Kekecial v Aus Made (2)
[2025] VCC 821
•20 June 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-20-05300
| KEKECIAL PTY LTD | Plaintiff |
| v | |
| AUS MADE EXPRESS INTERNATIONAL GROUP PTY LTD and HUIFENG LIU | First Defendant Second Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 and 31 October 2023; 1 and 2 November 2023; 8 March 2024; 15, 20-23, and 27-30 May 2024, 27 June 2024; 22 and 26 July 2024; and 2-4, 25 and 28 October 2024 | |
DATE OF JUDGMENT: | 20 June 2025 | |
CASE MAY BE CITED AS: | Kekecial v Aus Made (2) | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 821 | |
REASONS FOR JUDGMENT
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Contract claims – Misleading and deceptive conduct claims – Turns on own facts
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff and Defendants by counterclaim | Mr D J Williams KC with Mr L E P Magowan | Lin Legal & Associates |
| For the Defendants and Plaintiffs by counterclaim | Mr Iain R Jones KC with Mr C H Truong KC with | JB Solicitors |
Table of Contents
A. INTRODUCTION
I. BP rolls Issues Summary
$400,000 – loan or deposit?
$291,932.89 – overpayment
II. Regulatory Issues - summary
B. THE TRIAL
C. WHO’S WHO IN THIS DISPUTE
Kekecial parties
Aus Made parties and Shandong Ruhui
Kenny
Myron Companies
The Tea Co & T Biotech
Novapharm and Royal Touch
D. OVERVIEW OF COMMERCIAL RELATIONSHIPS
E. EVIDENCE
Andy
Kenny
Haha
Other witnesses
Documentary evidence
F. BP ROLLS ISSUES
Facts - BP Rolls Issues
$400,000 payment – Characterisation
Kekecial’s Restitution and Unjust Enrichment claims
Kekecial’s Advance Representation Claim
Aus Made’s Estoppel and Misleading and Deceptive Conduct Claims
G. REGULATORY ISSUES
Breach of contract claims
Misleading and deceptive conduct claims
Kekecial Damages claim
Facts – Kekecial Damages claim
Evolution of Kekecial’s claims for loss and damage
No evidence of Myron companies’ losses
Amounts Kekecial agreed to pay were not reasonable
Damages claim conclusion
H. CONCLUSION
HER HONOUR:
A. INTRODUCTION
1In this proceeding, Kekecial Pty Ltd sues Aus Made Express International Group Pty Ltd, and Aus Made’s director, Mr Huifeng Liu (known as Haha) for approximately AUD $2.5 million in damages. Aus Made and Haha, together, are referred to in this judgment as the Aus Made parties.
2Aus Made counterclaims against Kekecial, and Kekecial’s director, Mr Zhenhua Yang (known as Andy), seeking approximately $680,000 in damages. Kekecial and Andy, together, are referred to in this judgment as the Kekecial parties.
3It was a complicated case.
4I will briefly outline the issues, then say something about the trial, explain who was who in the facts underlying the disputes, give an overview of the principal commercial relationships involved, then turn to the evidence, and make some comments about the witnesses, and the documentary evidence. I will then turn to the issues in more detail.
5The key issues for determination fall comfortably into two parts.
6Before coming to these, it is helpful to explain that the disputes in this case related to sales by Aus Made to Kekecial of disinfecting liquid, and of a novel type of disinfectant (sometimes called sanitising) paper. The disinfectant paper was supplied in large rolls called mini parent rolls (or occasionally, ‘small parent’ rolls). Later, Aus Made was no longer able to supply the mini parent rolls to Kekecial, but instead proposed to supply the same paper in much larger rolls, described as big parent rolls (BP rolls). However, these BP rolls were never actually supplied.
7The first set of issues (BP rolls Issues) concern whether Kekecial ordered a quantity of BP rolls on 29 January 2020 (as Aus Made claims), or not (as Kekecial claims). This set of issues includes claims by Kekecial, and a counterclaim by Aus Made.
8The second set of issues (Regulatory Issues) concern whether Aus Made breached the overarching Supply Agreement it had entered into with Kekecial on 26 November 2018 (the Supply Agreement). Kekecial claims that the Supply Agreement was breached because mini parent rolls which Aus Made had sold to Kekecial could not be on-sold legally in China. Kekecial makes various claims relating to this. Aus Made denies these claims.
I. BP rolls Issues Summary
9Kekecial claims two amounts from Aus Made: $400,000 and $291,931.89.
$400,000 – loan or deposit?
10In short, Kekecial says that it loaned $400,000 to Aus Made; that the loan was repayable on demand; that upon it demanding repayment of the loan, Aus Made refused to repay it; and that as a consequence, Aus Made owes it $400,000, together with interest.
11This characterisation of the payment of $400,000 is hotly disputed by Aus Made, which asserts the payment was made by way of a deposit on an order made by Kekecial for BP rolls. Aus Made contends that, on 29 January 2020, Kekecial and Aus Made entered into a contract, pursuant to which Kekecial agreed to buy 320 BP rolls for $1,580,544 from Aus Made (the alleged BP Rolls Contract). It contends that the $400,000 was a deposit or part payment for the BP Rolls Contract.
12As things transpired, Aus Made never in fact supplied the BP rolls to Kekecial.
13Kekecial has two other, alternative, claims by which it seeks to recover the $400,000 (if it is not successful in establishing its loan claim):
(i)It claims that Aus Made and Haha made a representation to it prior to it advancing the $400,000, to the effect that, if that sum was advanced, it would be repaid on demand (the Advance Representation), and that it advanced the $400,000 to Aus Made in reliance upon this representation, and has suffered loss and damage to the value of $400,000 because the money has not been returned;
(ii)Alternatively it claims restitutionary relief from Aus Made, arising from the fact that, in all the circumstances, by retaining the $400,000 paid to it by Kekecial, Aus Made has been unjustly enriched to the detriment of Kekecial (the Unjust Enrichment claim).
(b) Aus Made denies each of these alternative claims. It denies that the Advance Representation was made. It denies that Kekecial has been unjustly enriched (and, in any event, contends that this unjust enrichment claim is inadequately pleaded, and so should not be allowed).
14Aus Made counterclaims against Kekecial, pleading that the BP Rolls Contract was entered into and that Kekecial breached the BP Rolls Contract by not paying the balance of the purchase price. It claims that as a consequence of Kekecial breaching the BP Rolls Contract, Aus Made suffered loss and damage (the Aus Made Damages) of approximately $680,000. This claim is detailed in Aus Made’s closing submissions at paragraphs 280 and 281. In short, it claims: loss of profit on the BP Rolls Contract; alternatively, loss of the deposit it paid the manufacturer (Novapharm, as defined below) on the contract Aus Made entered to buy BP Rolls from Novapharm (which Aus Made claims it entered only because Kekecial had entered the BP Rolls Contract with Aus Made); and also, a proportion of the legal costs it incurred in legal proceedings it commenced in the NSW Supreme Court against Novapharm in relation to the Novapharm BP Rolls contract, on the basis that it brought these proceedings to mitigate its losses.
15Aus Made also alleges in its counterclaim (as an alternative plea) that on or about 28 and 29 January 2020, the Kekecial parties made representations to it (BP Rolls Order Representation), to the following effect:
(i)that Kekecial had then made (or was then making) a firm order for 10 containers of BP rolls; and
(ii)that no ‘purchase order’ was required to give effect to, or formalise, that firm order.
16Aus Made alleges that, in reliance on the BP Rolls Order Representation, it placed its purchase order for BP rolls with Novapharm (its supplier), and that, as a consequence, it would suffer detriment if Kekecial were now permitted to resile from these representations, and that Kekecial is estopped from doing so.
17Aus Made also contends that the BP Rolls Order Representation was misleading and deceptive, or likely to mislead and deceive, in breach of s18 of the Australian Consumer Law (ACL), and that Aus Made suffered the Aus Made Damages, as a consequence of Kekecial’s misleading and deceptive conduct.
18Kekecial denies that the BP Rolls Contract was ever made, denies making the BP Rolls Order Representation, and denies that Aus Made is entitled to the Aus Made Damages.
$291,932.89 – overpayment
19Kekecial’s claim for $291,932.89 arises in the following circumstances:
(a) Kekecial paid Aus Made $291,931.89 too much on an order for disinfectant liquid, in circumstances where it paid the amount due on the original purchase order, and then the order was varied down by agreement (with a varied purchase order) so that less disinfectant liquid was ordered (and the cost dropped accordingly).
(b) Aus Made has kept the difference (that is, the $291,931.89), and seeks to apply it in reduction of the Aus Made Damages.
(c) Importantly, Aus Made agrees that the $291,931.89 needs to be paid to Kekecial if Aus Made does not succeed on its counterclaim in the proceeding.
II. Regulatory Issues - summary
20The Regulatory Issues (the second set of issues in this case) involve claims by Kekecial in both breach of contract, and misleading and deceptive conduct.
21First, Kekecial makes a breach of contract claim. In broad terms, it claims that:
(a) Under the Supply Agreement, Aus Made was responsible for ensuring that the product it supplied to Kekecial complied with Chinese laws and was fit to be sold in China (in circumstances where the mini paper rolls were to be cut down into smaller, labelled, rolls before being on-sold in China, and Aus Made was responsible for ensuring the labelling also complied with Chinese laws);
(b) The labels and product did not comply with Chinese laws;
(c) Kekecial suffered loss and damage (the Kekecial Damages) as a result. It claims that these arose from compensation agreements it says it reasonably entered, in November 2020, with the two companies to whom Kekecial on-sold the product after buying it from Aus Made. These companies processed the product into smaller, labelled, rolls. These two companies are collectively referred to as the Myron companies, as described below.
22Aus Made denies that it breached the Supply Agreement, that the labels and goods did not comply with Chinese laws, and that Kekecial is entitled to the loss and damage it claims.
23Second, Kekecial claims that the Aus Made parties made three sets of detailed representations to it, relating generally to labelling and compliance with Chinese laws. Kekecial claims that all of these were misleading and deceptive in breach of the ACL. It claims the same loss and damage for this claimed ACL breach, as it claims for the alleged breach of the Supply Agreement (that is, the Kekecial Damages).
24The Aus Made parties deny making the representations, and the alleged ACL breaches. They deny that Kekecial is entitled to the Kekecial Damages.
B. THE TRIAL
25This case took a long time.
26The writ was filed on 1 December 2020. Initially the trial was listed to start on 22 September 2021. However, it was relisted, repeatedly, for various reasons. On 9 October 2023 I dismissed an application by the Aus Made parties to adjourn it still further.
27The hearing commenced on 30 October 2023, and continued for four sitting days then. The parties opened their cases, and Kekecial’s director, Andy, commenced his evidence in chief. The trial was then adjourned, to allow for further pleadings and evidence, and to enable a second application for security for costs to be heard.
28On 22 February 2024, that security for costs application, and objections to further pleadings and proposed evidence, was due to be heard. Two days before that listed hearing – on 20 February – the Aus Made parties’ solicitor emailed the Court, saying that senior counsel for the Aus Made parties was unavailable, being part-heard in another matter. Most of the interlocutory steps ordered to be done for that hearing had not yet been completed, and the parties agreed to adjourn to 8 March 2024. Those interlocutory matters were then heard on 8 March: evidence objections; objections to the latest versions of the statement of claim, and defence and counterclaim; and the security for costs application. I gave oral rulings on most of those matters that day, and a written ruling on the final aspects on 21 March 2024.
