Cheng as Trustee of the NEZA Trust v Bullseye Mining Ltd
[2023] WADC 57
•31 MAY 2023
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: CHENG as Trustee of the NEZA TRUST -v- BULLSEYE MINING LTD [2023] WADC 57
CORAM: STAVRIANOU DCJ
HEARD: 7 DAYS BETWEEN 31 JANUARY - 4 FEBRUARY & 17-20 OCTOBER 2022
DELIVERED : 31 MAY 2023
FILE NO/S: CIV 1989 of 2020
BETWEEN: NAM CHENG as Trustee of the NEZA TRUST
First Plaintiff
SAM CHENG as Trustee of the NEZA TRUST
Second Plaintiff
AND
BULLSEYE MINING LTD
Defendant
AND
BULLSEYE MINING LTD
Plaintiff by counterclaim
AND
NAM CHENG as Trustee of the NEZA TRUST
First Defendant by counterclaim
SAM CHENG as Trustee of the NEZA TRUST
Second Defendant by counterclaim
Catchwords:
Principal and agent - Right to fee - Construction of agreement - Introduction - Effective cause - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 259A
Result:
Judgment for the plaintiff
Representation:
Counsel:
| First Plaintiff | : | Mr M L Bennett & Mr A J Tharby |
| Second Plaintiff | : | Mr M L Bennett & Mr A J Tharby |
| Defendant | : | Mr A P Hershowitz |
| Plaintiff by counterclaim | : | Mr A P Hershowitz |
| First Defendant by counterclaim | : | Mr M L Bennett & Mr A J Tharby |
| Second Defendant by counterclaim | : | Mr M L Bennett & Mr A J Tharby |
Solicitors:
| First Plaintiff | : | Bennett + Co |
| Second Plaintiff | : | Bennett + Co |
| Defendant | : | Murcia Pestell Hillard |
| Plaintiff by counterclaim | : | Murcia Pestell Hillard |
| First Defendant by counterclaim | : | Bennett + Co |
| Second Defendant by counterclaim | : | Bennett + Co |
Case(s) referred to in decision(s):
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Electricity Generation and Retail Corporation v EIT Kwinana Partner Pty Ltd [2022] WASCA 3
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Kelly v Humanis Group Limited [2014] WADC 43
LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52
Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2; (2001) 202 CLR 351
Moore v Luxury Boat Holdings Pty Ltd [2020] WASCA 144
Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3
Watson v Foxman (1995) 49 NSW LR 315
Table of Contents
Introduction
Background
The parties and principal participants
Other participants
Brief overview of the claims, defences and issues
The claims
The statement of claim
The amended defence and counterclaim
Particulars of defence
The construction issue
Mistake
Summary of issues
The facts
Evidence and credibility
The evidence of the plaintiffs
Sam Cheng
The defendant's evidence
Peter Joseph Burns
Warren Hoy
Peter Gerard Burns
Absence of witnesses
Jones v Dunkel
Failure to call Mr Wu and Mr Huang
Events at 52 Hutchinson Avenue, Mosman Park
Conduct following purchase of Mosman Park
The meeting of 28 May 2012
The October 2012 trip to China
Investments made and fees paid
The defendant's response to the investments made
The letters and other communications
The payment of fees
The minutes of the defendant
Meeting on 11 December 2017
Conduct subsequent to December 2017
Demand for payment and communications between the solicitors
Construction of the agreement
The issue
The terms
Legal principles as to contractual construction
Conclusion as to construction of the agreement
Further construction issues
The entitlement to a fee
Legal principles in relation to an agent's commission
The introduction of investors
Mistake
Payment of $120,000
Conclusion
SCHEDULE 1
STAVRIANOU DCJ:
Introduction
By a service agreement made on 31 July 2012, the plaintiffs were to procure suitable investors to provide capital to the defendant (the agreement).
The agreement required the defendant to pay the plaintiffs a fee on any capital received from an investor introduced by the plaintiffs during the term of the agreement. Whilst the agreement refers to payment of a fee the parties in their dealings generally described the fee payable as a commission. In these reasons the words fee and commission are used interchangeably and nothing turns on any such different use.
The plaintiffs claim unpaid fees of $366,000 in relation to two investors, Qiyuan Wu (Mr Wu) and Wei Huang (Mr Huang). The plaintiffs' case is that investments were made in the defendant through corporations of which they were directors.
The defendant denies that the plaintiffs introduced either investor.
Further the defendant's case is that upon a proper construction of the agreement the plaintiffs are not entitled to a fee.
The defendant counterclaims $237,000 as money mistakenly paid as a fee pursuant to the agreement in circumstances where payment was in fact not due. The plaintiffs deny that there was any mistake and say they would suffer detriment if required to make the payment. Further the plaintiffs' case is that they have changed position and in the circumstances there should be no relief.
Background
The parties and principal participants
Sam Cheng and Nam Cheng bring this action as trustees of the NEZA Trust. Nam is the son of Sam and is also known as Eddy.
The defendant, Bullseye Mining Ltd, is an unlisted public company which carries on the business of gold exploration and mining. In 2011 and 2012, it needed operating funds and was looking for investors. Whilst it is described as being involved with gold exploration and mining at the material dates it was also involved in iron ore mining.
Peter Joseph Burns, Peter Gerard Burns and Dariena Catherine Ann Mullan (Ms Mullan) were at all material times the directors of the defendant.
I will refer to the plaintiffs as Mr Sam Cheng and Mr Eddy Cheng respectively. I will similarly refer to Peter Joseph Burns as Mr Burns Snr and Peter Gerard Burns as Mr Burns Jnr. No disrespect is intended by use of the descriptors. Mr Burns Jnr is the son of Mr Burns Snr.
Other participants
Fountain Enterprise Int'l Co Ltd (Fountain) is a company incorporated in the Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong). Mr Wu was the sole director of Fountain and a former director of the defendant. On occasions he is referred to as Wu Qiyuan.
Mr Wu's wife is He Ding Wu and is also known as Helen (Mrs Wu).
Hongkong Xinhe International Investment Company Ltd (Xinhe) is a company incorporated in Hong Kong.
Mr Huang was the sole director of Xinhe and the chairman of Zhejiang Xinhu Group Co Ltd (Zhejiang Xinhu) (a company listed on the Hong Kong Exchange). Mr Huang is on occasions referred to as Huang Wei.
At all material times Xinhe, and Xinhu Zhongbao Co Ltd (Xinhu Zhongbao) were related bodies corporate.
Fountain and Xinhe were investors in the defendant and subsequently shareholders of it.
JunBo Lin (Ms Lin) is the Chairperson of Xinhu Zhongbao.
Aspen Corporate Pty Ltd (Aspen Corporate) is a public accountancy practice. Mr Sergio Di Vincenzo (Mr Di Vincenzo) is the former chair of the defendant and managing director of Aspen Corporate.
Holy Holdings Pty Ltd and Holy Investments Pty Ltd are companies of which Mr Sam Cheng is a director.
Schedule 1 to these reasons is a more complete list of dramatis personae and is based upon a document filed on behalf of the plaintiffs.
Brief overview of the claims, defences and issues
The claims
The statement of claim
The plaintiffs' claim relates to the fee on four investments made in the defendant. The claim in each case is calculated at a rate of 6% of the capital sum invested.
