Liu v Harris

[2013] WASC 58

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   LIU -v- HARRIS [2013] WASC 58

CORAM:   KENNETH MARTIN J

HEARD:   17-26 & 28 SEPTEMBER 2012

DELIVERED          :   1 MARCH 2013

FILE NO/S:   CIV 1038 of 2009

BETWEEN:   YIMING LIU

Plaintiff

AND

GRAHAM PHILIP HARRIS
First Defendant

PRIMESTAR ENTERPRISES PTY LTD
Second Defendant

LONEPINE ENTERPRISES PTY LTD
Third Defendant

Catchwords:

Contract - Construction - Land subdivision projects - Profit division issues - Accounting issues - Corporate vehicles - Fiduciary relationship alleged - Three projects - Two completed - Land purchased - Third project not completed

Legislation:

Corporations Act 2001 (Cth), s 232, s 233

Result:

Judgment for plaintiff
Defendants' counterclaim dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr G D Cobby

First Defendant             :     Mr R J Nash

Second Defendant         :     Mr R J Nash

Third Defendant           :     Mr R J Nash

Solicitors:

Plaintiff:     Tang Legal

First Defendant             :     Clifton Tham

Second Defendant         :     Clifton Tham

Third Defendant           :     Clifton Tham

Case(s) referred to in judgment(s):

AMEV‑UDC Finance Ltd v Austin [1986] HCA 63; (1986) 162 CLR 170

Ashburton Oil NL v Alpha Minerals NL (1971) 123 CLR 614

Codelfa Construction v State Rail Authority (NSW) (1982) 149 CLR 337

CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1

Fazio v Fazio [2010] WASC 263

Fazio v Fazio [2012] WASCA 72

Fox v Percy [2003] HCA 22; (2003) 214 CLR 118

Government Employees Superannuation Board v Martin (1997) 19 WAR 224

Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216

Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483

Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435

Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821

John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1

JR Marine Systems Pte Ltd v Wavemaster International Pty Ltd (in liq) [2011] WASCA 16

McCourt v Cranston [2012] WASCA 60

Ngurli Ltd, Carinya Ltd, Fitzroy Ltd & Myall Ltd v McCann (1953) 90 CLR 425

Redhill Iron Ltd v API Management Pty Ltd [2012] WASC 323

Saraceni v Mentha [No 2] [2012] WASC 336

United Dominions Corporation Ltd v Brian [1985] HCA 49; (1985) 157 CLR 1

Western Exports Services Inc v Jireh [2011] HCA 45

Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285

Table of Contents

Introduction
Overview of the main issues
Sources of evidence at trial
The plaintiff's evidence

Mr Liu's evidence
The defendants' evidence
Graham Harris' evidence

The Gosnells Agreement:  written component

Observations as to the written part of the Gosnells Agreement

Lake Clifton Agreement:  the pleadings

Observations concerning clauses in the Lake Clifton contract

Resolution of the essential issue:  Lake Clifton

18 July 2006 Lake Clifton contract
Analysis:  Lake Clifton - Cap/residue profit agreements

The alleged fiduciary relationship
Deferred issues
The Swan View Agreement between Mr Liu and Mr Harris

The written Swan View Agreement document
Analysis and observations concerning the Swan View Contract
Interpretation of cl 9 in the Swan View Cooperation Agreement

The disputed $120,000
Gosnells:  Mr Liu's Goldfind Investment Pty Ltd loan
Primestar:  the second defendant
Lonepine:  Mr Liu's shareholding position via Primestar
More residual issues

Conclusion

KENNETH MARTIN J: 

Introduction

1. The first defendant, Graham Harris (Mr Harris) is an Australian citizen.  From 1999 ‑ 2005, he was living and working in Nanjing, China.  Some time in 2002 he was introduced to the plaintiff, Mr Yiming Liu (Mr Liu).  Mr Liu's first language is Mandarin and he has a very limited ability to speak, or to read and write, English.  Communications between Mr Harris and Mr Liu were usually facilitated through the medium of a translator, Huang Yao.  He was also known as Peter Huang (Mr Huang). 

2. Mr Huang made the initial introduction between the two men in China, at Nanjing (see par 6 of the further re‑amended statement of claim (the FRASOC) of 19 September 2012, which is admitted).  Mr Liu's and Mr Harris' business relationship began with some personal borrowings from Mr Liu by Mr Harris, or persons with whom Mr Harris was associated (see allegations in pars 9 ‑ 20 of the FRASOC). Those initial borrowing transactions provide background.  They are not particularly material to issues in this litigation.

3. Between 2003 and 2008, the parties' business relationship extended to land acquisition, subdivision, property construction developments and re‑sale projects in Western Australia, drawing upon some prior experience of Mr Harris, in Perth, in this field, and with Mr Liu providing seed capital.

4. The first Liu/Harris land subdivision project was the acquisition of land at 47 Harry Street, Gosnells for subdivision and re‑sale of units.  In or around May 2003, the parties agreed to undertake the project (the Gosnells Project).  The parties commenced the Gosnells Project which involved the intended subdivision of the land and the building of 13 residential units across the subdivided lots.  These were to be sold off for profit.  It is accepted that one of the Gosnells units (unit 6) was agreed to be taken (beneficially) by Mr Liu at the end of the project.  Unit 6 was completed.  At some point, Mr Liu received from Mr Harris a set of keys for unit 6.  Mr Liu returned them shortly thereafter to Mr Harris.  Mr Liu continued to reside in Nanjing, China.  It is accepted that unit 6 was eventually sold off in 2008.  Sale proceeds of approximately $300,000 were applied to a purchase of other Western Australian land, approved at that time by Mr Liu.

5. A second project between Mr Liu and Mr Harris concerned the acquisition of rural land south of Mandurah, in the locality of Lake Clifton (the Lake Clifton Project).  This was a more extensive project, the land being more expensive to acquire.  The plan was to subdivide and eventually sell off approximately 40 rural lots.  This Lake Clifton Project had originally been conceived between Mr Liu and a business associate, a Perth‑based colleague of Mr Harris, Mr Ramon (Ray) Osborne (Mr Osborne). 

6. Mr Osborne gave evidence in the trial for Mr Harris.  He was an accountant.  He met Mr Liu when Mr Liu had visited Perth in the company of Mr Huang and Mr Harris on other business. 

7. It appears that for a time after 2003 there were discussions between Mr Osborne and Mr Liu about a Lake Clifton land project, in which Mr Harris' role was (at best) to be something of a project manager.  Eventually, however, Mr Osborne's bankruptcy (of 9 July 2003, but not disclosed to Mr Liu until some time in 2006) generated the somewhat curious evolution of the Lake Clifton Project (the land not even being purchased yet) involving Mr Harris and a company associated with him, Northbush Nominees Pty Ltd (Northbush).  Northbush was subsequently deregistered in August 2006.

8. The Lake Clifton Project then proceeded as between Mr Liu and Mr Harris.  Eventually 40 rural lots were created.  All but three were sold off in the period between 2006 and late 2008.

9. The relationship between Mr Liu and Mr Harris foundered around June 2008.  This was after an acquisition of further land for a third property subdivision development project involving land at 1 Balfour Road, Swan View (the Swan View Project).  It had been proposed that 34 units be built and eventually sold across that subdivided property.  The Swan View land was acquired for approximately $2.4 million in March 2008.  After a serious row between Mr Liu and Mr Harris during meetings in Mr Liu's Perth hotel room at Burswood in June 2008, the parties were unable to proceed any further with the Swan View Project.  The Swan View land is still held.  The intended subdivision and sale project has not proceeded.

10. In this action, Mr Liu seeks relief grounded upon alleged contractual breaches by Mr Harris.  He also pursues equitable relief against Mr Harris and the second and third defendants on various grounds, including the asserted breach of a number of alleged fiduciary duties said to be owed to him by Mr Harris. 

11. Mr Harris counterclaims damages against Mr Liu.  He contends that in June 2008 Mr Liu wrongly repudiated the parties' agreement concerning the development of the Swan View land for the Swan View Project.

12. The matter is complicated by a number of factors.  The parties' pleadings are complex.  They span dealings extending across many years.  Both sides' pleadings assert binding and enforceable agreements, accepted to have been consummated as between Mr Liu and Mr Harris in relation to the three projects at Gosnells, Lake Clifton and Swan View. 

13. The case went to trial and was argued on that basis.  The parties, however, disagree about how their three core agreements came to be constituted.  It is contended, on both sides, as regards Gosnells and Lake Clifton, there were oral components to these agreements.  In circumstances where Mr Harris does not really speak or understand more than a smattering of Mandarin, and Mr Liu does not speak, understand or read English, discord over oral terms arises (as a comparison of the constituents of the parties differing as pleaded agreements, reflects). 

14. Mr Harris, whilst in China, met and married a Chinese woman, Ms Li Cai Hong (Ms Li).  In 2005 she returned with him to reside in Perth, Western Australia.  Ms Li was a witness at the trial.  She manifested a passable command of spoken English with a lesser ability to comprehend written English.

15. A further complicating factor is that the parties attempted to reduce their three core agreements, or parts thereof, to writing, by homemade documents written out both in Chinese and in English.  For the Gosnells and Lake Clifton Projects, these documents say that if there is a difference as between the Chinese and the English, the Chinese version is to prevail.  The parties' written agreements were not drawn with any professional assistance and suffer in consequence.  In many respects, the written documents present as unclear and difficult to understand.

Overview of the main issues

1. While he was living in China, Mr Harris was involved in the management of the Blue Sky Bar in Nanjing.  Mr Harris' Chinese‑born wife, Ms Li, ran and part‑owned that establishment.  Ms Li was a Chinese citizen.  She married Mr Harris in 2002.  Mr Harris returned to live in Western Australia in 2005.  He then brought Ms Li to reside with him in Perth. 

2. From that point, they made intermittent trips back to China each year.  The ownership and management of the Blue Sky Bar appears to have passed to Mr Harris' brother, Mr Laurence Harris.  He was another witness for the defendants during trial.  At trial, Ms Li told the court that she and Mr Harris were now separated and in the process of divorcing. 

3. Between 2003 and 2008, Mr Liu and Mr Harris became involved together in the three significant property acquisition and redevelopment projects concerning Western Australian lands at Gosnells, Lake Clifton and Swan View.  The parties' pleadings, as I mentioned, accept that enforceable contracts were entered as between Mr Liu and Mr Harris, in relation to projects at Gosnells (begun 2003), Lake Clifton (begun 2006) and Swan View (land acquired in March 2008, but the envisaged land subdivision and unit building plan did not proceed).

4. There are some significant features within the contractual relationships accepted to have been created as between Mr Liu and Mr Harris.  These features should be noticed at the outset:

   (1)Mr Liu and Mr Harris accept that the contractual arrangements concerning Gosnells, Lake Clifton and Swan View are governed by Australian law, in particular, the laws of Western Australia.  Accordingly, all questions of contractual formation and interpretation are to be resolved in accordance with Australian, not Chinese, contract law.  This is so, notwithstanding that it will soon be seen that the parties' written contractual documentation was invariably prepared on the basis of dual written documents composed in Mandarin and English, then signed by Mr Liu and Mr Harris.  None of these written documents, however, were professionally drawn.  They are very much home-made, backyard efforts, prepared by people without legal skills or training.  Failure to engage professional drafting assistance is a large contributor to the uncertainties which blight the present dispute.

   (2)Mr Liu seeks to go further than asserting merely contractual obligations owed to him by Mr Harris.  He contends for fiduciary obligations due to him by Mr Harris, and their breach giving rise to the further relief he seeks in equity.

   (3)The land acquisition and development projects at Gosnells, Lake Clifton and Swan View invariably involved the use of a corporate vehicle.  A company would acquire the land, borrow development funds, implement the subdivision development plan and building program, and then finally sell off all the subdivided properties for an expected end profit.  In the case of Gosnells, the corporation deployed for the purpose of implementing the project was the second defendant, Primestar Enterprises Pty Ltd (Primestar).  For the subsequent Lake Clifton Project the corporate vehicle eventually chosen was the third defendant, Lonepine Enterprises Pty Ltd (Lonepine).  The Lake Clifton Project, as I mentioned, looks to have been first conceived between Mr Osborne and Mr Liu.  Its gestation towards including Mr Harris as a party participant took some years.  For a period, the corporate vehicle under consideration for Lake Clifton was another company, Fairbridge Asset Pty Ltd (Fairbridge).  This corporation was associated with Mr Osborne, although Mr Harris looks to have held some shareholding interest, directly or indirectly, at some point in time.  There was a last minute change in July 2006 to use Lonepine instead of Fairbridge as the corporate vehicle. 

   For the anticipated Swan View Project of 2008, the vehicle ultimately chosen was again the second defendant, Primestar (the Gosnells Project having been completed by then).

   (4)There are issues in this litigation associated with the shareholdings of Mr Liu in both Primestar and Lonepine, as well as over the present board control of both those corporations resting with Mr Harris.  Essentially, Mr Liu complains that his initial 2003 majority personal shareholding position in Primestar was unilaterally and wrongfully diluted by Mr Harris, without Mr Liu's permission.  Mr Liu articulates the same dilution grievance as regards his former majority shareholding position in Lonepine.  Primestar initially had held 68% of the shares in Lonepine (hence indirectly giving majority shareholder general meeting control of Lonepine to Mr Liu, as long as Mr Liu held shareholding control of Primestar).  Allocations of further shares in both Primestar and Lonepine to Mr Harris, now see him presently hold majority shareholding control of both the defendant corporations.  Mr Liu challenges both the direct (as regards Primestar) and indirect (as regards Lonepine) dilutions of his majority shareholding position by the subsequent issues and allocations of further shares to Mr Harris, at Mr Harris' instigation.  Mr Liu says this was unauthorised, unlawful and done for the wholly improper purpose of Mr Harris gaining shareholding control of the two corporations, at Mr Liu's expense.

   (5)The Gosnells and Lake Clifton land acquisition, subdivision and sale projects appear to have been substantially completed by late 2007.  Surprisingly, given their antecedents, both appear to have been profitable in the end.  All borrowings, expenses and liabilities associated with implementation of the two land projects, which were undertaken under the close local supervision of Mr Harris, have been repaid to the lending institution for both, namely the Police & Nurses Credit Society (Police & Nurses).  Mr Liu, Mr Harris and Mr Huang had provided their personal guarantees in respect of the external development fund borrowing obligations entered into by Primestar and Lonepine.  Their guarantees were never called upon.

