Li v Xin

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. S CI 2009 08906

PHILLIPS YIWEI LI	Plaintiff
v
CINDY YAN XIN AND THE REGISTRAR OF TITLES	Defendants

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JUDGE:	HABERSBERGER J
WHERE HELD:	MELBOURNE
DATES OF HEARING:	10, 11, 13, 24 and 25 SEPTEMBER; 26 and 31 OCTOBER; 12-14, 19-21 NOVEMBER; 11 and 12 DECEMBER 2012
DATE OF JUDGMENT:	13 MARCH 2013
CASE MAY BE CITED AS:	LI v XIN
MEDIUM NEUTRAL CITATION:	[2013] VSC 107

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Trusts – Whether the defendant held factory on trust for the plaintiff.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G D Bloch	Batten Sacks Harvey Bruce
For the First Defendant	Mr F Lim and Mr V Nath	Francis Lim
For the Second Defendant	No appearance

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

The Relevant Procedural History.................................................................................................... 3

A Preliminary Issue............................................................................................................................ 6

The Factual Background................................................................................................................. 13

The Existence of David Jie Li......................................................................................................... 23

The Alleged Sale of the Business to Qing Qing......................................................................... 31

The Business at the Amberley Crescent Property...................................................................... 40

The Receipt of $200,000 by Lucy Li.............................................................................................. 46

The Kirkham Road Property – Events Prior to Settlement...................................................... 54

The Trust Arrangement................................................................................................................... 63

The Kirkham Road Property – Settlement.................................................................................. 68

The Fit-out of the Kirkham Road Property................................................................................. 74

Payments After Settlement............................................................................................................. 78

The Credibility of the Witnesses................................................................................................... 90

Subsequent Transactions............................................................................................................... 92

Conclusion......................................................................................................................................... 96

Orders................................................................................................................................................. 98

HIS HONOUR:

Introduction

This judgment is concerned with the question of the beneficial ownership of a property known as Factory 4, 2-4 Kirkham Road, Dandenong (“the Kirkham Road property”). On the one hand, the plaintiff claimed that the first defendant, the registered proprietor of the Kirkham Road property, held it on trust for him. (As the second defendant, the Registrar of Titles, took no part in the proceeding I will refer hereafter to the first defendant as simply “the defendant”.) The plaintiff alleged that the defendant had agreed to borrow the money required to fund the purchase of the factory as the plaintiff could not obtain a loan. The plaintiff further alleged that he and his family had paid all of the costs associated with its purchase including paying the interest on the defendant’s loan from the Bank of Western Australia Ltd (“BankWest”). On the other hand, the defendant claimed that she had purchased the Kirkham Road property in her own right, had paid (in various ways) the balance of funds required at settlement and that the plaintiff’s family or his company had occupied the factory from a short time after settlement so that any money paid by or on their behalf was part of the rent owed to her. Related disputes were who owned a tofu making business which had been carried on in another factory at 2/61 Amberley Crescent, Dandenong and the circumstances surrounding the taking of a lease of the Kirkham Road property.

It will be obvious from this brief description of the dispute that the competing accounts of events are irreconcilable and that one party’s version of the critical issues must be false. The task of deciding where the truth lay was not helped by the fact that 10 of the 15 witnesses called were people of Chinese background who gave their evidence through an interpreter. This is not a criticism of the two interpreters. But I was often left with an uneasy feeling that the subtleties of the English language being used by the lawyers were not being properly appreciated by the witnesses. I was also left with the suspicion that on occasions I was not being told the full story by either side.

I have been vexed by the problem of what to call the parties and witnesses of Chinese background without appearing disrespectful. Many of them had the same surname of “Li”.[1] In order to avoid confusion, I decided to refer to the parties and witnesses of Chinese background generally by their full name without any prefix. With some of them I have added or substituted a non-Chinese given name which they used. With others I have taken the liberty of abbreviating their Chinese name.
[1]The defendant’s interpreter, Mr Li, in answer to a question as to whether he was related to any of the witnesses or parties, informed me that there were approximately 120 million people with that surname in China.

There were three main witnesses on each side. The plaintiff, Phillips Yiwei Li (“Phillips Li”), is now a geo-technical engineer in Western Australia. At the time of these events he was a student. His father, Duff Tian-Fu Li (“Duff Li”) had been, prior to coming to Australia, a senior lecturer in criminal law at the China Political Science and Law University in Beijing. The plaintiff’s mother was Lin Qiao. She played a key role in the events relating to the purchase of the Kirkham Road property.

The defendant, Cindy Yan Xin, migrated to Australia in August 2007. She was one of three directors of, and shareholders in, the company Qing Qing Australia Group Company Pty Ltd (“Qing Qing”). The other directors and shareholders were Lihua Li (“Lucy Li”) and her husband, Donald Leslie Dover. Both of them, but in particular Lucy Li, were very much involved in the events the subject of this dispute.

Cindy Yan Xin first met Lucy Li when she started working for her company in China. She worked in an administrative role in its animal husbandry business of breeding cattle. Cindy Yan Xin was a director of Qing Qing between 6 April 2007 and 28 April 2009 and again from 1 August 2009 until 14 April 2012. Cindy Yan Xin said that she first resigned because she wanted to conduct her own business. She rejoined of her “own will” and resigned again because she was residing in New South Wales and it was “inconvenient” to attend meetings.

The Relevant Procedural History

This proceeding was commenced on 15 September 2009. On 26 November 2010, the defendant’s solicitors, Henley Legal, filed and served a Notice by Legal Practitioner of Ceasing to Act (“Notice of Ceasing to Act”).

On 3 February 2011, Lansdowne AsJ ordered that the hearing for directions for trial be adjourned to 15 February 2011. Paragraphs 3 and 4 of her Honour’s order read as follows:

3. The Defendant is required to appear on the next occasion.
4.The solicitor of the Plaintiff notify the Defendant of these orders in writing at the address supplied on the notice of ceasing to act and also c/- Henley Legal.

Her Honour’s order was duly served on Henley Legal by post, facsimile and email and posted to the defendant at 8 Baillie Court, Frankston on 11 February 2011, which was her address on the Notice.

The defendant did not appear at the hearing on 15 February 2011. On that day Daly AsJ ordered that the proceeding be fixed for trial on 22 March 2011 on an estimate of half a day. Her Honour also ordered that a copy of her order be served in accordance with paragraph 4 of the order made on 3 February 2011. Although pleadings had closed, there had been no discovery by either party.

When the matter was called on for hearing before me on 22 March 2011, there was no appearance for the defendant. Upon being satisfied that the defendant had been notified of the trial date in accordance with the order of Daly AsJ, I heard evidence from the plaintiff and his mother and gave judgment for the plaintiff at the conclusion of the hearing and declared that she held the Kirkham Road property on trust for the plaintiff.[2]
[2]Li v Xin [2011] VSC 121.

On 24 May 2011, a copy of the authenticated final order together with a proposed transfer of land was posted and faxed to Henley legal.

By a summons dated 6 June 2011, the defendant applied, pursuant to r 49.02(2) of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”), to set aside the judgment on the basis that she was unaware of the trial date. The application was supported by an affidavit sworn by the defendant on 3 June 2011 (“first affidavit”). The plaintiff responded with an affidavit sworn on 8 August 2011. The defendant swore an affidavit in reply on 29 August 2011 (“second affidavit”) and a further affidavit in reply on 13 September 2011 (“third affidavit”). On 30 April 2012, the defendant swore a second further affidavit in reply (“fourth affidavit”). The application was adjourned several times in the Practice Court before eventually being set down for a hearing before me as the Judge who gave the judgment sought to be set aside.[3]
[3]Schafer v Blyth [1920] 3 KB 140; Brygel v Stoneham, Supreme Court of Victoria, unreported, 4 April 1997 (Batt J); Perpetual Trustees Victoria Limited v Xiao [2012] VSC 65.

In May 2012, the application to set aside the judgment against the defendant was adjourned because it was anticipated that the defendant’s solicitor, Mr Lim, who was then appearing as her counsel, would be giving evidence about his telephone conversation, on 7 September 2011, with the defendant’s former solicitor, Henry Wong, in which, as referred to by the defendant in her third affidavit, sworn on 13 September 2011, he allegedly made a number of admissions concerning what he had or had not done with respect to forwarding to the defendant the notice given by the plaintiff’s solicitors about the trial date. Mr Wong had prepared a draft affidavit disputing virtually all of the defendant’s evidence about what Mr Lim had told her of the conversation. In the circumstances, it was agreed by both sides that it would be inappropriate for Mr Lim to appear as both witness and counsel.

The application to set aside the judgment was then listed for hearing before me on a two day estimate commencing on 10 September 2012. After hearing opening submissions from counsel for the defendant, I raised with the parties whether it would not be preferable to avoid wasting further time and costs on the issue of whether the judgment should be set aside and instead to recognise the near inevitable result and to use the days already set aside as the start of a hearing of the dispute on its merits. After taking instructions, both parties consented to an order that the judgment be set aside, with the question of the costs thrown away reserved to the end of the new hearing. Counsel for both parties assured me that they would be ready to start the trial the next morning.

The reason why I proposed this course was that it seemed to me even at that early stage that an arguable defence on the merits had been raised. As events have shown, it would have been impossible to decide the dispute on the affidavits even with some limited cross-examination, as proposed by counsel for the plaintiff. Further, as the current expression of the relevant principles then stood,[4] it appeared that the fact that there was an arguable defence would almost inevitably outweigh the defendant’s failure to attend the first trial, even if I decided that her failure to attend was a deliberate tactic.[5]
[4]Xiao v Perpetual Trustees Victoria Ltd [2012] VSCA 85 (Buchanan and Mandie JJA) granting leave to appeal.
[5]See now Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2012] VSCA 316 (Weinberg, Harper and Priest JJA).

What I have to confess I did not fully appreciate at the time I made my suggestion, were the consequences of proceeding to trial without the parties having first provided discovery on oath of all relevant documents and without having issued subpoenas and inspected subpoenaed documents prior to the trial commencing. The result was that documents kept appearing throughout the trial sometimes after witnesses had given evidence, which meant that in fairness they had to be recalled. More importantly, some of the documents produced during the trial raised serious concerns about whether they had only recently been prepared and backdated. This occurred despite my urging the parties to quickly consider their position with respect to discovery and to request copies of required documents at an early stage.

The other unfortunate consequence of the late change from an application to set aside judgment to the trial itself was that I felt obliged to accommodate counsel’s and witnesses’ pre-existing commitments. This coupled with some difficulties about my own availability meant that a very disjointed and drawn out hearing resulted.

A Preliminary Issue

A preliminary issue was whether or not Cindy Yan Xin had notice of the trial date of 22 March 2011. This was still a relevant matter because it possibly reflected on the credibility of Cindy Yan Xin and on her attitude to defending the claim against her.

