Long Spring Pty Ltd v RD Beechworth Pty Ltd

[2025] NSWSC 437

Supreme Court

New South Wales

Medium Neutral Citation:

Long Spring Pty Ltd v RD Beechworth Pty Ltd [2025] NSWSC 437

Hearing dates:

5-6 May 2025

Date of orders:

7 May 2025

Decision date:

07 May 2025

Jurisdiction:

Equity - Commercial List

Before:

Peden J

Decision:

At [78]

Catchwords:

CONTRACT – Formation – Agreement – oral contract to advance money to developer – whether term of contract that money repayable within 18 months or at the end of the development – relevance of logic and objective facts to determination of terms of contract

Cases Cited:

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588

County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193

ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24

Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232

John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451

Lawrence v Ciantar [2020] NSWCA 89

Onassis v Vergottis [1968] 2 Lloyd’s Rep. 403

RD Beechworth Pty Ltd v Ku-ring-gai Council [2024] NSWLEC 1074

Ren v Jiang [2014] NSWCA 1

Singh v AKM Investments Group Pty Ltd [2024] NSWCA 268

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

Turner v Richards [2025] NSWCA 83

Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

Mark J Steele, “Witness Preparation and the Corruption of Evidence in Civil Proceedings” (2023) 42(2) Civil Justice Quarterly 148

Category:

Principal judgment

Parties:

Long Spring Pty Ltd (first plaintiff)
Forevet Flourish Pty Ltd (second plaintiff)
RD Beechworth Pty Ltd (first defendant)

Representation:

Counsel:
G A Sirtes SC with D Robertson (plaintiffs)
D Weinberger (defendant)

Solicitors:
Lin Tang & Co Lawyers (plaintiffs)
Keypoint Law (defendant)

File Number(s):

2024/00283475

Publication restriction:

Nil

JUDGMENT

1. The single issue in this case is when RD Beechworth Pty Ltd must repay the $2.5 million it received from each of the plaintiff companies, Long Spring Pty Ltd, and Forevet Flourish Pty Ltd, to assist it to purchase and develop two properties in Pymble, New South Wales.

2. There was no dispute that the plaintiffs loaned money to RD Beechworth after oral conversations between Mr Wei Shu, who controls the plaintiffs, and Mr Zhiyu Ning, who is one of the directors of RD Beechworth. There was also no dispute that, at the completion of the development, the plaintiffs would each receive 20% of any net profits through their shareholding in RD Beechworth.

3. The plaintiffs contended that the loans were repayable within 18 months from the date on which the funds were advanced. RD Beechworth contended that the money was repayable on the sale of the development properties, together with the portion of the net profit. There has been no repayment of any sum, and the development project has stalled due to litigation with the relevant council about the proposed subdivision, and this litigation.

4. For the reasons that follow, I consider the plaintiffs’ claim must fail; they are not currently entitled to repayment of the loan sums.

Background facts

5. Mr Wei Shu was born in China. In 2019, he migrated to Australia with his wife, Ms Lihua Lin, and his son, Yikai Shu. Mr Shu speaks Mandarin and does not understand English. He is a very successful businessman, with all his business being located in China. He owns four petrol stations and trades petroleum with an annual turnover worth several tens of millions of Australian dollars. Mr Shu has funded the purchase of at least four residential properties in Sydney for his wife and son, collectively valued at tens of millions of dollars. Mr Shu has incorporated entities “in case” he wants to do business projects. However, Mr Shu denied any knowledge of “details” of the property purchases. Further, Mr Shu denied he had any understanding of property development in China or in Australia.

6. Mr Shu considered himself the "actual controller" of the plaintiffs. However, he is not a director. Instead, his son is the director of Long Spring, and his wife is the director of Forevet Flourish. Mr Shu considered that his wife and son "act following [his] directions if necessary".

7. Also in 2019, Mr Shu was introduced to Mr Ning. Mr Shu met Mr Ning's father when he was inspecting houses for purchase in Sydney. Then, Mr Ning's father invited Mr Shu to his house and introduced him to his son. From the time they met, Mr Shu knew Mr Ning was a property developer.

8. Mr Ning founded the Rudder Group of companies in 2010 with his business partner, Mr Changyang Li. The Rudder Group has been involved in property development and construction activities in New South Wales, Victoria and the Australian Capital Territory. Most of the Rudder Group's developments have been on the upper north shore of Sydney. One of Ms Lin’s properties, purchased with Mr Shu’s money, is an apartment in Killara, developed by the Rudder Group. Mr Ning’s business office is also located there and Mr Shu’s family lived at the Killara development previously.