   (6)In ordinary circumstances, one would have thought that the annual financial accounts for Primestar and Lonepine across the relevant project periods would have provided a precise picture concerning the end profitability of the Gosnells and Lake Clifton Projects.  Unfortunately, proper accounts do not appear ever to have been kept or prepared.  The accounting situation, frankly, is a complete mess.  Mr Harris' accountant colleague, Mr Osborne, appears to have done some limited initial accounting work for Primestar and Lonepine.  Nothing approaching a level of reliable corporate accounts exists.  The accounting record position for the projects is wholly unsatisfactory.

   (7)Between 2003 and mid 2008, the three West Australian land acquisition and subdivision development deals concerning Gosnells, Lake Clifton and Swan View evolved and became interrelated.  That is particularly the case in respect of the position concerning Mr Liu's level of financial investment in each project and his guaranteed levels of profits out of, first Gosnells, then out of Lake Clifton.  A phenomenon of deal evolution in each project subsequently documented by laymen, in two different languages, using lay interpreters, has also made a significant contribution to the mess the parties now find themselves in. 

   (8)It is accepted that components of Mr Liu's capital investment and his guaranteed level of profit from the Gosnells Project, were consensually rolled across to become a part of his investment in the subsequent Lake Clifton Project.  Later still, some part of Mr Liu's guaranteed capital investment return (including his profit as derived out of the Lake Clifton Project) was re‑invested, again with his concurrence, in the Swan View land acquisition.  So also were proceeds of a sale of Mr Liu's allocated unit 6 at Gosnells.  That all gives rise to an acknowledged position that $1.5 million out of the approximately $2.4 million purchase price for the Swan View land in 2008, was contributed by Mr Liu from his share in proceeds of the Lake Clifton Project and from his unit 6 at Gosnells.

   (9)As regards the Gosnells Project, there is an issue over the level of Mr Liu's capital contribution, it being either, on the defendants' case, $916,656.43 or, on Mr Liu's case, $120,000 greater, at the amount of $1,036,656.43 (ts 783).  For Gosnells, Mr Liu was guaranteed by Mr Harris a fixed profit of $175,000, plus his receipt of one of the finished subdivided units at Gosnells (that is, unit 6, but it being sold in 2008, realising approximately $300,000).  So on Mr Liu's case (putting aside his beneficial receipt of unit 6 at Gosnells), the return of his invested capital, plus his guaranteed $175,000 profit from the Gosnells Project, would see him entitled to $1,211,656.43 (ignoring for the moment questions of interest).  Mr Harris' case is that Mr Liu's capital contribution to Gosnells was $120,000 less.  A lesser amount due to Mr Liu is attributable, on Mr Harris' case, to a subsidiary dispute about whether $120,000 received by Primestar should properly be classified as forfeited deposit monies from Chinese purchasers who did not proceed with the acquisition of properties at Gosnells, albeit the funds appear to have been advanced on their behalves via Mr Liu.  For reasons I provide separately at the end of these reasons, I am not persuaded the $120,000 funds, clearly emanating from Mr Liu in the first place, can be rationalised as forfeited purchaser's deposits to Primestar, in the way Mr Harris contends. 

   (10)Mr Harris also contends Mr Liu ultimately received more than his capital returned and a guaranteed profit of $175,000 in respect of Gosnells.  He contends Mr Liu first received $978,000, that is acknowledged to have been credited to Mr Liu, as a part of his capital contribution to the subsequent Lake Clifton Project.  There are two further amounts Mr Harris says Mr Liu received.  The amounts are first $7,718, said to have been paid for outgoings on Mr Liu's behalf in respect of unit 6 at Gosnells (see Mr Harris' witness statement at par 416 in exhibit 1, document 312 at page 1282).  Second is a further $160,000, said to have been paid on Mr Liu's behalf by Primestar from Mr Liu's Gosnells proceeds (as a loan by Mr Liu) to another corporation associated with Mr Harris, namely Goldfind Investments Pty Ltd (Goldfind). 

   (11)On Mr Harris' case, Mr Liu received out of Gosnells the return of his capital investment plus his guaranteed profit, in the total amount of $1,145,718.

   (12)Although there is dispute concerning the Gosnells Project over whether or not Mr Liu received all he was promised, as regards the return of his capital plus a fixed level of guaranteed profit of $175,000, there is no dispute as between the parties that Mr Harris was entitled to receive, after that level of return to Mr Liu, all the residual profits of the Gosnells Project.  The parties, as usual, reach an agreed position as to all Gosnells profit residue going to Mr Harris, in different ways.  According to par 42 of the FRASOC, a residual profit outcome for Mr Harris from Gosnells is reached by an express oral term, referred to as the October 2005 Gosnells Agreement.  The October 2005 Gosnells Agreement manifests in par 40 of the FRASOC in this way:

   In or about 19 October 2005, at a time when the construction of the 13 houses on the Gosnells Land was nearing completion, a further agreement partly written and partly oral was entered into between the plaintiff and the first defendant with respect to the Gosnells Project ('the October 2005 Gosnells Agreement').

   (13)One written term of the October 2005 Gosnells Agreement as contended for by Mr Liu, seen at par 41(j) of the FRASOC, is that (via cl 10 of the written document) 'all previous contracts signed would be terminated and cancelled when this contract becomes effective'. 

   (14)For the three defendants, par 42 of their further re‑amended defence and counterclaim (the FRADAC) appears to accept the oral term concerning the balance of the proceeds of sale of 12 houses on the Gosnells land going to Mr Harris, but with a qualification that the term was actually a term of the 'Second Gosnells Agreement'.  Paragraph 40 of the FRADAC identifies a Second Gosnells Agreement as a partly oral and partly written agreement comprising two oral components (the first in February 2005 and the second by reference to par 42 of the FRADAC) as well as a written agreement signed by Mr Liu and Mr Harris on 19 October 2005.  The defendants set out their as contended terms of the Second Gosnells Agreement at par 41, which significantly, by par 41.7, is also in terms:

   [A]ll previous agreements between the parties in relation to the Gosnells Project were terminated and cancelled.

   By par 41.4 of the FRADAC, the defendants contend Mr Harris 'was to take the balance of the [Gosnells] profit, after all costs were paid and the plaintiff's investment capital and profits were paid'.  It is not clear from par 41 of the FRADAC whether the term concerning Mr Harris' entitlement to the balance of profits in the Gosnells Project forms part of a written agreement, or whether the defendants accept that this was an oral component within partly oral and partly written arrangements. 

   (15)A term as to Mr Harris' residual Gosnells profit entitlement cannot be ascertained in a written document.  Therefore, an accepted term as to the profit residue from Gosnells being for Mr Harris' benefit looks to have been verbally agreed. 

   (16)In context, the overall significance of such a profit residue term, however derived, is not so much in relation to Gosnells, although that is of some importance.  Rather, its significance is more as being a part of an underlying background and surrounding framework for the same parties' (Mr Liu and Mr Harris) subsequent 2006 agreement concerning Lake Clifton and the profit division arrangements reached for that project.

   (17)As regards Lake Clifton, the formative arrangements evolved over time (2004 ‑ 2006) and are messy.  There is no dispute as between Mr Liu and Mr Harris, that there was brought into existence a binding and enforceable agreement for a Lake Clifton Project (the Lake Clifton Agreement) involving Lonepine as the corporate vehicle.  Nor is there dispute that Mr Liu made a total capital contribution towards Lake Clifton of $1,378,000, or that Mr Liu, in addition to the return of his capital, was to receive 'income' or 'proceeds' of $900,000 out of Lake Clifton.  All up, that amounted to an end return of funds for Mr Liu, guaranteed by Mr Harris, of $2.278 million (putting aside questions concerning entitlements of Mr Liu to interest).  That 'full amount' was guaranteed by Mr Harris to Mr Liu out of Mr Harris' own assets and earnings, and also out of the assets and earnings of the third defendant, Lonepine. 

   (18)It is accepted $978,000 of Mr Liu's total agreed $1.378 million capital contribution to Lake Clifton, was from his share of the proceeds from the Gosnells Project.

   (19)What is most fundamentally in dispute between the parties concerning Lake Clifton is whether, after the repayment to Mr Liu of a 'total amount' or a 'full amount' ($2.278 million) Mr Liu then enjoyed any further entitlement to a share in any remaining Lake Clifton profits, or whether after $2.278 million was received (like for what was earlier agreed orally for Gosnells), that any further Lake Clifton Project profit residue was all for Mr Harris.  A residue of profits scenario for Mr Harris clearly was earlier agreed upon by the men (verbally, it seems) for Gosnells in 2005.  The key question is whether a like residual profits outcome favouring Mr Harris was replicated between the parties for Lake Clifton?

   (20)The defendants acknowledge a guaranteed (capped) capital and profits return entitlement of Mr Liu out of the Lake Clifton Project (interest issues aside) of $2.278 million.  But they say this amount has been fully remitted to Mr Liu under three receipt components, namely:

   (a)$1.2 million invested out of Mr Liu's Lake Clifton entitlement in the acquisition, by Primestar, of the project land at Swan View in March 2008 (about which there appears to be no controversy concerning Mr Liu's level of financial contribution and his proportionate beneficial entitlement now held in this land);

   (b)$40,000 in cash given to Mr Liu in person in June 2008 by Mr Harris, when Mr Liu was then visiting Perth (again, as to which there appears no dispute); and

   (c)proceeds of a sale of three subdivided rural lots at Lake Clifton, being lots 108, 131 and 133, which are now held in a trust account.  The sale of the lots realised a net amount of $903,300.32.  Part of the defendants' case in this sphere is that they should be credited with the amount of $1,044,050, by reason of Mr Liu having agreed to purchase three Lake Clifton lots at agreed prices under offer and acceptance contracts entered into in China with Fairbridge.  If implemented, this would have seen Mr Liu or members of his family receive three lots as, in effect, a form of accepted repayment, in kind, and as a component of Mr Liu's $2.278 million (capped) aggregate return entitlement out of Lake Clifton. 

   (21)Mr Liu disputes making any binding property side deals concerning his, or his family's, taking of three lots at Lake Clifton.  He accepts that there was a proposal discussed in 2006, with offers signed for him to buy lots 131, 138 and 139 at Lake Clifton from Fairbridge.  But he says no such arrangements ever reached or concluded with Lonepine.  He says, in any event, that two of the three original Lake Clifton lots he was initially interested in having and then made offers upon to Fairbridge were, in the end, sold off to the original vendor of the Lake Clifton Project land.  Hence Mr Liu says by June 2008, he was not interested in different, less attractively positioned, lots at Lake Clifton.  He says that Mr Harris only told him of the proposed change of these lots in June 2008.  This was one of the contributing factors to the parties' row at that time. 

   (22)Accepting there is an issue over the above, in kind, lot arrangements concerning Lake Clifton, Mr Liu would nevertheless be entitled to receive the sale proceeds of three lots (now held in trust) which are now tendered by Mr Harris and Lonepine in respect of Lake Clifton.  On that basis there is $903,300.32 in trust, available to Mr Liu.  The parties (again putting interest questions aside) are only about $100,000 apart over Mr Liu's Lake Clifton return, were it decided that Mr Liu was only entitled to a total capped return of capital and profit of, in aggregate, $2.278 million. 

   (23)A more significant monetary dispute between the parties, concerning Lake Clifton, arises out of a contractual construction controversy as to whether or not Mr Liu holds further entitlements to a share in greater Lake Clifton profits or, alternatively, whether all the residual profits from the Lake Clifton Project once Mr Liu receives $2.278 million, are for the benefit of Mr Harris. 

   (24)Finally, as regards Swan View, there is an acknowledged utilisation in the 2008 land purchase, of $1.5 million of Mr Liu's funds (derived, as to $300,000 from a sale of Mr Liu's unit 6 at Gosnells, plus $1.2 million as a part of Mr Liu's entitlement from Lake Clifton).  Mr Harris accepts that there should be a declaration Mr Liu holds a 61.81% interest in the Swan View land at 1 Balfour Road (that land currently owned and registered in the name of the second defendant, Primestar).  This outcome is on the basis of a resulting or constructive trust in Mr Liu's favour, as regards the $1.5 million financial contribution to the acquisition price of the Swan View land.  But Mr Harris contends the balance of the beneficial interest in the Swan View land (ie as to a 38.19% interest) is held on trust by Primestar for him.  Mr Liu strongly challenges that contention.

1. From that overview emerges the overwhelmingly significant issue in the case.  It presents as one of contractual construction of the Lake Clifton Agreement, as regards Mr Liu's claimed entitlement to a 68/32% profit split in his favour out of any residue of profits from Lake Clifton land sales, and assessed after Mr Liu receives back a guaranteed return of his capital investment and a first tranche profits in the total amount of $2.278 million (interest issues aside).  Mr Harris, however, says any residual profits from Lake Clifton are fully his. 

Sources of evidence at trial

1. The documentary evidence comprised, primarily, a seven volume trial bundle which was, in the main, received into evidence as exhibit 1, without controversy.  The trial bundle spans almost 2,500 pages of material.  The parties agreed that the revised index is exhibit 2.  Some controversial documents were excised from the trial bundle after rulings made early in the trial, or as a result of concessions between the parties.  I am of the view that, in this case, the documentary sources of evidence significantly outweigh the reliability of the evidence from various witnesses called on either side who, as I explain, were far less reliable.

The plaintiff's evidence

1. Mr Liu adduced evidence from himself (under four witness statements, exhibits 3A ‑ 3D).  He was cross‑examined with the assistance of an accredited translator (see Supreme Court Consolidated Practice Direction 9.13).  I deal with Mr Liu's evidence separately. 

2. The plaintiff also called Mr Hai Lan Ye (whose witness statements became exhibits 4A and 4B) as a witness.  His cross‑examination was conducted over a video‑link between Perth and China.  Mr Chris Grieve (whose witness statement became exhibit 10) was not required for cross‑examination.  Last for the plaintiff was the evidence of an expert accountant, Mr George Lopez of Melsom Robson.  His reports of 18 July 2011 and 21 August 2012, became exhibits 6 and 7. 

3. There were a handful of further documents tendered on an ad hoc basis as the trial ran.

4. Mr Ye's evidence primarily concerned Mr Liu's visit to Perth in June 2008 and the row between Mr Liu and Mr Harris at Burswood.  At the time, Mr Ye was studying at a university in Perth.  He was earlier known to Mr Liu from China.  Mr Liu asked Mr Ye to attend some of his meetings with Mr Harris and his wife in this period, including a visit to the site of the Swan View land and in Mr Liu's hotel room at the Intercontinental Burswood Hotel, where business meetings took place. 