The first claim is for $60,000 and relates to an investment of $1,000,000 made by Xinhe in the defendant on or about 25 April 2015.
The second claim is also for $60,000 and relates to an investment of $1,000,000 made by Xinhe in the defendant on or about 24 September 2015.
The third claim is for $126,000 and relates to an investment of $2,100,000 made by Fountain in the defendant on or about 20 July 2016.
The fourth claim is for $120,000 and relates to an investment of $2,000,000 made by Xinhe in the defendant on or about 24 May 2017.
The total fee claimed ($366,000) is based upon the three investments made by Xinhe totalling $4,000,000 and the investment made by Fountain of $2,100,000.
One of the primary issues at trial concerned whether the plaintiffs introduced each of Fountain and Xinhe to the defendant. The issue is important because, pursuant to the agreement, a fee is payable 'on any capital received by the Company [the defendant] from an investor introduced by the Service Provider [the plaintiff] …'. The burden of proof is upon the plaintiffs to establish the entitlement to the fee.
Paragraphs 6 and 7 of the statement of claim plead the introduction by the plaintiffs of Fountain and Xinhe as follows:
6The plaintiffs introduced Fountain Enterprise Int'l Co Limited (Fountain), a company incorporated in the Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong), as an investor to Bullseye.
Particulars of introduction
(i)The second plaintiff (Mr Sam Cheng) has known Mr Wu since the 1990s.
(ii)In about September 2012, Bullseye was seeking capital from investors to fund an initial public offering for its subsidiary, Bullseye Resources Limited (BRL). Mr Sam Cheng informed Mr Wu of this and Mr Wu expressed interest. Mr Sam Cheng in turn informed Bullseye of Mr Wu's interest.
(iii)On 29 September 2012, Mr Burns Jnr provided to Mr Sam Cheng a share placement agreement for Mr Sam Cheng to provide to Mr Wu, and Mr Sam Cheng did so.
(iv)On 15 November 2012, Mr Burns Jnr provided to Mr Sam Cheng an IPO investor presentation which Mr Sam Cheng provided to Ms He Ding (Mr Wu's wife).
(v)In about December 2012 and January 2013, Bullseye required capital to pay an environmental bond in respect of one of its tenements in the sum of $794,000 and asked Mr Sam Cheng to arrange for investors to fund about two-thirds of this amount ($529,000).
(vi)Mr Sam Cheng sought investment from Mr Wu. Mr Wu did not then invest.
(vii)In about October 2013, Bullseye asked Mr Sam Cheng to arrange a further investment from investors in the amount of $2,671,000.
(vii)Mr Sam Cheng contacted Mr Wu who agreed to invest.
(ix)On or about 11 December 2013 Bullseye received the sum of $844,511 from Mr Wu.
(x)On or about 12 December 2013 Bullseye issued 11,560,000 shares to Mr Wu.
(xi)By letter to Mr Sam Cheng dated 29 January 2014, Bullseye acknowledged in writing that the funds were received from an investor introduced by the plaintiffs and that the plaintiffs were entitled to the Capital Raising Fee in respect of those funds.
(xii)Bullseye paid the plaintiffs the Capital Raising Fee on the funds invested by Mr Wu.
(xiii)Mr Wu is and at all material times was the sole director of Fountain.
Further particulars may be provided prior to trial.
Hongkong Xinhe International Investment Company Limited
7The plaintiffs introduced Hongkong Xinhe International Investment Company Limited (Xinhe), a company incorporated in Hong Kong, as an investor to Bullseye.
Particulars of introduction
(i)At all material times Xinhe, Zhejiang Xinhu Group Co Ltd (Zhejiang Xinhu) and Xinhu Zhongbao Co Ltd (Xinhu Zhongbao) were related bodies corporate.
(ii)Mr Wei Huang (Mr Huang) at all material times was and is the sole director of Xinhe and the Chairperson of Zhejiang Xinhu.
(iii)Mr Sam Cheng has known Mr Huang since the 1990s.
(iv)In about September 2012, Mr Sam Cheng informed Mr Huang of the opportunity to invest in Bullseye and Mr Huang expressed interest.
(v)In about December 2012 and January 2013, Bullseye required capital to pay an environmental bond in respect of one of its tenements in the sum of $794,000 and asked Mr Sam Cheng to arrange for investors to fund about two-thirds of this amount ($529,000).
(vi)Mr Sam Cheng provided the BRL IPO investor presentation to Mr Huang and Ms JunBo Lin (Chairperson of Xinhu Zhongbao) (Ms Lin).
(vii)Mr Sam Cheng sought investment from Mr Huang, Ms Fang Wong (Xinhe's chief financial officer) and Ms Lin.
(viii)On or about 16 January 2013, Xinhe invested and Bullseye received the sum of $529,000.
(ix)BRL issued 2,645,000 shares to Mr Huang.
(x)Bullseye paid the plaintiffs the Capital Raising Fee on the funds invested by Xinhe.
(xi)In about October 2013, Bullseye asked Mr Sam Cheng to arrange a further investment in the amount of $2,671,000.
(xii)Mr Sam Cheng contacted Mr Huang who agreed to invest.
(xiii)On or about 11 December 2013, Xinhe transferred and Bullseye received the sum of $1,826,499.
(xiv)On or about 11 December 2013, Bullseye by letter to Xinhe confirmed receipt of the funds.
(xv)On or about 12 December 2013 Bullseye issued shares to Mr Huang.
(xvi)By letter to Mr Sam Cheng dated 29 January 2014, Bullseye acknowledged in writing that the funds were received from an investor introduced by the plaintiffs and that the plaintiffs were entitled to the Capital Raising Fee in respect of those funds.
(xvii)Bullseye paid the plaintiffs the Capital Raising Fee on the funds invested by Xinhe.
(xviii)On or about 5 February 2014, Mr Huang transferred his shares to Xinhe.
Further particulars may be provided prior to trial.
The amended defence and counterclaim
The defendant contends that in relation to the investment made by Fountain, Mr Burns Snr introduced Mr Wu to the defendant who introduced Fountain to the defendant. The introduction of Fountain to the defendant is pleaded in the amended defence and counterclaim as follows:
6.As to paragraph 6 of the Statement of Claim, Bullseye denies each and every allegation in this paragraph and says that:
6.1Fountain was introduced as an investor to Bullseye by Wu Qiyuan; and
6.2Wu Qiyuan was introduced as an investor to Bullseye by Peter Joseph Burns.
The defendant's position in relation to investments made by Xinhe is that it was introduced to the defendant by Mr Wu. Xinhe's introduction is pleaded in the amended defence and counterclaim as follows:
7.As to paragraph 7 of the Statement of Claim, Bullseye denies each and every allegation in this paragraph and says that:
7.1Xinhe and its sole director and shareholder, Huang Wei, were introduced as investors to Bullseye by Wu Qiyuan; and
7.2Wu Qiyuan was introduced as an investor to Bullseye by Peter Joseph Burns.