In his opening on this issue, the defendant’s counsel made the following points:

(a)Cindy Yan Xin had moved from Lucy Li’s property at 8 Baillie Court, Frankston (“the Frankston address”) when it was sold in May 2009. Her solicitor Mr Wong should have known she was no longer at this address because he did the conveyancing for Lucy Li of both the sale of the Frankston property and the purchase of a new property in Dromana.
(b)Despite this, the Frankston address was put on the Notice of Ceasing to Act and documents were served there.
(c)Nowhere in the emails allegedly sent by Mr Wong to Cindy Yan Xin was there any mention of any urgency for her to do anything and the trial date was not mentioned. This point arose out of an apparent misreading of the documents produced by Mr Wong and was laid to rest when he produced copies of everything, including the orders, emailed to Cindy Yan Xin.
(d)It was only in May 2011 after she arranged for the documents to be collected that Cindy Yan Xin “first … realised how serious the matter was”.

Cindy Yan Xin said in her first affidavit that in about July 2010 Mr Wong told her that he could not continue to act for her. Cindy Yan Xin claimed that this conversation followed a meeting arranged by Mr Wong at his office to discuss with Duff Li an amicable resolution of the dispute. She said that Duff Li insisted that she attend the meeting without her father. In the end she was unable to attend as she was sick. She said that Duff Li attended and became very abusive accusing her of deliberately refusing to attend the meeting. Cindy Yan Xin said that she “had no more communication” with Mr Wong since that conversation. Mr Wong denied that he made any arrangement with Duff Li or the plaintiff to meet Cindy Yan Xin at his office.

In fact, as Cindy Yan Xin acknowledged in her third and fourth affidavits, she had a conference with counsel and Mr Wong on 7 August 2010. Whenever the relationship ended, Cindy Yan Xin said that she accepted Mr Wong’s withdrawal with some regret. But she then did nothing about the proceeding including not engaging new solicitors, until May 2011 after she learned that judgment had been entered against her.

Significantly, in cross-examination, Cindy Yan Xin said that Lucy Li and Donald Dover accompanied her to the conference with counsel. She said that Mr Wong translated but his Chinese was “not that good”. She also said that Lucy Li and Donald Dover waited outside because the barrister’s room was “very tiny” and they were called in if there were any issues raised which she could not answer. On the other hand, Mr Wong said that Lucy Li and Donald Dover were the ones providing “the particulars” at the conference. He said that “Yan Xin was silent at all times, after instructions were given from [sic] Donald and Lucy”.

In her second affidavit, Cindy Yan Xin denied receiving the Notice of Ceasing to Act. She suggested that it may have been sent to the Frankston address. She pointed out that she had not resided at 8 Baillie Court, Frankston since about June 2008 when she shifted to 38 Jackson Way, Dromana. She said that she then moved to Scone in New South Wales in about January 2010. Importantly, she also denied receiving a copy of the order of 3 February 2011 or the order of 15 February 2011. She said she received a call from Henley Legal on or about 26 May 2011 referring to the letter from the plaintiff’s solicitors dated 24 May 2011 and that she arranged for a friend in Melbourne to pick up the letter and enclosures and they were faxed to her on the same day.

In that affidavit, Cindy Yan Xin also explained that her relationship with her solicitor ended as a result of a misunderstanding. She said that she had been asked by Henley Legal to attend a mediation, but she was sick and could not attend. She misunderstood what her solicitors were advising and they argued and she said that she would not attend any mediation.

In her third affidavit, Cindy Yan Xin said that she had made a mistake and that, although Lucy Li purchased the Dromana property in August 2008, she did not move there until May 2009 after Lucy Li’s son, Shao Chen Zhu, sold the Frankston property which was owned beneficially by his mother.

Cindy Yan Xin gave evidence that she never received “any documents, official letter” telling her that Mr Wong was no longer acting on her behalf. She agreed that she received “quite a few” emails from Mr Wong but they were “all relating to bills”. She reluctantly agreed that the only way Mr Wong contacted her was by email. I note that she had not mentioned this in any of her four affidavits. Instead, she had denied receiving anything by post at the Frankston address.

Cindy Yan Xin said that when she moved to the country she had difficulty receiving emails because she “had no signal”. She had to go to “the Internet bar and check”, but when she was in Sydney she checked her emails more regularly.

In re-examination, Cindy Yan Xin denied that Mr Wong had told her before the first judgment that he would always communicate by email. She also claimed to have told Mr Wong that she had difficulties receiving email after she moved to the New South Wales country.

Mr Wong was called by the plaintiff to give evidence in the trial. Mr Wong said in his affidavit sworn on 1 August 2012 that, following Cindy Yan Xin’s refusal to attend a Court ordered mediation, on 25 November 2010 he sent an email to Cindy Yan Xin at her email addresses – [email protected] and [email protected] - enclosing the Notice of Ceasing to Act. He also attached his bill dated 25 November 2010. Mr Wong said that “the email did not bounce and was not returned”. He agreed the Notice gave the Frankston address as the defendant’s last known address but said that he did not mail these documents to that address.

Cindy Yan Xin agreed that the first of these email addresses was her personal email address. The second was Qing Qing’s. She said that she did not know who at the company would receive this email. Lucy Li said that the second email address was her address. She agreed that she received emails from Mr Wong at this address and that she would have read them and any attachments. In re-examination she said that she could not remember whether she passed on the messages to Cindy Yan Xin.

Mr Wong said that on 27 January 2011, he received an email from Cindy Yan Xin referring to his “request for her to pay” and querying whether some of the items had been “paid before”. Cindy Yan Xin did say in her email “just saw your email”, which possibly supports her evidence that she did not have continuous access to the internet and that she only read her emails when she was in Sydney. Cindy Yan Xin said in re-examination that her email would have been sent from “the city”. But her emailed reply does mean, in my opinion, that she received the email of 25 November 2010 enclosing the Notice of Ceasing to Act. If she received Mr Wong’s bill, as she clearly had, she would also have received the Notice. This conclusion is important because Cindy Yan Xin maintained that if she had received the Notice of Ceasing to Act she would have engaged a new firm of solicitors to act for her in defending the plaintiff’s claim.

Mr Wong said that on 11 February 2011 he received an email from the plaintiff’s solicitor enclosing the order of 3 February 2011. He said that on the same day he forwarded this email and attachment to Cindy Yan Xin at her two email addresses. Mr Wong said that “the email did not bounce and was not returned”. In his email the plaintiff’s solicitor had stated:

You will note further that Yan Xin is required to appear at the Directions for trial proceeding on 15 February 2011 at 12.00 noon.

Mr Wong said that on 24 February 2011 he received an email from the plaintiff’s solicitor enclosing the order of 15 February 2011. He said that on the same day he forwarded this email and attachment to Cindy Yan Xin at her two email addresses. Mr Wong said that “the email did not bounce and was not returned”.

Mr Wong said that on 24 May 2011 he received a facsimile from the plaintiff’s solicitor enclosing the final order of 22 March 2011 and a copy of the transfer of land to be signed by Cindy Yan Xin. He said that on the same day he scanned these documents and then emailed them to Cindy Yan Xin at her two email addresses. Mr Wong said that “the email did not bounce and was not returned”. Mr Wong denied giving this letter and enclosures to Cindy Yan Xin or her “friend” or to Lucy Li. He further denied telephoning Cindy Yan Xin on 26 May 2011 or at all in 2011. He was not cross-examined about these denials. On the basis of this evidence, I find that it was Cindy Yan Xin’s receipt of Mr Wong’s email of 24 May 2011 that stirred her into action.

Mr Wong said that between 7 June 2010 and 11 April 2012 he sent about 120 emails to Cindy Yan Xin at her two email addresses. He believed that none of them bounced or returned.

I do not accept Cindy Yan Xin’s denials that she did not receive the emails and attachments notifying her that she was required to attend Court on 15 February 2011 and that the trial was listed for 22 March 2011. This is just too much of a coincidence when she clearly received the email of 25 November 2010 and, as I have found, she received the email of 24 May 2011. Her ignoring of the issue of emails in her affidavits and her raising of the false issue of postage of the documents to the Frankston address damaged her credibility on this question. Thus, I find that she deliberately chose, for whatever reason, not to attend the trial on 22 March 2011. Perhaps she mistakenly thought that it could not proceed in her absence.

I find that Cindy Yan Xin:

(a) gave a false account of an alleged meeting at Mr Wong’s office; and
(b)falsely denied receiving Mr Wong’s emails of 25 November 2010, 11 February 2011, 24 February 2011 and 24 May 2011.

There remains the unresolved issue of the dispute about what was said in the telephone conversation between Mr Wong and Mr Lim, which took place according to Mr Wong on 5 and not 7 September 2011. In his affidavit Mr Wong relevantly:

(a)denied that he told Mr Lim that he had posted a copy of the order of 3 February 2011 to the Frankston address in about mid February 2011;
(b)denied that he told Mr Lim that he had posted a copy of the order of 15 February 2011 to the Frankston address towards the end of February 2011;
(c)denied that he had any conversation with Mr Lim about “posting” any letter. He said that he told Mr Lim that he always emailed the defendant at the two email addresses he had been given;
(d)denied that he told Mr Lim that, as the letters enclosing the copy orders had not been returned, he did not follow up with a phone call as he thought the defendant was still living at the Frankston address. He said that he knew she lived in New South Wales but he had never been given her address;
(e)denied that he told Mr Lim that he had forgotten that he acted for Shao Chen Zhu in the sale of his property at the Frankston address in May 2009 and that Cindy Yan Xin had shifted out from this house in May 2009. He said this topic had not been raised;
(f)denied that he told Mr Lim that when his process server attempted to serve his Magistrates’ Court complaint on Cindy Yan Xin at the Frankston address his process server found out that she was no longer residing at that address. He said that this topic had not been raised and that he did not use any process server in Victoria;
(g)denied that he told Mr Lim that on or about 26 May 2011 when he received the plaintiff’s solicitors’ letter dated 24 May 2011 and the copy of the order giving judgment for the plaintiff he thought that it was a serious matter and he called Cindy Yan Xin on her mobile to advise her on that day. He said that he did not call Cindy Yan Xin on that day and that he did not have her mobile telephone number;
(h)denied that he told Mr Lim that it was in this telephone conversation that Cindy Yan Xin reminded him that she had already moved to 116 Waverley Street, Scone. He said that he never spoke to Cindy Yan Xin in 2011 and that she had never given him that address;
(i)denied that he told Mr Lim that at Cindy Yan Xin’s request he handed a copy of the letter dated 24 May 2011 together with enclosures to Lucy Li. He said that Cindy Yan Xin did not make any such request. As previously stated, he said that he emailed these documents to Cindy Yan Xin; and
(j)denied that he told Mr Lim that Cindy Yan Xin may have given him her address in Scone, but he had forgotten it, and that he admitted that he rarely telephoned Cindy Yan Xin. He said that he had never rang her on her mobile.

Mr Lim did not swear an answering affidavit prior to the adjourned hearing date of the application to set aside the judgment and Mr Wong’s evidence was never challenged in cross-examination. In the circumstances, I see no reason not to accept Mr Wong’s evidence.

As this particular dispute does not affect the credibility of Cindy Yan Xin, given that her third affidavit was presumably prepared by her solicitor and she was only deposing to what she had been told, it is unnecessary to spend further time discussing it. However, it is a matter of concern to me that Mr Lim has never given his version on oath of the telephone conversation and explained how this false account of the conversation came to be put before the Court.