29On 15 May 2024, I dealt with yet more issues relating to pleadings, expert evidence, and discovery issues raised by the parties.
30Evidence then continued on trial days listed between 20 and 31 May, and on 27 June, 22 and 26 July, and 2 to 4 October 2024.
31Mr Daryl Williams KC and Mr Liam Magowan appeared as counsel for the Kekecial parties throughout.
32Mr Iain R Jones KC and Mr John Petras appeared as counsel for the Aus Made parties at the hearings from 30 October 2023 to 2 November 2023, and on 8 March 2024. Mr Cam H Truong KC and Mr Shaun Clement replaced them as counsel for the Aus Made parties at the hearings from 15 May 2024.
33The final pleadings relied on were:
· the third further amended statement of claim, dated 15 November 2023 (final Statement of Claim);
· the fourth defence to the third further amended statement of claim, and further amended counterclaim, dated 29 October 2024 (final Defence);
· the further amended reply and defence to further amended counterclaim, dated 12 February 2024.
34There were also requests for further and better particulars of earlier versions of the statement of claim, and particulars given in answer to those requests.
35As may be apparent from the many versions of the pleadings, the parties’ cases changed a number of times and continued to evolve even as the trial continued. The parties provided an agreed chronology and lists of issues to be determined (which list was revised repeatedly as the case progressed). The final version of this list of issues was version 7, provided on 4 October 2024.
36A court book was filed, and added to substantially, in the course of the trial. By the end of the trial, it had grown to 6108 pages. Of those, approximately 3320 pages were tendered.
37Following the evidence, the case was adjourned for final written submissions.
38Hundreds of pages of written closing submissions were filed.
39At this stage, Aus Made made an application to amend its defence still further. Relevantly, it sought to rely on a clause in the Supply Agreement to allege that Kekecial was not entitled to make the Kekecial Damages claim. I rejected that application for reasons given orally at trial: in short, because it was made too late, without explanation as to why it was made so late, and because allowing the amendment would have had significant time and costs consequences: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
40Oral closing submissions took place on 25 and 28 October 2024.
41In the end, the trial spanned almost a year: 363 days, starting on 30 October 2023, and ending on 28 October 2024. It was initially listed on a 4 day estimate. By the time the trial began, that had increased to a 10 day estimate. It in fact took 23 sitting days.
C. WHO’S WHO IN THIS DISPUTE
42There is a large cast of people and companies involved in the events underlying this dispute. To make it easier to follow who’s who, I have referred to people and companies by the following names in this judgment.
43It may be helpful to tag or bookmark this section, so you can refer back, as you read on in this judgment.
Kekecial parties
· Andy is Mr Zhenhua Yang, the second defendant by counterclaim, and a director of Kekecial.
· Kekecial is Kekecial Pty Ltd., the plaintiff, and first defendant by counterclaim. Its directors are Andy and his son Haobo. It is an Australian company, incorporated in July 2017 when Andy moved to Australia. It operates an export business exporting various Australian products to China. Relevantly in this case, it purchased goods from Aus Made in Australia, and sold them to the Myron companies (as referred to below) in China.
· the Kekecial parties are Kekecial and Andy.
· Haobo is Mr Haobo Yang, Andy’s son, and a director of Kekecial.
Aus Made parties and Shandong Ruhui
· Aus Made is Aus Made Express International Group Pty Ltd (the first defendant, and plaintiff by counterclaim). It is an Australian company which operates a business distributing and exporting healthcare and hygiene products, as well as dairy products and canola oil. Haha is its director and was CEO at the relevant times.
· Haha is Mr Huifeng Liu (the second defendant, and a director of the first defendant, Aus Made). He is also the director and shareholder of Shandong Ruhui.
· the Aus Made parties are Aus Made and Haha.
· Shandong Ruhui is Shandong Ruhui Import and Export Trade Co Ltd.It is a Chinese company, established in 2007 and it carries on an exporting and importing business in China. Haha is its director. Relevantly, it purchased goods from Myron Trading.
Kenny
· Kenny is Mr Zhen Khan, who worked with (or for) Aus Made and Haha during the relevant period (and was titled ‘CEO-Assistant in emails he sent to others on behalf of Aus Made and Haha), but who subsequently fell out with Haha. He gave evidence for the Kekecial parties.
Myron Companies
· Myron Biotech is Hunan Myron Biotechnology Co Ltd (sometimes referred to in contemporaneous documents by the name Myron Shengwu Jishu Co Ltd). Aiping Liu is its major shareholder, and was its legal representative (a Chinese term) until 21 June 2022.
· Myron Trading is Hunan Myron Trading Co Ltd. (sometimes referred to in contemporaneous documents by the name Hunan Mailun Trading Co., Ltd). Aiping Liu was its legal representative, and 80% shareholder until 21 December 2020 when Andy took over those roles.
· the Myron companies are Myron Biotech and Myron Trading. These Chinese companies purchased goods from Kekecial. Myron Trading then on-sold at least some of those goods in China, mostly to Shandong Ruhui. A big issue in this case was the extent of Andy’s financial or other involvement with the Myron companies
· Ms Aiping Liu was the legal representative (a Chinese term, as set out in formal documents filed with the Chinese government, and in company searches), and a shareholder, of Myron Trading from its inception, and of Myron Biotech until 10 December 2021 (when Andy took over as legal representative and major shareholder).
· Tmall is a website for Chinese consumers, which operates in a similar manner to Amazon. Aus Made signed a document which allowed Myron Trading to open a flagship store on Tmall to sell Evocide disinfectant and sanitising paper.
The Tea Co & T Biotech
· Tea Co is Hunan Tiantianqing Tea Industry Co, a Chinese company which Andy and his brother Zhendong Yang have been running for about twenty years. Andy said it was his primary line of business. Andy held 85.93% of its shares; his brother the rest. It sold and manufactured health tea products. Andy gave evidence there were more than 10,000 pharmacies in China selling its products. Kekecial, Myron Trading and Tea Co are parties to the Myron Trading Compensation Agreement, a tripartite agreement dated 10 November 2020 - one of the two compensation agreements which Kekecial relies on for the Kekecial Damages claim.
· T Biotech is Hunan Tiantianqing Biotechnology Co Ltd, another Chinese company which Andy controlled, at least between 26 November 2018 and 20 November 2020. According to information filed with the Chinese government, and put in evidence, it was established on 7 September, 2005. From June 2016 to 26 November 2018, it had 10 or 11 shareholders including Andy, his brother Zhendong Yang, and Aiping Liu. From 26 November 2018, Andy and his brother were the only shareholders. Andy is named in the filed company information as being ‘Senior Management’ which encompasses ‘Directors, Supervisors, Managers etc.’, for the period up to 20 November 2020, when his brother Zhendong is then named in that role. It is one of three companies Shandong Ruhui authorised to use the Ruhui trademark, for 2 years from 27 February 2019 (the other two companies being Myron Trading and Myron Biotech). On 21 November 2022, it was renamed Hunan Shiren Biotechnology Co Ltd.
Novapharm and Royal Touch
· Aeris is Aeris Environmental Ltd, a listed company and a parent in the Novapharm group.
· Peter is Mr Peter Bush, Aeris’ director.
· Novatech is Novatech Research Pty Ltd.
· Bruce is Mr Bruce Davidson, who was the chief representative of Novatech in the relevant dealings.
· Novapharm is a group of companies, relevantly including Aeris and Novatech, which sold goods to Aus Made. I have mostly referred to dealings with Aeris or Novatech by saying ‘Novapharm’, as the distinction between those entities does not matter in this case and the parties often referred to it this way.
· Royal Touch is Royal Touch Pty Ltd. It is an Australian company which was involved in the manufacture of the parent rolls (discussed below) at its factory, which were then sold to Novapharm.
D. OVERVIEW OF COMMERCIAL RELATIONSHIPS
44To put the disputes in this case into context, I will first outline the commercial relationships between the various companies involved in the supplies of disinfectant liquid, and disinfectant paper.
45The parties’ dealings began with disinfectant liquid (Evocide). It was sold by Novapharm to Aus Made, which on-sold to Kekecial, which on-sold to the Myron companies. The Myron companies then on-sold it to the Chinese market, including to Shandong Ruhui. There was no dispute in this case about these sales of disinfectant liquid.
46The parties then also started selling disinfectant paper.
47Royal Touch and Novapharm manufactured the disinfectant paper into mini parent rolls. I will refer to that product as the Raw End Product.
48Novapharm sold Raw End Product to Aus Made, which sold it to Kekecial.
49Kekecial sold the Raw End Product to the Myron companies. It delivered the mini paper rolls to a bonded area in Hunan, China. There, the Myron companies processed the mini parent rolls for retail sale: they cut the paper and put it in small, labelled, packs for retail sale in China. I will refer to this repackaged product as the End Product. By processing the goods in the bonded area of China, the goods could be advertised as ‘made in Australia’. This set up also meant that Andy’s company, Kekecial, was exporting to China (which was important for the business visa which Andy had applied to obtain from the Australian Government).
50Having manufactured the mini parent rolls into the smaller packages – the End Product - the Myron companies on-sold the End Product within China, principally to Shandong Ruhui (Haha’s Chinese company). Haha gave unchallenged evidence that Shandong Ruhui purchased approximately 70% of the Myron companies’ repackaged goods, and the invoices between Shandong Ruhui and Myron Trading provide some support for this figure. Andy purported not to know anything much about the Myron companies’ sales.
51Myron Trading also made online sales.
52The flow of goods is summarised in the following diagram which was handed up during the trial :
53Aus Made sold the Raw End Product to Kekecial under the brand name ‘Southern Cross’. In China, the End Product was sold under the brand name ‘Ruhui’. On 27 February 2019 Shandong Ruhui, which owned the Ruhui trademark, sent a letter on Aus Made’s letterhead, authorising Myron Trading ‘and its affiliates’, Myron Biotech and T Biotech, to use the Ruhui trademark for two years ‘to engage in the business of manufacturing, distributing and selling products affixed with the abovementioned trademark’.
54The End Product was sold as two different products: (Ruhui® Disinfectant Wipes (For Skin). and Ruhui® Disinfectant Paper Towels (for surface use). Broadly speaking, the wipes were designed to be dipped in water, then used to sanitise skin; and the paper towels were designed to have water sprayed on them and then used to sanitise surfaces.
55Later, Royal Touch arranged for a specialist machine to make paper rolls which were much larger than the mini parent rolls. These were called big parent rolls (BP rolls). Aus Made placed an order for BP rolls with Novapharm, and much of the dispute in this case relates, in broad terms, to whether Kekecial placed an order for BP rolls with Aus Made. No BP rolls were ever supplied.
56Haha and Andy were each involved in at least two different stages of the supply line. Haha was both a director of Aus Made and of Shandong Ruhui. Andy was both a director of Kekecial, and deeply involved with the Myron companies, as discussed further below. Andy also was a director of T Biotech, which was, according to Andy, involved in sales to drug stores in China. (Andy refers to T Biotech as Kekecial’s ‘distributor’, in an email relating to compensation claims which he sent on 2 November 2020 to Haha.)
E. EVIDENCE
57Andy was the main witness for the Kekecial parties in relation to the events leading to the disputes in this case. Kenny also gave evidence for the Kekecial parties.
58Haha gave the main evidence on those events for the Aus Made parties.
59A troubling aspect of this case is that I found the evidence of these key witnesses to be unreliable, so much so that, for the reasons explained below, I do not accept any of the oral evidence of Andy, Haha or Kenny on contentious matters, save where their evidence is supported by contemporaneous documents.