9. After their initial meeting, Mr Shu and Mr Ning caught up from time to time and discussed the property market in Sydney and Mr Ning’s development projects at a high level.

10. In early December 2021, Mr Shu and Mr Ning met at Mr Ning's parents' house in Killara, at which time Mr Shu said that he and Mr Ning had a conversation in words to the following effect:

Ning:   Mr Shu, there are two adjacent lands at Pymble for sale. It will be a good opportunity for development. Are you interested?

Shu:   How much will you need?

Ning:   The total purchase price of the two lands will be about $9 million. They can be subdivided into four lots and to construct one house on each lot. The total construction cost is about $8 million.

Shu:   When can you complete the construction and sell the properties? And what's the profit?

Ning:   I can complete this project in 18 months. The profit of each house is about $1.6 million, total profit $6.4 million.

Shu:   Sounds good. I can advance $5 million. You're responsible for the development and the rest of the funds. What's the return for me?

Ning:   I need to discuss that with my business partner Changyang Li.

Shu:   Let me know after the discussion. But you need to promise to return the money to me in 18 months.

Ning:   Sure.

11. Mr Ning denied that those particular words were spoken, and in particular, the reference to completion or repayment in 18 months. Instead, Mr Ning said they discussed Mr Shu “investing” up to $5 million in the development project, and that Mr Ning said that he would speak with Mr Li and get back to Mr Shu with a proposal. Mr Ning claimed that no time for repayment was discussed in that conversation.

12. Mr Shu said that later in that evening, Mr Ning telephoned him and they had a further conversation in words to the following effect:

Ning:   I've discussed with Li. We will give you 40% of the project profit as return. We can register a company to buy the land. You hold 40% and we hold 60% shares.

Shu:   Ok. I'm in. What's the process next?

Ning:   The accountant will handle it. In Australia, we do things in a formal way.

Shu:   Ok.

13. After these conversations, Mr Shu understood the $5 million would be repaid in a “maximum” of 18 months.

14. Mr Ning did not accept those exact words were spoken in the second conversation. He contended that he agreed Mr Shu would invest the money in the development and acquire a 40% shareholding in a corporate vehicle. Upon completion, Mr Shu’s companies would receive the return of $5 million and 40% of any resulting profit through their shareholding. That was said to be reflected in Mr Ning’s version of the conversation:

Ning:    I have talked to my partner. We will form a company to develop the land at Pymble and we will give you 40% of the company. When the project is complete you will get your $5 million back and 40% of any profit. We are hoping to sign the contracts fairly soon.

Shu:   That sounds good.

Ning:   You won't need to put the whole $5 million in straight away. There is a nine month settlement on the properties so we won't need it for a while and you can make progress payments.

15. Mr Shu said that a few days later, Mr Ning telephoned him again and told him to use two companies to hold the shares in the development company, with each holding 20%. Mr Shu said he did not know why Mr Ning made that suggestion and he did not ask. Mr Shu denied Mr Ning suggested the idea so that Mr Shu or the plaintiffs’ directors could avoid giving personal guarantees for any loans. Mr Ning was not cross-examined on why he suggested using two companies to Mr Shu. Mr Shu also said he was not involved in the incorporation of the plaintiff entities that were registered on 14 December 2021, but that he controls them.

16. On 17 December 2021, RD Beechworth was registered. Mr Ning and Mr Li were appointed as its two directors. The company's paid up share capital is $100, of which it has issued 100 shares as follows:

1. 30 shares to NZY Pty Ltd, a company associated with Mr Ning;

2. 30 shares to LM Family Capital Pty Ltd, a company associated with Mr Li;

3. 20 shares to Long Spring; and

4. 20 shares to Forevet Florish.

17. On 21 and 22 December 2021, RD Beechworth entered into contracts to purchase the two Pymble properties for a total price of $9 million. The settlement date was on or about 22 September 2022.