The Factual Background

I propose to start by setting out in roughly chronological order the facts which form the background against which the two competing versions of events have to be assessed. Some of these facts were common ground, some were clearly established by the evidence and the remainder were hotly contested.

For some years prior to April 2007, a tofu making business owned by Heng V (Australia) Pty Ltd (“HVA”) was carried on at Factory 2, 61 Amberley Crescent, Dandenong (“the Amberley Crescent property”). Duff Li was a part owner of HVA. Lin Qiao managed the business. Duff Li and Lin Qiao leased the premises at Amberley Crescent. The term of the lease was five years commencing on 1 September 2002, with options of further terms of three years and two years. Lin Qiao said that her family had spent over $100,000 installing the equipment in the Amberley Crescent property.

The business operated under the registered business name of “Newfield Soya-Bean Food Products” (“the Newfield Soya-Bean business name”). That business name was first registered to HVA on 26 March 2007, although the business, according to the records of Consumer Affairs, had commenced on 1 July 2005. HVA and the Amberley Crescent property were registered by the City of Greater Dandenong (“the Council”) under the Food Act 1984 for the year ending 31 December 2007.

By a contract of sale initially signed on 20 April 2007, Duff Li and HVA sold the business to Xiao Bing Li as from 24 April 2007 for $65,000 (including stock). Xiao Bing Li said that he bought the business for the purpose of emigrating to Australia. A signature on behalf of Xiao Bing Li dated 20 April 2007 was not identified or explained. However, Xiao Bing Li said that he signed the contract on 23 April 2007, after arriving in Australia for his first and only visit on 22 April 2007. In giving his evidence by video link from China, Xiao Bing Li identified his signature and the date on the contract. He left Australia on 28 April 2007. His arrival and departure dates were confirmed by his passport.

In response to a suggestion that Xiao Bing Li was Duff Li’s brother, Phillips Li said that Xiao Bing Li was an acquaintance of the family not a relative. Xiao Bing Li said that he had known Duff Li since 1986 but was not related to him. I accept that evidence.

On 22 April 2007, Xiao Bing Li became registered as owner of the Newfield Soya-Bean business name, as did Duff Li. Xiao Bing Li said that it should have been in his name alone. HVA ceased to be registered as owner on 23 April 2007 and Duff Li ceased to be registered as owner on 26 July 2007. Phillips Li’s parents stayed on as managers of the business for Xiao Bing Li. According to Xiao Bing Li, he authorised Duff Li to manage the business for him. The lease of the Amberley Crescent property remained in the names of Duff Li and Lin Qiao. By a certificate dated 14 January 2008 “Phillips X Lee” [sic] and the Amberley Crescent property were registered by the Council under the Food Act for the year ending 31 December 2008.

According to Lin Qiao, a person by the name of David Jie Li started working at the factory in Amberley Crescent in about late September or early October 2007. The defendant’s witnesses denied that such a person existed. This is the first important factual dispute and will be considered separately below.

Cindy Yan Xin said that she moved permanently to Australia on 12 August 2007. She said that when she moved to Australia she did “all sorts of jobs”. At the same time, she was undertaking an English course. She was not working for Qing Qing. She was too busy “sorting out” buying a business for herself. She said that she moved in with Lucy Li and Donald Dover at the Frankston property in May 2008.

At some time in 2008, Xiao Bing Li ceased to be the owner of the business. According to the defendant, this was because he sold it to Qing Qing on 1 March 2008 pursuant to a contract dated 10 October 2007, after it had been advertised for sale by Lin Qiao. Cindy Yan Xin said that the purchase price of $150,000 came from her funds in China. According to the plaintiff, the cessation occurred because when, in April 2008, Xiao Bing Li decided that he would not be emigrating to Australia he also decided to close the business down within a few months. This is the second important factual dispute and will be considered separately below.

Whether or not the business was sold by Xiao Bing Li, important developments occurred in April and May 2008 concerning the business being conducted at the Amberley Crescent property. For example, on 22 April 2008, Duff Li signed on behalf of Qing Qing an “Application for Transfer of Registration of Food Act Premises” with respect to the Amberley Crescent property and by 24 April 2008 Qing Qing was registered by the Council under the Food Act for the year ending 31 December 2008 in respect of that property.

At some time between March and May 2008 Cindy Yan Xin started work in the factory at Amberley Crescent.

Then, on 1 May 2008, Duff Li and Lin Qiao signed a Transfer of Lease of the Amberley Crescent property to Qing Qing. The term of the lease was for three years commencing on 1 September 2007 with an option of a further two years. Lucy Li and her husband Donald Dover guaranteed Qing Qing. That company started making rental payments to the agent, Collins Commercial & Industrial Pty Ltd (“Collins Commercial”) in May 2008.

Next, Xiao Bing Li ceased to be registered as the owner of the Newfield Soya-Bean business name on 6 June 2008 and on the same date Qing Qing became registered as the owner of that business name. There was evidence that this change in registration should have been made on 1 May 2008. The mistake was made by an officer in Consumer Affairs. Just why these events occurred is the third important factual dispute and will be considered separately below.

On 3 or 4 May 2008, Lucy Li received a Commonwealth Bank of Australia (“CBA”) bank cheque no 116720 for $200,000 which she paid into her bank account on 5 May 2008. There was a dispute concerning from whom Lucy Li had received the bank cheque for $200,000. Lin Qiao said that it was a loan from her to Lucy Li. Lucy Li said that she received the bank cheque from the person she thought was Xiao Bing Li, in the circumstances described below. This is the fourth important factual dispute and will be considered separately below.

Sometime in May 2008, Phillips Li entered into a contract to purchase a new home for the Li family at 24 Hartley Link, Endeavour Hills with a loan from BankWest. Cynthia Yu of SNC Finance & Conveyancing in Box Hill acted for the Li family in that transaction and arranged finance for Phillips Li. Phillips Li said that at the time he was working in a vacation job and as the bank only asked for two pay slips, he was able to produce evidence of satisfactory income. He did not tell the bank that this level of income would drop when he went back to university. In any event, the money was coming from his parents. Lin Qiao said that they borrowed from BankWest 95% of the purchase price of $495,000 and stamp duty of $25,360, which came to more than $490,000.

According to Giovani (John) Guastella, who was a senior salesman for Cameron Industrial Commercial, Real Estate Agents (“Camerons”), on 13 May 2008 he was contacted by Lin Qiao about the purchase of the Kirkham Road property.

On 16 May 2008, Qing Qing signed a lease of the Kirkham Road property, with a right of first refusal to purchase if the owner wanted to sell. The rental was $2,789.58 per calendar month, exclusive of GST. The term set out in the written lease was three years. On that day, Qing Qing paid one month’s rent, including GST, ($3,068.54), a documentation fee ($300.00) and the security deposit ($3,068.54).

On 16 June 2008, a holding deposit of $1,000 was paid with respect to the purchase of the Kirkham Road property. The $1,000 was paid in cash by Lin Qiao to Camerons. Lin Qiao retained possession of the original receipt in which the purchaser was named as “Xin Yan & or nominees”.

On 18 June 2008, Cindy Yan Xin signed an offer to purchase the Kirkham Road property for $538,000. Once again the purchaser was said to be “Xin Yan and/or nominees”. Angus Clark was named as the agent in that document. He was John Guastella’s assistant.

Sometime in June 2008, Lucy Li purchased her new house at 38 Jackson Way, Dromana. She and Donald Dover moved there, leaving Cindy Yan Xin and Lucy Li’s son living in the Frankston property.

On 3 July 2008, Cindy Yan Xin signed an application for a loan from BankWest to assist her to purchase the Kirkham Road property.

On 18 July 2008, the balance of the deposit was paid by a CBA bank cheque dated 18 July 2008 in the sum of $52,800 payable to Camerons’ trust account. The amount of $52,805.40 was withdrawn from Lucy Li’s bank account on that day. Presumably, the extra $5.40 was the cost of the bank cheque. Lucy Li retained possession of the original receipt from Camerons. According to Cindy Yan Xin, the $52,800 was a loan to her by Lucy Li and she signed a receipt acknowledging this. On the other hand, Lin Qiao said the $52,800 was a part repayment of her earlier loan of $200,000 to Lucy Li.

On the same day, Cindy Yan Xin signed a Contract Note to purchase the Kirkham Road property from Talawood Pty Ltd for $538,000. The Contract Note stated that the sale of the property was subject to the existing lease to Qing Qing.

Cindy Yan Xin and Lucy Li said that, in about August or early September 2008, Duff Li demanded the return of the tofu making business. They said that after discussions with Lin Qiao, it was agreed that the Li family would repay the $150,000 purchase price and would take over the lease of the Kirkham Road property and that there were also discussions about payment for the partly completed fit-out of the Kirkham Road property. Lin Qiao denied any such discussions occurred.

Lin Qiao gave evidence that on 30 July 2008 she was diagnosed with bowel cancer. She underwent an operation on 26 August 2008, was in hospital for 11 days and was convalescing at home for 10 days.

The events relating to the purchase of the Kirkham Road property prior to settlement and the circumstances surrounding the signing of the lease of that property by Qing Qing constitute the fifth important factual dispute and will be considered separately below.

As previously stated, this dispute arose because the plaintiff alleged that the defendant agreed to hold the Kirkham Road property on trust for him. The defendant denied having agreed to do so. Whether there is any evidence of an agreement by the defendant to hold the property on trust for the plaintiff is the sixth important factual dispute and will be considered separately below.

The settlement of the purchase of the Kirkham Road property took place on 19 September 2008. It was funded by a loan of $365,000 from BankWest and by the following means:

(a)a CBA bank cheque dated 18 September 2008 in the sum of $30,000, which was purchased from funds drawn from Lucy Li’s bank account;
(b)an ANZ bank cheque dated 18 September 2008 in the sum of $50,000, which was purchased from funds drawn from the bank account of Ou Lu, a friend of Lin Qiao, who lent that amount to Lin Qiao; and
(c)a BankWest bank cheque in the sum of $70,265.88, which was purchased from funds drawn from the plaintiff’s BankWest bank account on 18 September 2008.

The three bank cheques totalled $150,265.88. They were all made payable to “National Australia Bank on account of Talawood Pty Ltd” or something very similar. The three cheques were handed by Duff Li to Cynthia Yu at McDonalds in Glen Waverley on 18 September 2008. Duff Li said that Lin Qiao had given him the cheques.

Whilst the above facts were clearly established, there was a dispute between the parties as to why each of these cheques was part of the funds paid at settlement. According to the plaintiff’s case, the $30,000 was borrowed by Phillips Li from Lucy Li’s husband, Donald Dover, and the other two cheques were provided by or on behalf of the Li family as part of Phillips Li’s commitment to fund the purchase of the Kirkham Road property. According to the defendant’s case, the $30,000 was borrowed by Cindy Yan Xin from Lucy Li, and the other two cheques were provided by or on behalf of the Li family as part repayment to Cindy Yan Xin of the amount previously invested by her in Qing Qing to enable it to purchase the business from Xiao Bing Li. These conflicting versions will be examined below. This is the seventh important factual dispute and will be considered separately below.