Particulars of defence
Particulars were provided in relation to each of pars 6 and 7 of the defence as follows:
Request 1.1
1.In respect of:
1.1the allegation in sub-paragraph 6.1 that 'Fountain was introduced as an investor to Bullseye by Wu Qiyuan';
1.2…
1.3…
give particulars of:
1.4when each introduction was made;
1.5to whom each introduction was made;
1.6whether each introduction was made in writing, orally or partly in writing and partly orally and in any event:
1.6.1to the extent the introduction was made in writing, whether the introduction was by letter, email, text message or otherwise (in which case, specify how); and
1.6.2to the extent the introduction was made orally, whether the introduction was made in person, by telephone or otherwise (in which case, specify how); and
1.7the substance of each communication alleged to comprise each introduction.
Answer 1.1
At all material times, Fountain Enterprises Int'l Co, Limited (Fountain) was the alter ego of Wu Qiyuan (Wu), having been established on or about 8 June 2016 as a Hong Kong based private company.
Wu met Peter J Burns (Burns Snr) in or about September 2010 and they developed a relationship of friendship through regular contact.
From around mid-2011, Burns Snr spoke regularly to Wu about Wu investing in Bullseye Mining Limited (Bullseye), including providing Wu with information in relation to Bullseye's activities.
Wu and Fountain invested in Bullseye as a result of Wu's friendship with Burns Snr and the discussions between Wu and Burns Snr from around mid-2011 onwards.
Request 1.2
The alleged 'introductions'
1.In respect of:
1.1…
1.2the respective allegations in sub-paragraphs 6.2 and 7.2 that 'Wu Qiyuan was introduced as an investor to Bullseye by Peter Joseph Burns'; and
1.3…
give particulars of:
1.4when each introduction was made;
1.5to whom each introduction was made;
1.6whether each introduction was made in writing, orally or partly in writing and partly orally and in any event:
1.6.1to the extent the introduction was made in writing, whether the introduction was by letter, email, text message or otherwise (in which case, specify how); and
1.6.2to the extent the introduction was made orally, whether the introduction was made in person, by telephone or otherwise (in which case, specify how); and
1.7the substance of each communication alleged to comprise each introduction.
Answer 1.2
The defendant refers to and repeats the further and better particulars provided under Answer 1.1 hereof.
Request 1.3
The alleged 'introductions'
1.In respect of:
1.1…
1.2…
1.3the allegation in sub-paragraph 7.1 that 'Xinhe and its sole director and shareholder, Huang Wei, were introduced as investors to Bullseye by Wu Qiyuan',
give particulars of:
1.4when each introduction was made;
1.5to whom each introduction was made;
1.6whether each introduction was made in writing, orally or partly in writing and partly orally and in any event:
1.6.1to the extent the introduction was made in writing, whether the introduction was by letter, email, text message or otherwise (in which case, specify how); and
1.6.2to the extent the introduction was made orally, whether the introduction was made in person, by telephone or otherwise (in which case, specify how); and
1.7the substance of each communication alleged to comprise each introduction.
Answer 1.3
In or about 2011 or the first half of 2012, as a result of the friendship between Burns Snr and Wu and the discussions held between Wu and Burns Snr, as stated in Answer 1.1 above, Wu brought Bullseye to the attention of Huang Wei, the director/chairman of Xinhe, as a company in which Xinhe might want to invest.
Xinhe invested in Bullseye as a result of that introduction of Huang Wei to Bullseye by Wu.
The construction issue
The plaintiffs' claim in relation to the fee on the investment by Fountain depends upon the phrase 'investor' in the agreement extending to associates and related entities of the entity making the investment.
The defendant's case is that on a proper construction of the agreement no fee is payable in circumstances where a Related Body Corporate or Associate of an investor introduced by the plaintiffs decides to invest during the term of the agreement.
The defendant's submission is that 'Without more, if the construction contended for by Bullseye is correct, the claim for commission in respect of the $2,100,000 cannot succeed'. The defendant's case is that given Fountain was not incorporated until June 2016 the plaintiffs' proposed construction would in the circumstances be absurd and uncommercial. It would lead in the defendant's submission to the plaintiffs being 'entitled to commission notwithstanding the plaintiffs had no knowledge of those Associates and had nothing to do with them'.
Mistake
The defendant pleads a claim in mistake and that Mr Sam Cheng made false representations as to the introduction of investors.
The counterclaim reads:
22.Bullseye has, from time to time, made payments and issued shares in Bullseye to the NEZA Trust, and other entities or persons at the direction of Sam Cheng, as capital raising fees under the Services Agreement, under a mistake of fact, in that it was not under any obligation to do so.
Particulars
i.In relation to investments in the defendant made by Wu Qiyuan, Bullseye repeats the allegation in paragraph 6.2 above.
ii.Oral representations were made by Sam Cheng to Peter Gerard Burns and Dariena Catherine Mullan, executive directors of Bullseye, on or about 11 December 2013, and from time to time thereafter, that Wu Qiyuan had been introduced as an investor to Bullseye by the NEZA Trust, which was false.
iii.In reliance on the false representations made by Sam Cheng in respect of Wu Qiyuan, Peter Gerard Burns and Dariena Catherine Mullan authorised payments by Bullseye and the issue of shares in Bullseye, as more fully set out below.
iv.In relation to investments in Bullseye made by Xinhe and Huang Wei, Bullseye repeats the allegations in paragraphs 7.1 and 7.2 above.
v.Oral representations were made by Sam Cheng to Peter Gerard Burns, an executive director of Bullseye, on or about 16 January 2013, and from time to time thereafter, and to Peter Gerard Burns and Dariena Catherine Mullan, an executive director of Bullseye, on or about 11 December 2013, and from time to time thereafter, to the effect that Xinhe and Huang Wei had been introduced as investors to Bullseye by the NEZA Trust, which was false.
vi.In reliance on the false representations made by Sam Cheng in respect of Xinhe and Huang Wei, Peter Gerard Burns and Dariena Catherine Mullan authorised payments by Bullseye and the issue of shares in Bullseye, as more fully set out below.
23.Bullseye made the following payments and transferred the following shares in Bullseye to the NEZA Trust, and entities or persons at the direction of Sam Cheng, as capital raising fees under the Services Agreement, under a mistake of fact, in that it was under no obligation to do so:
…
23.5the payment of $60,000 to Hai Shan Li, on or about 20 August 2015, in respect of the investment in Bullseye pleaded in paragraph 8 of the Statement of claim;
23.6the payment of $60,000 to Hai Shan Li, on or about 15 October 2015, in respect of the investment in Bullseye pleaded in paragraph 10 of the Statement of Claim; and
23.7the issue of 900,000 shares in Bullseye, at a value of $0.13 per share ($117,000) to Tina Cheng, on or about 14 November 2014, in respect of investments in Bullseye, in or about April and May 2014, from Wu Qiyuan, of $792,000, and Xinhe of $1,158,000.
24.Accordingly, the plaintiffs are liable to Bullseye:
24.1to pay to it the sum of $120,000; and
24.2to transfer to it 900,000 shares in Bullseye, alternatively, pay to it the sum of $117,000.
The plaintiffs' reply pleads:
8The plaintiffs deny paragraph 24 of the Defence and Counterclaim and say further that:
[8.1not pressed;]
8.2the plaintiffs do not hold the 900,000 shares the subject of Bullseye's Defence and Counterclaim and accordingly could not transfer them to Bullseye; and
8.3Bullseye has not paid the sum of $117,000 to the plaintiffs and accordingly Bullseye has no reasonable cause of action for that sum.