5. Mr Ye, a student, was providing English/Mandarin translation services to Mr Liu for part of this period in 2008.  Mr Harris' wife, Ms Li, and Mr Huang also participated in the 2008 face‑to‑face conversations at Burswood and interpreted for Mr Harris and Mr Liu from time to time.  I assessed Mr Ye's evidence concerning these meetings, his participation and recollections to be relatively uncontroversial.  I did not understand his evidence to be given on a basis that his recollections were a full, or even partly reliable transcript concerning all discussions that may have occurred as between Mr Liu, Mr Harris and Ms Li at this time.

6. The most significant aspect of Mr Ye's evidence on my assessment is his reference to a request, made by Mr Harris at the June 2008 Burswood meetings, for Mr Liu to sign loan documentation from a bank for a loan of approximately $7 million to fund the Swan View Project (see par 39 and par 44 of exhibit 4A).  I accept that evidence.  But I point out that it is not suggested that Mr Liu was ever shown any bank loan documentation at that time.

7. Mr Grieve's short witness statement was tendered without a need for his cross‑examination.  Mr Grieve is a Certified Practising Accountant with the accounting firm EKS Solutions, where he worked between 2004 and 2010.  EKS Solutions provided some accounting services to Mr Harris, Primestar and Lonepine around June 2007. 

8. At that time, Mr Grieve prepared a file note after a meeting with Mr Harris (see exhibit 1, page 979).  This mid 2007 document was tendered effectively as an admission against Mr Harris (made to Mr Grieve), by reference to longhand notations made by Mr Grieve concerning the corporations Primestar and Lonepine. 

9. As regards Primestar, Mr Grieve appears to have written, as part of his longhand notes at the time, on the basis of instructions then received from Mr Harris:

   Primestar Developments P/L [Enterprises]

   13 house development Gosnells

   10% Graham

   90% Chinese

10. Mr Grieve made the following short dot points, notations concerning 'Lonepine Ent Pty Ltd':

    ·Lake Clifton subdivision

    ·Sold [off] plan

    ·Titles before June

    ·Farmland special rural (lifestyle blocks) - 5-acre lots

    ·$5 mil - $265 - $412 p/bloc

    ·Not registered for GST

    ·All loan

    ·Super cont?  (SMSF)

11. The significance of this notation essentially goes to a then recognised level of Mr Liu's shareholding interest by Mr Harris in Primestar, which Mr Liu contends to be at the level of 90% (on the basis of his personal 80% shareholding and the 10% shareholding in the name of Mr Huang said to be held on trust for Mr Liu).  I accept the notations by Mr Grieve in his interview with Mr Harris, in circumstances where Mr Grieve was not cross‑examined, as wholly reliable.  They support the contention of Mr Liu as to he being, at June 2007, a 90% shareholder in Primestar. 

12. Subsequently, that shareholding position in Primestar altered in 2008 by a unilateral issue of further shares to Mr Harris.  This happened in circumstances I deal with later in these reasons.  In short, I find Mr Harris caused the extra shares to be issued without Mr Liu's knowledge or concurrence for the purpose of Mr Harris obtaining shareholding control of Primestar. 

13. The board of Primestar in 2008 comprised only Mr Graham Harris and his brother, Mr Ken Harris.  In this action, Mr Liu seeks, as relief, to invalidate what is effectively his loss of majority shareholding control in Primestar.  Primestar was the corporate vehicle used for the Gosnells development and also later in 2008 as the vehicle to acquire the Swan View development.  Primestar purchased, then settled on the acquisition of the Swan View land at 1 Balfour Road, Swan View, in early April 2008.

14. Mr Lopez's accounting evidence was essentially directed towards showing, what he assessed and opined to be, considerable anomalies within the accounts of Primestar and Lonepine, such as they were.  I assess his evidence to be reliable and I accept it.  The significance of his evidence, however, must be heavily coloured by the answers to anterior questions concerning, first, whether Mr Harris holds, as he contends, the residual entitlement to profits in respect of the Lake Clifton Project; and, second, whether Mr Liu was, as he argues, owed fiduciary duties by Mr Harris in respect of any project. 

15. The approach of the defendants at trial was not to lead any evidence challenging Mr Lopez's expert views from a rival accounting expert. 

16. The defendants' core responses to Mr Lopez, through cross‑examination, proceed on a basis that if Primestar and Lonepine were corporate vehicles used to pursue the Gosnells and Lake Clifton Projects, in circumstances where all the subdivisional land would ultimately be sold off (and where Mr Harris was entitled to the residue of all profits, once Mr Liu had received certain fixed guaranteed entitlements) then challenges over poor or unexplained accounting entries in the books of Primestar and Lonepine were essentially, irrelevant.  That is particularly said to be the case in circumstances where many observations of Mr Lopez were directed towards suggesting either Mr Harris or his wife, Ms Li, or others associated with them, looked to have received funds from one or two of the two defendant corporations which looked, prima facie to Mr Lopez, to be unauthorised, or which he thought required further explanation, or better documentation. 

17. I point out, again, as regards the Gosnells Project and Primestar, there is no dispute that once Mr Liu received his guaranteed fixed level of capital return and profit (the guaranteed fixed profit of $175,000) that the residue of the profits were all for Mr Harris. 

18. There is a lesser controversy over whether Mr Liu received all his final entitlements out of the Gosnells Project.  But that is a different question. 

19. Most fundamentally, questions of unexplained drawings or unauthorised payments dealt with in Mr Lopez's two reports, concern Lonepine.  Here, there arises the significant controversy over whether Mr Liu was or was not entitled (after getting back a share of profits fixed at $900,000 and the return of his capital investment, plus interest) to receive any further share in profits of the Lake Clifton Project.  Mr Liu claims a 68/32 Lake Clifton split with Mr Harris.  Mr Harris says all profits of Lake Clifton, once Mr Liu received his $900,000, were his, and that outcome leaves no monies to be left in Lonepine.  This was always to be the case once all the Lake Clifton rural subdivision land was sold off and the project completed.

20. The answer to that underlying residual Lake Clifton profits question governs an assessment of the relevance of Mr Lopez's evidence because, if Mr Harris is correct, he was entitled to all residual funds anyway.  So does an issue over alleged fiduciary duties said to have been owed to Mr Liu and breached by Mr Harris, as regards all projects. 

Mr Liu's evidence

1. Mr Liu's primary witness statement is a lengthy document of 67 pages.  Because Mr Liu does not speak, read or understand English, his witness statements were made in Mandarin, then translated into English for him.  He was cross‑examined, with the use of an interpreter, upon his (four) witness statements. 

2. Mr Liu's cross‑examination exceeded two days (across 18, 19 and 20 September 2012).  Its duration blew out because of the inescapable need to translate English to Mandarin and vice versa.  Difficulties were thrown up in questioning over documents, many of which were in Mandarin and had been translated into English.  Overall, the utility of this evidence taking exercise struck me as unhelpful, particularly in circumstances where I must evaluate the existence or content of oral terms in oral agreements which were contended for by one or both parties, as regards Gosnells, Lake Clifton and Swan View. 

3. I did not find this process at all helpful or reliable as regards assessing Mr Liu, or providing a firm foundation for me to make findings as to demeanour or credibility.  Under questioning, Mr Liu looked to me to present as a dogmatic, rather excitable witness, as manifested in responses to questions under cross‑examination.  A proper degree of insight, however, was heavily obscured by the translation process.  Perhaps most significantly through the course of Mr Liu's cross‑examination, doing my level best, I could not detect a hint that Mr Liu had placed any degree of reliance or trust in Mr Harris to look after his interests in their business dealings.  In fact, my impression was firmly to the contrary. 

4. Mr Liu presented overall as shrewd and experienced in business.  He was very wealthy and generally risk averse, save for a penchant for gambling large amounts of cash on overseas trips out of China.  Because of his wealth, gambling was a passion he could afford to indulge at his whim. 

5. There was much inadmissible evidence within Mr Liu's primary witness statement which nevertheless was allowed in, without objection.  For instance (as regards Lake Clifton), at par 327 he says:

   Harris suggested that he take over [Osborne's] place in the project.  I agreed to him doing so. 

6. This evidence is obviously conclusionary and bad as a matter of form.  More so, it is unhelpful to me in terms of evaluating the evidence about the agreement.  Notwithstanding, it was not objected to.  I afford evidence of this nature negligible weight.  See also, as examples of this problem, par 335 and par 336 of Mr Liu's primary witness statement.

7. Regarding his meeting with Mr Harris (and Mr Harris' wife Ms Li) at the Blue Sky Bar in Nanjing on 2 June 2006, certain offer and acceptances are identified at par 369.  There follows the high‑water mark of evidentiary inadmissibility at par 370:

   I believed that all 3 contracts were binding.

8. I refer also to Mr Liu's par 459:

   It is common in the Chinese property development industry for the manager of a development project to personally undertake (by giving a 'promise statement') that they will bear the risk of the project going over budget. 

9. Such unfounded and unqualified opinion would be plainly irrelevant if objected to. 

10. See also par 461:

    I wanted Harris to bear the risk of the Swan View Project.

11. In a context of a contractual negotiation, uncommunicated subjective wants or desires are plainly of no admissible consequence.  See also par 510:

    I still did not know at this time that Huang Yeo [aka Peter Huang] had entered his own arrangements with Harris.

12. No explanation was given to me concerning that pejorative observation as to Mr Huang, who was not called as a witness at the trial.  There is some documentary evidence in the large trial bundle bearing on the issue.  But the observed conclusion and pejorative comment seen in par 510 is plainly inadmissible. 

13. Overall, my impression of the witness statements of Mr Liu (translated to English as they were) was that I was only getting part of the picture, in terms of Mr Liu's business dealings with Mr Harris, and a sanitised version at that. 

14. I reach a view Mr Liu was very much a distant and 'hands‑off' participant in the Gosnells and Lake Clifton Projects.  Understandably so.

15. Mr Liu lived in China and he would only visit Western Australia intermittently.  He could have had no reasonable or realistic expectation these land acquisition and subdivision projects, to be carried on in Western Australia, would just implement themselves.  Mr Liu was no naïve 'babe in the woods' in business matters.  On my assessment, he well understood that all the project work was to be, and was being, coordinated on the ground in Western Australia by Mr Harris.  Nor could Mr Liu have reasonably expected Mr Harris would do all this work gratuitously. 

16. Other than being updated verbally from time to time by Mr Harris and being reassured about his guaranteed levels of profit, across the course of evolving deals, Mr Liu did not seek to involve himself in the minutiae of these land subdivision and building projects at all.  This was all left to Mr Harris.  So was the risk of each deal ultimately turning up a profit at the end.  A profitable outcome would be desirable.  But Mr Liu's profit was guaranteed by Mr Harris for Gosnells and Lake Clifton, irrespective of whether the projects made any end profits overall.  A no risk outcome encapsulated Mr Liu's investment attitude, acting, I find essentially, as a banker to each project, rather than as a participant in a (joint) venture who was willing to accept a degree of risk tied to the end success of the projects. 

17. Finally, my best assessment of Mr Liu did not detect even a morsel of vulnerability on his part as regards his business dealings with Mr Harris.  Mr Liu was, I find, typically blunt in communicating with Mr Harris, using Mr Huang mostly, to translate.  Mr Liu was exacting with Mr Harris in his requirements and usually sceptical in these dealings with Mr Harris.  He asked a lot of questions.  Language was no real impediment for Mr Liu.  I find because of Mr Liu's wealth, the power balance in the business relationship and dealings with Mr Harris rested significantly in Mr Liu's favour.

The defendants' evidence

1. On behalf of the defendants, the primary witness was the first defendant, Mr Harris.  His cross‑examination also exceeded two days' duration.  Mr Harris' three revised witness statements became exhibits 11A, 11B and 11C, respectively.  Much inadmissible material was consensually excised from these statements. 

2. I deal separately with Mr Harris' evidence below, but, in short, I found his evidence to be unreliable. 

3. Evidence was also adduced at the trial, on behalf of the defendants, from Mr Harris' wife, Ms Li.  She indicated that she was presently separated from Mr Harris and that they were in the process of divorcing.  Ms Li gave her evidence‑in‑chief through the medium of a witness statement.  She was then cross‑examined, needing the assistance of an accredited interpreter.

4. Ms Li's 215 paragraph witness statement is exhibit 20.  Her spoken English is at a passable standard, but Ms Li struggles to read English documents, hence the need for interpreter assistance during cross‑examination. 

5. Cross‑examination exposed Ms Li's evidence of events to be vague and also, as I assessed it, largely unreliable.  The main significance of her evidence was directed towards her participation, effectively as a lay interpreter on behalf of her husband, in the 2 ‑ 3 day extended negotiations concerning the Swan View Project (both at site and then at Mr Liu's Burswood hotel room) in June 2008, and the parties' ultimate breakdown at this time. 

6. Ms Li had been responsible for interpreting some of the facsimile communications passing back and forth to China concerning Swan View in the early part of 2008.  The passing documents largely speak for themselves.

7. Also called as a witness on behalf of the defendants was Mr Graham Harris' brother, Mr Laurence Harris.  He appears to have taken over management of the Blue Sky Bar at Nanjing from Ms Li.  Mr Laurence Harris is still a resident of China.  His evidence was adduced through a witness statement (exhibit 23) and he was cross‑examined.  In the main, I assessed Mr Laurence Harris' evidence as irrelevant, or inconsequential.

8. The defendants also led the evidence of Mr Osborne (whose witness statement became exhibit 24).  Mr Osborne is a former accountant with a fraud conviction.  His evidence at this trial set new standards for unreliability, as a cursory review of the transcript of his cross‑examination at this trial attests.  Mr Osborne had early personal dealings with Mr Liu that evolved to provide a platform for Mr Osborne's eventual replacement by Mr Harris in the Lake Clifton deal. 

9. Mr Osborne's cross‑examination repeatedly exposed shoddy behaviour and wholly unacceptable accounting practices.  At one point even Mr Harris suggested Mr Osborne had misapplied funds that Mr Liu had paid to the Hong Kong and Shanghai Banking Corporation (HSBC) account of Fairbridge in Perth.  Mr Osborne's practices concerning rendering of accounts and highly convenient transfers of monies as between corporate entities by management fees was, in my assessment, decidedly dodgy.  Mr Osborne's evidence across exhibit 24 and 25 cannot be accepted, if not independently corroborated.