Some time in October 2008 Lucy Li and Cindy Yan Xin entered into a loan agreement with respect to the two amounts totalling $82,800 said to have been lent by Lucy Li to Cindy Yan Xin. Pursuant to the charge contained in that document, Lucy Li lodged a caveat over the Kirkham Road property on 27 October 2008.

After settlement of the purchase of the Kirkham Road property, the work of fitting out the premises so that they were suitable for a food manufacturing business commenced or continued. It was completed in about January 2009. Who did the fit-out work, for whom it was done and who paid for what is the eighth important factual dispute and will be considered separately below.

The ninth important factual dispute is who subsequently made the relevant payments concerning the Kirkham Road property and the defendant’s loan in respect of that property and why those payments were made. This topic will be considered separately below.

On 17 September 2008, Duff Li, on behalf of Phillips Li and Jian-Huq Zhang, registered the business name of “Newfield HF”. On 20 October 2008 Phillips Li and Jian-Huq Zhang incorporated LL King Australia Pty Ltd and this company became the sole proprietor of “Newfield HF” on the same day. Ten days later Jian-Huq Zhang resigned as a director and transferred all his shares in LL King to Phillips Li. The registered address of the business was the Kirkham Road property. Although Phillips Li was the sole director of LL King, its business was run by his parents, in particular his mother, Lin Qiao.

Phillips Li said that compared with the old business at Amberley Crescent his company’s new business was much more automated and there were extra products such as Japanese tofu and flavoured tofu.

Xiao Bing Li said that Duff Li paid $20,000 for the purchase of some of the secondhand equipment in his business. Duff Li produced a copy receipt dated 2 November 2008. He said that his family in China had paid Xiao Bing Li and they had the original receipt, whereas Lin Qiao said that her husband paid Xiao Bing Li when he went back to China in about September 2010.

On 10 November 2008, the Li family gave Lucy Li a bank cheque in the sum of $20,000 made payable to “Donald Dover”. Lin Qiao said that this was part repayment of the loan of $30,000 by Donald Dover. Lucy Li said that it was payment for Donald Dover transporting equipment from the Amberley Crescent property to the Kirkham Road property.

In about November or December 2008, Collins Commercial wrote to Qing Qing advising that it had found a prospective tenant to occupy the Amberley Crescent property as from 29 December 2008, subject to the Council’s Health Department passing the property.

On 27 January 2009, Onlaws, on behalf of Phillips Li, lodged a caveat on the Kirkham Road property claiming Cindy Yan Xin was a trustee for him by virtue of a Deed of Trust dated 18 September 2008 between Cindy Yan Xin and Phillips Li. As there was no such document signed by her, Cindy Yan Xin issued a notice pursuant to s 89(1) of the Transfer of Land Act 1958 in February 2009 and the caveat was removed in March 2009.

On 29 January 2009, the Council issued a certificate that Qing Qing trading as “Newfield” and the Kirkham Road property were registered under the Food Act. Phillips Li said that this was a mistake and on 3 February 2009, the Council issued a certificate that LL King trading as “Newfield HF” and the Kirkham Road property were registered under the Food Act. However, a Business Name certificate dated 3 February 2009 stated that the Newfield Soya-Bean business name was owned by Qing Qing and that the business was carried on at the Kirkham Road property.

Lin Qiao said that her family’s new business started at the Kirkham Road property at the end of January or early February 2009.

Cindy Yan Xin resigned as a director of Qing Qing on 28 April 2009.

According to Lin Qiao and Duff Li, David Jie Li and Cindy Yan Xin left the business on 30 April 2009 and both disappeared. Thereafter, Lin Qiao was unable to contact them.

On 4 May 2009, Duff Li, on behalf of Phillips Li, lodged a caveat dated 20 March 2009 over the Kirkham Road property claiming Cindy Yan Xin was a trustee for Phillips Li by virtue of a Deed of Trust dated 20 March 2009 between Cindy Yan Xin and Phillips Li. There was no such document signed by Cindy Yan Xin.

On the same day, Duff Li wrote on behalf of his wife to Lucy Li, Donald Dover and Henley Legal demanding payment of $220,000 in respect of an alleged loan of $200,000 from Lin Qiao to Lucy Li plus interest.

The property at 8 Baillie Court, Frankston was sold in early May 2009. Cindy Yan Xin said that she then resided at Lucy Li’s house in Dromana.

Also in May 2009, Duff Li, on behalf of Lin Qiao, lodged a caveat over Lucy Li’s property in Dromana claiming an interest as chargee. Lucy Li issued a s 89(1) notice in the same month and in July 2009 Lin Qiao’s caveat was removed.

A sub-lease of the Kirkham Road property was prepared in about April or May 2009 by Camerons. It was signed by Cindy Yan Xin as lessor and by Donald Dover on behalf of Qing Qing as sub-lessor. The sub-lessee was said to be “Yiwei Li T/as Newfield Health Foods”. The sub-lease was said to be for two years commencing on 16 May 2009. The monthly rental was stated to be $4,656.39, exclusive of GST. Cindy Yan Xin said that the plaintiff refused to sign.

Cindy Yan Xin married Xin Hua Zhu on 15 July 2009. Many of the plaintiff’s witnesses said that the person in a passport photograph of Xin Hua Zhu was known to them as David Jie Li.

The plaintiff commenced this proceeding on 15 September 2009.

As previously stated, the trial was set down for 22 March 2011. The defendant did not appear and I gave judgment for the plaintiff on that day.

On 25 March 2011, Lucy Li instructed a debt collection agency to recover the loan amount owed by Cindy Yan Xin. By an email dated 18 May 2011 it advised that contact had been made with Cindy Yan Xin, who was without a job and had no income, but she had agreed to make a payment proposal within nine days.

On 4 October 2011, Cindy Yan Xin and Qing Qing entered into an agreement pursuant to which Cindy Yan Xin charged her interest in the Kirkham Road property in respect of an alleged agreement between them dated 28 September 2008. On 10 October 2011, Qing Qing lodged a caveat, dated 5 October 2011, over the Kirkham Road property.

On 26 October 2011, Lucy Li sued Cindy Yan Xin in the County Court for the sum of $82,800 plus interest. On 20 December 2011, Lucy Li entered judgment in default of appearance in the County Court proceeding against Cindy Yan Xin.

On 30 April 2012, Lucy Li swore her only affidavit in this proceeding.

On 28 June 2012, a warrant was issued by Lucy Li against Cindy Yan Xin for the Sheriff to sell the Kirkham Road property pursuant to the above judgment. Her claim was now for $137,693.27.

By a letter dated 3 July 2012, the CBA advised that bank cheque no 116720 had been deposited into Lucy Li’s account on 5 May 2008.

By a letter dated 1 August 2012, the Registrar of Titles informed Phillips Li’s solicitors that the warrant had been lodged over the Kirkham Road property and that the dealing would be processed unless an injunction was obtained against the Registrar within 14 days.

On 9 August 2012, Phillips Li commenced proceeding no SCI 2012 04578 against Lucy Li, the Registrar of Titles and the Sheriff. On 14 August 2012, I made orders restraining the Registrar of Titles and the Sheriff from taking any further steps in respect of the warrant until further order. On 30 August 2012, Lucy Li swore an affidavit in this other proceeding.

Some of these various events following settlement of the purchase of the Kirkham Road property are examined as part of the tenth important factual dispute. This topic will be considered separately below.

The Existence of David Jie Li

The first important factual dispute is whether a person known as David Jie Li existed. The plaintiff’s case was that a person known to the Li family as David Jie Li had played an important role in the events concerning the purchase of the Kirkham Road property in the name of Cindy Yan Xin. The defendant’s case was that there was no such person known as David Jie Li, or at least that the defendant did not know any person called David Jie Li and that he had played no part in the relevant events.

Cindy Yan Xin’s counsel said in opening the application to set aside the judgment that the person David Jie Li was not known to Cindy Yan Xin and that she denied that he was her husband. Counsel then said that Cindy Yan Xin had told him that morning that she had never been married and had never had a partner. In opening the plaintiff’s case at the start of the trial, counsel tendered a Certificate of Marriage dated 15 July 2009 between Xin Hua Zhu and Cindy Yan Xin. The certificate stated that their usual occupations were “Unemployed” and “Machine Operator”, that the usual place of residence of both was 38 Jackson Way, Dromana (Lucy Li’s home), that their conjugal status was “Divorced” and “Never validly married”, that they had both been born in Shandong Province in China and that their dates of birth were “03/08/1964” and “23/05/1982”. Despite statements by her counsel that Cindy Yan Xin would explain how the false statement was made, she never did.

Eight of the plaintiff’s witnesses (Phillips Li, Lin Qiao, Duff Li, Xu Dong Qiao, Cynthia Yu, Ou Lu, Sanye Guo and Xian Li) said that there was a person known as David Jie Li. They gave fairly consistent descriptions of him, at least about his age. All bar Cynthia Yu said that David Jie Li had worked in the business at the Amberley Crescent property.

Phillips Li said that he understood that David Jie Li was Cindy Yan Xin’s husband and Lucy Li’s older brother. That was what Lucy Li called him. He said that David Jie Li appeared to be 46 to 48, in his “late 40s”. He said that his parents had a close relationship with David Jie Li and through him with his wife Cindy Yan Xin. They became family friends, as did David Jie Li’s sister, Lucy Li. Both David Jie Li and Cindy Yan Xin worked in the business conducted at the Amberley Crescent property. Phillips Li said that he met Cindy Yan Xin “on a few occasions” at the factory and later at dinners or lunches with Lucy Li and David Jie Li.

Lin Qiao said that David Jie Li started work at the factory in Amberley Crescent in about late September or early October 2007. She said that David Jie Li told her that he was 48 and that he was “a Shandong person”. In March or April 2008 he brought his younger sister and his wife to meet the Li family. David Jie Li told her that Cindy Yan Xin was his wife. Lin Qiao said that they looked like they were a couple. They arrived at the factory together in the one car and went home in the one car. Lin Qiao said they both continued to work for the Li family, in the Kirkham Road factory, from early January 2009 until they disappeared at the end of April 2009. She said that she had tried to locate him. She had rung both a home telephone number and his mobile number but there was no answer.

Lin Qiao said that when David Jie Li first started working in the business, he gave her his residential address as 8 Baillie Court, Frankston. Lin Qiao said she did not get a tax file number from David Jie Li when he started working in the business. She said that she paid his wages weekly in cash because he said that he had an ABN and could “lodge tax himself”. Lin Qiao said that she did not file with the Tax Office an end of year return for David Jie Li, although she did this for other employees of the business. Lin Qiao said that she could bring in from home David Jie Li’s ABN, but never did so. Lin Qiao said that when David Jie Li started work in the new business in early 2009, she again paid him in cash.