18. Between January and September 2022, Mr Shu caused the plaintiffs to advance amounts totalling $5 million to RD Beechworth. He paid instalments as and when directed by Mr Ning, and he said he did so without questioning the purpose each time. The payments were as follows:

1. On 19 January 2022, each plaintiff advanced $500,000;

2. On 7 March 2022, each plaintiff advanced $500,000; and

3. On 5 September 2022, each plaintiff advanced $1.5 million, a few weeks before settlement of the property purchases.

19. Mr Shu denied that he understood that the instalments before settlement were being used to progress a development application through the engagement of engineers and architects. His complete understanding was that the money was being used “to purchase and/or develop” the properties. He never asked any questions and stated that he had very few conversations with Mr Ning about the development, because he “trusted” Mr Ning. Mr Ning also considered there were few conversations about the development; Mr Shu left Mr Ning and Mr Li to progress the development.

20. RD Beechworth recorded the advanced funds as borrowings/non-current liabilities in its 2022 and 2023 financial statements.

21. In about July 2023, Mr Ning told Mr Shu that the development application was likely to be refused and that if the properties were sold then, it would be at a $2 million loss. Mr Shu stated in cross-examination that “even … as of today” he did not “quite fully comprehend” what a development application means.

22. In about August 2023, Mr Shu said he had a conversation with Mr Ning, in which he complained that RD Beechworth had mortgaged the properties for about $6.3 million, and asked about the funding of the construction costs. Mr Shu said he told Mr Li that “I need my money back. Just sell the lands”.

23. On 27 February 2024, the New South Wales Land and Environment Court upheld an appeal granting consent to RD Beechworth’s concept development application, approving the subdivision of the properties into four new allotments: RD Beechworth Pty Ltd v Ku-ring-gai Council [2024] NSWLEC 1074.

24. If the loan was to be repaid within 18 months of the final advance, it was repayable by about 5 March 2024.

25. On 26 April 2024, the plaintiffs’ solicitors sent a letter to RD Beechworth on Mr Shu’s instructions, which demanded repayment of the $5 million by 24 May 2024. That letter included the following:

5. In order to obtain funds to purchase [the properties] Beechworth borrowed [$5 million from the plaintiffs] …

6. The parties did not specify any date on which Beechworth was required to repay the [loans] and therefore the loans are repayable upon demand …

8. Furthermore, we are also instructed that Mr Li and Mr Ning represented to our clients that [the properties] would be developed within 2 years of the purchase of the properties, that is, by about late 2023 …

26. There is no mention in that letter that the loans would be repayable in 18 months (even if the parties had not “specified [a] date”), despite that letter being the first formal demand.

27. On 7 May 2024, RD Beechworth’s solicitors responded by letter, which relevantly stated:

We understand that:

1. Entities controlled by the Directors and each of your clients are the shareholders of the Company;

2. The Directors (on behalf of the Company) and your clients entered into a verbal agreement or agreements. It was a term of those agreements that:

(a) The relevant shareholder would advance $2.5 million to the Company for the purpose of acquiring and developing the property …; and

(b) Upon sale of the developed property:

(i) each of your clients would be entitled to repayment of the loans, and

(ii) the Directors (in consultation with your clients) would consider the distribution of part, or all of, any profit to the shareholders (including your clients).

The company:

3. Denies that the loans made by your clients are repayable on demand;

…

6. Denies that it and the Directors made the representation set out in paragraph 8 of your letter. As experienced property developers who are well aware that development timelines are impossible to predict and often out of their control, neither Mr Li nor Mr Ning would consider a commitment of the type apparently contended for.

You are on notice that the Company contends that:

7. The loans are not currently repayable; and

8. [T]here is a genuine dispute in relation to the existence of the debt claimed.

28. On 19 July 2024, the plaintiffs’ solicitor responded by letter, which included:

We are instructed that:

… 2. In about November/December 2021, Mr Shu discussed with Mr Ning and agreed to lent [sic] $5 million for the purchase of [the properties]. The loan would be repayable upon the development approval (DA) being obtained or the constructions being completed, and in any event within 18 months from the loan being advanced.

29. This was a different version of “instructions” from those in the April 2024 letter, because it referenced various different possible dates for repayment. No definition of when the “loan [was] advanced” was given, from which the 18 month period could be calculated.

30. On 2 August 2024, the plaintiffs filed their Summons and Commercial List Statement, which included a contention that the term of the loans “would be ‘about’ 18 months from the date on which the funds were advanced” to RD Beechworth.