10. The final witness for the defendants was a Mr Serge Serdzeff (whose witness statement became exhibit 27).  Mr Serdzeff was subjected to a short cross‑examination.  The thrust of his evidence seemed to relate to payments made from an ultimately unsuccessful West Australian homewares business  that he and Mr Harris ran around 2003 before it failed.  There appears to have been large amounts of cash circulating in this business in 2003.  I refer to the concluding paragraph of Mr Serdzeff's statement:

    After discussions with Mr Harris, I arranged to put money aside from the homeware stores 2003 Christmas Sales to raise money to pay Mr Liu in respect of the Bradley South loan.  I had put aside $48,000 in cash (which I had counted) and gave that cash to Mr Harris to pass on to Mr Liu. 

    There is little overall relevance in Mr Serdzeff's evidence.

11. I turn to make further observations concerning the evidence of the first defendant, Mr Graham Harris.

Graham Harris' evidence

1. Mr Harris was subjected to a long cross‑examination.  It spanned most of 21, all of 24 and half of 25 September 2012 (see ts 387 ‑ 613).  After a very short re‑examination, Mr Harris completed his evidence (ts 613 ‑ 624). 

1. For the most part the documents tendered in this case, not the witness' evidence, dictate the outcomes in respect of determining the most significant issues.  That is indeed fortunate for Mr Harris, since his evidence, as I assessed it, was unsatisfactory.  Illustrating the basis of that adverse assessment, I refer (non‑exhaustively) to the following aspects of his evidence:

   (1)Mr Harris had a close working relationship with his long‑term accountant, adviser and friend, Mr Osborne.  Mr Osborne's unprincipled approach to running his accounting business, spilled over to infect associates, including I find, to Mr Harris.

   (2)Mr Harris' attitude to the convenient movements of accessible money by using creative management fee invoices rendered as between corporations, with no underlying rationale, was at times breathtaking.  It provides a significant insight to what I assess was an almost sociopathic mentality concerning proper corporate accounting obligations (see ts 597).

   (3)There are documents which suggest that there were some backhanded fee arrangements in place as between Mr Osborne, Mr Harris and benefitting Mr Huang, about which Mr Liu was kept in the dark.  In that respect, see exhibit 1, pages 419 and 420.  Both documents appear to carry a common date, 13 December 2005.  Mr Huang is referred to as Party B in both documents.  Those arrangements, which would see Mr Huang receive a 45% share of net profits from the Gosnells Project, in return for getting Mr Liu to 'pay the balance of money owed for the project', are very concerning.  See also the covenant concerning Lake Clifton wherein Party B (Mr Huang):

   [W]ill get his share of the profit (20%) provided he gets Mr Liu Yi Ming to sign the New contract and allow his money that comes from the Gosnells Project to be invested in the Lake Clifton Project.

   Pressed about these documents, Mr Harris' responses were vague or obfuscatory (see ts 405 ‑ 408).  Mr Harris seemed to be suggesting that Mr Liu was aware of Mr Huang's personal interests and effectively condoned it.  Mr Huang, of course, was not called as a witness at the trial.  I was told that he was based in China and so, effectively not compellable as a witness under the subpoena process.  In the absence of Mr Huang, I am cautious about elevating too much of this adverse material in the circumstances.  But I must say I was troubled, nevertheless, by a suggestion Mr Liu's usual interpreter and translator on his visits to Australia may have been compromised (by a secret payment made behind Mr Liu's back) so as to potentially influence Mr Liu's business decisions in favour of Mr Harris and Mr Osborne.  Because of Mr Huang's absence as a witness, I draw back from revealing a severe adverse inference against Mr Harris out of this material, in circumstances where I also hold countervailing concerns about the overall reliability of Mr Liu's evidence.

   (4)Mr Harris is attacked by Mr Liu in this action for using and abusing his powers as a director of Primestar and Lonepine for an improper purpose, by unilaterally causing the issue of further shares to himself in Primestar in 2008, so as to dilute the (formerly held) majority shareholding position of Mr Liu.  Mr Harris is similarly attacked for doing, essentially, the same with Lonepine shares in 2006, and thus diluting Primestar's majority 68% shareholding demands to that of a minority shareholder.  The modus operandi in each instance was by the issue of further shares to Mr Harris, so as to obtain a majority shareholding and ensuing control for him.  In this context, I found Mr Harris' cross‑examination over his dealings with Fairbridge to be very revealing.  On the afternoon of the first day of his cross‑examination, Mr Harris was asked (ts 450 ‑ 451):

   Why were more shares issued in Fairbridge Assets in March 2009?‑‑‑I would say we were probably planning to use the company to do something.  I don't remember specifically.

   …

   In March 2009, Fairbridge wasn't trading at that time?---That wasn't doing any active business, no, I don't think so.

   Weren't the share issues to dilute Primestar's shareholding in this company?---Could have been the reason.  (my emphasis)

   Now, in your case you controlled Primestar, didn't you?---Yes.

   Why would you want to dilute Primestar's shareholding in Fairbridge?---I didn't say I did want it.

   So it could have been the reason to dilute?‑‑‑I do not remember issuing these shares. 

   Mr Harris' answer concerning dilution possibly being his reason, was delivered without batting an eyelid.  It assists me to conclude Mr Harris would utilise any of his powers to dilute a majority shareholder in Primestar such as Mr Liu, or dilute Primestar's majority shareholding position in Lonepine, without a second thought, if he thought that doing so would be to his advantage. 

   (5)Mr Harris related how he stepped in as a party to replace Mr Osborne in the Lake Clifton deal with Mr Liu around May 2006, in the wake of his discovery that Mr Osborne had become bankrupt.  The late realisation evidence of Mr Harris as to Mr Osborne's bankruptcy struck me as hollow and suspicious.  It is clear Mr Osborne and Mr Harris were tight and constant in their business dealings with each other.  I find it most unlikely Mr Harris did not know of Mr Osborne's bankruptcy earlier than May 2006.  The situation in which shares in Fairbridge once held by Mr Osborne's wife and as well by an Osborne related company, Desert Spice Pty Ltd, all wended their way towards ultimate ownership by Mr Harris, also looked to me to be highly suspicious.  All Mr Osborne's held assets should have formed part of his bankrupt estate.  A convenient intrusion of the Osborne Family Trust as the asserted true owner, rather than Mr Osborne, was rationalised by Mr Osborne in his evidence to explain inconveniences of this kind.  On my assessment, these events were of an unsavoury character.

   (6)The circumstances in which Mr Harris' corporation, Northbush, effectively dropped out of the Lake Clifton contract with Mr Liu, were never really satisfactorily explained, save for the fact it is clear that Northbridge was deregistered by ASIC on 27 August 2006.  Everyone appears to have carried on regardless. 

   (7)I also found the ultimate non‑contribution by Mr Harris of his $600,000 (or at least even $200,000) to the Lake Clifton Project as his own capital contribution, to be completely glossed over by him.

   (8)The invoices administered by Osborne & Associates (see exhibit 1, pages 561 and 562) to Primestar on 25 May 2006 were the subjects of cross‑examination for both Mr Harris and Mr Osborne (see Mr Harris, ts 572 and Mr Osborne, ts 714).  These invoices presented to me to be entirely bogus and the attempted explanations appeared wholly implausible.  Likewise for an invoice of 30 May 2006 seen at exhibit 1, page 563, issued from Mr Osborne to Primestar.

   (9)The documents at pages 2202 and 2203 of exhibit 1 were the subject of cross‑examination with both Mr Harris and Mr Osborne.  The subject matter was money emanating from Mr Liu and paid into the HSBC account of Fairbridge in Perth.  In Australian dollars, the amount at issue was a payment of $435,000, by Mr Liu (see exhibit 1, page 2219).  The relevant payment date appears to be at or around 22 September 2004.  At page 2202, a juxtaposition of item 3, as to $65,000, then ensuing cheques to be drawn from Osborne's trust account at item 1 in the amount of $59,428, indicates to me there was skimming off the top, or a second set of books for the Lake Clifton Project (at that stage under the carriage of Osborne).  The difference between $65,000 and $59,428 is $6,572.  This amount turns up under item 3 of proposed cheques from Mr Osborne's trust account as a 'management fee' payment to Mr Harris via cheque to Mr Ken Harris.  Mr Harris' efforts to explain all this in cross‑examination were unconvincing, to say the least.  The worst aspect of the affair, however, is the fact an amount of $99,000 proposed as a deposit for the Lake Clifton property and to be held in Osborne's trust account, was never applied to that purpose.  It was misappropriated to Mr Osborne's own ends (see ts 719 ‑ 720).  Mr Osborne, in cross‑examination, denied this, but a stench emanating is unmistakeable. 

   (10)Lastly, a number of interlocutory affidavits sworn by Mr Harris in these proceedings concerning freezing orders earlier made, and then adjusted, were tendered and used to contradict Mr Harris during cross‑examination (exhibits 12, 13 and 17).  Exhibit 13, Mr Harris' affidavit sworn 30 July 2009, was shown as being seriously in error, particularly at par 37, as to the relevant date alleged in 2005.  Errors by Mr Harris as regards pars 68 and 69 were also identified in cross‑examination (see ts 541 ‑ 542).

2. All this and his evidence as a whole confirmed to me Mr Harris' general unreliability as a witness.  In the end, however, applying the contemporary approach identified in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [30] ‑ [31], concerning decision‑making and the limited utility of credibility and demeanour findings (see Fazio v Fazio [2010] WASC 263 [51] (Martin CJ); Fazio v Fazio [2012] WASCA 72 [43] ‑ [44]; CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1 [19] ‑ [24]), the documentary evidence is, on my assessment, a more reliable edifice for decision‑making.

The Gosnells Agreement:  written component

1. I have referred to the state of the pleadings concerning the Gosnells Agreement and the parties' differing positions.  As regards written components, these were clearly a culmination of earlier discussions, arrangements and an evolving consensus as between Mr Liu and Mr Harris, in a period from about early 2003 (the Gosnells land being inspected in Perth around May 2003 by Mr Liu, Mr Harris and Mr Huang).  Primestar acquired the Gosnells land on or about 22 September 2003 (see par 35 of the FRASOC, which is admitted). 

2. There is a dispute between the parties concerning the removal of Mr Liu and Mr Huang as directors of Primestar, around 14 September 2005, through the filing of a Form 484 with the Australian Securities and Investment Commission (ASIC) (see par 39 of the FRASOC, and pars 39 and 41 of the FRADAC).  There is no evidence that either Mr Liu or Mr Huang ever agreed or consented to their removal as directors of Primestar.  Their respective removals appear to have been achieved unilaterally, through the filing a form with ASIC electronically, it appears that Mr Osborne acted as a facilitator of the filing of these forms on behalf of Mr Harris. 

3. It is now convenient to set out the content of the written component of the Gosnells Agreement of October/November 2005.  A Mandarin version of this document is found at page 392 of exhibit 1.  An English version prepared at the time, is at page 389.  By cl 11, the parties agree that if there is any discrepancy between the two versions, 'the Chinese version of the contract shall prevail'.

4. To facilitate trial, the plaintiff arranged for a certified translation to English of the Mandarin versions of most key documents.  For Gosnells, I have worked from this, rather than from the parties' English version of 2005, since the Chinese version prevails if there is a discrepancy.  The certified translation from Mandarin to English is found at pages 390 ‑ 391 of exhibit 1.  As translated, the document provides:

   Agreement

   For the Project at 47 Harry Street

   Between Graham Harris

   And

   Mr LIU Yiming

   1.The developed and constructed 13 houses located in 47 Harry Street, Perth are fully invested by Mr LIU Yiming, who holds the full ownership of the property right.

   2.Mr LIU Yiming agrees to authorise Graham Harris to sell 12 of these houses on his behalf, and retains one house for himself.  Graham Harris guarantees that the net income for Mr LIU Yiming from the Project at 47 Harry Street shall be AUD $175,000 after all the deduction of costs.

   3.Graham Harris agrees to sell some of these houses of the Project to Mr LIU Yiming's friends in China at the market price and gives appropriate preferential treatment.  (Possibly some Discount.  (Signature))

   4.Graham Harris shall estimate and calculate the costs and profits and reports to Mr LIU Yiming and gets Mr LIU Yiming's approval before he starts to sell the houses.

   5.Graham Harris shall sell out all these houses within 6 months after receiving the title deeds of the properties.  And he shall ensure that all the money from the sale of the houses be deposited into the bank account of Primestar Company till the time when all the 12 houses are sold out.  Graham Harris shall take his reward only after Mr LIU Yiming's net profit is guaranteed.

   6.If Graham Harris fails to sell out all these 12 houses within 6 months after receiving the title deeds of the properties, he shall ensure to pay Mr LIU Yiming a fine of AUD $1,500 in cash monthly for each month exceeding the time limit.  And the longest extension is no more than ten months.

   7.While implementing Clauses 1 to 6 of this Agreement, Graham Harris shall serve as the agent of Primestar Company for marketing and sale of the 12 houses at 47 Harry Street.

   8.If Graham Harris violates the relevant agreements for the 47 Harry Street Project, Mr LIU Yiming has the right to terminate Graham Harris’ position as the marketing and sales agent of Primestar Company for the 12 houses at 47 Harry Street, to investigate his responsibility for the economic losses and to instruct him to make compensations.

   9.After this contract is signed and becomes effective, Mr LIU Yiming shall be responsible for all the fines caused by Mr LIU Yiming's late payments in this project.  Graham Harris agrees that all the previous losses shall be counted as costs.  Afterwards, it is Graham Harris' obligation to remind Mr LIU Yiming or his financial staff directly with an oral and written notice in 15 days before the due date of a future payment.

   10.All the contracts signed previously shall be terminated and cancelled when this contract becomes effective.

   11.This contract is made in English and Chinese, with one original for each language.  If there is any discrepancy between these two versions, the Chinese version of the contract shall prevail.

   Mr LIU Yiming (Signature)   Date:  19 October 2005

   Graham Harris (Signature)     Date:  21 November 2005

Observations as to the written part of the Gosnells Agreement

1. I render these preliminary observations as regards clauses in the Gosnells document:

   (1)This is an unprofessionally drawn document.  Clause 1 presents as unintelligible.  In fact, it appears to be inconsistent with Primestar having the ownership of the constructed dwellings.  This matters little in the end.  No party contends that an agreement was not consummated or that their agreement fails for a lack of certainty as regards essential terms.

