - then I just passed the offer to Ning and informed Ning that Mr Yang is willing to make an offer of 680,000.

MR O'BRIEN: Now, was that conversation on the phone or in person with Ms Ning?

INTERPRETER: All in phone calls. Ning said, “What? So yes, it is true that I purchased this unit for 680,000. However, I spent a lot of money on this unit, including the interest payable to the loan, management - building management fees, city council fees and other legal costs. So I almost spent, like, 900,000 on this - on this unit.” Ning said, “Please tell Mr Yang this information.”

MR O'BRIEN: Now, did you subsequently tell Mr Yang that information in a discussion?

INTERPRETER: Yes. Of course, I told Mr Yang.

310. [310]
     Although some caution should be exercised in relation to Mr Zheng’s evidence generally, once again his evidence on this point is more consistent with the content of the text exchange than Mr Yang’s version. Also, Mr Yang gave evidence that Ms Ning did refer to that sum ($900,000) as the value of the unit at the inspection, as explained in [117](c). If that evidence was not a reconstruction in the witness box, it does tend to support Mr Zheng’s version because it shows Ms Ning giving the figure Mr Zheng recalled. I recognise that part of Mr Zheng’s version is inconsistent with Mr Chen’s version as to who obtained the search. I do not think this is sufficient, however, to reject that version.
311. [311]
     Fourth, for the reasons given in [129] and [130] above, I am not satisfied of Mr Yang’s version of events relating to the Versace visit. It does not assist the conspiracy inference.
312. [312]
     Fifth, at no point was the conspiracy directly put to Mr Zheng in cross examination.
313. [313]
     Finally, I accept that it is possible that Mr Zheng might have been embarrassed over Ms Ning’s failure to repay Mr Yang and it is possible Mr Zheng he saw a deal with Ms Ning as a convenient way for Mr Yang to also achieve his objective of recovering money paid on the 121 visa. But it was uncontentious that Mr Zheng and Mr Yang were friends and business associates. Their falling out was well in the future. The proposition that Mr Zheng would deliberately defraud Mr Yang in that context is improbable.
314. [314]
     I am not satisfied that the evidence makes good the conspiracy alleged by Mr Yang, much less that it supports the particular representations alleged.

152. Other issues

152. Mr Chen’s evidence

315. [315]
     Although there was no direct challenge to Mr Chen’s evidence, he had a surprisingly detailed recollection of the minutiae of events relating to the particular days in question, and the particular unit. These events would have been long in the past by the time it appears Mr Chen was asked for his first account. Mr Chen does now have a commercial and personal relationship with Mr Yang. Without intending to question his honesty, one might suspect that some of the detail of his recollection might have been affected by that link.
316. [316]
     However, even accepting his evidence, it is not sufficient to address the problems with Mr Yang’s evidence. It gives one cause to question the details of Mr Zheng’s and Ms Zou’s account of the day of the inspection. It gives one cause to question whether Mr Zheng at some point did a search of the unit on the relevant database. But neither consideration provides evidence that the alleged representations were ever made, much less that there was a conspiracy to trick Mr Yang.

152. No reliance on value representation

317. [317]
     There is one further matter to bear in mind. I refer to [118] above. Not only is that inconsistent with his pleaded case but it is also evidence which makes any purchase price representation irrelevant, as Mr Yang says it was not relied on.

152. Failure to call Ms Ning

318. [318]
     Mr Yang relies on a Jones v Dunkel inference arising from the failure of Mr Zheng to call Ms Ning. However, I doubt that a Jones v Dunkel inference arises and even if it does, I am not persuaded it assists Mr Yang in the state of the evidence.
319. [319]
     As to the former point, I could not identify any evidence from either side dealing with the failure of Mr Zheng to call Ms Ning in his case. There was no evidence of the current nature of Mr Zheng and Ms Zou’s relationship with Ms Ning. Ms Ning had, until the settlement, been a separately represented party in the misrepresentation proceedings, at least if the settlement deed is anything to go by.^[125] Further, the Deed of Settlement of Mr Yang’s proceedings against Ms Ning included a payment of $100,000 by Ms Ning. Mr Zheng’s case was that he had no liability to Ms Ning. Why then should I infer Ms Ning was in Mr Zheng’s camp?
320. [320]
     As to the latter point, even if Ms Ning was not called and should have been, it makes no difference in this case. As is explained in Cross on Evidence:^[126]

Secondly, the rule in Jones v Dunkel permits an inference that the untendered evidence would not have helped the party who failed to tender it. It entitles the trier of fact to take that into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken. It entitles the trier of fact the more readily to draw any inference fairly to be drawn from the other evidence by reason of the opponent being able to prove the contrary had the party chosen to give or call evidence. But the rule does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it. The rule does not create any admission…

[footnotes omitted]

321. [321]
     The other evidence before me fails to make out any aspect of Mr Yang’s misrepresentation case. In that circumstance, Jones v Dunkel will not assist Mr Yang.

152. Mr Yang’s complaint

322. [322]
     Having dealt with all the above matters, I am not persuaded that Mr Yang’s complaints in his April 2016 text is evidence which assists him. It does not refer to any statement or conduct of Mr Zheng. It could just as easily be complaint about Ms Ning’s conduct, as the 1 May 2016 text suggests. Further, those emails were sent nearly three years after the events. Texts sent about that time also showed grave errors of fact by Mr Yang. There is no reason to think he was any more reliable on this issue.

152. Conclusion on the misrepresentation claim

323. [323]
     There are some oddities about the purchase of the unit. However, oddities are not sufficient to make good Mr Yang’s case. I do not accept his evidence about the circumstances of the purchase of the unit generally, nor his evidence of the alleged representations in particular. The misrepresentation case must therefore fail.

152. Loss

324. [324]
     The parties were able to reach agreement on the proper measure of loss by Mr Yang in the event he was successful on the misrepresentation case. That sum was ultimately agreed at $76,000.^[127]

152. Final observations

325. [325]
     I record my thanks for the efficient way counsel conducted the trial, seeking to narrow the issues wherever reasonably possible, and providing helpful and direct submissions on the issues which remained. Without their efforts, the trial and these reasons would have been significantly longer. I record thanks to the indefatigable interpreter, Ms Di, whose resilience and diligence contributed significantly to the efficient conduct of the proceedings.