31. On 20 September 2024, RD Beechworth filed its Commercial List Response, in which it contended that the plaintiffs’ $5 million advance was not advanced by way of “loan”, but rather “as capital to assist” RD Beechworth to purchase and develop the properties. However, RD Beechworth’s evidence and submissions were framed as an agreement that RD Beechworth would repay the $5 million and 40% of the profit after the development completed. There is no issue (or no longer an issue) that the parties agreed to a loan. Instead, it is essentially the repayment date which must be determined.

Ascertaining the terms of a contract

32. The legal principles relevant to determining the terms of an agreement are not in dispute.

33. Where parties agree that they entered into a contract and the issue is the terms of that contract, the Court must ascertain the objective intention of the parties, that is, the intention of the parties as outwardly manifested by their words and conduct, not each party’s unspoken subjective intention: see eg Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

34. Where a contract is entirely oral, or partly oral and partly to be inferred from conduct, the Court must consider all the relevant circumstances when determining the terms of the agreement, including both pre-contractual and post-contractual conduct as a matter of fact: see eg County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[8], [17]-[27] (Spigelman CJ); Lawrence v Ciantar [2020] NSWCA 89 at [114] (Bathurst CJ, Meagher and Gleeson JJA agreeing); Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232 at [35] (Stern JA, Kirk JA and Basten AJA agreeing).

35. The plaintiffs must satisfy the civil standard of proof, requiring “actual persuasion” of the occurrence or existence of the fact in issue: see eg Singh v AKM Investments Group Pty Ltd [2024] NSWCA 268 at [44]-[47] (Gleeson JA, Bell CJ and Stern JA agreeing).

36. Where a dispute concerns an oral agreement, the appropriate considerations involved in factual findings concerning what was agreed were recently set out by Payne JA (Leeming and Adamson JJA agreeing) in Turner v Richards [2025] NSWCA 83 at [58]-[60]. Without seeking to depart from the principles detailed in that judgment and those cited therein and above, some key matters are:

1. Human memory is fallible and worsens with time and the intervention of disputes: see Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce); see also Watson v Foxman (1995) 49 NSWLR 315 at 318-319 (McLelland CJ in Eq). It is possible for witness testimony to be honest, credible, but wrong: see eg discussion in Mark J Steele, “Witness Preparation and the Corruption of Evidence in Civil Proceedings” (2023) 42(2) Civil Justice Quarterly 148.

2. Available objective evidence is likely to be the most reliable basis for determining matters of credit. Further matters relevant include the inherent unlikelihood of an occurrence of a given description or the gravity of the consequences flowing from a particular finding: see also John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] (Hammerschlag J, as his Honour then was); ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24 at [27]-[29] (Bell P, Bathurst CJ agreeing).

37. It has been said that “the law ordinarily will take the parties at their word and the court will be slow to find that a bargain is not as the parties expressed it”: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 at [40] (Gaudron, McHugh, Gummow and Hayne JJ). The plaintiffs cited this proposition in support of their case. However, that does not assist the plaintiffs here, where the issue is what the parties’ “word” or expression in fact was.

Did the parties agree to loans repayable in 18 months?

38. In opening written submissions, the plaintiffs relied upon the following evidence to support their case:

1. Mr Shu’s evidence of oral conversations with Mr Ning in December 2021;

2. RD Beechworth having recorded in its financial statements the $5 million advance as a "loan", and not as "equity";

3. The fact that RD Beechworth’s share capital/equity is $100 and does not include the $5 million advanced by the plaintiffs; and

4. The “admission” by RD Beechworth’s solicitors in their letter dated 7 May 2024 that the $5 million advanced were "loans" by the plaintiffs.

39. Mr Shu further submitted that to accept RD Beechworth’s characterisation of the agreement would be uncommercial, because RD Beechworth would control the timing of the repayment of the loan sums.

40. However, in closing, the plaintiffs’ oral submissions concerned Mr Shu’s credit and the commerciality of the alleged agreement with a repayment date of 18 months from the date of advance. This is likely because in opening submissions, RD Beechworth conceded that the advances were by way of loan and were repayable, and the other issues concerning the difference between whether the money was advanced by way of a loan or equity were less important.

Mr Shu’s evidence

41. Mr Shu and Mr Ning gave conflicting, largely uncorroborated affidavit evidence about their oral discussions concerning the loans. English is not the first language of either. Further, their affidavits refer to conversations with “words to the effect of”. I do not consider I ought to infer that either witness ought not be believed because their evidence in cross-examination referred to further conversations not found in the affidavits prepared with legal assistance.