60The fact that I have been unable to accept so much of the oral evidence of these key witnesses in this case, absent documentary corroboration, is quite extraordinary. It has made my task of ascertaining the facts a more difficult one and has had a significant bearing on my findings on the key issues. In the end I have relied heavily on the documentary evidence for the primary evidence in the proceeding. This task, too, was harder than usual, as there was some doubt as to when some of the documents relied on were actually created. I discuss all this below.
Andy
61Andy was a Chinese citizen who sought, and eventually obtained, permanent residency in Australia, having applied for a business migration visa. He had considerable experience in operating businesses in the Hunan Province in China.
62Andy speaks little English, and gave evidence via an interpreter. After most of Andy’s evidence in chief was given, the trial was adjourned for some months. It then resumed and he completed his evidence. Much of the time that he gave evidence was taken up by his many long, rambling, evasive, and non-responsive answers to questions. He frequently made long speeches designed to highlight points he thought it important to make about the Kekecial parties’ case – rather than answering the specific question put to him.
63His oral evidence was frequently contradictory, and flew in the face of what was contained in contemporaneous written documents. Cross-examined about particular contemporaneous messages which were not consistent with the story he was giving in his evidence to the Court, he first argued that the translation was wrong, then gave unconvincing explanations.
64He firmly denied the existence of any phone calls between himself and Haha in around January 2020 (the period leading up to the alleged BP Rolls Contract being entered into). Then, when telephone records were produced to show that there were phone calls, he accepted that there were such phone calls, but said that the discussions excluded any discussion of BP rolls – which both he and Haha were repeatedly referring to in WeChat and other messages at the time. In the face of the documentary evidence, his oral evidence on these points was not credible.
65His evidence about his involvement with, and knowledge of, the operation of the Myron companies was particularly unimpressive, as I discuss in the section dealing with the Kekecial Damages claim below. He sought to convey the impression that Kekecial was an agent for the Myron companies in dealing with Aus Made, but that he had hardly any involvement with the Myron companies or knowledge about their financial and business affairs. This was despite him clearly having significant involvement, as I discuss in the section on the Regulatory Issues below, in relation to the Kekecial Damages claim.
66He was often evasive, in giving evidence, in relation to what he claimed to know about the Myron companies. For example, on the one hand, he gave specific evidence about employees with particular experience being hired by Myron Trading, but on the other, when cross-examined for more information, said, ‘How would I know? I was no employee of Hunan Myron’.
67Andy claimed, in giving evidence, to not to know anything about Myron Trading on-selling goods to Shandong Ruhui. This was despite a contemporaneous email on 4 June 2019 where he forwarded a contract between Shandong Ruhui and Myron Trading to others, along with four related invoices; despite other contemporaneous messages he wrote to Haha about advance payments and sales made by Shandong Ruhui to Myron Trading. On 31 August 2019, Andy replied on behalf of Myron Trading (referring to it as ‘we’) in regard to a proposed order by Shandong Ruhui:
Ok, you ask him to formally place the order and pay the deposit, we can only stock up according to the order
68A lot of communication occurred via WeChat, with groups of people included in different WeChat groups for different purposes. In the ‘Disinfection Project – China Subcontracting Project Team’ WeChat Group (the Disinfection Project WeChat group), members communicated about many aspects of the goods, as well as their supply and sales in China, but no one from the Myron companies (was part of that WeChat group (or included in any of the messages). Andy was included and spoke on behalf of the Myron companies, but purported in giving evidence, to only know a limited amount about them, or even about the sales he referred to in those messages. For example, on 26 September 2019, the Disinfection Project WeChat group (ncluding Andy) was told of a large payment (‘1 million’), which Shandong Ruhui had made to Myron Trading for disinfectant towels. Andy conceded in evidence that he knew of the payment at the time, but went on to claim that he didn’t know where Myron Trading had got the product from, saying Haha could have been providing them with products. I do not accept Andy did not know the source of that payment. There was no evidence – nor any other suggestion in the trial – that Myron Trading was obtaining disinfectant goods from anyone other than Kekecial at that time. (I note that I assume the ‘1 million’ payment was in RMB. RMB, or renminbi, is the currency system in China. Its base unit is yuan, which can also be written ‘CNY.’ Various documents in evidence refer to currency in RMB or CNY.)
69Importantly, the two Myron companies and the Tea Co and T Biotech all had the same telephone number (as shown in company documents). There was no dispute that Andy controlled two of these: Tea Co and T Biotech. Andy was cross-examined about this by Mr Truong KC, and, tellingly, compared the situation to Haha’s three companies sharing a phone number:
Mr Yang, is it right to say that the two tea companies and the two Myron companies have the same phone number?
Mr Yang, it was just a yes or no, please?---Yes, but it's for the use in China. According to the regulations of Chinese government, a company must have a fixed landline and that was 20 years ago …
…
That's because you control all four businesses, Mr Yang?---Absolutely not, for example, Haha had three companies, they all use the same number. It is common in China. …
70Haha gave evidence that in early 2018, Andy told him that he owned both Myron Biotech and Myron Trading, but that he did not have himself recorded as the owner or trader of these companies because of Australian immigration and visa requirements. Haha said that Andy wanted it to look like the Myron companies were separate to his Australian company, Kekecial, so that he could present the agreements between the companies as being genuine arms-length transactions to support his visa application. Haha gave evidence that, at the end of 2018, Andy informed Haha that one of the Myron companies was registered in his employee’s name (Aiping Liu).
71On 27 February 2019, Shandong Ruhui authorised the use of the Ruhui trademark for two years, to Myron Trading, ‘and its affiliates’, Myron Biotech and T Biotech:
to engage in the business of manufacturing, distributing and selling products affixed with the abovementioned trademark…
72Haha (Shandong Ruhui’s director) gave evidence that he gave that authorisation for the Myron companies and T Biotech to use the Ruhui brand name:
… because Andy told me those three companies belonged to him. He asked me to send a letter of authorisation for those companies ah together use the brand name, and as well as a sales authorisation.
73In an affidavit filed in the NSW proceedings between Novapharm and Aus Made, Kenny gave evidence of his belief that the Myron companies were controlled by Andy. In this current proceeding – having fallen out with Haha, and now giving evidence for the Kekecial parties - Kenny tried to explain away that earlier evidence, saying that what he had sworn to earlier was just what Haha had told him. In circumstances where he was communicating with Andy throughout the relevant period, I consider what he said in the NSW proceeding more likely to correctly reflect his own observations from that period.
74No-one was called from the Myron companies to give evidence. In particular, Aiping Liu was not called. The Kekecial parties point to the fact that, as a Chinese national, she could not be subpoenaed to give evidence in an Australian court (which the Aus Made parties accepted), and they submit that she was not in the Kekecial parties ‘camp’ (in terms of ability to call her). However, Andy had clearly had a long connection with the Myron companies and with Aiping Liu. There was nothing to suggest that they had fallen out in any way: asked about why she was not called, Andy simply said that he was ‘rarely in contact’ with her. Kekecial arranged for another Chinese person to give evidence by flying him to Australia. There is no evidence Aiping Liu was even asked to come to give evidence.
75I accept the submissions made by Aus Made:
47. Ms Aiping Liu was not called as a witness. There was no adequate explanation for her absence. She was uniquely positioned to put a true complexion on the facts. Andy said she was the owner and controller of Myron Trading and Myron Biotechnology. The relationship between Kekecial and Myron Trading, the process of manufacturing and on-selling paper towel products and the alleged compensation was an important aspect of this proceeding and Kekecial’s loss and damage claims. Ms Liu’s absence means that any inference favourable to the Aus Made parties should be more confidently drawn against the Kekecial parties.
76I draw an inference that Aiping’s evidence would not have helped the Kekecial parties: Jones v Dunkel (1959) HCA 8, 101 CLR 298. That strengthens my willingness to accept Haha’s evidence about Andy’s involvement with the Myron companies. Haha’s evidence about that is also consistent with the matters outlined above, the timing of when the Myron companies were established, and the fact that there are no contemporaneous documents showing anyone else making decisions or negotiating on behalf of the Myron companies. The evidence establishes that Aiping Liu signed documents for the companies, and she is pictured in the odd photograph, but otherwise she is remarkably absent from the many, many documents in evidence.
77On 18 January 2023 Myron Biotech was selling Novapharm’s disinfectant paper online, as indicated in a screenshot from the JD.com website in evidence. Aeris is named as manufacturer. There were over 1,000 product reviews for the product. This was relevant to the Kekecial Damages claim, as part of the reason that Kekecial claimed the Myron companies needed to be compensated was that they had purchased machinery for processing parent rolls, and were not able to use it anymore after all the regulatory issues occurred. These 2023 sales suggest the machinery was still being used. Andy was cross-examined about them. And although he was Myron Biotech’s director, major shareholder, and legal representative, at that time, he purported, in giving his evidence, not to know anything about these sales, saying he was only an investor in Myron Biotech and was not involved in the business side of things.
78Andy claimed that he lost relevant documents or emails and messages involving the Myron companies, or didn’t have them, for different reasons. At one stage, it was because he had lost mobile phones which had them on it. At another (asked about his later involvement with Myron Biotech), it was because he was no longer a shareholder. He gave evidence that he was only the ‘boss’ of Myron Biotech, and its controlling shareholder, for ‘a few months’, and that he stopped as it was losing money. (In fact he controlled it, and was its major shareholder, for nearly two years). Asked to produce documents to show it was losing money (as he claimed), he said that because he was no longer a shareholder he could not produce any documents to show this.
79I do not accept that all these documents were lost or that he could not produce them. To state the obvious: in this wired and interconnected world, Andy could have requested them from the Myron companies even in the course of the trial and had them emailed and produced to the Court. The extent of his involvement with the Myron companies was clearly an important issue.
80I am satisfied that, contrary to his evidence at trial, during the relevant period, Andy treated the Myron companies as his companies.
81Also relevant to Andy’s credit, the Kekecial parties’ claims in relation to damages changed significantly as the case proceeded, and highly relevant documents were produced without adequate explanation as to why they had not been produced earlier. Andy backdated at least one document, on his own evidence (the Deed of Loan between himself and Kekecial, stated to be dated 6 December 2022 but in fact signed some months later, at least). He only admitted that back dating after the Aus Made parties’ solicitors demanded a native electronic copy of the document. I am not satisfied that all the documents the Kekecial parties produced, at those later times, were all created on the dates they bear, as I discuss further in the Regulatory Issues, in relation to the Kekecial Damages claim, below
82Endeavouring to explain some of the difficulties with Andy’s evidence, Kekecial submitted that he is a new immigrant, not experienced in operating through an interpreter or giving evidence before a Court, and his ‘flow’ was interrupted by objections from Senior Counsel for Aus Made on occasion.
83The need for translation can make it more difficult to elicit clear evidence. And most of the evidence in the trial did not emerge in a clear, chronological or narratively consistent way, which also made it more difficult to follow some of the cross-examination. However, I do not accept that these difficulties explain all the inconsistencies in Andy’s evidence. Nor are they explained by the fact that on occasions, his ‘flow’ may have been interrupted by objections being made. I have considered his evidence carefully, to account for occasions where something which the Aus Made parties submitted was a lie, may have been in fact an ambiguous response, a misunderstanding, or an incomplete answer, for various reasons. There are many instances where none of those excuses can adequately explain his contradictory evidence.