9In further answer to the Defence and Counterclaim, if (which is denied) Bullseye would otherwise be entitled to relief, the plaintiffs say that:
9.1the plaintiffs did not receive the payments made or the shares issued by Bullseye as pleaded in paragraphs 23.5, 23.6 and 23.7 of the Defence and Counterclaim or at all;
9.2such payments as are alleged to have been made and such shares as were issued by Bullseye were made or issued to third parties; and
9.3the plaintiffs would suffer detriment if they were to be held liable to Bullseye in respect of them,
such that the plaintiffs have changed their position and the Court ought not make orders in respect of the payments made or shares issued by Bullseye.
At trial the claim for the transfer of 900,000 shares was abandoned by the defendant. However, the claim for $117,000 remained.
Summary of issues
The principal issues may be summarised as:
•The proper construction of the agreement.
•Whether Mr Sam Cheng introduced Mr Wu to the defendant.
•Whether Mr Sam Cheng introduced Mr Huang and Xinhe to the defendant.
•Whether Mr Sam Cheng introduced Fountain to the defendant.
•Whether the defendant previously paid commissions to the plaintiffs in the mistaken belief that Mr Sam Cheng introduced Mr Wu to the defendant.
•Whether the defendant previously paid commissions to the plaintiffs in the mistaken belief that Mr Sam Cheng introduced Xinhe to the defendant.
•Whether the plaintiffs are entitled to all or any of the claimed commissions.
The facts
The parties produced a trial bundle comprising in excess of 2,000 pages. The majority of the documents were admitted without significant objection. The communications extended over a period of approximately 10 years. The documents essentially provide the evidence in support of the facts. Notwithstanding the documents there are factual disputes which are identified. The chronology of events is generally not in issue. It is appropriate in the circumstances to outline the chronology and, where appropriate, identify the documentary material.
Mr Sam Cheng was born in China and moved to Australia in 2008.
Mr Wu and Mr Huang were also born in China and have always lived there.
Mr Wu and Mr Huang were Chinese nationals.
In or about late August 2010, Mr and Mrs Wu were interested in buying a home in Perth and obtaining Australian residency. One method of securing residency was by way of a business visa.
On 10 September 2010, Mr and Mrs Wu arrived in Perth. They stayed with Mr Sam Cheng who assisted them in relation to the purchase of a home and identification of potential business/investment opportunities.
Mr and Mrs Wu engaged a real estate agent, Ms Carmen Tutor, who arranged for an inspection of a property situated at 52 Hutchinson Avenue, Mosman Park (52 Hutchinson Avenue). The property was owned by Mr Roger Harris and his wife. Their agent on the sale was Mr Burns Snr.
On 16 September 2010, Mr Sam Cheng, Mr Wu, Mrs Wu and Ms Carmen Tutor inspected 52 Hutchinson Avenue. When they arrived Mr Burns Snr was at the property. There is a real issue as to what if anything was discussed during the inspection and more particularly concerning investments to be made by Mr Wu.
Following the inspection and on the same day, Mr and Mrs Wu made an offer to purchase the property for $4,977,000 which was accepted. On that same day Mr and Mrs Wu returned to China.
Mr Sam Cheng dealt with the settlement of the sale on behalf of Mr and Mrs Wu which occurred on 18 November 2010.
Between about December 2010 and sometime in 2012, Mr Sam Cheng resided in the home. He moved out when Mr Wu came to live at the property.
In November 2010, Mrs Wu sent an email to Mr Sam Cheng which enclosed a copy of a sponsorship agreement issued by the West Australian government which was to support a business visa application. One of the terms in that sponsorship agreement was the transfer of at least AUD$3,000,000 into Western Australia for business investment and domestic arrangements. There was clearly a relationship between Mr Sam Cheng and Mr Wu.
In 2011, Mr Sam Cheng was asked by Chinese friends to look for investments in the Western Australian iron ore industry. There were a number of different persons and groups involved in possible investments.
Mr Sam Cheng approached Madam Wang, the Consul General for China in Western Australia. She identified a company Cazaly Resources Ltd for potential investment.
In about June 2012, Mr Sam Cheng spoke to Mr Roger Harris who told him about the involvement of Mr Burns Snr in a mining company. Mr Sam Cheng telephoned Mr Burns Snr and told him there were Chinese persons interested in investing in mining.
On 28 May 2012, Mr Sam Cheng and Mr Eddy Cheng attended the defendant's offices. There was a discussion about bringing in investors. Mr Burns Snr agreed to a 6% fee being paid in relation to investments made.
On 8 June 2012, Mr Sam Cheng sent an email to Mrs Wu. The email attached copies of documents in relation to Cazaly Resources Ltd which in part were translated into Chinese by Mr Eddy Cheng. The email reads in part:
This project works as a reference to compare with Peter's company's existing mineral resources future value. This project works as a reference so that you can see the future value of the existing minerals in Peter's company …
It was Mr Sam Cheng's evidence that the reference to 'Peter' in the email was to Mr Burns Snr.
On 13 June 2012 at 5.52 pm, Ms Mullan emailed Mr Eddy Cheng and Mr Sam Cheng in relation to the defendant. The email attached sample results, a Google Earth place mark for the tenement and an annual report. In the email Ms Mullan said that she would send the Bullseye Babylonia Project update together with recent exploration results. The email concluded: 'if you would like to translate this report (4 pages) it will offer the most comprehensive summary'.
Ms Mullan's email of 13 June 2012 reads:
Hello Eddy,
Phew - we are hard at work!
Please find attached:
•2 most recent MMI sample result reports for Babylonia (May 2012)
•The Google Earth place mark for the tenement (you will need to have installed Google Earth, you can download it from the internet)
•The only existing historical Annual Report for Babylonia 1989‑1990
I will also send you our Bullseye Babylonia Project update incorporating a summary of the Project and our most recent exploration results from MMI sampling carried out as recently as May 2012. If you would like to translate this report (4 pages) it will offer the most comprehensive summary.
Four minutes later, Ms Mullan sent a further email to Mr Sam Cheng enclosing the Bullseye Babylonia Project update. She advised that she was still working on a gold mine summary document.
Mr Sam Cheng was examined in relation to the email of 13 June 2012 from Ms Mullan. He gave evidence which I accept that the information requested was for another investor and his group and not for Mr and Mrs Wu.
On 19 June 2012, Mr Sam Cheng sent an email to Mr Roger Harris which reads:
Hi Roger,
We are very interested with the project.
Would you be able to find out the following information:
1)If they are selling the company including the mines & production plant?
2)If they are looking for investor and selling the interest of production?
3)What is the JORC Mineral Resources and Ore Reserves
4)What will be the cost to achieve the planned production at 1.5MT/PA
5)What is the estimated total cost (roughly) for the product
6)What is the current transportation routine to the nearest port?
7)If there is any deed agreement with any port owner?
8)What is the estimated transportation cost to port?
Thank you very much
Kind Regards
Sam
Part of the email included a message received from Mr Roger Harris dated 19 June 2012 which reads:
Hi Sam
This is the email I just received.
Regards
Roger
Sent from my iPhone
Begin forwarded message:
Subject: Iron Ore Production
Roger,
As discussed.