Lin Qiao said that her family hired David Jie Li to supervise the fit-out of the Kirkham Road property. One of the invoices relating to that work, an invoice dated 16 November 2008 from Yarra Valley Refrigeration, had as “the originator” – “Lin David Lucy”. Another page of the same invoice listed only “Lin” as the originator.

Duff Li said that he first met David Jie Li in about October 2007 when he came to the factory “to do some work”. Duff Li said that he estimated David Jie Li was 45 or 46 and about 174 centimetres tall. David Jie Li told him that he came from Shandong Province. David Jie Li later told Duff Li that Lucy Li was his younger sister and that Cindy Yan Xin was his wife. Duff Li said that sometimes Cindy Yan Xin and David Jie Li arrived at work together and left together.

Duff Li said that his family often had meals in restaurants with David Jie Li, Lucy Li, Donald Dover and Cindy Yan Xin. In cross-examination, he said he would describe him as a family friend because David Jie Li had eaten dinner in their house about ten or more times. He could not say whether he would describe him as a “close family friend”.

Cynthia Xia Yu, a conveyancer and mortgage broker, gave evidence that a “David” was introduced to her by Lin Qiao in April 2008 and that he later brought Cindy Yan Xin to her office. Lin Qiao gave evidence that the “David” in question was David Jie Li. Cynthia Yu described David Jie Li as 40 to 45 years old.

One of the covers on Cynthia Yu’s two relevant files was headed “Yan Xin”. Below that there appeared:

0431 271 088 (David)
0432 554 961 (Yan Xin).

The other file cover had the names of “Yan Xin” and “David” and the above mobile telephone numbers for each of them, as well as the telephone and fax number of Qing Qing. Cynthia Yu said that she first wrote David Jie Li’s name and mobile number and later she added Cindy Yan Xin’s name and number. She said that David Jie Li gave her his telephone number on the first occasion she met him.

Ou Lu said that she knew David Jie Li. She had been introduced to him by Lin Qiao at the Amberley Crescent factory. She described him as 45 or 46 at that time, about 172 to 174 centimetres and “quite good looking”. She met him several times at dinners. He initially said that he was single, but later said that he was married to the daughter of a friend. She could not remember meeting the wife. Ou Lu also said that David Jie Li told her that he had a younger sister called “Li Lihua”. In cross-examination, she said that she saw David Jie Li at the Amberley Crescent factory “more than three times”.

Sanye Guo was called by the plaintiff. He migrated from China to Australia in January 2006 on a business investment visa. Initially his kitchenware business was located next door to the Kirkham Road property. He knew Lin Qiao because before he came to Australia his daughter worked for Lin Qiao at the “old factory”. Sanye Guo said that he knew David Jie Li. He said that David Jie Li was “over 40” and “quite tall”. He met him at both “the old factory and the new factory”. He said that when the fit-out work was being done, he saw David Jie Li and Lin Qiao there.

Sanye Guo said that David Jie Li had a shop in Box Hill and he had asked him to provide him with televisions. Sanye Guo supplied him with four. David Jie Li returned one and only paid for one. Sanye Guo said he could not find David Jie Li to obtain payment for the other two.

Xian Li said that she started work for the business as a process worker in July or August 2007. She left in February or March 2008. Xian Li said that she knew David Jie Li. He started work there about two months after her. He was about 40. When shown the passport photograph of Xin Hua Zhu, she said that it was the person she knew as David Jie Li. Xian Li said that David Jie Li said different things about his marital status. He did not say to whom he was married. Although David Jie Li started as just an ordinary worker, Lin Qiao trusted him and they often went out together. After she left that employment she went back to the factory several times and on one occasion Lin Qiao pointed out Cindy Yan Xin as “David’s little wife”. Xian Li identified Cindy Yan Xin in court as David Jie Li’s “little wife”.

Cindy Yan Xin said that she did not know Xian Li. She had never met her. She suggested Xian Li had given this evidence because she was a friend of Lin Qiao’s.

Late in the plaintiff’s case, his lawyers obtained by subpoena from the Department of Immigration and Citizenship a copy of the passport of Xin Hua Zhu and a larger photograph of the same person. Both Xian Li and Lin Qiao, initially the only witnesses called by the plaintiff after these documents became available, identified Xin Hua Zhu as the person known to them as David Jie Li. As the defendant’s counsel maintained the denial that there was any such person known as David Jie Li, I permitted the plaintiff’s counsel to recall Duff Li, Xu Dong Qiao, Cynthia Yu, Ou Lu and Sanye Guo. When recalled, each one of them identified the person in the photograph as David Jie Li. As the plaintiff had returned to his work in Western Australia he was not recalled simply to be shown the passport photograph. In the circumstances, the cost was not warranted.

Cindy Yan Xin said in evidence that she did not know anyone called David Jie Li. However, she agreed that Xin Hua Zhu was her husband. They first met in May 2009 and married in July 2009. But:

After we married our relationship … was on the rock [sic], so we could not live in harmony so we separated … [in] early … 2011.

She said that the last time she had spoken to Xin Hua Zhu was in June 2012. Her home in Australia had been broken into whilst she was in China and amongst the items stolen had been her Chinese passport. She called Xin Hua Zhu, who was then in Australia, to ask whether he knew anything about the incident. She had not spoken to him since despite her best efforts to get hold of him.

Cindy Yan Xin said that Xin Hua Zhu did not have another name and she had never heard him being called “David”. Rather surprisingly, Cindy Yan Xin said that she did not know whether Lucy Li and Xin Hua Zhu were related. It turned out, when Lucy Li gave evidence, that Xin Hua Zhu was her first husband and the father of her son. However, Lucy Li said that he had nothing to do with Qing Qing or its business.

Cindy Yan Xin said that when she came to Australia she started working for Lucy Li. She lived with Lucy Li at 8 Baillie Court, Frankston and then in Dromana. Xin Hua Zhu did not live there with her before their marriage.

Lucy Li denied knowing any David Jie Li. So did Donald Dover and her son (Joel) Shao Chen Zhu. Lucy said that Xin Hua Zhu was her ex-husband. She denied he was called David Jie Li. Rather histrionically she said that she called him “stinky pig”. According to her, she had only seen Xin Hua Zhu with Cindy Yan Xin on one or two occasions. Lucy Li said that Cindy Yan Xin knew that Xin Hua Zhu was her ex-husband. She denied that he had ever worked in the business.

Donald Dover gave evidence that he did not recognise the person in the photograph of Xin Hua Zhu. He said that he had never met his wife’s ex-husband.

Shao Chen Zhu denied that either a person called David Jie Li or his natural father had ever lived at the Frankston address or the Dromana address.

It was put to Duff Li in cross-examination that Cindy Yan Xin and Lucy Li would give evidence that working in the factory at Amberley Crescent there was a person called David, who was not David Jie Li. Duff Li denied this and no such evidence was given by Cindy Yan Xin or Lucy Li.

I note that in Cindy Yan Xin’s defence to the amended statement of claim it was not said, in response to the allegation that David Jie Li had signed on behalf of Cindy Yan Xin a receipt for payments made to her, that no such person existed. Instead, it was denied:

that anything done by David Jie Li was done on her behalf.

There was one other piece of evidence which possibly pointed to the existence of David Jie Li. A company called ACTV Tech Pty Ltd (“ACTV Tech”) was incorporated on 21 April 2008, with a paid up capital of 1,000 $1 shares. Its original directors were Jie Feng who held 500 shares, Xiao Bing Li who held 250 shares and Shao Chen Zhu, Lucy Li’s son, who held 200 shares. Lucy Li, who at some time held 50 shares in the company, was a director between 1 May 2008 and 2 March 2009. A person by the name of Jei Li became a director on 2 March 2009. He became the owner of 250 shares in May 2009. Shao Chen Zhu, Jie Feng, Xiao Bing Li and Jei Li were still directors of the company when it was deregistered on 13 September 2010.

The plaintiff submitted that the person “Jei Li” was David Jie Li. Obviously the spelling was different. But there was some evidentiary basis for the submission. In one of Cynthia Yu’s files there was a Suncorp application for Small Business Finance form dated 2 July 2008 and signed by Cindy Yan Xin. The address for Cindy Yan Xin was Unit 1/24 Rose Street, Box Hill. Under the heading “Borrowing Entity” was the name “ACTV Tech Pty Ltd”. Cynthia Yu said that she thought this was “David’s company or something like that”.

In opening the defendant’s case, counsel told the Court that they definitely wanted Xin Hua Zhu to give evidence. Later, counsel said they now knew that Xin Hua Zhu had gone back to China and leave was sought to arrange for him to give evidence by video link. Later again I was told that they were arranging for him to come to Australia from China and time was needed to have his handwriting tested. This necessitated an adjournment of nearly three weeks. Then when the hearing resumed I was informed that Xin Hua Zhu had said he was not able to make any arrangements to come. No attempt was made to substitute evidence by video link.

On the basis of the above evidence, I am satisfied that a person known by the name David Jie Li did indeed exist, and that Xin Hua Zhu, Cindy Yan Xin’s possibly estranged husband, was the person known as David Jie Li. The following matters assisted me in reaching that conclusion:

(a)the evidence of Phillips Li, his parents and uncle that David Jie Li existed;
(b)the evidence of the more or less independent witnesses, Cynthia Yu, Ou Lu, Sanye Guo and Xian Li, that David Jie Li existed;
(c)the fairly consistent descriptions of the person known to the witnesses as David Jie Li;
(d)the use of the name “David” on Cynthia Yu’s file;
(e)the use of the name “David” on the invoice from Yarra Valley Refrigeration;
(f)the identification by seven witnesses that the person shown in the passport photograph of Xin Hua Zhu was known to them as David Jie Li;
(g)the denial by Cindy Yan Xin, through her counsel, that she had been married or had a partner;
(h)the statement by Cindy Yan Xin that she did not know whether Lucy Li and Xin Hua Zhu were related. It beggars belief that Cindy Yan Xin did not know that her husband was the ex-husband of her friend, Lucy Li; and
(i)the failure by Xin Hua Zhu to give evidence, either in person or by video link, denying that he was known as David Jie Li and had been involved in the events the subject of this dispute.

In reaching this conclusion I have not placed any weight on the evidence concerning a mobile telephone. Lin Qiao and Duff Li gave evidence that she had provided a mobile telephone to David Jie Li when he was working for them. Its number was 0433 781 083. The records for that number, which was in the name of Lin Qiao, for the period between 9 October 2008 and 3 February 2009 were tendered. They showed 126 calls to Lucy Li and 37 to Cindy Yan Xin. But that does not prove that the calls were made by David Jie Li. Lin Qiao may well have made them. Cindy Yan Xin gave evidence that Lin Qiao sometimes, but “not very often”, contacted her by telephone out of working hours. This could explain the unusual times at which some of the calls were made to Cindy Yan Xin’s number. She denied that this mobile telephone was used by Xin Hua Zhu. I also note that this number was not that given by “David” to Cynthia Yu.