   (2)Clause 10 of the document is significant in seeking to replace all contracts which preceded the October/November 2005 arrangements.  Because of this, what preceded the October/November 2005 written document must be put aside.  Paramountcy must and will be accorded to the last agreement.  This outcome is complicated by the fact that both parties also acknowledge (differing) oral components of their agreement, beyond written documents. 

   The oral component relates to a residual profit entitlement given to Mr Harris.  This entitlement is acknowledged by both parties for Gosnells. 

   Need for an oral component to the Gosnells arrangements is apparent from the elliptical nature of cl 5, which refers to Mr Harris taking 'his reward only after Mr Liu Yiming's net profit is guaranteed'.  This is vague wording which on the face of it does not explain how Mr Harris receives, as his 'reward', all or any residue of the Gosnells Project's profits, after Mr Liu receives his entitlements. 

   (3)Clause 2 expressly refers to a guaranteed 'net income' of $175,000 for Mr Liu.  The amount of Mr Liu's capital contribution is left unstated.  I doubt this was accidental.  But as I have indicated earlier, the parties are apart only to the extent of $120,000 over the capital contribution issue for Mr Liu.  That requires a separate resolution of Mr Harris' underlying contention that $120,000, emanating from Mr Liu via the Fairbridge account with the HSBC, was actually received by Primestar on behalf of six Chinese purchasers who subsequently defaulted and whose deposits were thereby forfeited to the advantage of Primestar.  Clause 3 refers to sales of houses to Mr Liu's friends in China at market price and 'appropriate preferential treatment' with '[p]ossibly some Discount'.

   (4)The nature of Mr Harris' obligations concerning his authority to sell 12 houses (cl 2), and his obligations to guarantee Mr Liu's net income (cl 2), sell houses to Mr Liu's friends in China (cl 3), report to Mr Liu and obtain Mr Liu's approval before commencing to sell the houses (cl 4), and to sell the 12 houses within six months of receiving title deeds (cl 5), are all express contractual obligations accepted by Mr Harris.  Mr Harris was also to ensure that sale monies were deposited in Primestar's bank account (cl 5). 

   (5)Clause 6 seeks to impose a 'fine' against Mr Harris, if the sale of the 12 properties takes longer than six months after the issue of title deeds (with the capacity for extension to ten months).  No issue arose at the trial concerning the attempted imposition of a 'penalty' against Mr Harris by Mr Liu.  Equity's distaste for penalties would pose problems for any implementation of cl 6 in circumstances, were the 'fine' (so called) not assessed as a genuine pre‑estimate of damages (see generally AMEV‑UDC Finance Ltd v Austin [1986] HCA 63; (1986) 162 CLR 170).

   (6)Mr Harris' position as agent of Primestar in terms of marketing the sale of Gosnells properties is seen in cl 7, as is his exposure to termination as the marketing and sales agent under cl 8. 

   (7)There is acknowledgement seen in cl 9 relating to some apparent late payments by Mr Liu concerning this project which for present purposes are irrelevant. 

   (8)A reminder obligation is placed upon Mr Harris in the concluding sentence of cl 9. 

Lake Clifton Agreement:  the pleadings

1. The FRASOC deals with Mr Liu's investment in the Lake Clifton Project at pars 49 ‑ 91.  The FRADAC responds seriatim across pars 49 ‑ 91D.  These pleadings are convoluted.

2. As regards Lake Clifton, the FRASOC culminates at par 68 at a 'third Lake Clifton contract' of 'on or about 18 July 2006'.  This is the contract pleaded to have been made between Mr Liu, Mr Harris on his own behalf, and also by Mr Harris for and on behalf of Lonepine.  As pleaded, this agreement was 'in effect' an agreement that Lonepine would take the place of Fairbridge in the Lake Clifton Project and that the third Lake Clifton contract otherwise ratified the second Lake Clifton contract. 

3. The defendants' position by the FRADAC is different (see pars 68.1 ‑ 68.8).  At minimum, it is accepted that there was a binding agreement concerning Lake Clifton.  The defendants contend for a contract that is partly written, partly oral and partly by conduct (see par 68.1). 

4. It is necessary to track back to the so‑called second Lake Clifton Agreement in the FRASOC.  This is found pleaded at par 56 of the FRASOC with relevant terms of a written part in par 57.  According to par 56 this was an agreement partly written and party oral in respect of the Lake Clifton Project made on or about 10 May 2006.  This agreement is said to have been as between Mr Liu, Mr Harris and Mr Harris' company Northbush, made this time on the basis of Mr Liu being told by Mr Harris (in Nanjing) that Mr Osborne had become bankrupt and had to withdraw from the Lake Clifton Project.  Mr Liu contends for an oral component of the second Lake Clifton contract, concerning the treatment of Mr Harris' indebtedness under oral terms, the subject of what appears to be a first Lake Clifton Agreement, but defined in pars 50 ‑ 51 as the 'Osborne Lake Clifton Agreement'.  The parties to the first Lake Clifton Agreement (said to be partly oral and partly written and formed on or about 28 April 2004) are said to be Mr Liu, Mr Harris and Mr Osborne on behalf of the Osborne Family Trust. 

1. This first agreement (see par 50 of the FRASOC) is said to have been in respect of a purchase for $2.13 million and for a development by way of subdivision of lots 23 and 25 Southern Estuary Road, Lake Clifton.  Paragraph 50 pleads that the written component of this first Lake Clifton Agreement was entered on the basis that the purchase and development of the Lake Clifton land was to be in the name of Fairbridge. 

2. The defendants' pleaded position (see par 50 of the FRADAC) admits the existence of an agreement between Mr Liu and Mr Osborne under documents signed on 27 and 28 April 2004 (see par 50.1), but denies Mr Harris was party to such agreement.  It also contends that the agreement involved the acquisition of different land to that pleaded by the plaintiff (lots 22 and 25, not lots 23 and 25).  The defendants also say that the purchase price was greater ($3,150,000 rather than $2,130,000).  There is also contention over the alleged oral terms of the first Lake Clifton Agreement (see par 51 of the FRADAC).

3. It is necessary to pursue the issue of a first Lake Clifton Agreement involving Mr Osborne a little further.  A Mandarin version of a document apparently carrying Mr Osborne's signature of 27 April 2004 and Mr Liu's signature of 28 April 2004, is found at page 83 of exhibit 1.  There is a certified translation into English of the Mandarin version, at page 82.  There is an English version again apparently signed by Mr Osborne and Mr Liu, at page 81. 

4. From examining these documents, I discern no reference, express or implied, to Mr Harris as a participating party.  I do note direct reference to the acquisition of lots 22 and 25 Southern Estuary Road by Fairbridge for $3,150,000 (cl 1), allocation of 68% of the shares in Fairbridge to Mr Liu, with 32% to the Osborne Family Trust (cl 2 and cl 3).  There follows reference to Mr Liu investing $1,378,000 by paying a deposit of $400,000 immediately.  This was to be followed by a second payment, of $978,000, when notified (cl 4).  Osborne Family Trust as Party B, was to invest $600,000 (cl 5). 

5. The contractual arrangements of 2004, that were once in effect between the Osborne Family Trust and Mr Liu, provide background as to the evolution of the project.  But in my view they are only marginally relevant as regards Mr Harris, who was not a party to the arrangements but who, I find, would have been told of them by Mr Osborne.  Even more irrelevant are the alleged oral terms in an alleged 2004 Osborne agreement not involving Mr Harris. 

6. Mr Liu at par 56 of the FRASOC contends for a Second Lake Clifton Contract partly written and partly oral, and with relevant written terms identified in par 57.  The parties are now Mr Liu, Mr Harris and Northbush.  In response, par 56 of the FRADAC acknowledges a (different) agreement the defendants define as the 'Second Lake Clifton Agreement'.  It is contended to be partly written, partly oral and partly constituted by conduct.  Paragraph 56.6 of the FRADAC identifies 'a number of agreements, in both English and Chinese, endeavouring to record terms of the Second Lake Clifton Agreement'.  Particulars to that subparagraph identify agreements of 11 May 2006 between Mr Liu, Mr Harris and Northbush, and of 18 July 2006 between Mr Liu, Mr Harris and Lonepine.  The defendants identify oral components of this Second Lake Clifton Agreement in par 56.5, as well as conduct components at par 56.7 (in which there is a typographical error referring to 11 July 2009; presumably the intended reference was 11 July 2006).

7. Broadly, the parties accept that an agreement was concluded between Mr Liu, Mr Harris and Northbush around 10 or 11 May 2006 and that this agreement had partly written and partly oral components (see par 56 of the FRASOC referring to the Second Lake Clifton Contract (as defined) and par 57 referring to the relevant terms of the written part).  This may be compared with par 56 of the FRADAC referring to the Second Lake Clifton Agreement with written components of 11 May 2006 at particulars to pars 56.6(a) and (b). 

8. As to written aspects, I refer to copies of facsimile documents found in exhibit 1 at pages 546 ‑ 547 (Mandarin version), and the certified translation from Mandarin to English at pages 544 ‑ 545.  An English version for this written document would have been prepared by the parties at the time (10 May 2006) but does not now appear to exist.  This document appears to align with the written agreement at par 56.6(b) of the FRADAC.  It makes explicit reference to the third defendant, Lonepine, as being a party (namely Party B), jointly with Mr Harris.  Interestingly however at page 545 Party B is identified as Northbush and Mr Harris (not Lonepine).  Special condition 1 in this agreement refers to Party A and Party B agreeing to purchase Fairbridge's blocks at 23 and 25 Southern Estuary Road.  Fairbridge is referred to once again in the context of Party A and Party B's anticipated shareholdings at cl 3.  See also the reference to Fairbridge in cl 9.  This written document was signed by Mr Harris both on his own behalf and on behalf of Northbush.  It carries Mr Liu's signature on a Mandarin version. 

9. The Lake Clifton documents of May 2006 are the precursor templates to further documents admittedly signed by Mr Harris and Mr Liu on 18 July 2006, via an exchange of facsimile communications (see exhibit 1, page 699, Mandarin version - and see footer notation of this facsimile as sent to China from another of Mr Harris' businesses, 'In‑Depth Investigations' at '10.47' (the proximate date notation of 07/05, 2013, is obviously incorrect)). 

10. A certified English translation of the Mandarin is at page 698 (for special conditions 1 ‑ 6 only).  On 18 July 2006, there was a late substitution of Lonepine for Fairbridge into cl 3 of the written agreement.  This is seen by contrasting pages 1 and 2 of the same facsimile at 10.47 from In‑Depth Investigations at exhibit 1, pages 693 ‑ 694. 

11. The substitution of Lonepine for Fairbridge as a party is confirmed by exhibit 1, page 702; a certified English translation for which is at page 701:

    Letter of Commitment

    The name of the company used in the cooperation project between Liu Yiming and Graham has been changed from Fairbridge [Assets] to Lonepine [Enterprises].  The agreement signed in the past remains unchanged. 

    Li Cai Hong       (Signature)

    Graham Harris     (Signature)

    18 July 2006

12. Crude as the effort was, the amalgamating of the English translations at page 698 (special conditions 1 ‑ 6) and page 692 (for special conditions 7 ‑ 11), seems to have been the objectively intended end point.

13. I can conclude then that the written component of what Mr Liu, Mr Harris and Northbush accepted on 18 July 2006, read in these terms:

    Lake Clifton Contract

    Date: 10 May 2006

    Party A: Mr LIU Yiming

    Party B: Northbush Nominees Pty Ltd

    Graham Harris

    Special Conditions

    1.Both Party A and Party B agree to purchase Lone Pine Enterprises which owns Block 23 and 25 of Southern Estuary Road for a total price of AUD 3,500,000.  Party B guarantees that Lone Pine Enterprises does not have any liability.

    2. Party A agrees to invest AUD 1,378,000 in accordance with this contract.  The first instalment payment is AUD 400,000 (of which AUD337,890 was already paid on 28 Apr 2004).  The second instalment payment is AUD 978,000.  The balance shall be paid after signing.  The second instalment payment is based on the profit from the Gosnells Project.

    3.The shareholdings of Lone Pine Enterprises are as follows:  Party A gets 68%, and Party B gets 32%.  In accordance with this contract, Party A will receive AUD 900,000 profit from the Lake Clifton Project, which is handled by Party B.  Party B shall control the project and its finances.

    4.Party B will invest AUD 600,000 in this project in accordance with this contract.  The first instalment payment of AUD 200,000 is a guarantee for the project, and shall be paid immediately.  The second instalment payment of AUD 400,000 shall be paid within seven days as required under the project.

    5.Party B agrees to repay Party A a total sum of AUD 2.278 million (including capital investment and profits).  The first instalment of AUD 1,500,000 shall be fully paid sixty days after the land title is issued.  If this amount is not paid on time, an extension of three months shall be allowed.  If this amount is paid after the extension of three months, a monthly interest of AUD 6,250, based on 5% interest rate, shall be paid by Party B.  The second instalment of AUD 778,000 shall be paid three months after the first payment.  If Party B pays this amount after paying the balance, and if Party B pays the balance over more than three months, an interest payment of AUD 4862.50 per month, based on 7.5% interest rate, shall be paid monthly by Party B.

    6.If the project could not continue due to Party B's faults, Party B shall repay the deposit and all capital investments to Party A immediately (within five days).

    (Signature of LIU Yiming)   (Signature of Graham Harris)

    18 July 2006

    7.Party B agrees to be responsible for getting the bank loans of AUD $4 Million (AUD $4,000,000).  Party A agrees to sign the loan contract, but the Party A is not responsible for any loan‑related costs, including fees, interest and the principal repayment.  In the case that the loans cannot be obtained, Party A shall bear no responsibility and this contract shall be terminated at the same time.

    8.Party A agrees that Party B sells the land in the Tree Plantation to repay the loans.

    9.Party B shall guarantee Party A's investment of AUD $1,378,000 and the income of AUD $900,000 with the assets and earnings of Party B and Lonepine Enterprises Company.  Party B agrees to repay Party A the full amount of AUD $2.278 million (including the capital investment and the proceeds.  The interest will be calculated separately in accordance with the Article 5 of this contract.)  Party B must implement this contract.  Party A is entitled to start proceedings to a court in Party B's location or a court designated by Party A, to apply for the enforcement in order to safeguard Party A's rights and interests.