I have an ASX listed company that has recently completed its' plant commissioning and has begun the production and sale of iron ore.
The concept was to begin with small production and ramp up as cashflows increased.
The current rate of production (dry beneficiation) is 16 000T per month, or an equivalent rate 200 000 tons per annum.
All production is currently being sold at mine gate. All production sold is used in steel production.
When the additional wet beneficiation production comes on line in September 2012 production will be ramped up to 33 000 tonnes per month, or 400ktpa equivalent.
The planned production rate will increase to 1.5Mtpa (1 500 000 tonnes per annum) by the end of calendar 2014.
It uses both dry and wet (September 2012) beneficiation with the minimum grade across all product being 56% with the top product yielding 60%.
Dry beneficiation material has a cash cost of US$15 per ton.
Wet beneficiation material has a cash cost of US$44 per ton.
56% material sells for approximately $US 100 per tonne. Obviously, higher grades are achieving higher prices.
I can discuss off-take and investment strategy on behalf of the company for all or part of the company's production.
If your associates have interest in the company:
The company would be happy to host a site visit, at your associates expense, to the fully operational mine and production facility as required.
Complete a full and proper due diligence process.
All the figures quoted in this e-mail can be supported by public ASX announcements made by the company.
Please let me know if you have any further interest.
I have included some photos of the mine and the plant.
On 29 June 2012, Mr Sam Cheng sent an email to Mrs Wu. The email was in Chinese and the evidence of the interpreter in relation to the translation was as follows:
From - from Sam Cheng, date 29 June 2012 at 12:20:10 to Dean Helen. Subject forward WA North Perth Basin Coal Mine Project. And then there's another date Thursday, 28 June 2012 from Chang Shon Lin to [email protected] [email protected] subject forward WA North Perth Basin Coal Mine Project. SA greetings.Sam. Greetings. Those three emails you sent me I try to send out but maybe it's too big therefore they were all rejected. I can only - I can break apart the attachments and send it to you. Please help me to find out the initial state of this project, how to - how it's operated and how do we carry out negotiations. Thank you. Shanghai Shun Au(?) Import Export Company Limited. Address Shanghai City, Pudong District, Fujian Road, Number 76, Room 702 and 703. Telephone mobile. Email. Website and postcode.
On 17 July 2012, Mr Burns Jnr sent an email to Mr Sam Cheng. The email attached a draft share placement agreement in relation to Bullseye Resources Ltd (BRL). The placement agreement related to the placement of 60,000,000 shares of a price of AUD$0.20 per share to raise $12,000,000. The email reads:
Hi Sam,
As discussed, please find attached the 'DRAFT ONLY' Bullseye Investor Agreement.
As I mentioned this is still subject to a legal review and we need advice on timing of funds and obtaining of shareholder approval for any investor to hold more than 20% in the company.
Please review the document and give usu our initial thoughts ??.
We are also preparing a presentation to give to the investors at our offices on Friday morning - we would like to finalise the content of this presentation with you also.
Perhaps we can meet up tomorrow or Thursday to finalise everything ??.
We look forward to hearing from you soon.
Best regards,
Peter
The email speaks in terms of obtaining Mr Sam Cheng's 'initial thoughts' and requests a further meeting. The share placement agreement attached to the email does not identify the proposed investor. At that time Mr Sam Cheng had a number of different groups of possible investors.
On 25 July 2012, Mr Burns Jnr sent an email to Mr Sam Cheng attaching a revised 'Bullseye Share Placement Agreement'. The revised version reflected that the agreement related to placement of shares in the defendant rather than in BRL.
The email reads:
Dear Sam/Eddy,
Please find attached the revised Bullseye Share Placement Agreement which incorporates all additional clauses recently discussed.
For your convenience, I have left 'Track Changes' on so you can easily see what has been added.
Please note also that following legal advice, the offer is now being made from 'Bullseye Mining' rather than 'Bullseye Resources'.
For your information, all Bullseye company assets are currently held in 'Bullseye Mining'. At this stage, 'Bullseye Resources' is a company 'shell' with approval to list on ASX. Our plan was to secure investment into 'Bullseye Resources' and then transfer over all assets from 'Bullseye Mining' into 'Bullseye Resources'.
Having assessed the full situation with our lawyers, the whole process of transferring all the assets across from one company to the other will take a long time and require special shareholder approvals etc. This will mean that there will be a time delay from when we accept funds from the investors and when we can actually issue them shares for their investment. We felt that this might discourage and confuse the investors and have decided the 'easiest' and quickest course of action is to take investment directly into 'Bullseye Mining' and forget about 'Bullseye Resources'.
All the work done on 'Bullseye Resources' to gain ASX approval can now easily be replicated by 'Bullseye Mining' which will enable 'Bullseye Mining' to be potentially listed on ASX some time in the future.
I trust all this is clear, however if you need further clarification, please feel free to contact me.
Thanks and best regards,
Peter
Subsequent to the email of 25 July 2012, there were further discussions about the terms of any share placement and on 25 July 2012, Mr Burns Jnr confirmed the position by email to Mr Sam Cheng as follows:
Dear Sam/Eddy,
Please find attached the updated Share Placement agreement to reflect the changes we just discussed.
In a cover e-mail to the investors, please include the following summary of changes to the agreement:
1.Please note that the initial 'Draft' agreement previously supplied was drafted in the wrong company name by our solicitors due to the rushed nature of preparing the document. This investment offer is made by 'Bullseye Mining Limited' which the Directors warrant is the entity that holds all all 'Bullseye' company projects and company assets. We apologise for this error.
2.Payment schedule and requirement of funds has been extended as discussed.
3.Agreement has been altered to allow appointment of 3 Directors by the investor to the Board of Bullseye.
4.The investor is now offered a 'First Right' to fund individual Bullseye projects.
5.As agreed by the parties, the revised agreement states that the offer is valid for a period of 14 days and must be accepted by the investor on or before 6th August, otherwise Bullseye will proceed with offering the Share Placement to other interested parties.
Many thanks and best regards,
…
The email does not identify any specific investor.
There were discussions as to changes to the terms of the share placement agreement and amended documents were prepared reflecting those changes.
On 26 July 2012, Mr Burns Jnr sent an email to Mr Sam Cheng in part noting that '… we are working on obtaining the following outstanding items for the investor'. The email identified the items as including audited financial accounts and recent bank statements.
On 26 July 2012, an email was sent from Mr Eddy Cheng ([email protected]) to the email addresses Cheng Shun Lin @ sh‑shena.com, [email protected] and wfywyywm163.com. The email reads:
Mr Cheng, Mrs Lin and Huang. Greetings. Please read the translated Bullseye amended share insurance agreement amongst which we have highlighted all the amendments in red. Because I do not have Mr Huang's email, please forward this to him. Thank you. From Eddy.
In cross-examination Mr Sam Cheng agreed that in the email of 26 July 2012 he had asked for the recipients of the email to send it to Mr Huang of Xinhe. He was asked and I accept that he wanted to send the email to Xinhe as he needed to recommend the project to it as Xinhe 'wanted investment as well'.
On or about 26 July 2012, Mr Burns Jnr sent a lengthy email (93 pages) to Mr Sam Cheng and Mr Eddy Cheng. This was sent in the context of a share placement agreement and information requested by Mr Sam Cheng in relation to the defendant.