Counsel for the defendant submitted that the plaintiff should have called David Jie Li as a witness and that I should draw an adverse inference against him for not doing so. I do not agree. The plaintiff’s case was, in effect, that David Jie Li, Lucy Li and Cindy Yan Xin had conspired together to cheat the plaintiff of his beneficial ownership of the Kirkham Road property. In those circumstances, it is hardly sensible to hold that the plaintiff should have called David Jie Li. Moreover, the question has to be asked why the defendant so strenuously resisted the suggestion that this person was David Jie Li. On her case, she could have admitted there was such a person, denied that he had any authority to act on her behalf and put forward the same arguments as to why the plaintiff’s case could not succeed. It seems to me that the reason why the defendant falsely denied the existence of David Jie Li was that admitting that he was involved undermined her defence to the plaintiff’s claim, particularly when it turned out that Xin Hua Zhu, Cindy Yan Xin’s possibly estranged husband, was the person known as David Jie Li.

The Alleged Sale of the Business to Qing Qing

In her first affidavit, Cindy Yan Xin stated that in or about September 2007 Lin Qiao advertised the business for sale in a Chinese newspaper. She said that at that time she went to see Lin Qiao, who told her she wanted to sell the New Field Soya-Bean Food Products business because she was recently divorced and wanted to stop working there. She said that Lin Qiao showed her a copy of her divorce certificate. She also said that Lin Qiao told her that the business was owned by Duff Li’s brother in China, Xiao Bing Li, also known as Philips X Lee/Li. It was not put to Lin Qiao in cross-examination that she was recently divorced.

When Cindy Yan Xin came to give her evidence she corrected this part of her first affidavit. She said it was Lucy Li and not her who had taken all these steps and negotiated with Lin Qiao. The explanation for the false statements in the affidavit was that it was prepared in a “rush”. However, this basic and glaring mistake in the first affidavit was not corrected in either of Cindy Yan Xin’s following three affidavits, even though other mistakes were. Cindy Yan Xin agreed in cross-examination that her second affidavit had been prepared after she had sat down with her solicitor, Mr Lim, and gone through the plaintiff’s affidavit paragraph by paragraph in Mandarin giving him instructions when she disputed something. She agreed that on this occasion there was no rush.

In her affidavit in this proceeding sworn on 30 April 2012, Lucy Li made no mention of the glaring error in Cindy Yan Xin’s first affidavit. This was despite the fact that Lucy Li referred to Cindy Yan Xin’s first affidavit and corrected another mistake. Lucy Li did say, however, in her affidavit that she met Lin Qiao to discuss the purchase of the business from Xiao Bing Li and that Lin Qiao told her that Xiao Bing Li was Duff Li’s brother. Lucy Li gave evidence that this meeting took place in about September 2007. Lucy Li said that she heard from a friend that the business was advertised for sale in a Chinese newspaper. Lucy Li said that after speaking to Lin Qiao she spoke by telephone to Cindy Yan Xin and told her about the possibility of buying the business. After thinking about it, Cindy Yan Xin rang her back and agreed to go ahead.

Lin Qiao denied ever advertising the business for sale. She said that the suggestion was ridiculous. It was not her business to sell. The advertisement was never produced.

Cindy Yan Xin gave evidence that in about October 2007 Lucy Li contacted her and “mentioned that one business was available which was suitable for my business migration purpose”. Cindy Yan Xin said she was interested. Lucy Li told her later that “she had already signed some sort of agreement with the other side” and that Cindy Yan Xin had better get her money ready. Cindy Yan Xin said that before she came to Australia she had already intended to do some sort of business so she transferred the money she had borrowed against the security of her house in China, about 980,000 Chinese yuan or renminbi (“RMB”), into her parents’ account.

Cindy Yan Xin further said in her first affidavit that on or about 12 October 2007, Lin Qiao arranged for a contract of sale of the business to be signed. She said that the contract was between Xiao Bing Li, also known as Phillips X Lee/Li, “who was then still in China”, and “our company”, Qing Qing, and that the purchase price was $150,000. She produced as an exhibit to her affidavit “a copy of the Contract of Sale” but it was missing the first two pages and therefore had no signatures. It consisted of the Particulars of Sale on page 3, general conditions on pages 4 to 9, special conditions on pages 10 to 15, three schedules on page 15, a Schedule of Fixtures, Fittings and Equipment as the next page, a 2006-2007 rate notice as the next page, a Certificate of Audit dated 22 January 2008 as the next page and an invoice dated 16 August 2007 from the agent, Collins Commercial, to Duff Li and Lin Qiao, the tenants of the Amberley Crescent property, as the last page. In the Particulars of Sale the vendor was stated to be Phillips X Lee/Li. The Certificate of Audit stated that “Newfield Soy Products Pty Ltd” had been audited to the requirements of the Victorian Food Act 1984 and certified that the business complied with the requisite food safety standards. The address of that business was not given.

The defendant’s counsel sought to put what was said to be the original of the contract of sale to Lin Qiao. This was a bound document. It had the first two pages included. On the first page the vendor was again named as Phillips X Lee/Li. On the second page Phillips X Lee/Li, Lucy Li and Cindy Yan Xin had purportedly signed on 10 October 2007. Other additional pages were a Certificate of Registration of the business name dated 23 April 2007, and Certificate of Registration of the Amberley Crescent property under the Food Act dated 14 January 2008. The inclusion of the two documents respectively dated 14 and 22 January 2008 meant that either the so-called original was a false document or it had not been signed in October 2007. Even after this was pointed out, the defendant’s counsel put to Lin Qiao that this was the document which she gave to Lucy Li to sign in October 2007. He said that these were his instructions from Lucy Li.

Lucy Li later gave evidence of different events in an attempt to explain how this apparent impossibility occurred. She said that what was signed on 12 October 2007 was “only a few pages” not a formal contract. She could not remember how many pages there were, but was “sure” the schedule of fixtures and fittings was included. Lucy Li said that Lin Qiao produced two copies of the “contract” with Phillips X Lee/Li’s signature already on them. Lucy Li signed the two copies of the “contract” and Lin Qiao then took both of them away. Lucy Li was unable to give a satisfactory explanation why she did not retain one set of the papers as evidence of what her company had just purchased. She suggested that Lin Qiao had said there were “a lot of things that have not been done yet”. But she also said that she thought she needed two signatures on behalf of Qing Qing, which would have been a reason to keep both copies and then return one to Lin Qiao when she had obtained the second signature.

Lucy Li said that on 1 March 2008 Lin Qiao showed her two copies of the bound contract. She said that she kept one copy and Lin Qiao took the other away. Cindy Yan Xin said that she signed two copies of the bound contract in May 2008. She said that Lucy Li and Lin Qiao were present when she signed. The date and the other two signatures were on the document when she signed.

Having Cindy Yan Xin sign a contract which had already been performed was said to have been done to help her immigration application. Surely better evidence for that purpose would have been proof of Cindy Yan Xin paying the $150,000 to purchase the business. Lucy Li said that it was a loan by Cindy Yan Xin to Qing Qing. Donald Dover said the same. But there was no document produced showing that a written loan agreement between Cindy Yan Xin and Qing Qing had been entered into. When asked what the point of signing was, when allegedly the business had already been transferred and the purchase price paid, Cindy Yan Xin said:

Well I signed this document looks … more reasonable to me.

Cindy Yan Xin also said that the two copies she signed were taken by Lucy Li because it was something to do with the company. She suggested a copy of the bound agreement may have been given to, and retained by, Mr Wong. However, Lucy Li said that she kept one copy and gave the other one to Lin Qiao.

Donald Dover said his wife showed him a copy of the bound contract in March 2008. He did not sign it as the second director of Qing Qing. Instead, Lucy Li told him that she had to get Cindy Yan Xin’s signature when she arrived. Donald Dover said that he remembered the time he saw it because it was after the settlement of the purchase of the business.

There was no satisfactory explanation of why the incomplete “contract” and not the bound copy of the contract was exhibited to Cindy Yan Xin’s first affidavit. Counsel simply said that it had been “overlooked”. That seems highly unlikely given its importance to the defendant’s case. The bound copy of the contract did not appear until it was exhibited to Lucy Li’s affidavit, sworn on 30 August 2012 in proceeding no SCI 2012 04578. Prior to that, it was not exhibited to any of Cindy Yan Xin’s four affidavits nor was it exhibited to Lucy Li’s affidavit in this proceeding. The plaintiff’s counsel submitted that the obvious explanation was that the bound copy was fabricated and that the person putting it together had mistakenly included the two 2008 documents.

Lin Qiao was asked to look at only the first 15 pages of the alleged original Contract of Sale. She said that she had never seen that document before and had not given it to Lucy Li. She said that she did not know Lucy Li in October 2007.

Lucy Li gave evidence that about the end of March 2008 when she was at the Amberley Crescent factory Lin Qiao introduced her to a man as Xiao Bing Li, the person from whom Qing Qing had bought the business. She said, however, that the person she met was not the Xiao Bing Li who gave evidence by video link from China.

Xiao Bing Li gave evidence that he never sold the business. He said that he closed it down in August 2008. He denied that it was his signature in the bound copy of the contract of sale. He said that he did not know Cindy Yan Xin, Lihua Li, Donald Dover or David Jie Li and had never heard of the company Qing Qing.

The Particulars of Sale referred to a deposit of $15,000, to a maximum stock value of $20,000, and to a settlement date of 1 March 2008. Cindy Yan Xin said in her first affidavit that “on or about 1 March 2008 I paid the full purchase price of $150,000 and the cost of stock to Xiao Bing Li aka Phillips X Lee/Li and Qing Qing took over the business”. No further details were given of this transaction in her affidavits. When asked by me about how much she had paid for the stock, Cindy Yan Xin replied that she thought the $150,000 included the stock. This was not what the contract said and was not what she had sworn in her first affidavit. Cindy Yan Xin agreed that she had never met the man who claimed to be Xiao Bing Li or Phillips X Lee/Li.

When Cindy Yan Xin gave evidence, she attempted to say that her parents had paid Xiao Bing Li, in China, with her money on the due date for settlement, 1 March 2008. Cindy Yan Xin said that Lucy Li gave her Xiao Bing Li’s contact number which she passed on to her parents in China so that they could pay Xiao Bing Li in China. No records of the parents’ account, showing this money going into and out of the account, were produced. Cindy Yan Xin said that she could not make the payment herself as she was in Australia on that date. This was obviously correct but was contrary to Lucy Li’s and Donald Dover’s evidence that Cindy Yan Xin did not arrive in Australia until May 2008.

To show that she had the $150,000, Cindy Yan Xin produced in re-examination a “multi-functional account book” in her name with the Shenzhen Development Bank Co Ltd. It was not an original. The three pages were all photocopies. Cindy Yan Xin said that she had inherited her grandmother’s house and she used that property as a security to borrow RMB950,000 (equivalent of $150,000) from the bank. The third page of this exhibit showed an advance of RMB950,000 on 14 June 2007 which was withdrawn in three amounts that day (RMB530,000, RMB400,000 and RMB20,000). RMB20,000 was repaid into the account on 12 July 2007. There followed a number of smaller debits and credits, most of them occurring after Cindy Yan Xin arrived in Australia. The last entry on the page was dated 14 February 2008.