    10.Party A agrees to transfer the capital and proceeds of the Gosnells Project to the Lake Clifton Project as Party A's second installment of investment funds, and the balance shall be retained by Party A.

    11.This contract is made in both Chinese and English.  If there is any difference, the Chinese version should prevail.

    Party A:   LIU Yiming                Party B:  Northbush Nominees Co. Ltd.
      Graham Harris
    Party A's Signature  Party B's signature
    Date:  18 July 2006  Date:  17 July 2006

Observations concerning clauses in the Lake Clifton contract

1. Whilst the parties are in agreement by their pleadings as to the consummation of an enforceable Lake Clifton Agreement, at least as between Mr Liu and Mr Harris, they differ over the constituent components of the agreement. 

2. Because I am unable to accept as reliable the uncorroborated evidence of either Mr Liu or Mr Harris, I find myself unable to accept what Mr Liu contends as oral components of a Second or Third Lake Clifton Contract (see pars 56, 58, 68, 69 and 70A of the FRASOC).  But nor do I accept Mr Harris' pleaded contention as to oral components of a Second or Third Lake Clifton Agreement, or Second or Third Lake Clifton Contract (see the FRADAC par 56.5(a)(1)). 

3. But what was set down in writing above, across 11 clauses on 18 July 2006 by exchanged faxes, must in the end have been supplemented or varied by some further components after 18 July 2006, as regards:

   (1)an acquisition for the Lake Clifton Project of lot 22, in addition to lots 23 and 25 on Southern Estuary Road;

   (2)the non‑participation and excision from any Lake Clifton Agreement of Mr Harris' corporation Northbush, which was deregistered by ASIC on 27 August 2006; and

   (3)the ultimate non‑contribution of $600,000 to the Lake Clifton Project by Mr Harris.  This result was contrary to written cl 4, on the basis of anticipated instalments by Party B (Mr Harris) of $200,000 and $400,000, with the $200,000 instalment payable immediately and the second instalment payable 'within seven days as required under the project'.  There is no suggestion Mr Harris or Northbush ever caused those (or any) capital contribution payments to be made as regards Lake Clifton. 

4. Nevertheless there is no doubt the Lake Clifton land was acquired by Lonepine.  It was later subdivided and mostly sold off across 2007.

5. It is admitted that subdivided titles for the 40 lots in the Lake Clifton Project issued on or about 18 July 2007 (see the FRASOC par 89).  But the defendants say that the Lake Clifton development was not complete until March 2008.  That was when electrical contractors finished installation of the power supply (see the FRADAC par 89).

6. Paragraph 90 of the FRASOC asserts that as at 25 November 2008 all but three of the rural lots in the Lake Clifton Project had been sold off for a total purchase price of $9,699,500.  This averment is admitted (see par 90 of the FRADAC).  But the defendants say those three remaining lots in the Lake Clifton Project were intentionally left unsold, as Mr Liu and Mr Harris had agreed by another agreement (allegedly made on or around 2 June 2006) that Mr Liu would purchase these three lots at Lake Clifton and receive them as a part of his return of capital and profit.  The defendants say this arrangement was verbally agreed in Nanjing, pursuant to the second Lake Clifton Agreement.

7. In terms of a resolution of the major issues of disputed construction arising out of the parties' admitted agreement concerning Lake Clifton (which I ascertain essentially to be what is in writing) I first contrast the parties' pleaded positions.  Paragraph 60(c) of the FRASOC says that on the proper construction of the Second Lake Clifton contract the benefits to be received by Mr Liu were a return of his investment plus $900,000 as income, plus interest on those amounts (if they were not paid on stipulated due dates) plus a 68% shareholding in Fairbridge (which is adjusted to a 68% shareholding in the third defendant Lonepine under the third Lake Clifton contract (see par 68)).  The response of the defendants in pars 68.4 and 68.6 of the FRADAC requires evaluation.

8. First, at par 68.4, the defendants essentially deny that it was a term of the second or third Lake Clifton Agreement that Lonepine would take the place of Fairbridge in the Lake Clifton Project.  The contention is wholly untenable on the trial evidence.  It cannot be accepted.  It is inconsistent with longhand references to Lonepine in cl 3, to which I have referred, and also inconsistent with what is said in the 'Letter of Commitment' of 18 July 2006 by Mr Harris.  Clearly, arrangements as between the parties as of 18 July 2006 consensually excised Fairbridge as the parties' Lake Clifton corporate vehicle, replacing it with the shelf company Lonepine. 

9. Beyond that unnecessary distraction, however, the defendants assert (see par 68.6 of the FRADAC) that Mr Liu, on the proper construction of the Second Lake Clifton Agreement or, alternatively, the Third Lake Clifton Contract (as pleaded at par 68 of the FRASOC) 'did not confer on [Mr Liu] any benefit under the Lake Clifton Project beyond his entitlement to $900,000, together with the return of his original investment'. 

10. Thus, it is said by the defendants that a capped and guaranteed total return of $2.278 million to Mr Liu (aside from interest), was Mr Liu's maximum entitlement from Lake Clifton.  This they plead is the true construction as to Mr Liu's entitlement and is irrespective of any 68/32% shareholding split that was held in the project's corporate vehicle, Lonepine (as between Primestar and Mr Harris as its only shareholders). 

11. From the formulation of par 60(c) of the FRASOC, Mr Liu's case towards seeking profit share entitlements out of Lake Clifton greater than the return of $2.278 million, proceeds on the basis of his core contention as to his further profit share entitlement result being delivered to him consequently, by a holding of a 68% shareholding in Fairbridge (later Lonepine).  (Actually, the holding was always by Primestar, not by Mr Liu personally.)

12. With that in mind I return to what I ascertain to be written components of the parties' Lake Clifton contract of 18 July 2006. 

13. As to this I first observe that cl 3 does make it explicit Mr Liu is to receive a 68% shareholding in Lonepine.  Mr Harris was to receive the remaining 32% shareholding.  Yet cl 3 goes on to articulate Mr Liu's profit of $900,000 from the Lake Clifton Project.  Clause 3 then says that the project is to be 'handled by' Mr Harris (with, at the time, Northbush).  Clause 3 concludes 'Party B [Mr Harris and Northbush] shall control the project and its finances'. 

14. Clause 3 is unambiguous as regards the parties' respective shareholdings in Lonepine.  Mr Liu was to receive a 68% shareholding.  Yet when the 100 shares in the Lonepine shelf company were issued in June 2006, they were not issued to Mr Liu.  Rather, they issued to the second defendant, Primestar.  The other 32 shares issued to Mr Harris.  Bearing in mind Mr Liu held at least an 80% shareholding interest in Primestar (or 90%, depending on whether Mr Huang held his 10 Primestar shares on trust for Mr Liu), the June 2006 issue of 68 Lonepine shares to Primestar and not to Mr Liu personally, would roughly satisfy the shareholding control split objective of cl 3, provided Mr Liu held a majority shareholding position in Primestar.

15. The 68/32% shareholding split in Lonepine as between Mr Liu and Mr Harris (or by Mr Liu through Primestar and Mr Harris) contextually bears upon, but in my view is not decisive of, the key issue of construction.  That is, whether or not Mr Liu is entitled to a further share of profits of a successful Lake Clifton Project, even after he had received $2.278 million (plus any interest due him via cl 5). 

16. Mr Liu is clearly guaranteed an amount of $2.278 million by Mr Harris (and Northbush), irrespective of the success or failure of the Lake Clifton Project.  As with Gosnells before, the parties' arrangement was for their chosen corporate vehicle (Lonepine) to acquire rural land at Lake Clifton, subdivide it, then sell off all the created rural lots at a profit.  On that plan, the levels of the shareholdings in the corporate vehicle (if the created rural lots were sold off and all profits distributed, leaving the vehicle ultimately assetless) does not really suggest to me any extra profit entitlement in Mr Liu to a tranche of further profits beyond his first granted $2.278 million return.  The correlative issue, of course, is whether all residual profits, once Mr Liu gets his $2.278 million, go to Party B (Mr Harris and Northbush), after all expenses and project loans were repaid.  I propose to make some further observations concerning the Lake Clifton contract before returning to and resolving that critical issue of construction.

17. Of Mr Liu's Lake Clifton capital investment of $1.378 million, his second capital instalment (of $978,000) (cl 2) was sourced from 'the profit from the Gosnells Project' (last sentence, cl 2).  See also cl 10 as regards Mr Liu agreeing to transfer capital and proceeds of the Gosnells Project to the Lake Clifton Project, as Mr Liu's 'second instalment of investment funds'. 

18. By cl 10 the parties appear to recognise Mr Liu is (in June 2006) likely to be due even further returns (above $978,000) from Gosnells, see the phrase 'and the balance shall be retained by Party A' found in cl 3.  I assess those words to be a reference to a balance of funds payable to Mr Liu in the Gosnells Project, after receiving the $978,000 from Gosnells and which was then applied on his behalf to part of his capital contribution to Lake Clifton.

1. Once the outstanding Lake Clifton funds are received by Mr Liu, then Mr Harris then can share with Mr Liu pro rata, in a proportionate entitlement in respect of the Swan View land.  But Mr Liu must first be repaid those Lake Clifton funds. 

2. On my construction of the Lake Clifton Agreement, Mr Harris was not entitled to any residual profits out of Lake Clifton, until Mr Liu had first received his $2.278 million plus interest.  Receipt of funds held in trust from the proceeds of the three Lake Clifton lots now sold, will assist that end, in part.

3. I now proceed to consider the residual issues, namely, the extent of Mr Liu's contribution to the Gosnells Project, an alleged investment in Goldfind on behalf of Mr Liu (representing $160,000 of his Gosnells entitlements) and the question of interest under the Lake Clifton Agreement.  Lastly, I will assess the shareholding and directorship positions in the two corporate vehicles, that is Primestar (as regards Gosnells and Swan View) and Lonepine (as regards Lake Clifton).

The disputed $120,000

1. This side issue concerns $120,000.  That is the amount in dispute as between Mr Liu and Mr Harris concerning the level of his financial investment in the Gosnells Project.  The side issue is murky as to its underlying facts assessed by the evidence at trial.

2. The FRASOC par 34 asserts Mr Liu invested at least $1,230,101.43 in the Gosnells Project.  Particulars follow.  In response, the FRADAC par 34.2 contends Mr Liu invested only $916,656.43 in the Gosnells Project.  This is elaborated upon by particulars:

   The defendants admit that the plaintiff forwarded a total of $1,036,656.43 in respect of the Gosnells Project of which $120,000 comprised deposits of six Chinese buyers for units in the Gosnells development and the balance was paid from the plaintiff. 

3. Mr Liu's re‑amended reply and defence to re‑amended counterclaim of 12 September 2012 does not assist on this issue.

4. By reference to the state of the pleadings, what appears to be contended by Mr Harris is that $120,000 of the funds received by Primestar for Gosnells were the deposit funds paid by Mr Liu on behalf of six Chinese purchasers, and that these deposits were ultimately forfeited.  Between pages 92 ‑ 103 of exhibit 1 are six offer and acceptance documents (which appear to have been submitted to the Western Australian Office of State Revenue) showing offers by six (variously named) Chinese purchasers to purchase units at 47 Harry Street, Gosnells, for $200,000 each.  In each document, the deposit is specified as $20,000.  That deposit amount as stipulated is either 'paid herewith', alternatively, $2,000 paid with $18,000 said to be paid 30 days after acceptance.  Each offer is subject to FIRB approval.

5. In each case, the offer document looks to have been accepted by Primestar and signed, although Primestar's seal is not applied. 

6. I was not referred to any documentation concerning these contracts which indicated that a notice of default for failure to settle was given to any purchaser in accordance with the applicable notice provisions under the 2002 General Conditions.  No Chinese purchaser gave evidence at trial.

7. I can ascertain no documentation indicating that any of these six contracts was ended on the basis of a purchaser's default, resulting in forfeiture of each purchaser's deposit.  In three instances, a stamp on the document seems to signify that the contract has been cancelled, possibly by the Office of State Revenue.  That is not the case for units 6, 8 and 9. 

8. I was not shown any documentary record indicating that $120,000 had been accounted for as forfeited deposit funds in Primestar's books.  I was not referred to any other document in a seven volume trial bundle advancing this alleged forfeiture of deposit funds issue any further. 

9. On the basis of a startling lack of documentary evidence on this issue, I am not satisfied Primestar holds $120,000 in forfeited deposit funds derived from six defaulting Chinese purchasers at Gosnells. 

10. I assess the witness statements of Mr Liu and Mr Harris on this issue, bearing in mind I am looking for some independent corroboration as against what is essentially a bare, unsupported assertion by Mr Harris.  First, I mention Mr Harris' witness statement, exhibit 11B.  At par 151, Mr Harris refers back to par 147(a) of his statement.  That paragraph has been excised.  It had contained a reference to a document which no longer remains in the trial bundle as a result of an objection in relation to Fairbridge.  This was not a promising start.  Nevertheless, at par 152, Mr Harris says:

    I told Mr Liu that we had to have the deposits paid by the 6 Chinese purchasers of the units in Gosnells in order to satisfy Police & Nurses of those pre‑sales contracts.  Mr Liu said to me that he would transfer that money with the other funds he was transferring for the Project.  Subsequently, the sum of $435,608.02 was received by Fairbridge.  There was never any other payment received for the deposits by the Chinese purchasers.  Mr Liu's assertion in his responsive statement that Chinese currency for the equivalent of $AUS120,000 as deposits for these 6 units is untrue. 

11. That leads me to Mr Liu's witness statement (exhibit 3D) where, at par 54, he commences to explain an investment relationship with a Mr Chen Yi Fei's wine business in China.  Mr Liu says he invested in excess of ¥20,000,000.  A long story unfolds in respect of Mr Fei's acquisition of six houses in the Gosnells Project from Primestar (par 57).  Mr Liu was to pay a $120,000 deposit on Mr Fei's behalf and receive a credit, it would seem, in Mr Fei's Chinese wine business (par 58).  Mr Liu says at par 63 that he gave Mr Harris cash in Chinese currency in the sum equivalent to AUD$120,000, in the presence of Mr Fei.  Mr Fei was not a witness at trial.  Mr Liu says Mr Harris wrote a receipt to Mr Fei for the $120,000.  Mr Liu does not have a copy of this receipt.  Mr Harris gave it to Mr Fei.  At pars 70 and 71, Mr Liu disputes that the $435,608.02 he arranged to be transferred from an HSBC account in Hong Kong to Fairbridge's account on 21 July 2004 represented deposits paid on behalf of Mr Fei for the six houses in the Gosnells Project.  Mr Liu says, at pars 70 ‑ 71:

    The deposit was paid in cash to Harris, after Chen Yi Fei had signed the contract in his name. 