Mr Sam Cheng and Mr Burns Snr discussed the possibility of an investment in the defendant. There were discussions between Mr Sam Cheng and representatives of the defendant which led into the entry of the agreement on 31 July 2012. Pursuant to the agreement the plaintiffs were to provide services to the defendant which were identified as being 'to procure suitable investors (strategic or otherwise) to provide capital to the Company'.
The defendant's ongoing need for funds resulted in a number of share placements being made to investors. The evidence in relation to the obtaining of funds, payments received and shares issued is essentially evidenced by numerous email communications and other documents including proposals, reports, bank records and minutes of meetings tendered in evidence. That contemporaneous material is generally consistent with the evidence adduced on behalf of the plaintiffs.
On 26 July 2012 and 27 July 2012, further emails were sent by Mr Burns Jnr to Mr Sam Cheng enclosing information in relation to the defendant.
On 31 July 2012, the plaintiffs and the defendant executed the agreement.
On 12 August 2012 and 13 August 2012, Mr Sam Cheng sent emails concerning the defendant to Mr Wu and Mrs Wu respectively. The email in each case attached a translation by Mr Eddy Cheng of the defendant's reports.
On 13 August 2012, Mr Sam Cheng sent an email concerning the defendant to Mr Wu. The email attached a translation by Mr Eddy Cheng of the defendant's reports.
On 23 August 2012, Mr Burns Jnr sent an email to Mr Sam Cheng. The subject line of the email reads 'Responses to Investor Queries'. The email attaches a number of documents relating to the defendant including its constitution and a register of members. The email was translated by Mr Eddy Cheng and then onforwarded to Mrs Wu on the 27 August 2012.
On 6 September 2012, Mr Burns Jnr sent an email to Mr Sam Cheng concerning investment by Mr Wu in the defendant. In the email Mr Burns Jnr refers to 'our detailed discussion yesterday, I have sought feedback from the Board of Bullseye and advise the following'. The email goes on to refer to what is described as a final offer. In his evidence, Mr Burns Jnr accepted that this was the first time there had 'been a detailed discussion of Mr Wu making an investment'. This was the first indication of any intention to invest by Mr Wu and Mr Burns Snr accepted this had been raised by Mr Sam Cheng with the defendant.
On 29 September 2012, Mr Burns Jnr sent an email to Mr Sam Cheng in the following terms:
Hi Sam/Eddy,
Further to our recent discussions, please find attached the final Share Placement for Mr Wu.
Would appreciate if you can translate and forward to Mr Wu at your earliest convenience.
Many thanks and best regards,
Peter
The email attached a share placement agreement in relation to investment in BRL.
Mr Sam Cheng informed Mr Wu of this and Mr Wu expressed interest. Mr Sam Cheng in turn informed the defendant of Mr Wu's interest.
On 29 September 2012, Mr Burns Jnr provided to Mr Sam Cheng a share placement agreement for Mr Sam Cheng to provide to Mr Wu. The placement related to a proposed investment of AUD$6,000,000.
On 4 October 2012, Mr Burns Jnr sent an email to Mr Sam Cheng requesting he 'follow up with Mr Wu and ensure he has had a chance to read the agreement before we meet'.
On 4 October 2012, Mr Sam Cheng sent a translated version of the share placement agreement to Mrs Wu.
On or about 6 October 2012, Mr Sam Cheng and Mr Burns Jnr travelled to China where a presentation was made to potential investors.
On 15 November 2012, Mr Sam Cheng received from Mr Burns Jnr a 'revised IPO investment presentation'.
On 24 November 2012, Mr Sam Cheng sent the revised presentation which he had received to Mrs Wu.
On 10 December 2012, Mr Burns Jnr sent an email to Mr Sam Cheng in relation to draft share subscription agreements in relation to proposed investors in BRL. The email reads:
Hi Sam,
As discussed, please find attached Draft Share Subscription Agreements prepared for:
1.Mr Wong - $2,200,000
2.Mr Wu - $800,000
3.Professor Wu - $200,000
The defendant's financial position as at December 2012 was such as to require the obtaining of further funds. More particularly funding was required to meet payment of part of an environmental bond in relation to tenements.
In about December 2012, Mr Burns Snr and Mr Burns Jnr met with Mr Sam Cheng at 52 Hutchinson Avenue. They requested his assistance to obtain funds to meet payment of an environmental bond on behalf of the defendant. The amount requested was $529,000.
Mr Sam Cheng provided information as to the proposed investment to Mr Wu.
On 22 December 2012, Mr Burns Jnr sent an email to Mr Sam Cheng in the following terms:
Hi Sam,
As discussed last night, please find attached the letter for Mr Wu and accompanying documentation.
The letter explains why we require the bond urgently and the following supporting documentation is attached:
1.E-mail from Bullseye solicitors acting in relation to the Gold Mine explaining the situation within the government and the Department of Mines.
2.E-mail from our other company solicitors showing proof of receipt of $800K funds from other Chinese investors.
3.Copy of the bond lodgement documentation required to lodge the bond with the Mines Minister.
Let me know if you require anything further or need to discuss.
Many thanks and best regards,
Peter
The email from Mr Burns Jnr attached a letter dated 22 December 2012 from Mr Burns Jnr to Mr Wu. The letter notes: 'Further to your discussions with Sam yesterday regarding the urgent need for funds to pay the environmental bond…'.
On 25 December 2012, Mr Sam Cheng sent an email to Mr Wu which attached a number of documents which had been translated by Mr Eddy Cheng. No investment was made by Mr Wu at that stage.
On 5 January 2013, Mr Sam Cheng sent an email to the Chief Financial Officers of Xinhe and Xinhu, Mr Huang, Ms Lim and to Mrs Wu enclosing the Bullseye Resources Limited IPO Presentation.
On 10 January 2013, Mr Burns Jnr sent an email to Mr Sam Cheng advising that he had had discussions with the boards of the defendant and of BRL. He noted in the email that the most urgent matter related to receipt of $529,000 as 'part payment of the Gold Mine Bond'.
On 11 January 2013, Mr Sam Cheng sent an email to Mr Huang. There were attachments to the email described in evidence to include the environmental protection bond, proposal letter, BRL share placement agreement, a translation of the agreement and Hope's Hill environmental protection bond matters.
On 11 January 2013, Mr Burns Jnr sent an email to Ms Wong. The email noted that: 'Sam Cheng has asked me to forward account details for funds transfer'. The email referred to a transfer amount of AUD$529,000.
On or about 15 January 2013, Mr Huang invested $529,000 in BRL (then a subsidiary of the defendant) which issued shares to him.
On 16 January 2013, Mr Burns Jnr wrote to Mr Huang acknowledging receipt of $529,000 on that date and stating that shares would be issued to him shortly. A letter in identical terms was sent on the same day to Xinhe.
On 28 January 2013, Mr Burns Jnr wrote to Mr Huang confirming agreement to issue bonus shares 'following your recent investment in the company'. In the same document Mr Burns Jnr noted that Mr Huang had had recent discussions with Mr Sam Cheng. Mr Sam Cheng gave evidence that communications with Mr Huang at Xinhe were not limited to email but there was also 'talking on the line'.