The defendant’s reliance on this document was puzzling. According to the bank book, the advance was made and the funds withdrawn before there was any talk of Cindy Yan Xin purchasing, or lending money to Qing Qing to purchase, the business in Australia. Further, there was no proof that this amount of money was paid to Xiao Bing Li on 1 March 2008. There were no bank records and no receipt. Moreover, there was no proper documentary proof that this third page actually related to Cindy Yan Xin’s bank account although it probably does.

None of these complicated financial dealings were mentioned by Cindy Yan Xin in any of her four affidavits.

Lucy Li gave evidence, almost as a throw away line, that Lin Qiao had said to her that “the other side, talking about China, received the money”. This was never put to Lin Qiao and I do not accept that it was said.

Counsel for the defendant suggested that two cash payments into the plaintiff’s Citibank account were the funds paid for the purchase of the business being returned to Australia. They were the sum of $100,000 on 28 March 2008 and the sum of $80,000 on 31 March 2008. However, the plaintiff’s counsel pointed out that on 20 March 2008, Lin Qiao had sold her home at 4 Hollygreen Drive, Wheelers Hill for $530,000. Out of the settlement proceeds, the sum of $264,491.15 was paid to Phillips Li. That amount was paid into his Westpac bank account on that day, increasing the credit balance to $265,583.49. On 28 March 2008, the sum of $100,000 was withdrawn from the plaintiff’s Westpac bank account. On 31 March 2008, a further sum of $100,000 was withdrawn from the same account. The two withdrawals from the Westpac bank account left it with a credit balance of over $64,000. The two deposits into the Citibank account reduced a debit balance of about $200,000 to one of about $20,000. By a redraw of $130,000 on 11 April 2008 and one of $55,000 on 7 May 2008, the debit balance of the Citibank account was increased to over $200,000. In my opinion, these transactions do not assist the defendant’s claim to have paid $150,000 for Qing Qing to purchase Xiao Bing Li’s business.

Counsel for the defendant made much of the fact that both versions of the contract between Xiao Bing Li and Qing Qing contained a list of equipment which matched the list contained in the contract between Duff Li and HVA and Xiao Bing Li. It was submitted that the presence of this page proved that the contract for the sale to Qing Qing had come from Lin Qiao. How else could it have been in an October 2007 contract? But it was not until 3 June 2011, when the document was included in the partial contract exhibited to Cindy Yan Xin’s first affidavit, that I can be sure that Cindy Yan Xin or Lucy Li had possession of it. There could be any number of explanations for either or both of them having possession of this document prior to 3 June 2011. For example, there may have been a passing of a copy of this document to Qing Qing when the lease was transferred in May 2008. The same argument applies to the other documents found in the partial contract and to the similarity in the details of the lease in the two contracts.

Lin Qiao also made the point that some of the equipment sold to Xiao Bing Li in April 2007 had been thrown away a few months later. Thus, the list of equipment in the alleged October 2007 contract would not, in any event, have been the same. But the defendant’s case was that this contract was prepared by Lin Qiao and she may not have bothered to update the schedule of equipment from one contract to the next.

Cindy Yan Xin said in her fourth affidavit:

Since settlement of my purchase of the Property in September 2008 until 10 July 2009, I made the mortgage repayments every month to BankWest and collected rent from Qing Qing.

This was obviously incorrect as Qing Qing only made the two payments. In any event, why would Qing Qing be paying her rent until July 2009 when, according to Cindy Yan Xin, Duff Li had forcefully taken possession of the property in late January 2009? Cindy Yan Xin agreed in cross-examination that this statement “was not right”. This shows confusion on her part as to her story.

In her evidence, Cindy Yan Xin said that she funded the payment of the monthly instalments on her BankWest loan from her wages. She said that she worked for the Li family between December 2008 and April 2009. She said she had difficulty finding another job, so she continued to work at that business so that she could earn enough money to pay the BankWest loan. She said that she was paid about $12 per hour and agreed that for a 40 hour week she would receive about $480 gross. She then said that she had two jobs – working in the tofu business and as a waitress. Cindy Yan Xin said that her weekly take home pay, after tax, from both jobs was between $700 and $800 per week. She agreed that monthly it was about $3,000. She said that she did not have much in the way of expenses because she was living at Lucy Li’s place. In re-examination, Cindy Yan Xin added “savings” as a source of funds for her payment of the monthly instalments. The above evidence does not, in my opinion, support her claim to have funded the monthly instalments prior to May or June 2009, when she defaulted.

In cross-examination, Cindy Yan Xin said that at this time she was “really hard up with money”. She stated that “one of the reasons” for stopping payment was to force the Li family to pay rent. She agreed that she had taken no steps to evict them from the property. She said that she found them “hard people to deal with”.

After resolution of the Notice of Demand, Cindy Yan Xin’s BankWest bank statements show the following payments, described as “Cheque Deposit at Fountain Gate”, in reduction of her loan:

16/09/2009 $2,300.00

19/10/2009 $2,400.00

16/11/2009 $2,300.00

21/12/2009 $2,300.00

19/01/2010 $2,350.00

22/02/2010 $2,350.00

22/03/2010 $2,400.00

19/04/2010 $2,400.00

20/05/2010 $2,350.00

21/06/2010 $2,500.00

Phillips Li gave evidence that he or his mother had continued to pay the monthly instalments on the BankWest loan as set out above and produced receipts from BankWest for most, if not all, of the “Cheque Deposits at Fountain Gate”. The Li family has continued to pay the monthly instalments on the loan.

There was also one payment of $1,000.00, described as “Cash Deposit at Hornsby Store” on 14 March 2010, which was credited to Cindy Yan Xin’s BankWest account on 15 March 2010. This may have been paid by Cindy Yan Xin, but she was not asked about it.

The dispute about the non-payment of the mortgage instalments was followed by the issue of the writ on 15 September 2009.

Cindy Yan Xin said that each of the monthly amounts paid by the Li family to meet the interest due on her loan was only about half what they should have been paying by way of rental. She said the rent should be about $4,500 per month. Her explanation as to why she did not sue or counterclaim for possession or for unpaid rent if the full rent was not being paid was confusing and unconvincing.

The plaintiff’s case was that he or his family had also paid all outgoings on the Kirkham Road property from September 2008. Phillips Li produced an Owners Corporation Fee Notice for the Kirkham Road property for the period from 1 November 2008 to 31 October 2009 in the sum of $3,042.90, and a receipt for payment of this amount, due on 1 January 2009, on 2 June 2009. He also produced accounts from South East Water for the Kirkham Road property due June 2009, September 2009, June 2010 and September 2010, and receipts for payment of the respective amounts of $967.05, $951.10, $1,122.45 and $1,186.45 in these months. I am satisfied that all of the above payments were made by the Li family. But this does not establish that the Li family has paid all of the outgoings in respect of the property. Most of the above payments were made after August 2009, leaving a gap for the period commencing 19 September 2008. Further, the rates for the 2010, 2011 and 2012 years were outstanding at the time of the hearing.

In her first affidavit, Cindy Yan Xin said that Phillips Li and Duff Li refused to pay rent to her or to pay any outgoings for using the Kirkham Road property. She said that Duff Li said that Phillips Li owned the property because he had provided the $120,000 paid by Lin Qiao to Cindy Yan Xin. She said that she had, therefore, paid all the water rates, Council rates and body corporate fees for the Kirkham Road property between September 2008 and May 2011. But she exhibited no documents to her affidavits in support of this claim, although she was able to show, when giving evidence, that the 2009 Council rates of $1,912.91 were paid by her on 2 March 2009 using her ANZ Gold credit card. But there was no evidence that she had paid any other outgoings.

In my opinion, the following facts from the above analysis point to the conclusion that the plaintiff had met all of the instalments on the defendant’s loan and paid some of the outgoings as the beneficial owner of the Kirkham Road property and not the tenant:

(a) the receipt for four payments, exhibit 10, signed by Cindy Yan Xin;
(b) the receipt for four payments, exhibit 11, signed by David Jie Li;
(c)the fact that Lin Qiao had prepared these receipts and retained possession of them;
(d)the efforts Lin Qiao made to ensure that she could keep making the monthly instalments;
(e)Cindy Yan Xin’s extraordinary statement that she deliberately stopped making the loan repayments;
(f)the inconsistencies in Cindy Yan Xin’s evidence about how she funded the loan repayments; and
(g)the failure by Cindy Yan Xin to seek possession of the property or the alleged unpaid rent for a period of about four years (up to the end of the hearing).

The Credibility of the Witnesses

Before considering the final topic, I should say something about the credibility of the witnesses. Duff Li and Lin Qiao were the plaintiff’s main witnesses as he had very little personal involvement in the relevant events. However, he did give evidence and I generally found him to be a credible witness.

Whilst I accept much of the evidence given by Duff Li and Lin Qiao, there were contradictions internally and between each other. But generally this does not apply to the critical areas of evidence discussed above. Where on these critical issues their evidence conflicted with the evidence of the defendant and her witnesses, I prefer the evidence of Duff Li and Lin Qiao. However, my criticism that I was not being told the full story applies to these witnesses.

One particular attack was made on Lin Qiao’s reliability as a witness. Both Lucy Li and Cindy Yan Xin alleged that Lin Qiao was in receipt of Centrelink welfare payments and therefore that she could not have lent Lucy Li $200,000. In opening, the defendant’s counsel said that they had “evidence of that”. On the second occasion Lin Qiao gave evidence she was asked whether she had “at any time” (my emphasis) been “on welfare payment”. She became very agitated but appeared to say she had. She was then asked what was the basis for a payment from the government. Her answer was to the effect that she was interviewed and sometimes she received a payment and sometimes she did not. The generality of the first question meant that the answer did not rule out that Lin Qiao could have had $200,000 to lend to Lucy Li. Certainly there did not appear to be any shortage of assets belonging to the Li family.

The defendant was not an impressive witness. Her evidence was full of contradictions and she often resorted to saying that she did not know the relevant facts. This may well have been true because I was left with the distinct impression that she had really been a pawn in the hands of people such as David Jie Li and Lucy Li. She seemed prepared to do whatever she was told, regardless of the consequences to her credibility.

I am afraid to say that I have great difficulty in accepting any of Lucy Li’s evidence on the critical issues. In my opinion, she told many untruths, as set out above. I also consider that her husband, Donald Dover, was not telling the truth when he supported her evidence on critical issues. He gave the appearance of knowing what he had to say and simply saying it.

It is not necessary to say anything specific about the plaintiff’s other witnesses. I have previously indicated that I regarded them as witnesses of truth.

Subsequent Transactions

Duff Li’s conduct in lodging caveats over the Kirkham Road property and Lucy Li’s Dromana property was rightly criticised by counsel for the defendant. Members of the public must understand that they cannot lodge caveats based on false claims and rely on the potential difficulties for the owner in removing the caveat as bargaining chips in a dispute.[7] Duff Li had no basis for lodging caveats based on signed Deeds of Trust. There were no such documents. Duff Li said that he did not tell the solicitors that Cindy Yan Xin had signed the Deed of Trust, he just told them that they had the agreement with Cindy Yan Xin. I do not accept that explanation for the wording of the caveats. His action in lodging the caveat over the Dromana property was even more reprehensible. I cannot emphasise enough that Duff Li’s actions in this respect did nothing to assist his son’s claim.
[7]Goldstraw v Goldstraw [2002] VSC 491, [39] (Dodds-Streeton J); Weingarten v Fletcher [2003] VSC 448, [5]; Maxwell v Moorabool Developments Pty Ltd [2004] VSC 392, [264].