84As a consequence of these matters, I do not accept Andy’s evidence except where it is uncontroversial, or corroborated by contemporaneous documents.
Kenny
85Kenny gave evidence for the Kekecial parties.
86His memory of events was clearly affected by time’s passing – he often said he could not remember things clearly.
87In emails he sent throughout the relevant period, Kenny named himself ‘CEO Assistant’ to Haha. The Aus Made parties submitted (and Haha gave evidence) that Kenny was not in fact an employee of Aus Made, but rather was Haha’s business partner who helped Haha with translation and interpretation. Kenny also gave evidence of his business relationship, and that of his (now) ex-wife, with projects that Shandong Ruhui was involved with. There were separate WeChat groups involving the different projects. Kenny was highly involved with what was occurring in relation to the goods being supplied from Aus Made to Kekecial, then to the Myron companies, and then to Shandong Ruhui, given his own family interests. Regardless of whether he was employed by Aus Made, he was sending emails at Haha’s behest, which Haha asked him to do due to Haha’s lack of knowledge of English.
88He subsequently stopped working with Aus Made and Haha, fell out with the Aus Made parties (and was involved in litigation against them), and eventually was a witness for the Kekecial parties in this case. I consider that some of his evidence of what had occurred at relevant times was tailored to try to support the Kekecial parties’ case, rather than being what he actually recalled occurring.
89As the Aus Made parties submitted:
41 Kenny was formerly involved in the disinfection project as a partner in China and, through his ex-wife, was a financial investor in the project. He has since fallen out with Haha, and commenced legal proceedings against him, including in the Supreme Court of Victoria on 3 April 2023, China, in the Federal Court of Australia, and Kenny also gave affidavit evidence against Haha and Aus Made (in support of Novapharm) in proceedings in the New South Wales Supreme Court. After freezing orders were made in this proceeding, Kenny posted about the freezing orders widely on social media and called Haha a “deadbeat”. He voluntarily gave evidence for Kekecial. The hostility between Kenny and Haha colours Kenny’s evidence that is not otherwise corroborated by contemporaneous documents.
42 Kenny’s evidence was also affected by the effluxion of time, as he said on many occasions that he could not remember events or details clearly. He said that he could remember things clearer in 2022, but now only has some “impression”. His memory seemed to only fail in relation to matters unhelpful to Kekecial’s case theory, however, and Kenny showed a willingness to give explicit evidence when he considered it harmful to Aus Made’s case. See, for example, his remarkable evidence that he “clearly” remembers not preparing the March 2020 purchase order, despite the contemporaneous messages showing he was asked to prepare it and Kenny acknowledging his affirmation that he would do so, and Kenny’s evidence under cross-examination that he did the calculations for the invoice.
43 Kenny’s evidence was plainly infected by his falling out with Haha. His evidence under cross-examination was tailored to try to assist Kekecial and harm Aus Made. One example is when Kenny resiled from his own sworn evidence in another proceeding that Andy owned or controlled both Myron companies, and tried to say that he did not actually know such a thing, but instead only said it on oath because it was something that Haha had purportedly said.
90Although Haha’s evidence was that Kenny frequently commented, in messages, on aspects that Haha had not asked him to, in the end, nothing in particular turned on this. Senior Counsel for the Aus Made parties did not invite the Court to find, in relation to any particular contemporaneous messages or emails Kenny had written, that Haha did not know about them.
91Kenny gave evidence to the effect that he drafted emails under Haha’s instructions and that many things he wrote were not actually happening as described in those emails. For example, asked about an email he sent to Novapharm, on 7 January 2020, which referred to sales gradually increasing, he said:
I don't remember this because the contents of all emails were drafted by me under the instruction of Haha, including some of the previous emails were also directed by Haha. So I wasn't aware clearly of lots of the specifics in these contents, I was just drafting those contents under instruction. When you ask the question whether the sales were increasing, I wasn't aware of this clearly at that time. So a lot of the emails - I can say this, a lot of the emails were drafted because Novapharm was pushing for that information and Haha was trying hard to remain as the exclusive distributor. For a period of time a lot of the things were not actually happened but the content was drafted at his direction.
92However, putting things at their highest for him, Kenny still chose to send some emails and messages knowing them to contain untruths at the time (such as relating to his own financial position).
93As a consequence of my concerns about Kenny’s evidence, I do not accept his evidence on controversial matters, save where it is supported by contemporaneous documents.
Haha
94Like Andy, Haha gave lengthy evidence, through an interpreter. His evidence, like Andy’s, took longer than it needed to. His answers were lengthy and verbose, often going well beyond the questions asked, apparently with the intention of telling the court things he considered relevant about the Aus Made parties’ case, rather than simply answering the questions put to him.
95He was an unsatisfactory witness, giving non-responsive answers at times, and contradictory answers on important points.
96He gave evidence of specific conversations in detail. I am not satisfied that he actually remembered these conversations.
97He presented as certain when stating things which were later proven to be incorrect, or in relation to matters about which he later gave contradictory evidence.
98He had clearly reconstructed some of his evidence to make it fit with what were otherwise gaps in evidence in relation to the claims Aus Made made relating to the alleged BP Rolls Contract, in the contemporaneous messages, emails and other documents. An example of this is the way he confidently asserted in great detail what had been said in a lengthy phone call (as shown in the telephone records) he had with Andy on 28 January 2020, in circumstances where the telephone call was made over four years before he gave evidence, and no notes were taken.
99He admitted to lying to Andy and others in various WeChat messages and emails he sent, or which were sent on his behalf by Kenny. For example, he conceded in giving evidence, that a voice message he left in a group WeChat, sent to 8 people on 28 January 2020, included a lie. The message stated that the manufacturer had said full payment needed to be made when an order was placed. But Haha gave evidence that the manufacturer had not said this. He then continued:
This was my own thinking of giving them pressure, asking them not to randomly put orders in because of COVID coming in. … My worry was that if they put in an order and put some deposit but when the COVID was not there, they do not want it.
100He then went on to assert that he had separately told Andy the truth (that full payment was not needed) in a telephone call with Andy, and that Andy was the only one of the eight people who knew that full payment was not needed. His evidence about this claimed conversation with Andy, was that it occurred on 29 January, ‘if I remember correctly’.
101This evidence was the opposite of earlier evidence Haha gave, which was that he said to Andy in a conversation on 29 January (at 4.18 pm):
You know, during the pandemic when you place an order, you need to pay the price in full.
102And that Andy had responded to him:
Rest assured, no problem.
103Haha also conceded that he told Kenny to tell lies about what was happening with Novapharm, in the emails he asked Kenny to send. An example of this was the email Kenny sent Novapharm on 15 April 2020, claiming that customers had had payments for orders refunded to them due to delays in filling the orders (discussed further in the chronology section below). He conceded in cross-examination that there had been no refunds.
104In a WeChat message he sent Andy on 24 March 2020, Haha said that all the payments Aus Made had made to Novapharm for BP rolls had come from withdrawals from his own mortgage and Kenny’s mortgage.
105This was a lie. No money was withdrawn from Kenny’s home mortgage to pay Novapharm. Cross-examined about the message, Haha blamed Kenny, saying that he and Kenny ‘came up with this idea’ of mentioning that the money had come from Kenny’s mortgage, to apply pressure on Andy so he would pay as soon as possible, adding, ‘Kenny told me what to write’. Haha agreed under cross-examination that it was ultimately his decision to lie to Andy – but then insisted it was not him lying, it was Kenny.
106Haha chose to send the message. Whether Kenny had been involved in suggesting it be made is irrelevant to the fact Haha lied.
107Haha also claimed that although Aus Made did not have a lack of cash at the relevant time, he told Andy that it did, in order to ‘give him pressure so that he would pay the money for the products’. He claimed he was lying to both Novapharm and Andy when he told them of Aus Made’s shortage of cash.
108I do not accept that such untruths are simply ‘white lies’, as the Aus Made parties submitted. These were not harmless or trivial lies. They were designed to alter the way others acted, by misrepresenting important matters. And the fact that Haha accepted, when giving evidence, that he had lied in the past, in the face of clear examples of those lies being before the Court, does not make him a forthright witness, as Aus Made submits. He simply accepted the obvious.
Other witnesses
109Mr Qian Lei (who came from China to give evidence) gave brief evidence for the Aus Made parties as to the circumstances in which case a document relevant to the allegations about breaches of Chinese laws, came into existence.
110The Aus Made parties also called Mr Du Yang, a translator.
111In relation to their counterclaim, they called Mr. John Michael Rose as an expert costs consultant.
112Reports by Chinese lawyers were filed by each side, on the basis they were experts in Chinese law. Mr Linlin Zhang gave evidence about this for the Kekecial parties. Ms Yuan Zhou gave evidence about this for the Aus Made parties. Both came from China to give evidence in person.
113I am not satisfied that either of these expert witnesses was completely independent. Both had clearly had repeated discussions with those instructing them before providing their reports. However, I found that each of them did endeavour to be honest in giving their evidence, and in the end, it was the laws and regulations that they identified that I mostly needed to have regard to.
Documentary evidence
114Given the difficulties and unreliability of much of the oral evidence (as outlined above), I have needed to pay particular attention to the documentary evidence in this case. It includes hundreds of emails, WeChat messages, text messages and recorded voice messages – many of which were scattered across the Court Book in no particular order, sometimes repeatedly. I have put it in chronological order, as best I could, below.
115The parties in this case communicated across a variety of platforms, switching back and forth from WeChat messages to emails to text messages to voice messages. Many of the documents in evidence are translations, either official via an interpreter, or done by way of artificial intelligence. Where I have included extracts, I have not changed mistakes in the documents; so, for example, spelling mistakes have been left as in the originals.
116Kekecial discovered many documents relating to the Myron companies, late in this proceeding, including the Compensation Agreements it relies on for the Kekecial Damages claim, and various invoices and purchase orders relating to sales from Kekecial to the Myron companies. Aus Made disputes that they were all created around the dates they bear. It is understandable that this dispute has arisen given that the documents were provided in the way they were, and so late in the proceeding. I am not satisfied that all the documents were created on or around the dates they bear, but in the end, this was not determinative of the issues in the case. I discuss this in more detail when I come to the Regulatory Issues, and particularly, the Kekecial Damages claim.
F. BP ROLLS ISSUES
117The BP rolls Issues are summarised at paragraphs 10-18 above.
118I will set out relevant facts relating to these issues, then turn to the issues themselves.
Facts - BP Rolls Issues
119In August 2017, Andy, who had recently arrived in Australia from China, was introduced to Haha, by a friend. Andy was looking for a business opportunity to support his business-migration visa application. Haha is a Chinese Australian who had been successfully carrying on business in Australia for some time.
120In late 2017, Andy’s company, Kekecial, placed two purchase orders for canola oil with Haha’s company, Aus Made. These orders were filled, and the canola oil was exported to China.
121Later, Haha raised another potential business opportunity with Andy, in relation to the supply of Evocide disinfectant liquid (which Aus Made purchased from Novapharm).
122On 8 February 2018, Novapharm entered a non-exclusive distribution agreement with Aus Made in relation to the sale of Novapharm’s goods in China.
123On 14 June 2018, Aus Made and Kekecial entered an overarching supply agreement for the sale of barrels of disinfectant liquid to Kekecial (Disinfectant Supply Agreement). This case does not involve any disputes arising from this agreement.