On 26 February 2013, Mr Burns Jnr sent an email to Mr Sam Cheng requesting Holy Holdings Pty Ltd raise an invoice for commissions payable on the investment by Mr Huang. The email referred to the investment of $529,000 and commission payable of $31,740 (being 6% of $529,000). The invoice was issued by Holy Investments Pty Ltd as requested and paid by the defendant. In this regard on the 26 February 2013, Mr Burns Jnr sent an email to Aspen Corporate requesting urgent payment be made of the invoice which included the sum of $31,740.
On 26 February 2013, Holy Holdings Pty Ltd sent an invoice to the defendant which claimed $31,740 plus GST in relation to $529,000 received from 'Huang Wei at 6%'. A share certificate reflecting the subscription of 2,645,000 shares at AUD$0.20 was subsequently issued by the defendant.
The invoice followed a request of the same date from Mr Burns Jnr by email to Mr Eddy Cheng and Mr Sam Cheng for an invoice, specifying the detail to be provided in the invoice as being 'commission payable for fundraising for Bullseye mining as per Services Agreement'. The email from Mr Burns Jnr then specified the amount received and the commission to be claimed. The evidence establishes that the claim for $31,740 was part of a total claim of $61,314.
Mr Burns Jnr in an email to Aspen Corporate dated 26 February 2013 approved the payment and directed that it be made urgently.
On 14 May 2013, Mr Wu was appointed a director of BRL.
On 31 January 2014, Mr Wu was appointed a director of the defendant. In 2018 he was removed as a director.
On 14 May 2013, Mr Sam Cheng was appointed a director of BRL. On 8 December 2017 he was asked to leave the defendant.
On 13 September 2013, Mr Sam Cheng sent an email to Mr Wu enclosing an updated share register for the defendant. The updated register had been provided by Mr Burns Jnr to Mr Sam Cheng.
On 22 September 2013, Mr Burns Jnr sent an email to Mr Sam Cheng in relation to a project that the defendant was then considering. In that email there is reference to an enclosure being an overview. In the same email Mr Burns Jnr asked that the document be forwarded to China.
On 9 October 2013, a meeting of the defendant was held. Mr Burns Snr, Mr Burns Jnr and Ms Mullan were in attendance. Mr Di Vincenzo and Mr Sam Cheng are noted as being in attendance by invitation. It is noted in the minutes of meeting that:
24.The board acknowledged SC's commitment so far as raising funds for Bullseye from his network of Chinese investors. Given the importance of raising capital for Bullseye in the near-term, the Board discussed the prospect of [Sam Cheng] devoting his efforts full-time towards raising capital for Bullseye. It was agreed that [Sam Cheng] be offered a monthly retainer of $18,000 (+GST) to progress full time fund raising activities for Bullseye. It was agreed that [Sam Cheng] be given a letter of appointment with no fixed term.
On 9 October 2013, the defendant wrote to Mr Sam Cheng appointing him a consultant. The letter includes:
The current services agreement for capital raising with NEZA Trust will remain in place.
In about October 2013, the defendant asked Mr Sam Cheng to arrange a further investment from investors in the amount of $2,671,000.
On 31 October 2013, Mr Burns Jnr sent an email to Mr Sam Cheng attaching a spreadsheet of calculations in relation to a capital restructure of the defendant. The document included reference to a capital raising of AUD$6,000,000. Part of that sum related to the raising of $2,671,000 from 'Chinese'. In the email Mr Burns Jnr notes: 'I am not sure how you are planning to divide up the $2,671,000 investment and from which investors??. Is this coming from the Narada and Mr Huang's company - or others??'.
On 3 November 2013, Mr Sam Cheng sent the proposed subscription agreement by email to Mr Wu. At trial the email was translated as follows:
Mr Wu, Greetings. Attachment is the investment contract for Mr Huang. Thank you.
On 19 November 2013, the proposed investment was discussed at a meeting of the defendant's Board. Mr Burns Snr, Mr Burns Jnr and Ms Mullan were the attendees.
The minutes of the meeting note:
Chinese Investment Update
1.PGB ( Mr Burns Jnr) and PJB (Mr Burns Snr) were pleased to advise that the Share Subscription Agreements with various Chinese parties introduced by Sam Cheng and Mr Wu were signed on 18th November 2013, committing a further A$2,671,000 to the company and completing a total investment of A$4 million into the Company.
2.PGB advised that the A$2,671,000 investment amount was split between Mr Wu for A$844,551 and Mr Huang for A$1,826,449 and none of the Chinese parties would hold over 19.9% equity in the Company at this stage.
3.PBG advised that given there is no further uncertainty regarding major investment and potential triggering of take-over provisions, the Company can now proceed with calling its Annual General Meeting.
Mr Sam Cheng again contacted Mr Wu and Mr Huang.
Ultimately on 11 December 2013, $2,671,000 was received by the defendant. On that same day Mr Burns Jnr wrote to Xinhe acknowledging receipt of that sum. Of that sum $844,551 related to Mr Wu and $1,826,449 related to Xinhe. On or about 12 December 2013 the defendant issued 11,560,000 shares to Mr Wu.
On 29 January 2014, Mr Burns Jnr sent an email to Mr Sam Cheng in the following terms:
Re: Confirmation of Commission Payable for Capital Raising Services to Bullseye Mining
As per the Services Agreement entered into between NEZA Trust (NEZA) and Bullseye Mining Limited (Bullseye), dated 31st July 2012, it was agreed that Bullseye will pay a commission of 6% on investment funds successfully introduced by NEZA and received by Bullseye.
Bullseye acknowledges receipt of A$2,671,000 funds received on 11th December 2013 by investors introduced by NEZA and agrees to pay commission of 6% (A$160,260), payable by way of 1,602,600 shares in Bullseye with a face value of A$0.10 per share.
As instructed by you, we will issue the shares as follows:
Name: XINLEI WU
Address:52 Hutchinson Avenue
Mosman Park WA 6012
Number of Shares: 1,000,000
You will advise shortly of the name/entity to issue the remaining 602,600 shares to.
We thank you for your fund raising efforts and ongoing commitment to Bullseye.
Kind regards,
[signature]
Peter G Burns
Executive Director
Bullseye Mining Limited
The email of 29 January 2014, confirms the investment of $2,671,000 in the defendant, confirms the entitlement of the plaintiffs to commission and confirms the agreement of the defendant to pay 'commission of 6% ($160,260) payable by way of 1,602,600 shares in Bullseye with a face value of A$0.10 per share'. The commission was subsequently paid.
By email dated 30 January 2014, Mr Burns Jnr gave instructions to Aspen Corporate to issue 1,000,000 shares in the defendant to Xinlei Wu. There then followed communications by email in late January/early February 2014 from Mr Burns Jnr in relation to payment of commission and issue of shares to the NEZA Trust 'in relation to commission payable for recent Bullseye capital raising'.
On 10 February 2014, Mr Burns Jnr sent an email to Aspen Corporate in the following terms:
Dear Julie/Vishang,
Further to the my e-mail below dated 30th January 2014 and the attached letter agreement, dated 29th January 2014, with Mr Sam Cheng & NEZA Trust, there is an outstanding matter in relation to commission payable for recent Bullseye capital raising, equating to 602,600 Bullseye Mining shares.