41. Mr Shu gave evidence with the aid of an interpreter. This made the assessment of his credibility more difficult, as is often the case where an interpreter is required: Ren v Jiang [2014] NSWCA 1 at [13] (Leeming JA). This difficulty, together with inherent issues with human memory, reinforces the need for particular reliance on objective evidence and the logic of events. Nevertheless, there are some important matters arising from Mr Shu’s evidence.

42. There is no clarity in Mr Shu’s evidence of the alleged 18 month payment term. Mr Shu did concede that he expected the money to be returned after the development was completed and the properties were sold, but he sometimes maintained that Mr Ning had “guaranteed” repayment would occur within 18 months. However, his evidence varied in cross-examination and included (emphasis added):

It’s actually [Mr Ning] who told me at the time after purchase that pieces of land, it will take roughly 18 months to complete the project. That’s what he told me.

…

Q: … You said a few minutes ago that the first time that there was any mention of 18 months or the project being completed within 18 months was after the land … was acquired. Do you agree or disagree that that was the answer you gave a few minutes ago?

A. INTERPRETER: [Mr Ning] didn’t mention anything specifically about the land purchase or anything – anything related to that. He just mentioned it takes 18 months to complete a project - and very vaguely. That’s it.

Q: Very vaguely – does that mean, Mr Shu, that you have a vague recollection of the conversation?

A. INTERPRETER: I think what he told me was it took –

Q. … [D]oes that mean you have a vague recollection of the conversation, yes or no?

A. INTERPRETER: I remember that specifically very clearly that he mentioned it took – it would take 18 months to complete a project.

Q. But that was after the land … was acquired. That was the answer you gave five minutes ago. Do you agree or disagree?

A. INTERPRETER: I don’t – I don’t think he mentioned after the purchase of the land it would take 18 months.

…

Q. I’m going to ask you about the conversation on 3 December 2021. The only mention of the expression “18 months” was when [Mr Ning] told you that it will take 18 months to carry out the project; is that your evidence.

A. INTERPRETER: Yes. He mentioned it would take 18 months to complete the project …including the selling of the … developed properties and to recover all the money.

…

Q. … you agreed to give [Mr Ning] $5 million, you understood that you would receive your $5 million back, together with a share of the profits, after four houses had been built and sold; agree or disagree?

A. INTERPRETER: I think it was principal plus the interest payment on those money.

Q. And what do you say the interest was that you agreed in December 2021?

A. INTERPRETER: … so that’s basically – refers to the 40% of the total projected profit … or thereabout[s].

44. Mr Shu never clearly gave evidence in cross-examination that there was a promise to repay the money within 18 months, rather than when the development was complete and sold, which he said Mr Ning had stated would take 18 months.

45. Further, Mr Shu’s evidence was unsatisfactory in a number of ways and that makes his evidence about the 18 month repayment term difficult to accept:

1. He changed his evidence about his residential address. In chief, he said his residential address was in Lindfield. In cross-examination, he confirmed “I live in [the Lindfield property]”. However, he later stated he lived in Bellevue Hill, as he had recently moved. It does not speak to his credit that he gave incorrect evidence on such a non-contentious issue.

2. When first asked, he said his only business was running petrol stations in China (“Nothing else. All my business back in China has been involving in running these four petrol stations”). But he later volunteered that his business was also trading in petroleum in very significant sums.

3. He claimed not to remember various parts of his evidence, despite his affidavits being dated 25 October 2024 and 12 March 2025. For example, in his affidavit, he indicated that his wife and son were the directors of the plaintiff companies and they “act following my directions”. However, in cross examination, he refused to accept that he gave instructions to an accountant to establish the plaintiff companies and cause his family to be the directors, even though he considered he controlled the plaintiffs. He said he could not “recall all the details”. He also could not recall who the directors were and when pressed, indicated whatever was in his affidavit must be accurate.

4. Upon being shown a printed bundle of his text messages with Mr Ning, before being asked any substantive question, Mr Shu immediately volunteered:

This actually, I believe, is a fake document produced by your client, because I believe, in September I was already back in China. So this must be a fake one.

However, during cross-examination, he accepted that all of the messages were between Mr Ning and himself. There was no apparent reason for Mr Shu to allege the document was fake.