124On 26 November 2018, Aus Made and Kekecial entered the Supply Agreement at the heart of this dispute. It was also an overarching agreement for the international sale of goods by Aus Made to Kekecial. Kekecial and Aus Made each allege the other breached this agreement, in this case.
125The Supply Agreement related to proposed sales of sanitising paper products and in particular of mini parent rolls. It included a clause in relation to Kekecial processing the goods it was sold by Aus Made to a smaller size, in the bonded area of Hunan, China, as well as clauses relating to the process of purchasing particular goods by way of the placement of purchase orders. It also included a minimum purchase clause for each order placed (at least one container).
126On 8 February 2019, Kekecial, in turn, entered an overarching sales agreement with Myron Trading (Myron Trading Supply Agreement), and a similar one with Myron Biotech (Myron Biotech Supply Agreement), relating to sales of sanitising paper. The agreements include clauses making Kekecial responsible for product packaging and labelling and meeting the requirements of Chinese laws regarding disinfecting products, broadly mirroring the responsibility Aus Made had to Kekecial under the Supply Agreement (which is discussed in the Regulatory Issues below), and include a liquidated damages clause. These agreements also require specific ‘sales contracts’ to be placed for particular orders of goods (effectively, these sales contracts are like the purchase orders required for particular orders of goods, pursuant to the Supply Agreement between Aus Made and Kekecial).
127At around this time (that is, February 2019) Novapharm and Aus Made discussed designing a specialised machine for their purposes that would be used to manufacture much larger paper rolls (BP rolls). On 12 February 2019, Bruce wrote to Kenny about the proposed new machine.
128On 27 March 2019, Aus Made signed an exclusive distribution agreement with Novapharm. By it, Aus Made was appointed as a distributor and official representative of Novapharm’s products in the Greater China Region, including mainland China, Hong Kong, Macau and Taiwan. The agreement concerned Novapharm’s disinfectant liquids (Evocide) and sanitising paper products (Hand and Skin Sanitising Mini Treated Parent Rolls, Hand & Skin Treated Parent Rolls, Hard Surface Disinfectant Mini Treated Parent Rolls and Hard Surface Treated Parent Rolls). Appendix 2 of the agreement made reference, among other things, to prices and measurements for both ‘mini treated parent rolls’: 2.8m x 300m = 840m2, at A $235 per roll , ‘to end Aug 2019 only’, and for ‘treated parent rolls’ (that is, BP rolls): 1.4 x 1.2 = 12,600 m2 at USD $1,600 per roll. It also included minimum order quantities and agreed minimum sales commitments. Relevant minimums were 240 mini parent rolls per 40-foot container, and 32 BP rolls per 40-foot container.
129That same day, 27 March 2019, Haha signed a personal guarantee with Novapharm to support Novapharm’s acquisition of the specialised machine (estimated to cost USD $660,000) to be used to deliver, treated, the BP rolls to Aus Made. By this guarantee, Haha guaranteed Aus Made’s minimum sales commitments made in the Novapharm distribution agreement. The guarantee provided that Aus Made would undertake the final conversion of the products into finished paper product packs ‘in its China facility’, that would then be marked and distributed under the Aus Made Southern Cross brand name.
130A few days later, on 4 April 2019, Kekecial signed a purchase order with Aus Made for 960 parent rolls (mini parent rolls) at $315,840.
131There is a purchase order, dated 7 April 2019, between Myron Trading and Kekecial for the same amount of 960 parent rolls at $364,800.
132Haha gave evidence that in April 2019, in Changsha, he told Andy ‘the price’ for BP rolls, and gave him ‘a quote’ (this evidence is discussed further below).
133On 15 April 2019, Myron Trading paid Kekecial $364,800 (as shown in a debit advice).
134On 23 May 2019, Kekecial signed a purchase order with Aus Made for 736 mini parent rolls at $242,144.
135There is a purchase order dated 27 May 2019 between Myron Biotech and Kekecial for 736 mini parent rolls at $279,680.
136On 3 June 2019, Myron Trading and Shandong Ruhui entered an agreement (titled ‘2019 Annual Goods Purchase and Sale Contract’) for Shandong Ruhui to purchase Ruhui disinfectant products from Myron Trading. The next day, on 4 June 2019, Andy forwarded, in WeChat, scanned copies of this contract, and four related invoices, to the members of the Disinfection Project WeChat group.
137From June 2019 to October 2020, Myron Trading sold disinfectant liquid and sanitising paper (the End Product) to Shandong Ruhui. There are invoices in evidence showing this.138There is a purchase order dated 1 July 2019 between Myron Biotech and Kekecial for 368 parent rolls at $139,840.
139On 2 July 2019, Kekecial signed a purchase order with Aus Made for 368 mini parent rolls at $121,072.
140On 31 August 2019, at 8.41 am, Haha messaged a WeChat group which included Andy in relation to an order from JD.com. Shortly afterwards, at 9.02 am, Andy responded:
Ok, you ask him to formally place the order and pay the deposit, we can only stock up according to the order …
141Clearly, here Haha was writing about an order that had come in from JD.com (presumably to his Chinese company Shandong Ruhui, which purchased End Products from Myron Trading). Andy’s response was that a formal purchase order was required, and payment of the deposit, before ‘we’ could stock up. The ‘we’ he refers to is clearly a reference to Myron Trading.
142There is a purchase order dated 3 September 2019 between Kekecial and Myron Biotech for 372 mini parent rolls at $180,420.
143On 3 September 2019, Kekecial signed a purchase order with Aus Made for 368 mini parent rolls at $164,142.72.
144There is a purchase order dated 30 September from Kekecial to Aus Made for 368 mini parent rolls at $164,142.72, which Aus Made says was actually entered into on 18 September. I accept it was in fact entered then: the relevant invoice and payment documents are all dated from 18 to 20 September.
145On 19 September 2019, there is a purchase order between Kekecial and Myron Biotech for 368 mini parent rolls at $178,480.
146There is a purchase order dated 26 September 2019 between Myron Biotech and Kekecial for 262 mini parent rolls at $127,070.
147On 5 October 2019, Kekecial signed a purchase order with Aus Made for 262 mini parent rolls at $116,862.48.
148On 1 November 2019, there is a purchase order between Myron Trading and Kekecial for 368 mini parent rolls at $178,480. There is another purchase order the same day between Myron Trading and Kekecial for 369 mini parent rolls at $178,900.
149On 2 November 2019, Kekecial signed a purchase order with Aus Made for 368 mini parent rolls at $164,142.72.
150On 11 November 2019, Bruce wrote to Kenny about the need to order additional mini parent rolls now, if required, and about the initial commissioning of a proposed machine for making BP rolls. Kenny replied to Bruce a little later that day:
According to the current situation, we should have enough mini treated rolls in hand for the next months. Also, we’ve informed everybody that there will be a 3 months lead time for their new orders, so even they close for Xmas, there will be no problem with it.
151On 30 November 2019, there was a meeting between Haha, Novapharm representatives, and others. In an affidavit filed in NSW proceedings between Aus Made and Novapharm, Haha swore that, at this meeting, Novapharm agreed that Aus Made was no longer the exclusive distributor, and that the sales targets imposed by their 27 March 2019 distribution agreement had been lifted. Novapharm disputed that it had agreed to this, in the NSW proceedings.
152On 9 December 2019, Bruce wrote to Kenny:
… I have spoken to Royal Touch & the parent roll to parent roll Taiwan commissioning trial went extremely well & it’s now being dismantled & packed into a container for shipping to Aust. It will be here mid Jan.
Do you have any indication of when 1st parent rolls orders will be placed?
153On 12 December 2019, at 12.42 pm, Bruce wrote to Kenny asking him to:
…please confirm how many mini treated parent rolls you have left in stock in China?.
154Kenny wrote to Bruce at 1.35 pm:
I just confirmed with the factory. All the last five containers (1744 skin rolls) were in the stock. Also, some HSD left as well, but not too much. We’ve manufactured enough for customer orders and marketing activities (such as the samples put in the material bags and giving out on Disinfectant Conference). We need to have customer’s order to convert the rolls to small packs.
155Bruce wrote to Kenny (cc’ing Haha), at 1.45 pm on 12 December:
That’s not very encouraging to note that there is so many treated mini parent rolls still in the factory and that these (1,744 rolls) have not been converted into finished pack products. As per earlier advise, the parent roll to parent roll machine that Aus Made insisted that we go ahead with buying at a cost of $1m arrives in Mid Jan and we are expecting that it would be needed immediately to meet your committed volumes.
Can you please push your producers re placement of orders and volume requirements. What can we expect to receive by way of orders in January ?????
156Kenny replied to Bruce at 2.04 pm:
I totally understand you want to see new orders. We are more desperately hope to see the orders than you. We invested 20 times more than 1M on this project (a list of some of the investments was sent before) but as we said we need more time for letting ppl know the unique functions of our products. This needs more time and money to invest in. The Disinfectant Conference is one of the things we do to achieve this aim. We talked about this with Mr Stang, Steve and Peter in China, and after they met many distributors and the hospitals, Mr Stang had new plans for China market. And all the related info. was recorded in the meeting minutes.
No matter whether we want or not, it is the truth that we can not have new orders very soon. However, we are doing our best to promote the products. Disinfectant Conference made hospital and healthcare channel knew the products a lot, and we have a new plan on advertisement through new media and online influencers, etc. Everybody knows the products believe we’ll have a bright future, but as we said, it could not that quick.
157On 7 January 2020, Covid was referred to for the first time in the parties’ communications. Bruce sent an email to Kenny and Haha, with the subject line: ‘A mysterious virus is making China (and the rest of Asia) nervous. It’s not SARS, so what is it?’ The email went on to ask of sales news, continuing:
Would appreciate to hear of any update on how everything is progressing, especially as the Parent roll machine has arrived in Aust & will be operational within 2-3 weeks. Orders would be great!
158Kenny messaged in response:
Thx for sending the link. It happened several days before and we've already organized an article that combined Evocide Extra and paper products together with this event and more than 100 media and online platforms will publish the article. It the article we mentioned this event which can make the readers focus on disinfectant and then we introduced the products which are the best choice for disinfection for both public and private areas. Later I can send you a list of the links which published the article.
Also, the sales were gradually increasing and we developed some new channels after the Disinfectant Conference. Also, we have a big plan for promoting the products by online influencers, which is the most popular and efficient way to promote products currently in China. From the report of CCTV news, the 2 top online influencers achieved more than 400 million AUD each during the online shopping festival in November (only one day). Currently, we cooperated with Tik Tok (biggest online influencer platform in China) and will do a 3-month promotion which will have 200 to 300 online influencers to promote the products on their channels every day. The investment for this project is around 3.2 million AUD. Hopefully, we'll achieve much better sales.
159On 8 January 2020, Myron Trading paid Kekecial $181,093.20.
160Bruce emailed Kenny at 10.07 am that day (cc’ing Haha):
Kenny, what are the chances that you will need to place orders for either the hand or hard surface paper parent rolls over the next 3-4 weeks?
161At 10.24 am, Kenny emailed Bruce and Haha:
For paper order, it based on the sales situation. There are more and more channels joined in and more products sold. But as we reported, we still have big stock of rolls in hand. We need to use this first. There might be explosive growth in sales of both products after our deep cultivation of the market, but we still can not see any significate change till now. Once we may place new orders, I'll let you know as early as possible.
162On 22 January at 6.45 pm, Bruce emailed Kenny:
… Can confirm that RT can fit 368x 400m mini treated parent rolls in a 40” container. …
If you wish to place orders for either or both hand & hard surface mini treated parent rolls please confirm with issuing appropriate PO by COB tomorrow.