We have received instructions from Mr Sam Cheng and this matter is to be finalised as follows:
Total of 337,500 Bullseye Mining shares to be issued as follows:
Name: MR SAM CHENG
Address: 46 The Circus
Burswood WA 6100
Number of shares: 337,500
Issue Price: A$0.10 per share
Date of issue: 10th February 2014
Cash payment of A$26,510 to be made as follows:
Bank: National Australia Bank
Account Name: Sam Cheng
BSB: 082 201
Account Number: 811 498 340
Julie: Can you please proceed with issuing the shares as outlined above and forward the Share Certificate for signing by myself and Dariena.
Vishang: Can you please proceed with making the cash commission payment as outlined above. It would be appreciated if this can be done today.
Following issue of the outlined shares and the cash payment, there is nothing further outstanding in relation to this matter.
Please feel free to contact me if you have any queries in relation to this matter.
Thanks and best regards,
Peter
On 10 February 2014, payment of $26,300 was made in accordance with Mr Burns Jnr's request.
On 31 October 2014, Mr Burns Jnr wrote to Mr Sam Cheng acknowledging 'receipt of A$1,950,000 funds received during April and May 2014 introduced by NEZA and agrees to pay commission of 6% (A$ 117,000), payable by way of 900,000 shares in Bullseye with a face value of A$ 0.13 per share'.
On 14 November 2014, Mr Burns Jnr wrote to Mr Sam Cheng and to the NEZA Trust in identical terms to the communication of 31 October 2014.
On 14 November 2014, Mr Sam Cheng agreed in writing to the outlined commission payable and confirmed that upon issuing of 900,000 shares in the defendant the claim for commission of $117,000 would be satisfied.
On 23 January 2015, Mr Burns Jnr sent an email to Mr Sam Cheng in relation to placement of shares in the defendant to be made to Xinhe. The email concluded with a request that Mr Sam Cheng review the documents and 'let me know if all is Ok …'.
On 17 February 2015, the defendant wrote to Mr Wu and Mr Huang in relation to the raising of $2,000,000 by way of loan to the defendant. It was the evidence of Mr Sam Cheng that he had discussed the payment with Mr Huang. This had been in a telephone call.
The investment in 2015 in the defendant by Xinhe was explained in a letter from Mr Burns Jnr to Xinhe dated 16 October 2015. That letter notes a total of 3,569,763 shares issued to Xinhe in relation to an investment of $1,000,000 made on 24 April 2015. The letter itself had been provided to Mr Sam Cheng by Mr Burns Jnr in an email dated 2 November 2015. Mr Burns Jnr wrote a similar letter on 4 May 2016 to Xinhe in relation to the investment made by Xinhe of $1,000,000 in the defendant on 24 September 2015.
On 20 July 2016, Mr Burns Jnr wrote to Fountain care of Mr Wu acknowledging receipt of $2,100,000 funds received by the defendant.
On 21 July 2016, Mr Burns Jnr sent an email to Mr Sam Cheng enclosing a receipt for the AUD$2.1 million. The email requested Mr Sam Cheng to forward the 'attached receipt to the relevant party'.
On 20 January 2017, Mr Burns Jr wrote to Fountain and confirmed the issue of shares to Fountain in relation to the investment made. The letter identified that the issue is pursuant to the agreement dated 16 March 2016 and an investment made on 20 July 2016 of $2,100,000. Part of the fee claimed by the plaintiffs in this action relates to that sum.
On 1 July 2016, Mr Sam Cheng entered into a share placement agreement with the defendant. Pursuant to that agreement Mr Sam Cheng or his nominee were to receive 10,000,000 shares in the defendant at a price of AUD$0.20 per share. Xinhe ultimately became the nominee in relation to the placement. It was Mr Sam Cheng's evidence that he had dealt with Mr Huang in relation to the investment made in May 2017 of the sum of $2,000,000.
On 24 May 2017, Mr Burns Jnr wrote to Xinhe acknowledging receipt of $2,000,000. On 16 June 2017, the defendant issued 10,000,000 shares to Xinhe in relation to the investment of $2,000,000.
Between April 2015 and June 2017, Xinhe and Fountain invested AUD$6,100,000 in the defendant.
The agreement has never been terminated.
Between 29 November 2018 and 16 March 2020, there were communications between the plaintiffs' solicitors, Bennett + Co (Bennett + Co) and the defendant and its solicitors Corrs Chambers Westgarth (Corrs).
On 29 May 2020, the writ of summons was filed in the action.
Evidence and credibility
There were detailed oral and written submissions as to the oral evidence and its assessment which in part focussed upon the demeanour of each of the witnesses.
I accept that a trial judge should strive, as far as they can, to decide cases without undue reliance on such fallible considerations as their assessment of witness credibility: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3 [88].
In Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [30] ‑ [31] Gleeson CJ, Gummow and Kirby JJ said:
30.It is true, as McHugh J has pointed out, that for a very long time judges in appellate courts have given as a reason for appellate deference to the decision of a trial judge, the assessment of the appearance of witnesses as they give their testimony that is possible at trial and normally impossible in an appellate court. However, it is equally true that, for almost as long, other judges have cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses. Thus, in 1924 Atkin LJ observed in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The 'Palitana'):
(footnote omitted)
'… I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.'
31.Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.
The events the subject of the action are alleged to have occurred a number of years ago. I have carefully considered the evidence and the impact of the passage of time. In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, 545, McHugh J, in dealing with an appeal in relation to the application of a limitation period said:
The enactment of time limitations has been driven by the general perception that '[w]here there is delay the whole quality of justice deteriorates'. Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo (1972) 407 US 514 at 532, 'what has been forgotten can rarely be shown'. So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now 'knowing' that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose.
| No. | Name | Description |
| 26. | Tina Cheng (Mrs Cheng) | Wife of Sam Cheng. |
| 27. | Warren Hoy (Mr Hoy) | Former director of Bullseye Mining Ltd; director of Cape Riviera Pty Ltd, a shareholder in Bullseye Mining Ltd; witness for the defendants. |
| 28. | Wei Huang (Mr Huang) | Father of Luke Huang and founder of the Xinhe group of companies, in which he holds approximately 53%; director of Hongkong Xinhe International Investment Co Ltd; and the Chairperson of Zhejiang Xinhu. |
| 29. | Wu Qiyuan (Mr Wu) | Former director of Bullseye Mining Ltd; previously the nominee director of Hongkong Xinhe International Investment Co Ltd. |
| 30. | Xinhu Zhongbao Co Ltd (Xinhu Zhongbao) | Owns 48% of Hongkong Xinhe International Investment Company Limited (Xinhe). |
| 31. | Xinlei Wu | Shareholder of Bullseye Mining Limited. |
| 32. | Yiyang Huang | Son of Mr Wei Huang, director of Hongkong Xinhe International Investment Co Ltd; has acted as its representative in Australia since about January 2018. Also known as Luke Qiu, Luke Huang, Yiyang Huang and his Chinese name is Yiyang Qiu. |
| 33. | Zhejiang Xinhu Group Co Ltd | Owns 52% of Hongkong Xinhe International Investment Company Limited (Xinhe). |
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
FE
Associate
31 MAY 2023
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