    Chen Yi Fei's business later failed.  He owes me a considerable amount.  I have not been able to locate him for some time.

12. The evidence at trial from both sides in relation to this issue is less than fulsome.  In the end, however, $120,000 in funds was undoubtedly received from Mr Liu via Fairbridge to Primestar. 

13. The question, really, is whether this $120,000 amount should be classed as having been received by Primestar on behalf of persons other than Mr Liu for a different purpose.  That is disputed by Mr Liu on the basis the monies paid on behalf of Mr Fei by Mr Liu had been paid in cash to Mr Harris in China.

14. In the end, I consider that it is for Mr Harris to satisfy me on the balance of probabilities that the $120,000 in funds (undoubtedly received by Primestar) is attributable to another purpose and became forfeited deposits.  That has not been shown to my satisfaction. 

15. Accordingly, Mr Liu should receive credit for this disputed amount of $120,000 for Gosnells. 

16. Mr Liu's financial contribution to Gosnells is hence assessed by me as $1,036,656.43, as Mr Liu pleads.

Gosnells:  Mr Liu's Goldfind Investment Pty Ltd loan

1. The second residual issue arises because Mr Harris and Primestar contend there should be a credit by Mr Liu, to them, for an amount of $160,000, paid on Mr Liu's behalf as a secured loan by Mr Liu to Goldfind (another corporation associated with Mr Harris). 

2. Primestar and Mr Harris both contend these funds were paid as part of proceeds Mr Liu would otherwise have received out of his return derived from the Gosnells Project and that they became Mr Liu's loan to Goldfind.  Security for Mr Liu's $160,000 loan was apparently a mortgage over 20% of Goldfind's issued shares (held by someone in favour of Mr Liu).

3. On the pleadings, Mr Liu accepts he advanced $160,000 to Goldfind.  But Mr Liu does not accept the loan funds were paid out of the proceeds of his Gosnells entitlements.  Again, the documentation for this side issue is sparse.  It is necessary to examine pleadings, witness statements and the transcript.

4. During closing, I was told by counsel for the defendants that Goldfind had not repaid the $160,000 loan to Mr Liu and, further:

   Goldfind would not - as I understand the evidence, is not able to repay the loan, although there is still what I understand to be security over 33,000 trees, although I'm not sure that there's any document - apart from what's in the Goldfind contract.  There's no other form of security documentation (ts 789).

5. The FRASOC deals with the Goldfind issue between pars 118 and 125. By a written agreement of 2 June 2006 there is, essentially, a four‑year loan by Mr Liu of $160,000 to Goldfind 'for the purpose of growing and selling Gingko Balboa trees'. Mr Liu pleads, at par 120 the FRASOC, that in breach of the Goldfind agreement, Mr Harris did not pay any interest to Mr Liu in June 2007 or June 2008, and failed to cause Goldfind to issue Mr Liu's agreed shareholding, of 20% of Goldfind shares, to Mr Liu. Between pars 121 ‑ 125 the FRASOC seeks to contend for breaches of s 10 of the Fair Trading Act 1987 (WA) by false representations by Mr Harris concerning the 20% shareholding and the payment of interest. This is on the basis these were representations made as to future matters, about which Mr Harris did not have reasonable grounds. Mr Liu seeks $160,000 he asserts as lost as a result of his payment to Goldfind.

6. By par J of his prayer for relief, Mr Liu seeks damages from Mr Harris (more correctly, statutory compensation), 'pursuant to s 79 of the FTA [Fair Trading Act] in respect of the Goldfind Agreement'. 

7. The defendants' FRADAC addresses this issue between pars 118 ‑ 125.  In the first place, Mr Harris asserts he was never party to any contractual arrangement with Mr Liu relating to Goldfind.  He contends a Goldfind Agreement only existed as between Mr Liu and Goldfind. 

8. At par 119 of the FRADAC, the issue over the source of $160,000 paid by Mr Liu to Goldfind, finally emerges.  The defendants admit Mr Liu's $160,000 investment took place, but say 'the investment was, at the plaintiff's request, paid out of the plaintiff's entitlements from the Gosnells Project'.  The remaining allegations are denied with little more elaboration. 

9. Mr Liu's re‑amended reply and defence to re‑amended counterclaim does not respond to par 119 of the FRADAC.

10. Mr Harris addresses the Goldfind issue by his first witness statement, exhibit 11A, at pars 245 ‑ 266.  He refers to a written agreement with Mr Liu of 2 June 2006 (witness statement, par 256) referring to a document found (in Mandarin and English) at pages 1076 ‑ 1077 of exhibit 1.  I see nothing from the face of this document to indicate Mr Harris was ever personally a party.  Party B is identified as Goldfind Investment Pty Ltd, Mr Harris and Mr Charles Peaty (who Mr Harris relates is now deceased) sign on behalf of Party B on 2 June 2006.  Clause 5 says the arrangement concerned a four‑year loan of $160,000 by Mr Liu to Goldfind.  Clause 6 indicates the source of the $160,000, presumably a loan from Police & Nurses, was to be secured by a mortgage over Mr Liu's unit 6 at 47 Harry Street, Gosnells.  Clause 6(a) of the Goldfind agreement provides:

    It should be noted that [Mr Liu] will retain full possession of unit 6/47 Harry Street, Gosnells, WA.

11. Clause 8 refers to Mr Liu taking up the position of general manager 'in charge of seed production' upon Goldfind receiving $160,000.  Clause 9, apparently inserted by printing, at some point (both on a Mandarin and English version) says, '30,000 trees to be set aside as guarantee for the loan'.

12. The written document indicates a source of funds to be provided to Goldfind by Mr Liu (that is, a loan raised against his Gosnells unit, although Mr Liu had not ever had the title transferred to him so as to confer registered proprietorship). 

13. Mr Harris, in his witness statement, having referred to the agreement, says:

    257.I arranged for the financing of the Goldfind investment out of funds from the Gosnells Project, as requested by Mr Liu.

    258.He instructed me to arrange for a payment of $160,000 on his behalf, and a part payment of an investment in Goldfind for Mr Huang in the sum of $45,000.  

14. Reference is made by Mr Harris to a Primestar cash account disbursement on 9 August 2006 for $205,000.  A component $45,000 payment therein, on behalf of Mr Huang, is an issue I do not need to pursue. 

15. What Mr Harris says he caused Primestar to pay on 9 August 2006, on behalf of Mr Liu to Goldfind, is not consistent with Mr Liu taking out a loan from Police & Nurses that was secured against unit 6, 47 Harry Street, Gosnells.  That borrowing, as envisaged for Mr Liu, in fact did not ever happen.  Mr Harris provided no explanation for the departure from the loan arrangement postulated by cl 6 of the Goldfind Agreement. 

16. At par 263 of exhibit 11A, Mr Harris asserts that Mr Liu did become a 20% shareholder in Goldfind.  He refers to an ASIC search for Goldfind in the trial bundle.  The intended reference would appear to be to pages 2396 ‑ 2398 of exhibit 1 (a three‑page document filed with ASIC entitled 'Form 484, Change to Company Details').  This document looks to have been signed by Mr Graham Harris' brother, Mr Laurence Harris, in his capacity as a director of Goldfind, on 18 December 2008. 

17. Changes recorded included Mr Charles Peaty's cessation as a director of Goldfind, from 17 December 2008, and the issue of a further 98 shares on 18 December 2008.  This took the total number of issued ordinary Goldfind shares to 100 as at 18 December 2008.  Ensuing changes to the Goldfind register of members records an issue of 20 shares to Mr Liu on 17 December 2008, plus an issue of 13 shares to Mr Huang the same day.  The document goes on to record a holding of 65 Goldfind shares by Gingko Products Pty Ltd. 

18. In substance, then, it appears that up until mid December 2008 there had been only two issued shares in Goldfind.  The further 98 shares were only issued in mid December 2008 as between Mr Liu, Mr Huang and Gingko Products Pty Ltd.  All this, of course, was long after Mr Liu's loan of $160,000 in 2006. 

19. There is the aroma of an 'after the event' tidying up emanating out of these 2008 materials.  An earlier Form 484 document suggests the two original Goldfind shares were held by Mr Peaty (one share issued on 1 March 2006) and by Mr Graham Harris (one share issued on 1 March 2006), respectively (exhibit 1, pages 2385 ‑ 2386).

20. From those documents I further discern Mr Graham Harris resigned as a director of Goldfind on 23 November 2006, being replaced by his brother, Mr Laurence Harris (exhibit 1, pages 2388 ‑ 2389).  Mr Ken Harris also ceased to be a director of Goldfind on 5 November 2007. 

21. I turn to Mr Liu's witness statements.  The Goldfind loan arrangements seem to emanate from discussions at the Blue Sky Bar Nanjing involving Mr Liu, Mr Harris and Ms Li (exhibit 3A, pars 347, 360 and 364).  Mr Liu returns very briefly to the subject of Goldfind at par 437 as regards the asserted non‑payment to him of interest and what he says he was told by Mr Harris.

22. Otherwise, the evidentiary cupboard is distinctly bare in terms of the Goldfind issue.

23. On the face of it, there does seem to have been a loan to Goldfind in the amount of $160,000 by Mr Liu, made with funds emanating from Primestar.  But the once envisaged arrangement, whereby Mr Liu would take out a loan secured by a mortgage over his unit 6 at Gosnells (albeit that unit was only beneficially held by him), was never implemented.  In fact, it is known that this same Gosnells unit was sold in 2008, with Mr Liu's consent, in order to obtain funds for Mr Liu ($300,000), to be used in the Swan View land acquisition. 

24. Mr Liu appears to hold a cause of action against Goldfind (who is not a party to this action) for the non‑repayment of his loan and for unpaid interest (the four‑year loan period after June or even August 2006 having well and truly run).  Prospects of recovery, however, do not look promising, even though it would appear that Mr Liu holds 20 of the 100 issued shares in Goldfind, as some form of security, as well as possibly holding some further security over trees.  Goldfind, of course, is not a party to these proceedings and is not bound by any findings.

25. I am not satisfied on the evidence as a whole that Mr Liu has made good the cause of action against Mr Harris, as formulated, for breach of the Fair Trading Act, by reason of representations as to future matters.  The evidence is just too sparse for me to reach that conclusion.  That claim fails. 

26. The more substantive question is whether there is enough evidence for me to conclude that, on the balance of probabilities, $160,000 in funds Mr Liu loaned to Goldfind should be credited against Mr Liu's return entitlement from the Gosnells Project.  On the overall state of the trial evidence, I am not persuaded it should be.  There were numerous loose dealings back and forth between Mr Liu and Mr Harris, many involving cash, arising out of (translated) conversations occurring at the Blue Sky Bar in Nanjing.  I find this loose evidence, from both camps, unreliable.  I can identify no document from the trial bundle subsequent to the Goldfind agreement of 2 June 2006 that says, in explicit terms, that an arrangement stipulated by cl 5(a), which involved Mr Liu taking out a loan from Police & Nurses and secured by a mortgage over his Gosnells unit 6, was replaced later by arrangements, pursuant to which Mr Liu agreed that a part of his return from the Gosnells Project would be returned by him by way of Primestar advancing on his behalf $160,000 to Goldfind. 

27. That contention requires at least a modicum of proof, particularly in the face of the different loan arrangements expressed in a document that clearly were not followed.  At the least, a better, more coherent explanation from a reliable witness is required.  Lest it need be said, I am not at all persuaded by the defendants' argument that Mr Liu's $160,000 loan to Goldfind, which is admitted, must have come from somewhere and, therefore, it is more likely then not to have come out of his entitlements from the Gosnells Project.  That 'stab in the dark' is not proof to a standard acceptable.  The parties may have approached their business arrangements in loose fashion between 2003 and 2008, but a personal sloppiness in doing business does not set a standard for the fact‑finding and level of proof required by this court, even on  civil standard. 

28. Accordingly, I am not in the end persuaded Mr Liu's entitlements from the Gosnells Project are to be reduced to an extent of $160,000, by reference to a loan he made to Goldfind. 

29. A historical company extract from the ASIC database, conducted 13 September 2012, shows Goldfind has been deregistered on 17 July 2011.  It has no presently‑serving directors.  Mr Laurence Harris ceased to be a director on 17 July 2011 (see exhibit 1, pages 2358 ‑ 2363).

Primestar:  the second defendant

1. As is now apparent, Primestar is the corporate vehicle used both in the Gosnells Project and the Swan View land acquisition.

2. Primestar's Constitution can be found in exhibit 1, pages 31 ‑ 54.  An ASIC database search has been provided in respect of Primestar (see exhibit 1, pages 1321 ‑ 1328). 

3. Primestar appears to have been acquired as a shelf company some time around May 2003, when Mr Liu signed a Form 361 document which provided an address for service of an annual return form on 9 May 2003 (see exhibit 1, page 55).  Mr Liu, Mr Huang and Mr Harris were all appointed directors of Primestar on 9 May 2003 (see exhibit 1, page 57).  Mr Liu received his allotment of 79 shares (added to his one existing share) the same day.  Mr Huang received 10 shares, as did Mr Harris (see exhibit 1, pages 58, 62).

1. Documents of around 10 June 2003 existed, allowing for Mr Harris to resign as a director of Primestar, and to acknowledge he held no substantive investment or shares in that company (see exhibit 1, pages 66 ‑ 67).  But Mr Harris did not cease to be a director of Primestar until 31 May 2004 (see exhibit 1, page 1323).  A Form 484 was prepared to implement Mr Harris' resignation as a director (see exhibit 1, pages 85 ‑ 88).  However, another Form 484 showing a change in the register of members of Primestar at 14 March 2005, reflecting Mr Harris ceasing to hold his 10 shares in Primestar and for his shares instead to be held by Mr Huang, was never implemented (see exhibit 1, pages 268 ‑ 269). 

2. Subsequently, Mr Harris was reappointed a director of Primestar, on 12 September 2005 (see exhibit 1, page 1323).  At the same time, Mr Harris, through Shelf Companies Australia, appears to have caused a Form 484 to be lodged electronically with ASIC, bringing about the cessation of Mr Huang and Mr Liu as directors of Primestar on 12 September 2005 (see exhibit 1, pages 372 ‑ 375).  There further transpired the appointment of Mr Harris as Primestar's secretary and the appointment of Mr Harris' brother, Mr Ken Harris, as a director, at that date. 