163Kenny wrote back at 9.46 pm confirming that no new mini parent rolls were needed, saying, ‘we still have about 5 containers’.
164That same day (22 January 2020) Aus Made issued over $100,000 worth of purchase orders to Novapharm, for disinfectant liquid and related items. It issued others on 23, 24 and 29 January 2020 (as listed below, in Novapharm’s letter of 4 February 2020).
165On 27 January 2020, Kekecial advanced $100,000 to Aus Made, with the descriptor ‘Kekecial’ on the banking record. The next day, 28 January, it advanced a further $100,000, this time with the descriptor ‘bill’ on the banking record. These two sums were subsequently applied toward a disinfectant liquid purchase order dated 2 February 2020, which Kekecial placed with Aus Made, reducing the amount due on that purchase order by $200,000.
166Haha gave evidence that he had telephone calls on 28 and 29 January with Andy, in which BP rolls were discussed.
167Andy at first gave evidence that there were no telephone calls between himself and Haha on 28 January and no discussion about BP rolls, and ‘everything was in email’. However, in cross-examination, Andy was taken to Haha’s wife’s telephone records (which included Haha’s telephone records). They show many calls with Andy’s Chinese telephone number in January and February, including three on 28 January 2020. Andy then gave evidence that there were phone calls, but there was ‘no discussion of big parent roll’ in those calls. I find it highly unlikely that there were no discussions of big parent rolls, given that they were being discussed in that period in WeChat and email messages. However, I am not satisfied about what was said, in those calls, about them, given that I do not accept Haha’s evidence.
168Haha gave evidence he remembered three calls with Andy on 28 January 2020. (Haha had of course seen the phone records showing three calls, and the length of those calls, before giving this evidence.) I set out the most relevant parts of his evidence about what he claimed to remember about those calls, below.
169The telephone records show that the first phone call between Haha and Andy was at 11.54 am on 28 January (for 1 minute and 51 seconds). Haha said about this:
Andy was asking me that the stock of the Novapharm disinfection liquid and also the paper towel, on the quantity. I said, ‘I will go and check for you.’ When I referred to disinfection paper towel, it was the small parent roll.
170The second call between Haha and Andy was at 4.37 pm (for just 31 seconds according to the phone record). Haha gave evidence that in this call he told Andy the stock situation, and Andy said ‘I’m busy. I’m very busy at the moment, why don’t you call me later.’
171Then, at 4.54 pm, Andy emailed Haha:
Because China is having a very severe pandemic now, the supply of disinfectant liquids and sanitizing papers falls short of demand. We urgently need 10 containers, disinfectant liquids of 180 tons, of which 90 tons should be shipped by air freight and 90 tons should be shipped by sea freight. The quantity of sanitizing papers is still being calculated.
172The third phone call between Haha and Andy was at 7.49 pm (for 10 minutes and 39 seconds, according to the phone records). Haha gave detailed evidence as to what he claimed was said in that call:
… in the afternoon, after 7 o'clock on the 28th, in our telephone conversation, I asked him to confirm the order, how much exactly the liquid product you would need and also how much the paper towel products you would need from the big parent roll. You need to send me email to confirm.
During the conversation I again reiterated to Andy and stated to him that the manufacturer does not have the small parent roll, there is no stock left. In relation to the liquid, with the raw material in existence, it can only produce around 100 barrels and when I say a barrel, the can contain 1,000 litres.
Then I said to him that, 'If you require paper towel further, there won't be any small parent roll, it will be produced out of big parent roll' and then he said, 'The price for the big parent roll will be about the same as what you described in April last year.' When he referred to April last year, it was the April in 2019 when I told him the price for big parent roll in Changsha Hunan Province. Because at that time it was in April 2019, my company and I have signed with Novapharm in relation to big parent roll. Because at that time the big parent roll in relation to the size, width, length and the total area in fact has been sent to me in detail by Novapharm, therefore in April 2019, at that time in Changsha I did give him a quote. That price was based on the accumulation of the proportion of square metre of small parent roll and then he was asking me whether the price will be changed because at that time we were in the midst of the COVID 19.
…
Then he asked me that, 'Today isn't any change to the price you quoted me in April 2019, is there', and also he again confirmed with me that each container can contain how many big parent rolls, and also he was asking me the specific size of the big parent roll, and then he reconfirm with me again the price.
…
I told him that, 'The size would be exactly the same as I quoted you in April 2019 because the manufacturer hasn't updated me with any changes. If the big parent roll had any alterations or any changes, Novapharm would have told me already' and then he said, 'I know now. Let me calculate how much big parent roll I will need.' He asked me, 'Haha, in relation to manufacturing the big parent roll, do you know how long it will take for them to produce that.' I said, 'Andy, you know, Novapharm now' - which is 28 January - 'that they would produce and manufacture next month' but I said, 'As you always know, Novapharm's delivery of goods always been postponed.' I estimated at least, based on the previous experience, it would be more than one and a half months and he said, 'I understand.'
173He claimed that Andy said to him, in this conversation:
'I am still in calculation, I'm still unsure but at least I would need 10 containers.' He said, 'I can't tell you exactly now, however, I need to talk to my team to do a very specific and accurate calculation before I can tell you.' I said, 'That's okay.'
174At 9.47 pm, Haha emailed Andy, replying to Andy’s 4.54 pm email:
Well noted. Please calculate the quantity of sanitizing papers as soon as possible. There is no stock of mini parent rolls now.
175At 10.32 pm, Haha sent a voice message to eight members of the ‘Ruhui Operation (8)’ WeChat group, including Andy:
Then, if you have paper rolls of five containers to ten containers, you could calculate how many boxes of sanitizing papers could be made? My estimation is that papers of forty to fifty containers could be made, right? There should be no problem for one container to make papers of four to five containers. So, let’s think about it. There will be no problem if we want to promote hot-selling products then. As long as we could last for one and half a month, it’s totally possible that we could make it a hot-selling product. But you need to tell me the amount, tell me what’s the approximate sales amount after one month and a half. For example, I can’t let the manufacturer… The current policy of our manufacturer is like this: As long as you place an order, you need to make full payment. Understood? It’s not like what it was before. In the past, only 50% needed to be paid. Now they are also scared. They see the current situation and are worried that, for example, if the pandemic is over, you might no longer want the products. Really, if the pandemic is over, tell me, how many people will buy the product, right? I can’t tell it for sure now. However, regarding disinfectant liquid, I think for disinfectant liquid, I can’t tell it for sure how many people will purchase it if the pandemic is over. But, regarding sanitizing papers, they will definitely have a better and better status of sale.
176As discussed above, Haha conceded, in cross-examination, that he had been lying in this message in asserting that the manufacturer had told Aus Made that full payment needed to be made when an order was placed.
177However, he went on to say that in fact Andy knew the truth (that full payment was not due when an order was placed) as:
I told him on the phone. If I remember correctly, it was on 29 January…
178At some point between 10.32 pm on 28 January and 12.45 am on 29 January 2020 – the exact time is unclear – Andy replied to Haha’s 10.32 pm voice message, in the WeChat group:
I definitely need 10 containers of paper rolls. It’s temporarily confirmed.
179Haha gave evidence of what he understood from that message. He said:
Because he was still doing calculation and his calculation was not completed as yet
…. I understood that he hasn't confirmed and decided the order as yet.
… I also believe that he wasn’t confirming he needs 10 containers in the WeChat, therefore I was waiting for his email.
180At 12.45 am on 29 January, Andy then wrote in the same WeChat group:
If sanitizing papers need a production cycle of one and half a month, it’s not a good timing to do promotion now, because sea freight will take more than 20 days, so it will be more than two months. Moreover, it does take time to do sub-packaging.
I believe that to build a brand, promotion is essential, and it’s a long process of cultivation.
181Commencing at 12.45 am, Andy texted Haha the following messages:
Do take care of yourself.
Ok.
10 containers.
Sanitizing papers.
182Haha gave evidence that, by these messages, he understood Andy to have:
…done his calculation and all the statistics of his stock in the warehouse and he has decided how much, and the quantity of the goods to be imported.
183At some time between 1.04 am and 1.13 am, Haha sent a voice message to Andy, asking Andy to advise him:
You need to advise me an approximate amount of big paper rolls sometime tomorrow. The amount of big parent roll has been confirmed, by which it will be very good for our production.
184At 1.13 am Andy texted back:
Right.
Pharmacies are the focus of promotion now.
185At 2.35 pm, Kenny emailed Peter and Bruce, thanking them for flying to Melbourne for the meeting the day before, and continuing:
… Because you will have the board meeting on Thur, so haha had several meetings with some key distributors immediately after our meeting. For promoting the products in this special opportunity, we’ll invest more money and energy on it. In the first stage, we'll place an order for 10 containers of big treated mother rolls (320). Could you please calculate the estimated delivery date, so that we can arrange a new round of advertising on the media. …
186With the email, Kenny attached two signed purchase orders from Aus Made to Novapharm, one for Evocide, and the other for 10 containers of BP rolls, with the delivery date stated as ‘ASAP before 28/02/2020’.
(e) Kekecial shall repay to the Tea Co a debt in the sum of 4,694,170 within 5 years in the form of cash or actual goods (clause 5).
488The Myron Biotech Compensation Agreement was between Kekecial and Myron Biotech. Andy signed for Kekecial; Aiping Liu for Myron Trading. By it, Kekecial agreed to pay Myron Biotech RMB 5,885,685 (being a ‘refund’ of RMB 4,527,450 and a ‘penalty’ of RMB 1,358,235) (clause 4.1). The payments were not due until after judgment in Kekecial’s litigation against Aus Made and Haha in Victoria, Australia (clause 4.2). That is, they were not due until after this judgment was given.
489Kekecial issued this court proceeding three weeks after the Compensation Agreements, on 1 December 2020. As discussed below, it did not claim any loss and damage at that time, and did not mention it had entered agreements to pay the Myron companies compensation.
490On 21 December 2020 the Tea Co reduced the amount Myron Trading owed it by RMB 3,610,900 . This was the ‘refund’ amount Kekecial had agreed to pay under the Myron Trading Compensation Agreement. The ‘penalty’ amount was not paid. Tea Co made a book-keeping entry in the Myron Trading loan account, noting those amounts as ‘Offsetting the compensation amount of Kekecial Pty Ltd’. Kekecial claims that it is liable to repay Tea Co this amount. It is part of the Kekecial Damages claim.
491There is an Agreement on Equity Transfer dated 10 December 2021, made between Andy and Aiping Liu, in evidence. By it, Andy agreed to pay Aiping Liu RMB 40,000, for 80% of Myron Biotech’s shares, and to assume Myron Biotech’s debts. It has an unusual clause relating to how the proceeds of compensation to be paid to Myron Biotech under the Myron Biotech Agreement are to be dealt with:
4. Party A (Liu Aiping) was the former shareholder and legal representative of Hunan Myron Biotechnology Co., Ltd as of December 10, 2021. The beneficiaries of the compensation agreement on disinfecting paper concluded between Kekecial Pty Ltd (an Australian company) and Hunan Myron Biotechnology Co., Ltd on November 10, 2020 were Liu Aiping and other shareholders. Such compensation was given to the formal shareholders. After receipt of the compensation by Hunan Myron Biotechnology Co., Ltd, Liu Aiping shall distribute the compensation. Hunan Myron Biotechnology Co., Ltd shall cooperate and shall not intervene with such distribution. Party B (Yang Zhenhua) and Hunan Myron Biotechnology Co., Ltd subject to the change shall not benefit from such compensation.