5. Mr Shu claimed that he has never really understood what a development application is and the earliest he became aware of that concept was in July 2023, when he came to understand that government approval was required for the development. However, that is inconsistent with:

1. His affidavit, in which he indicated that from October 2022 he learnt of the development application; and

2. His text messages with Mr Ning, which show that Mr Shu understood that certain dwellings could not legally be demolished, and that he engaged with discussion with Mr Ning about developments, including development applications, in 2019, 2020 and 2021. Mr Shu said that he could not recall any of those conversations about property developments with Mr Ning evidenced in his text messages. However, he refused to accept that the messages appeared to indicate that he had been involved in those communications. Further, one of the developments mentioned in the messages was a development at Turramurra, and Mr Shu himself gave evidence that Mr Ning offered that Mr Shu could move the loans across to that development. Mr Shu rejected that offer, because he was not interested in that development. Therefore, he must have had some knowledge of it.

46. Despite his wealth, business experience, experience purchasing properties, discussions with Mr Ning, and his family’s experience in renovating properties, including heritage properties, he claimed he had no understanding of residential development processes in China or Australia. I consider that an incredible possibility. Instead, I consider Mr Shu would have understood that there was uncertainty as to the timeframes for planning, construction and sale processes, even if he did not have a good understanding of development applications.

47. The true position appears to be disclosed in Mr Shu’s evidence that:

Q: … by the end of December 2021, you understood that you would receive your $5 million back, plus 40% of 6.4 million after [Mr Ning] had built four houses and sold all four houses. Yes or no?

A. INTERPRETER: Yes. That’s correct.

Mr Ning’s evidence

48. I do not accept that Mr Ning was shaken on any of his affidavit evidence or answers in cross-examination. He made appropriate concessions. For example, he accepted that he had not included in his affidavit any evidence about discussing the timing of the likely completion of the project. He accepted he did not provide Mr Shu with any feasibility study or exact break down of development costs, in contrast to the materials he provided Mr Shu for another development in Turramurra. However, there is no dispute that Mr Ning told Mr Shu that construction costs beyond the land purchase were to be about $8 million on Mr Shu’s evidence and total additional development costs were about $11-12 million on Mr Ning’s evidence.

49. Further, I did not consider cross-examination about Mr Ning’s understanding of the appropriate legal characterisation of the payment (whether it was a “loan” or “advance”) or the way it was pleaded or expressed in legal submissions was relevant to the issues in dispute or Mr Ning’s credit.

50. Other challenges to Mr Ning’s evidence amounted to memory tests and went nowhere. For example, Mr Ning was challenged as to whether he had included in his affidavit that he knew Mr Shu was involved in property development. While he could not find it in the witness box, his affidavit referred to Mr Shu having told him he had been involved in three to four developments. Similarly, it was suggested that Mr Ning did not include discussing potential losses with Mr Shu. However, in his affidavit, he twice referred to the project “losing” money.

51. Mr Ning did include in his affidavit that he considered it would take “about 18 months to get to the stage of subdividing the land”. It was suggested to him that he mentioned repayment of the money based on that 18 month milestone. Mr Ning rejected that suggestion and he was not challenged further. His clear evidence was that he did not say the project would be finished in 18 months, because he did not believe that was possible. Mr Ning was not cross-examined on his version of the relevant conversation.

52. Mr Ning and Mr Li were experienced property developers. They were aware that Mr Shu was a wealthy businessman who was interested in property investments. He also had a personal connection to Mr Ning’s father. It would have been in Mr Ning and Mr Li’s interests to have Mr Shu as an investor, who might invest in other projects in the future. It would not have been in their interests to deceive Mr Shu about the likely length of time for completion or the repayment trigger. They understood the complexity of the development, the development application process, and the cost and time involved in construction.

53. As for Mr Li, while he was not involved in any of the key conversations, he did give evidence that Mr Ning had never told him that Mr Shu was to be repaid in 18 months, and that Mr Shu never represented that idea to him in their conversations. Mr Li was not cross-examined, and no submission was made that I ought not accept his evidence. There is no reason why Mr Ning would not have told Mr Li if the agreement was for repayment in 18 months, as it would impact on the money needed for the project and their business relationship.

54. I prefer Mr Ning’s evidence over that of Mr Shu.

RD Beechworth’s financials

55. I do not accept the plaintiffs’ submissions that other matters, said in opening to conclusively support their case, were significant. The key issue is the substance of the agreement, rather than the labels given to it by the parties over time. There is no dispute that RD Beechworth promised to repay the plaintiffs’ $5 million.