However, in my opinion, the conduct of Lucy Li and to a lesser extent, Cindy Yan Xin, in respect of two other subsequent transactions was even more reprehensible. First, there was the cynical and deceitful attempt by Lucy Li to have the Kirkham Road property sold by the Sheriff. I consider that Lucy Li’s engagement of a debt collector to recover the amount allegedly owned by her friend Cindy Yan Xin was just a smokescreen. After all, Cindy Yan Xin said that Lucy Li discussed with her before suing her that she would be doing so and that Lucy Li also told her that once she got judgment she would try, through the services of the Sheriff, to sell the Kirkham Road property.

Lucy Li could not really explain why Qing Qing had not sued the Li family for $260,000 ($30,000 plus $230,000) when she had sued her friend, Cindy Yan Xin, for $82,500.

Had it not been for the warning notice from the Registrar of Titles and the swift reaction by the plaintiff’s lawyers, this plan might have succeeded with the property being sold and the proceeds disbursed before the plaintiff knew what was happening. Moreover, all of these steps were taken when both Lucy Li and Cindy Yan Xin knew at the time:

(a)       the County Court proceeding was commenced,
(b)      the default judgment was entered, and
(c)       the warrant was issued

that there was an existing judgment of this Court declaring that Phillips Li was the beneficial owner of the Kirkham Road property and that unless and until that judgment was set aside Cindy Yan Xin had no beneficial interest in that property.

Secondly, there was the even more outrageous episode of October 2011. Lucy Li said in her affidavit in this proceeding that all fit-out works were undertaken by Qing Qing on its own behalf as the owner of the business conducted at the property. She said that Qing Qing did not receive any payment from the plaintiff’s family and that she did not agree to set off the costs of the fit-out works against the alleged $200,000 loan. In her affidavit in the other proceeding Lucy Li had sworn that in addition to the Li family still owing a further $30,000 for the purchasing back of the business, it owed Qing Qing $230,000 for the fit-out. Lucy Li said:

Qiao Lin and family have never paid the $30,000 balance nor have they reimbursed Qing Qing for $230,000 spent on refurbishment of Kirkham Road.

Contrary to this evidence, on 10 October 2011 K & P Legal Services Pty Ltd on behalf of Qing Qing lodged a caveat dated 5 October 2011 over the Kirkham Road property in which Qing Qing claimed “an equitable interest as chargee pursuant to a Deed made between the Caveator and the Registered Proprietor dated 4^th day of October 2011”. The Deed dated 4 October 2011 referred to an agreement dated 28 September 2008 pursuant to which it was said that Cindy Yan Xin owed Qing Qing $230,000 for the cost of the fit-out of the Kirkham Road property. The Deed contained agreement by Cindy Yan Xin to pay the debt of $230,000 plus interest “at the rate of 25% per annum calculated daily beginning from the date of this Deed”. The Deed further provided as follows:

7Both parties agree that Qing Qing shall be entitled to lodge a caveat over the Land whilst the Land is subject to a mortgage or if the Land is not subject to a mortgage, Qing Qing shall be entitled to hold the original title of the Land and to lodge a mortgage over the Land.

…
11Yan Xin represents and warrants to Qing Qing that no action, suit, investigation or proceeding is pending or known to be threatened against Yan Xin before any Court, Tribunal or administrative agency, the outcome of which, by itself or taken together with other such litigation, might have a material and adverse effect upon the financial status or solvency of Yan Xin.

How both Cindy Yan Xin, on her own behalf, and Lucy Li and Donald Dover, as the directors of Qing Qing, could enter into a Deed containing the last clause quoted above is quite extraordinary. Each of them knew that at that time there was an existing judgment of the Court declaring that Phillips Li was the beneficial owner of the Kirkham Road property and that unless and until that judgment was set aside, Cindy Yan Xin had no beneficial interest in the Kirkham Road property. Cindy Yan Xin said that she understood that the Deed gave Qing Qing security rights over the Kirkham Road property. She said she signed:

Because I really owed … the money, so I just, … decided to do so.

The next day Cindy Yan Xin gave evidence throwing doubt on whether she had in fact signed the Deed. It was not available in Court, as she said she had left her copy at her home in New South Wales, and Lucy Li had not yet provided a copy to Cindy Yan Xin’s solicitors. When pressed about whether or not she had signed the Deed, Cindy Yan Xin replied:

Better ask the company.

Lucy Li had great difficulty in explaining how these documents came to be entered into. Referring to the Deed dated 4 October 2011, she said that Qing Qing had spent a “lot of money on the renovation” and she had “sent a lot of the invoices to Yiwei” (presumably she meant the plaintiff and his family) to no avail. She said that when she got the promise from Cindy Yan Xin, they signed the agreement.

Lucy Li said that she did not think about the effect of the judgment in favour of the plaintiff at the time the Deed was prepared. She said that Qing Qing had paid out a lot of money and the intention was to protect Qing Qing’s position.

Donald Dover said that the fit-out “being an asset of the building, Yan Xin would owe us the money for the fit-out”. He said he was told this was agreed in September 2008.

The agreement dated 28 September 2008 was an even more extraordinary document. It provided that Qing Qing would carry out and Cindy Yan Xin would pay for the works described in the special conditions. Article 1 of those special conditions contained the Scope of Work. It was a quite detailed description of the fit-out work required to have the Kirkham Road property registered as suitable food manufacturing premises by the Council. Article 2 provided that the work was to be “substantially completed” no later than 28 February 2009. Article 3 provided that this was a “Fixed Price Contract” and that Cindy Yan Xin agreed to pay a total price of $230,000 ”for construction of the internal fit-out of the building” within 90 days of the final inspection by the Council and registration of the premises “to allow food manufacture”.

This document was prepared by Donald Dover. He said that everything changed in September 2008, but he maintained that no fit-out work was done for the Li family. No mention was made of this agreement allegedly signed in September 2008 until after the hearing had been going for many days.

I do not accept that this was a genuine document entered into on 28 September 2008. I do not understand why Cindy Yan Xin as the purported owner/landlord of the Kirkham Road property would have agreed to be liable for the cost of the fit-out when it was said that the Li family was liable for this debt. I reject the idea that this was a fixed price contract which, as it happened, appears to have miraculously anticipated the claimed cost to Qing Qing - $230,000 compared with $229,397.09. Further, if after 28 September 2008 Qing Qing was carrying out this work at Cindy Yan Xin’s expense, why are there so many invoices where payments have been made by the Li family.

Lucy Li said that an independent person assessed that the cost of renovating the premises as a food processing plant would probably be $350,000. They thought that if Qing Qing did the work the cost might be $200,000 or a bit more. She said that at the time they did not think about the ramifications to either Cindy Yan Xin or Qing Qing if the fixed price turned out to be in error.

Donald Dover said that in September 2008 he had “a rough idea” of the likely final cost because nearly everything had been purchased by then. In cross-examination, Donald Dover said that they came in “fairly close” to the figure of $230,000 for the fit-out cost. Yet in re-examination he said that the actual costs were more than $100,000 extra!

I am satisfied that the Deed dated 4 October 2011 and the agreement dated 28 September 2008 were both created in about early October 2011 by Cindy Yan Xin, Lucy Li and Donald Dover in a desperate attempt to obtain some payment to them should Cindy Yan Xin’s defence of the plaintiff’s claim not be successful because either her application to set aside the judgment in favour of the plaintiff was rejected or she lost at any eventual rehearing.

In my opinion, as is only appropriate, these two reprehensible attempts to deprive the plaintiff of the full fruits of his claim should he be successful, have been extremely damaging to the credibility of Cindy Yan Xin and Lucy Li. The same applies to Donald Dover given his clear involvement in the second transaction, even if it has not been shown that he had any involvement in the first.

Conclusion

In the above discussion I have sometimes said that the established or undisputed facts of a particular topic could fit either of the competing versions. Nevertheless, looking at the dispute as a whole I have come to the conclusion that the plaintiff has made out his claim that the defendant holds the Kirkham Road property on trust for him. I have reached that conclusion for the following reasons:

(a)The findings that David Jie Li existed and that Xin Hua Zhu was the person known as David Jie Li were important because according to the plaintiff’s case David Jie Li played a key role in the events leading to this dispute and on the other hand the defendant’s case was weakened by the false denial of David Jie Li’s existence.
(b)The finding that Qing Qing did not purchase Xiao Bing Li’s tofu business was important because the allegation to the contrary was a key plank in the defendant’s explanation of the sources of the funds paid at the settlement of the purchase of the property. Without the alleged purchase there could be no alleged re-purchase and therefore no reason for the Li family to be paying $120,265.88 at settlement.

(c)The finding that Lucy Li did not receive the $200,000 bank cheque from the false Xiao Bing Li was important because it was another key plank in the defendant’s explanation of the sources of the funds paid at the settlement. If, as I found, Lin Qiao did lend the $200,000 to Lucy Li then this made the plaintiff’s case about the source of the $82,800 that much more likely and undermined the defendant’s case that she had borrowed these funds from Lucy Li.
(d)The evidence of John Guastella and Cynthia Yu confirmed the primary role played by Lin Qiao and supported her version of who did what with respect to the purchase of the Kirkham Road property.
(e)I am satisfied that I should accept the evidence of Duff Li and Lin Qiao concerning the discussions which resulted in the trust arrangement.
(f)I am also satisfied that it was the Li family who provided the $150,265.88 needed at settlement in the way described by Lin Qiao.
(g)I am satisfied that I should find that the plaintiff or the Li family on his behalf made all of the payments referred to above as the beneficial owner of the property and not in some other capacity, such as tenant.
(h)The conduct of Cindy Yan Xin in participating in the reprehensible attempts by Lucy Li and, to a lesser extent, her husband to subvert the outcome of this proceeding destroyed what remained of her credibility as a reliable witness.

Because I have found on the facts that there was an express agreement by the defendant to hold the Kirkham Road property on trust for the plaintiff, it is not necessary to consider what other equitable remedies might be available to the plaintiff given the financial contributions he, or his family on his behalf, have made to the purchase of that property.

Orders

Once the parties have had an opportunity to read this judgment I will hear submissions on the form of final orders and on the question of costs. It seems to me that, in the circumstances, more detailed orders may be required than were previously made.

---

16/09/2009	$2,300.00
19/10/2009	$2,400.00
16/11/2009	$2,300.00
21/12/2009	$2,300.00
19/01/2010	$2,350.00
22/02/2010	$2,350.00
22/03/2010	$2,400.00
19/04/2010	$2,400.00
20/05/2010	$2,350.00
21/06/2010	$2,500.00

[2013] VSC 107

13 MARCH 2013