492Filed company records for Myron Biotech indicate that on 21 December 2021, Andy became the majority shareholder of Myron Biotech, and its legal representative. He is shown to have invested RMB 1.6 million. (I note that this is 80% of the Myron Biotech shares, consistent with the Agreement on Equity Transfer. However, the amount invested is much higher than the amount the Agreement on Equity Transfer records that he paid Aiping Liu for the shares).
493On 16 December 2021 a Supplementary Agreement on Escrow Lease was entered between Kekecial and Myron Trading. It allows Kekecial to pay 2,950,408 yuan said to be due to Myron Trading under the Escrow Lease Agreement (of 15 May 2019), by letting Myron Trading ‘use’ 80 barrels of disinfectant liquid as compensation. This document was provided to the Aus Made parties for the first time in July 2022.
494There is a Deed of Loan in evidence, between Andy and Kekecial dated (in handwriting) 6 December 2022, and signed by Andy on behalf of Kekecial as well as his own behalf. The Deed of Loan provides that the Lender (Andy) ‘will make’ various payments to Myron Biotech as directed by the Kekecial. Only after Aus Made’s solicitors requested the native electronic copy did Kekecial’s solicitors disclose, in a letter of 29 April 2024, that the Deed of Loan had been backdated. Andy had emailed his accountant about it on or around 6 December 2002, but it was only provided to him in March 2023, as the accountant was busy. It follows that it must have been signed some time after March 2023, though when was not made clear.
495Between 8 and 11 December 2022, Andy paid Myron Biotech RMB 4,527,450. He was the majority shareholder of Myron Biotech at the time. This was the ‘refund amount Kekecial had agreed pay under the Myron Biotech Compensation Agreement. The ‘penalty’ amount was not paid. Kekecial claims that it is liable to repay Andy this amount. It is part of the Kekecial Damages claim.
496On 18 January 2023 Myron Biotech was selling Novapharm’s disinfectant paper online, as indicated in a screenshot from the JD.com website in evidence. Aeris is named as manufacturer. There were over 1,000 product reviews for the product.
497On 14 September 2023 Andy ceased being a director and legal representative of Myron Biotech.
Evolution of Kekecial’s claims for loss and damage
498Kekecial’s claims for loss and damage evolved, in contradictory ways, through these proceedings, and highly relevant documents were produced years after the dates they bear, and years into the litigation. This has understandably given rise to concerns some of these documents were not created on the dates they bear. This is particularly so, as the Deed of Loan between Andy and Kekecial was backdated, and this only came to light after Aus Made pursued the issue of when it had been entered into.
499For several years of this litigation, Kekecial denied ever on-selling the goods it had purchased from Aus Made. It then changed its claim to rely on an allegation it had sold them to the Myron companies; and that, following the regulatory issues which arose, Kekecial entered the Myron Biotech Compensation Agreement, and the Myron Trading Compensation Agreement, on 10 November 2020. Its claimed losses stem from those agreements.
500However, when Kekecial issued proceedings three weeks later, on 1 December 2020, the initial statement of claim (drafted by a solicitor) simply sought rescission of the Supply Agreement or a declaration that it was unenforceable (and not, to be clear, any damages).
501A year and a half later, on 2 June 2021, it filed an amended statement of claim (settled by junior counsel for the Kekecial parties). In the amended statement of claim, Kekecial sought a refund of the money it had paid Aus Made under the Supply Agreement, and an indemnity for loss and damage. It pleaded that the goods it had purchased had no value to it, and it continued to seek rescission of the Supply Agreement. It specifically pleaded, in relation to its claimed loss, only the following, at [30]:
The product is in storage and has not been sold. Storage costs have been incurred.
502Nine months later, on 12 April 2022, after Kekecial was asked to discover further documents including those relating to its dealings with the Myron companies, Kekecial’s then solicitors wrote to Aus Made’s solicitors (the 12 April letter), saying that their client instructed that he did not have any ‘sales agreements or invoices’ between Kekecial and Myron Trading or Myron Biotech (in other words, Kekecial did not have any purchase orders or invoices relating to sales of the Raw End Product with those companies in its possession). I note that this was consistent with the pleadings then in place, stating that the product had not been sold (implicitly, sold by Kekecial).
503The 12 April letter discovered documents relating to the arrangements about leasing of the warehouse from which the Myron companies operated: two warehouse lease agreements dated December 2019 between Myron Biotech and a landlord: and the Escrow Lease Agreement dated May 2019, and Supplementary Agreement to the Escrow Lease dated 16 December 2021, both between Kekecial and Myron Biotech.
504Andy was cross-examined about the 12 April 2022 letter, and agreed that, following his solicitor asking him to produce documents, he gave his solicitor instructions to write saying there were no sales agreements or invoices because:
I did not want to produce documents. I didn’t know about Australia laws as in how it regulates compensation matters when there’s stipulation in agreements. … By saying that I was trying to – by saying that actually, I was unwilling to provide such documents, I thought the International Sale of Goods Agreement with Haha would be suffice.
505Three months later, on 8 July 2022, Kekecial first provided a copy to Aus Made of the Myron Supply Agreements, both dated 8 February 2019; and also produced a swathe of payment records, purchase orders and sales invoices relating to sales between Kekecial and the Myron companies. (In other words, documents he had previously denied having).
506On 24 April 2023, Kekecial filed a further amended statement of claim. In it, Kekecial finally made the Kekecial Damages claims it now pursues, arising from the Compensation Agreements and referencing the Myron Supply Agreements.
507The application to further amend the statement of claim was supported by an affidavit of solicitor Feng Lin dated 3 February 2023. It attached a number of new documents (new to Aus Made and the Court, at least), including the Compensation Agreements dated 20 November 2021, the Agreement on Equity Transfer between Andy and Aiping Liu, dated 10 December 2021, and a payment receipt for Andy’s payments to Myron Biotech between 9 and 11 December 2021. In the affidavit, Lin said he had emailed the proposed further amended statement of claim to the solicitor for the Aus Made parties on 22 December 2022, and that (at paragraph 6) ‘the amendments reflect recent instructions and document that I had been given’. He said that Andy had instructed him that Andy had travelled to cities in China on business and experienced frequent lockdowns due to the China Covid-Zero policy, that Andy ‘had difficulties giving us the instructions and accessing and collecting his documents’, and that (as of late November 2022) it was easier for Andy to give full instructions now he was in Melbourne.
508In this day of email and online connectivity, I do not accept that any of those reasons are adequate reasons, or explanations, for the Kekecial parties not providing those documents or instructions in a timely fashion. The Kekecial parties had discovery obligations: serious obligations to provide relevant documents.
509To refer to the most obvious missing documents, Kekecial claims to have entered the Myron Trading Compensation Agreement and the Myron Trading Compensation Agreement in 10 November 2020 – before these proceedings were even issued. Yet Andy did not tell his solicitor or counsel about them until some time in late 2022, or Aus Made about them until December 2022. And it is these Compensation Agreements that it relies on to make out its damages claim.
510Andy was cross-examined that in fact he did not discover documents – which were later produced and are relied on by the Kekecial parties – because they did not exist at that time. He denied that.
511Having considered all this evidence, I am not satisfied on the balance of probability that the invoices between Kekecial and the Myron companies, the Myron Supply Agreements, the Compensation Agreements, the purchase orders between the Myron companies and Kekecial, and the Agreement on Equity Transfer, were all entered into on the dates that are noted on those documents.
512And, even assuming that they were entered on the dates they bear, I am not satisfied that Kekecial has established its entitlement to the Kekecial Damages.
No evidence of Myron companies’ losses
513In circumstances where Kekecial claims it needed to compensate the Myron companies for their losses, it is striking that there is no evidence (other than Andy’s oral evidence) that the Myron companies had suffered loss and damage as a result of the claimed breaches, or of what that loss and damage was.
514As I have made clear already, I do not accept Andy’s evidence on contentious matters unless backed up by contemporaneous evidence.
515There is no evidence that either Myron company ever made a demand to Kekecial for compensation or damages. That, one would expect, would be the first thing required before a major compensation payment was agreed to. Nor is there evidence of any complaint or demand being made upon the Myron companies by those companies they sold products to.
516Andy gave oral evidence of Myron Trading sending an email claiming losses to Kekecial, but did not produce the email. I am not satisfied it existed.
517The one contemporaneous document relating to any claim from a Myron company around this time is in the email that Andy sent Haha on 2 November 2020 (set out in the ‘Facts – Kekecial Damages’ section of this judgment, above.)
518It hinders, rather than helping support Kekecial’s Damages claims.
519The email refers to losses by:
… our Kekecial Company and our importer-Hunan Mailun Commerce Trading Co., Ltd, and distributor Hunan Tiantianqing Biotechnology Co., …
520Myron Trading has not been called Hunan Mailun Commerce Trading Co in any other documents I have seen, but I am prepared to accept this was meant to be a reference to Hunan Mailun Trading Co, which Myron Trading was sometimes referred to, since Andy refers to the company as ‘our importer’.
521So the email refers to losses Kekecial, Myron Trading and T Biotech have purportedly suffered.
522In it, Andy claims that ‘distributor’ Hunan Tiantianqing Biotechnology Co., Ltd. (that is, T Biotech) had goods returned to it:
Hunan Tiantianqing Biotechnology Company received a return of more than 9 million from the drug store.
523T Biotech is Andy’s company. Kekecial had no contract with it. And there is no evidence, anyway, to support the assertion that goods were actually returned to it. There is no evidence of any loss it suffered or how that relates to the Myron companies’ supposed losses.
524The 2 November email does not even refer to Myron Biotech, let alone any demand by, or loss suffered by, Myron Biotech.
525I do not accept the assertions made by Andy in this email, as to losses he claims that Kekecial, Myron Trading, and T Biotech suffered as amounting to any proof of what those companies in fact lost. There is nothing to support the claims.
526There are contemporaneous messages and documents which suggest that after the regulatory issues arose with Chinese authorities in relation to Ruhui disinfectant products, there was some drop in sales of those products in online stores, and in pharmacies, but there is no evidence to establish how much, and of course, any drop in sales occurred further down the sales chain. There is no evidence of what sales, if any, the Myron companies lost (that they otherwise would have made), or of any goods being returned to them, or of claims being made on them.
527It was not clear whether the Myron companies had already on-sold all of the End Product they had produced by the time the Compensation Agreements were entered; or if so, the total that was on-sold. Whatever had been sold was, of course, sold at a profit. There is no evidence to show that the Myron companies still had Raw Product and could not sell it.
528There is no evidence that Myron Biotech actually on-sold any of the goods. The only invoices in evidence relating to onward sales are between Myron Trading and Shandong Ruhui.
Amounts Kekecial agreed to pay were not reasonable
529I am not satisfied that the amounts Kekecial agreed to pay in the Compensation Agreements (and the amounts it claims Andy, and Tea Co, paid on its behalf) were reasonable compensation for losses the Myron companies suffered.
530Andy gave evidence that the Compensation Agreements were drafted by ‘Hunan Myron’. He said he did not seek any legal advice, saying, ‘This is how we do things’, and that he thought that what was agreed was reasonable compensation. Obviously, Andy’s belief is not sufficient to establish the reasonableness of the amounts Kekecial agreed to pay.
531He gave evidence that the figures which Kekecial agreed to pay related to the Myron companies’ losses, ‘suffered due to their marketing investment’.