56. Merely because RD Beechworth characterised the plaintiffs’ $5 million as “loans” in accounting documents does not prove they were repayable in 18 months.

Admissions?

57. I do not consider RD Beechworth’s solicitor’s 7 May 2024 letter contains an “admission” that assists the plaintiffs. The letter makes plain RD Beechworth’s position that the plaintiffs’ $5 million was a loan repayable upon completion of the development, which is consistent with the submissions made at trial. RD Beechworth’s promise was to return the $5 million and pay 40% of the net profit of the development, which is agreed between the parties. The only issue is the time for repayment of the loan.

58. However, I consider the plaintiffs’ solicitor’s letters dated 26 April 2024 and 19 July 2024 are telling against the plaintiffs. In the first letter, the plaintiffs’ solicitor, on Mr Shu’s instructions, never stated that the loans were repayable within 18 months or “about 18 months”, as pleaded, or a “maximum of 18 months”, as asserted by Mr Shu.

59. When asked why there was no reference to that important 18 month timeframe in the April 2024 letter, Mr Shu stated: “Maybe I forgot to tell him, or maybe I got memory wrong”. The available inference is that Mr Shu told his solicitor that there was no discussion about a repayment date, including the 18 month timeframe, particularly in circumstances where there is no explanation as to why Mr Shu’s instructions later changed.

60. The second letter of July 2024 does not assist the plaintiffs either, as it introduces further inconsistent possibilities of when the loans were agreed to be repayable. One of those was when the development approval was obtained, but Mr Shu’s evidence was he did not understand what such an approval was, and it is unlikely he agreed to that being the trigger. Further, the reference to a timeframe for repayment after the money was advanced did not deal with the fact that the money was advanced in tranches, and therefore the letter contained no certainty of the repayment date. The fact that Mr Shu’s instructions changed without explanation does not assist the plaintiffs’ case.

Consideration

61. As noted above, the objective evidence and the logic of events are important in determining the time for repayment under the oral agreement.

62. I consider that the advances to RD Beechworth are repayable on the completion and sale of the development for the following reasons and based on the above understanding.

63. First, the logic of events, the likely commercial reality, and the conduct of the parties supports the finding that Mr Ning and Mr Shu orally agreed that the loans were repayable at the conclusion of the project. The recording of the advances as loans in RD Beechworth’s books, together with the shareholdings in that special purpose vehicle, are consistent with an agreement that the distribution of profit, repayment of loans, and discharge of mortgages would take place when the project was sold and the company had fulfilled its purpose.

64. If the loans were for 18 months, the plaintiffs would be receiving a 40% interest in RD Beechworth, with no further liability to contribute, but where significant further funds were needed to complete the development but 40% of the shareholding had been divested. I do not accept that was the parties’ intention. Mr Ning was accustomed to sourcing funding from various lenders or investors, and it is unlikely he would have agreed to borrow $5 million for 18 months, where the “interest” on that loan would be, on his estimate, almost 50% of the loan amount.

65. Secondly, it is more probable that the occurrence of an event would trigger the obligation to repay, rather than a particular period elapsing. I consider Mr Shu was sufficiently aware of the uncertainties associated with property development that would make it difficult to ascertain a precise date, by which the development would be completed and sold. Mr Shu may well have thought that the trigger event would be subdivision of the development properties, and that this would take 18 months as that is consistent with Mr Ning’s estimate. However, that is beside the point.

66. Thirdly, supposing that repayment of the loan was due in 18 months, it is unclear from what date the 18 month period would run, considering that the advances were being made as and when Mr Ning directed Mr Shu to make them. This uncertainty militates against the possibility that the parties agreed to repayment being triggered when a particular period of time had elapsed.

67. Fourthly, Mr Shu did not act consistently with an 18 month repayment term. From mid-2023, Mr Shu demanded the money back. For example, his evidence is that he said in August 2023 (less than one year after the final instalment):

You said you can return the money to me in 18 months. Now it’s already more than one year, and even the DA [ie development application] has not been approved. When can you return my $5 million to me? And how to calculate the interest? … Just sell the lands after the DA is determined.

68. In November 2023, again before the 18 months after the last payment was made, Mr Shu’s evidence was that he said “I need my money back. Just sell the lands”. While these demands did not adhere to the 18 month timeframe, they did appear to indicate that Mr Shu understood repayment would come from the sale proceeds and therefore he wanted the land sold.