3. So from September 2005, the board of Primestar became Mr Harris and his brother. 

4. Mr Harris would have it that these September 2005 changes occurred with the concurrence of Mr Liu, in the context of a then revised Gosnells Project deal that, from then on, saw Mr Harris assume full responsibility for the implementation of the Gosnells Project (but guarantee a fixed return of $175,000 to Mr Liu).  This disputed evidence emanating from Mr Harris is not corroborated by an independent, reliable source.  I do not accept it.  There is no corroboration to support Mr Harris' contention that Mr Liu, and, for that matter, Mr Huang, voluntarily resigned as directors of Primestar in September 2005.  Mr Liu disputes he ever agreed to resign as a director. 

5. I find Mr Liu and Mr Huang were unilaterally removed by Mr Harris in September 2005 without their knowledge.  This was done so that Mr Harris could control Primestar's board decisions along with his brother, Mr Ken Harris.  I find that removal of Mr Liu as a director, effected by the unilateral lodgement of a Form 484 and without Mr Liu's consent, was improper conduct by Mr Harris.  Orders are appropriate invalidating that removal and restoring Mr Liu to Primestar's board. 

6. On 20 June 2008, Mr Harris caused another Form 484 to be lodged with ASIC in respect of Primestar (exhibit 1, pages 1283 ‑ 1288).  This document showed the issue of a further 200 shares in Primestar, on 10 June 2008.  Mr Harris was now receiving a further 195 ordinary shares.  That  2008 share issue now took his shareholding to 215.  The other five newly issued shares were received by Mr Harris' brother, Mr Laurence Harris.  (It is not clear how Mr Harris' initial holding in Primestar, of 10 shares, increased to 20 shares prior to his receipt of a further 195 shares on 10 June 2008.  It may be Mr Huang's original 10 shares had somehow been transferred to Mr Harris, although that is not clear from the ASIC documents in the trial bundle.  Such position is also inconsistent with the state of the pleadings.)

7. Within the trial bundle, there is a document described as Primestar's 'Company Register' (exhibit 1, pages 1791 ‑ 1898).  The document was not mentioned at all by either side during trial.  There is an indication therein that a Mr Anwar Hossain was appointed a secretary of Primestar on 20 April 2008.  It also indicates that of the 300 issued shares in the company, 80 became held by Mr Liu, 215 by Mr Graham Harris and five by Mr Laurence Harris.  But I detect nothing in the register to show either:

   (1)the basis upon which Mr Harris appears to have received 10 shares, formerly held, in 2003, by Mr Huang (taking Mr Harris' shareholding to 20 out of 100 issued Primestar shares);

   (2)why Mr Harris received, in 2008, an allocation of a further 195 shares in Primestar, thereby rendering him the majority Primestar shareholder; and

   (3)any indication that Mr Liu or Mr Huang consented to resigning as directors of Primestar in 2005, or to further allocations of shares in 2008 to Mr Harris and Mr Laurence Harris.

8. In my overall assessment, the inference is irresistible that the further 195 shares issued to Mr Harris in June 2008 occurred at his instigation in the aftermath of his row with Mr Liu at Burswood (when the parties met in person but were unable to resolve differences concerning the Swan View Project). 

9. In the aftermath of that dispute, I find Mr Harris made a quick 'grab for power', now procuring for himself a majority shareholding in Primestar.  His purpose was to diminish the shareholding position of Mr Liu.  Primestar, of course, was now registered proprietor of the Swan View land.  If Mr Liu remained majority Primestar shareholder, Mr Harris knew he was vulnerable to an adverse vote at a general meeting of Primestar's shareholders.  His actions were taken to redress that vulnerability and to seize shareholding control for himself in Primestar.

10. I find Mr Harris, in conjunction with his brother Laurence Harris (the other director of Primestar) used their positions as board members to allocate a further 200 shares, in June 2008, so that Mr Harris could illegitimately obtain majority shareholder control. 

11. The allocation of the further 200 shares should be avoided and set aside.  So also should Mr Harris' acquisition of 10 shares from Mr Huang, for which no legitimate basis is ascertainable.

12. There is a reasonable basis, on the evidence, to conclude Mr Huang held his shares on trust for Mr Liu, rendering Mr Liu, in effect, a 90% shareholder in Primestar, before the further 200 shares were issued in 2008. 

13. Mr Liu's majority shareholding position in Primestar ought be restored.  Orders should be made setting aside, avoiding then cancelling the shareholding of Mr Harris beyond his original position of holding only 10 Primestar shares. 

14. For completeness, I repeat that the Liu/Harris respective shareholding positions in Primestar do not bear upon what I have earlier ascertained to be the parties' contractual positions (as between Mr Liu and Mr Harris) in relation to Mr Liu and Mr Harris' financial return entitlements in the development projects at Gosnells, Lake Clifton and Swan View.  Control of corporate vehicles used to advance these projects only carries an adjacent, but not determinative, contextual relevance, in my view. 

15. The position concerning the illegitimate removal of Mr Liu as a director of Primestar should also be corrected. 

16. The allocation of five shares to Mr Laurence Harris should be cancelled as, in my view, no legitimate basis has been demonstrated for that issue of shares to him. 

Lonepine:  Mr Liu's shareholding position via Primestar

1. Lonepine's constitution can be found at pages 581 ‑ 610 of exhibit 1.  It's register of members is at exhibit 1, page 611. 

2. There is an ASIC search for Lonepine at pages 1191 ‑ 1192 of exhibit 1.  (This search is said in the trial bundle's index to be of 10 April 2008.)  The document shows the only director of Lonepine as Mr Harris, appointed on 19 June 2006 and who continues in that office. 

3. Lonepine's secretary, Mr Anwar Hossain, looks to have been appointed on 1 March 2008. 

4. The ASIC search for Lonepine shows 150 ordinary shares issued, of which 68 are shown as issued to Primestar and 82 to Mr Harris.

5. So, above the 32 shares Mr Harris held at the time Lonepine was incorporated in 2006 (out of 100 shares issued at the time), a further 50 shares were since issued.  Mr Harris received them all, thereby rendering him majority shareholder.  That is Mr Liu's grievance.

6. It is clear from the register for Lonepine that as at 19 June 2006 100 issued shares in Lonepine were split between Mr Harris, who held 32 shares and Primestar, holding 68.  A resolution of directors of the same day shows Lonepine's directors were Mr Harris and his brother, Mr Ken Harris.  The latter also fulfilled the role of company secretary (effectively upon a 2006 acquisition of Lonepine as a shelf company). 

7. A further 50 shares then issued to Mr Harris (exhibit 1, pages 851 ‑ 854).  Holding the further 50 shares meant that of 150 Lonepine shares on issue, Mr Harris' total of 82 shares afforded him a 54.66% majority shareholding.  Primestar's former 68% majority position became reduced to a minority shareholding, at 45.33%.

8. Mr Ken Harris is no longer a director or a secretary of Lonepine.  Mr Anwar Hossain was appointed Lonepine's secretary as of 1 March 2008.  That left Mr Harris as sole director of Lonepine from then (exhibit 1, page 1191).

9. Throughout the course of evidence adduced during trial, particularly the cross‑examination of Mr Harris, nothing emerged to indicate any possible legitimate rationale for an allocation of the further 50 shares in Lonepine to Mr Harris.  The initial 68% shareholding by Primestar broadly aligned to the 68 holding as envisaged in cl 3 of the Lake Clifton Agreement documents, albeit cl 3 envisaged Mr Liu personally owning these shares, rather than Primestar.  Bearing in mind the state of the evidence, I can ascertain no rationale whatsoever for the issue of the further 50 shares to Mr Harris in September 2006, other than for him to seize a majority shareholding control in Lonepine, by increasing his shareholding from 32% up to a controlling 54.66% stake. 

10. Mr Harris' purpose in issuing 50 further Lonepine shares (to gain shareholder voting control) was, I find, wholly illegitimate.  It was clearly for an improper purpose.  No other viable legitimate rationale presents on the evidence. 

11. Accordingly, orders are approrpriate avoiding the issue of the further 50 shares in Lonepine to Mr Harris, and restoring the shareholding position to a 68/32 (out of 100 shares) split in favour of Primestar, as majority shareholder. 

12. The board of Lonepine, which in 2006 comprised Mr Harris and his brother Mr Ken Harris, acted improperly in issuing the further 50 shares to Mr Harris.  I would declare accordingly.  See, generally as to illegitimate exercises of board power for purposes of obtaining shareholding control:  Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821, 837; Ngurli Ltd, Carinya Ltd, Fitzroy Ltd & Myall Ltd v McCann (1953) 90 CLR 425, 440; Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483; Ashburton Oil NL v Alpha Minerals NL (1971) 123 CLR 614, 640; Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, 291.

13. It is clear, generally speaking, that directors of corporations may not cause shares to be issued for the improper purpose of seeking to defeat the voting power of other existing blocks of shareholders, by a creation of an altered majority shareholding position.  That is what I conclude has occurred here, in respect to issues of shares in both Lonepine and Primestar.

14. I point out again that the finding as to the legitimate shareholding position in Lonepine does not carry with it any correlative conclusion as to a profit entitlement to be derived on a like percentage basis as the shareholding split (68/32) in going about assessing the residual profit entitlements of Mr Liu, out of the Lake Clifton Project.  In my view, the distinct concepts of a profit split and a shareholding split in the project vehicles remain just that, distinct. 

15. To the extent Primestar was once the majority shareholder in Lonepine and was, by the issue of a further 50 shares to Mr Harris, thereby diluted, I would, to the extent necessary, see as appropriate that orders be made invalidating that issue via a derivative action brought against Mr Harris by Primestar, in respect of which I gave leave for Mr Liu to pursue by late amendments at the trial. 

16. Accordingly, relief in terms of par E of Mr Liu's prayer for relief is appropriate, as regards the issues of shares in Primestar, and as well, under prayer par F as regards the impugned issues of shares in Lonepine.

More residual issues

1. My findings in respect of construction issues and as to an absence of any fiduciary duty owed to Mr Liu, largely dictate the outcomes in the litigation. 

2. To the extent minor issues remain concerning, for instance, contentions that it was an obligation of Mr Harris, by way of an inferred or implied term to cause either Primestar or Lonepine to keep proper accounting records and books, my view is that an obligation to keep proper accounts, in each case rested upon the corporation itself.  I am not persuaded implied or inferred contractual terms favouring Mr Liu were applicable to Mr Harris, to require him to promise Mr Liu bring about any result whereby Primestar and Lonepine kept proper accounts. 

3. There is little doubt these disputes would have been capable of easier resolution had proper accounts and records been kept.  But that is not the test for an implication of contractual terms.  There is also a question posed by the non‑availability of funds for proper accounting work to be undertaken.  Those are responsibilities of the board members of each corporation.  Nothing I say detracts from their discrete obligations. 

4. I am not persuaded to find the implied terms, as contended for in the FRASOC pars 30 and 31 (see also pars 43 ‑ 44, 59 and 72).  These contentions are minor distractions from the significant main events, I have now resolved.

Conclusion

1. In the end, therefore, I find for Mr Liu against Mr Harris as follows:

(1)	In respect of the Gosnells Project as against Mr Harris, in the amount of:
Liu Contribution		$1,036,656.43
Less (to Lake Clifton)  -		$978,000.00
=		$58,656.43
Plus guaranteed Gosnells profit           +		175,000.00
Due:		$233,656.43
Plus simple interest at 6% from a period commencing 10 months (cl 6 Gosnells written agreement) after the issue of the last tranche of Gosnells strata titles on (see ts 92).
(2)	In respect of the Lake Clifton Project against Mr Harris, as below:
Titles Issued - Lake Clifton	18 July 2007
Due date for payment of $1.5 million 16 September  2007	$1,500,000.00
Interest free period concluded	16 December 2007
Interest on $1.5 million from 17 December 2007 to 10 March 2008 (85 days) at 5% per annum	$17,465.75
Balance after Mr Liu's contribution from Lake Clifton to Swan View Project of $1.2 million	$300,000.00
Interest on $300,000 ($1.2 million having been directed to be paid to Primestar) from 11 March 2008 to 21 June 2008 (103 days) at 5% per annum	$4,232.88
Interest on $260,000 ($40,000 cash having been paid to the plaintiff on 22 June 2008) from 22 June 2008 to 1 March 2013 (1714 days) at 5% per annum	$60,320.06
Further $778,000 payable 16 December 2007	$778,000.00
Interest free period concludes	16 March 2008
Interest on $778,000 from 17 March 2008 to 1 March 2013 at 7.5% per annum (1811 days)	$289,039.75
Total (as at 1 March 2013)	$1,449,058.30

(3)Subject to (4) below, I would declare as regards the property at 1 Balfour Road, Swan View, that the property registered in the name of Primestar is held on trust for Mr Liu and Mr Harris, in proportions which reflect their contributions to the acquisition price, with the acquisition contribution by Mr Liu being assessed at $1.5 million. 

(4)Further to (3) above, I would declare and order that Mr Liu be paid out first from the proceeds of any realisation of the Swan View property his assessed monetary entitlements herein for Lake Clifton in priority, before Mr Harris receives any part of these proceeds. 

(5)I declare that the funds Mr Harris accessed from Lonepine to make his acquisition contribution towards the purchase of the Swan View property, were sourced from the Lake Clifton Project conducted by Lonepine and that the Lake Clifton Agreement documents, on their proper construction, only confer on Mr Harris the entitlement to receive residual profits in the Lake Clifton Project after Mr Liu receives his full Lake Clifton entitlement (of $2.278 million plus all interest due to him).

[I observe that Mr Liu, on my assessment, has not yet received from Lonepine the full amount of his return entitlement in respect of his capital, profit and interest from Lake Clifton.  Until that transpires, Mr Harris is not entitled to receive any funds from Lake Clifton.  Mr Harris was not entitled to receive the benefit of the funds out of Lonepine in the acquisition of the Swan View land in 2008.  Until Mr Liu fully receives all his Lake Clifton entitlements including interest, as specified herein, Mr Harris should not receive any proceeds from a sale or realisation of the Swan View land.] 

(6)I dismiss the counterclaim of Mr Harris against Mr Liu seeking damages for alleged repudiation and breach of the Swan View Agreement. 

(7)I dismiss all other claims.