And the figure was only a reflection on the purchase price described in our contract. Because when we entered into a contract there was an allocation of risk – or risks – between the parties so we were simply just following what was agreed upon in our contract.
532The reference to the ‘contract’ there is to the Myron Supply Agreements. These provide, in general terms, that if the products Kekecial supplied the relevant Myron company were not able to be legally sold in China, then Kekecial should repay the relevant Myron company the cost of those goods as ‘compensation for material damage’. They also provide that because the relevant Myron company ‘and its downstream distributors at all levels put a huge amount of advertising in Hunan province and on the Internet’, if Kekecial breaches the contract, causing the relevant Myron company ‘and its downstream distributors’ to be unable to sell the goods legally, ‘it will cause huge losses’, therefore Kekecial ‘shall also bear 30% of the total amount of goods purchased as liquidated damages’.
533In other words, these Myron Supply Agreements set up the basis for the payment regime agreed to in the Compensation Agreements: they provide for repayment of the purchase price of all the affected goods, and an additional 30% payment. In the Compensation Agreements, these sums are described as ‘refund’ and ‘penalty’.
534But – and this a big But – although Myron Supply Agreements were referred to in later versions of the statement of claim, and the Compensation Agreements were pleaded as being entered into pursuant to them - Kekecial did not,in fact, rely on the repayment or damages clauses in them in making submissions in support of the Kekecial Damages claim in this proceeding. It did not argue that the Myron Compensation Agreements represented reasonable compensation for Myron losses because of the provisions of the Myron Supply Agreements, nor that Kekecial needed to pay those amounts because of those clauses in the Myron Supply Agreements.
535This may well have been because the Myron Supply Agreements have significant difficulties themselves in terms of founding the Kekecial Damages claims. That includes the fact that the ‘penalty’ which was provided for under each agreement arises from marketing costs purportedly expended by the relevant Myron company. There was no evidence of those marketing costs. And, had the terms of the Myron Supply Agreements been relied on, no doubt Aus Made would have defended on the basis that those clauses regarding loss and damage amounted to a penalty (under contract law). In any event, the Myron Supply Agreements were only mentioned in passing in the course of the trial, including in the parties’ final submissions.
536I note that only 11 days after the Myron Trading Compensation Agreement was entered, providing for payment of both a ‘refund’ and a ‘penalty’ amount, Tea Co purportedly paid the agreed refund amount only, by its book-keeping entry. Two years after the Myron Biotech Compensation Agreement, Andy purportedly paid the agreed refund amount only. The ‘penalty’ amounts due under the agreements were never paid (or claimed). These were significant sums, being 1/3 of the value of the ‘refund’ payments. In the paragraph 28F and 28J of the final Statement of Claim, Kekecial pleads that the ‘penalty’ amounts were forgiven on the basis of prompt payment. No evidence was given about this.
537I am also not satisfied that the claims agreed to be paid under the Compensation Agreements and the amounts paid represent reasonable compensation in light of how interlinked the Myron companies, Tea Co, T Biotech and Andy’s interests were.
538First, a few comments about the Myron Trading Compensation Agreement, and the payment Tea Co made in relation to that (by reducing the amount of its loan account with Myron Trading).
539The Myron companies were only established once Andy and Haha’s business plans for Australia-China trade got going. Tea Co – Andy’s company - then loaned Myron Trading a lot of money on 6 March 2019. That was its first advance to Myron Trading. This was around the time that the Myron companies started processing the product Kekecial sold them into the End Product.
540I infer that Tea Co made that first advance to give Myron Trading funds to assist it with the work involved in repackaging the Raw End Products.
541Tea Co also made loans to Myron Trading in the couple of months before it entered the Compensation Agreement: on 21 September 2020 for CNY 3,000,000, on 22 September 2020 for CNY 4,500,000, on 23 September 2020, for CNY 2,500,000, and on 2 November 2020, for CNY 1,100,000.542Asked about why Tea Co had lent Myron Trading money, Andy said that Myron Trading was short of funds:
… so it just so happened that the Tiantianqing Tea Co had some extra money and the tea company would charge – would only receive an interest which is a normal practice in China
543He said about the first loan, that, in 2019, Myron Trading was ‘a bit tight in terms of funding’ and sought to borrow from him:
… in 2019 they had other businesses to do which would be money and they were a bit tight in terms of funding so they borrow - they sought to borrow money from me. …
544Andy said he was willing for Tea Co to loan the money to Myron Trading:
Because previously the two people from the Hunan Myron company, Iaiping and Wang Hong were my colleagues. We were in good relationships and we were doing import and export trading businesses together [in] Changsha Airport free trading zone. In 2019 they told me that they would like to continue their lines of businesses, however, they would need money. That's why I lent a sum of 1 million to them, the primary reason being I wanted to earn interest. If I were to deposit my money with the bank the interest rate was so small, it was marginal, but if I loaned money to them, we would apply the normal bank mortgage interest rate which was pretty okay.
545There is no evidence of any other businesses being run by Myron Trading.
546The loan agreements in evidence between Tea Co and Myron Trading refer to the money paid as being ‘turnover of current capital’ of Myron Trading (that is, cash flow).
547The total that Andy claimed Tea Co ‘just so happened’ to have available to lend Myron Trading, because Myron Trading was ‘a bit tight in terms of funding’ was a very substantial sum: RMB 12,000,000. No security was provided.
548I am not satisfied that these were arms-length loans. This adds to the reasons I am not satisfied that the amounts paid or agreed to be paid were reasonable compensation.
549Second, some comments about the Myron Biotech Compensation Agreement and the payments Andy made in relation to that.
550That agreement was entered into when Andy was not on the record as a shareholder or as legal representative. However, he became both of these later (on 21 December 2021). Importantly, in December 2022, when Andy paid the money to Myron Biotech which Kekecial relies on its Kekecial Damages claim, he was a shareholder and legal representative of Myron Biotech. The payments were not due under the Myron Biotech Compensation Agreement at the time Andy made them; they were not due to be paid until after judgement in this case.
551The extent of Andy’s financial investment in the company is unclear. In an Information of Change document (similar to a company search), Andy is recorded as having invested RMB 1.6 million. How and when such investment occurred is not shown: it is a much higher figure than the RMB 40,000 shown in the Agreement to Transfer document dated 10 December 2021, between him and Aiping Liu, for her 80% shareholding.
552Kekecial relies on the Deed of Loan Andy signed with Myron Biotech and Andy, which is dated (in handwriting) 6 December 2022 to support its claim that the money Andy paid was a loan.
553The Deed of Loan provides that the Lender (Andy) ‘will make’ various payments to Myron Biotech as directed by the Borrower (Kekecial).
554However, as discussed above, Andy backdated the Deed of Loan. It was not signed until at least March 2023. This means that the executed Deed of Loan postdates the payments made (which were made from 8 to 11 December 2022). Aus Made submits that because the Deed post-dates the alleged payments, as a matter of fact and law, Andy’s payments were not made pursuant to it. It relies on Netage Pty Ltd v Cantley (1985) 6 IPR 200, 208 (Young J):
“A deed is presumed to have been made upon the date appearing on the face of it but if it is established by evidence that the deed is made on some other day then the date on the deed is entirely disregarded and it operates from the date it was in fact made.”
555I agree with this analysis. The payments were not made pursuant to the Deed of Loan. However, I accept that as between Andy and Myron Biotech the money he advanced was nonetheless a loan. It is not unusual for people involved with companies to lend those companies money.
556I note too that the ‘penalty’ which was agreed to be paid under the Myron Biotech Compensation Agreement, purportedly arises from the fact machinery bought by Myron Biotech to process the sanitising paper was unable to be used following the regulatory issues.
557Even if Myron Biotech had purchased that machinery – and there is no evidence it was the purchaser - I am not satisfied that Myron Biotech was entitled to compensation for this on the basis claimed, namely that it could no longer be used. The equipment was used by Myron Biotech after the Compensation Agreement was entered, when Myron Biotech obtained goods directly from Novapharm. A copy of a webpage dated 18 January 2023 shows that Myron Biotech had purchased sanitising paper products directly from Novapharm at that time (the website refers to Aeris), and listed those products for sale on its online website.
558Further, the Myron Biotech Compensation Agreement purports to compensate Myron Biotech on the basis that Myron Biotech had purchased goods from Kekecial. I am not satisfied as to the validity of the purchase orders and other documents supporting such purchases, given the timing of when they were produced and other matters discussed above. All the contemporaneous payment records show payments from Myron Trading to Kekecial – not Myron Biotech.
Damages claim conclusion
559Kekecial has not satisfied me of its entitlement to the Kekecial Damages. It has not claimed loss and damage for breach of the Supply Agreement, or for Aus Made’s alleged misleading and deceptive conduct, as arising in any other way.
560I will order that Aus Made pay Kekecial nominal damages for breach of the Supply Agreement, as no loss has been proved. I will award $1.00 in nominal damages.
H. CONCLUSION
561In summary, I find as follows as to the issues in this proceeding:
562As to the BP Rolls Issues:
(a) I am not satisfied that the BP Rolls Contract was entered into between Aus Made and Kekecial. It follows that Aus Made’s counterclaim based on alleged breaches by Kekecial of a BP Rolls Contract fails.
(b) I am not satisfied that Kekecial made the BP Rolls Order Representations.
(c) As it has not established the BP Rolls Contract, Aus Made must repay the overpayment of $291,931.89. (Aus Made agreed that this would follow if it did not establish that contract was made.)
(d) I find that the $400,000 advanced by Kekecial to Aus Made around 6 March 2020 was a loan repayable on demand. Aus Made must repay it.
(e) As a result of my findings on Kekecial’s loan claim, it is not necessary to decide Kekecial’s alternative claim to the $400,000 based on restitution. However, were I wrong in finding that the $400,000 payment was made by way of loan, I would find that Kekecial was entitled to restitution to that extent.
(f) I am not satisfied that Aus Made and Haha made the Advance Representation.
563As to the Regulatory Issues
(a) I am satisfied that Aus Made breached the Supply Agreement.
(b) Kekecial has not established it suffered any loss and damage as a result of the breach of the Supply Agreement, and thus, is entitled to an award of nominal damages only. I award $1.00 nominal damages.
(c) I do not need to deal with Kekecial’s misleading and deceptive conduct claims, as no loss and damage was established in any event (loss and damage being a necessary part of that cause of action).
564I will give judgment for Kekecial on its claim.
565I will order that Aus Made pay Kekecial:
(a) $291,931.89 and interest;
(b) $400,000 and interest;
(c) $1.00.
566I will dismiss the counterclaim.
567I direct that the parties confer about these reasons for judgment with a view to agreeing upon the final orders to be made giving effect to the judgment including orders for costs. If the parties cannot agree, then they should file:
(a) any affidavit material on which they rely together with an outline of submissions by 4:00pm on 7 July 2025;
(b) any reply material and submissions by 4 pm on 14 July 2025.
568The submissions are limited to six A4 pages, and the reply submissions are limited to three A4 pages. Each set of submissions should have a minimum 12-point typeface, 1.5 spacing and 40mm margins on either side of the page. Unless I consider a hearing is required, I will decide the issue of costs and the form of final order on the papers.
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Certificate
I certify that these 130 pages are a true copy of the reasons for decision of Her Honour Judge Marks delivered on 20 June 2025.
Dated: 20 June 2025
Leo Arthur
Associate to Her Honour Judge Marks