69. Fifthly, I do not accept the plaintiffs’ case theory that it ought to be inferred that Mr Ning was desperate for money and that Mr Ning considered Mr Shu an “interim lender”, who would be replaced by a first tier lender bank after subdivision. Nor do I accept that this supports Mr Shu’s case that the loan was only for 18 months, which would accord with Mr Ning’s estimate of time until subdivision. The structure of the plaintiffs’ loans was unlike ordinary lenders, because the interest component was linked to profit.

70. I reject Mr Shu’s submission that Mr Ning was desperate for Mr Shu’s money to complete the sale. It was apparent that Mr Ning’s group had various projects at the time and was interested in finding investors. However, from June 2019, Mr Shu had been engaging with Mr Ning about possible property developments in China and on Sydney’s north shore. I do not accept there is any evidence of any urgency on Mr Ning’s part; the properties had not been purchased and there was no obligation on Mr Ning to purchase them. Instead, Mr Shu had expressed an interest in being involved in Mr Ning’s property development. Further, I accept Mr Ning’s evidence that he did not have the intention to refinance on subdivision.

71. Sixthly, I consider it highly unlikely that Mr Shu would have considered it foreseeable or certain that the whole development and sale could complete within 18 months. As noted above, I accept Mr Ning’s evidence that he did not promise Mr Shu that the advances would be returned within 18 months, and instead said the money would be repaid on completion of the sale of the project. This is consistent with Mr Ning not agreeing to pay out the plaintiffs early before the development’s completion as requested by Mr Shu, but instead offering to transfer the plaintiffs’ funds to another project.

72. Consequently I do not accept that the parties agreed that the money would be repaid in 18 months.

Cross claim

73. By way of cross claim filed on the first day of the hearing, RD Beechworth seeks declarations as to its alleged terms of the agreement. The declaration sought is:

On or about December 2021 each of the plaintiffs and the defendant entered into an agreement the terms of which included the following:

(a) The plaintiffs will advance the defendant $5 million.

(b) The defendant will acquire the land …

(c) The defendant will take reasonable steps to obtain development consent to sub-divide the Site into 4 lots, sub-divide the Site, construct a house on each of the 4 lots and sell the 4 lots within a reasonable time (the Project).

(d) The defendant will repay the plaintiff [sic] $5 million and 40% of the profit (or repay the plaintiff [sic] $5m less 40% of the loss) derived by the defendant from the Project at the conclusion of the Project, that is when the sale of the 4 homes complete.

74. There is no dispute that an agreement was formed in December 2021 concerning the provision of the $5 million by the plaintiffs to assist RD Beechworth in purchasing and developing the land. It was also agreed that RD Beechworth was to subdivide the land into three or four lots and build houses on the lots, and to then sell the properties and pay the plaintiffs 40% of the profits.

75. The contentious parts of the cross claim were said to be:

1. The timing of repayment, which I have found above was to be at the time of the completion of the project and the sale of the properties.

2. Whether the plaintiffs are to bear 40% of any losses of the development.

76. As to possible losses, there was no evidence of any conversation before formation about that issue. There was some discussion in 2023 when there were delays in obtaining the development application. However, those discussions are too late to be considered an express term. RD Beechworth has not pleaded, nor submitted, that any such term was implied.

76. I have determined that the plaintiffs have failed, and the repayment obligation is triggered on the sale of the development. However, I do not consider there is utility in making any declaration about the non-contentious terms of the agreement. Further, there is no claim on foot for breach. Should such a claim be brought, then the relevant terms for such a claim might be decided, but not now.

Conclusion

78. In light of the above, the appropriate orders are:

1. Summons dismissed.

2. Declare the parties agreed that the defendant must repay each plaintiff $2,500,000.00 at the conclusion of the sale of the development properties.

3. Plaintiffs to pay the defendant’s costs as agreed or assessed.

4. Grant liberty to the parties to apply for an alternative costs order within seven days of today's date, setting out the application and any evidence and submissions of no more than three pages upon which they rely.

5. Should such an application be made for an alternative costs order, the responding party is to provide evidence and submissions of no more than three pages opposing any alternative costs order within seven days of receiving the first application.

6. The Court will determine any such alternative costs application on the papers, if appropriate.

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Decision last updated: 07 May 2025