Petropoulos v Li

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2018 00145

BETWEEN:

CHRISTOS PETROPOULOS & ORS (according to the attached schedule)	Plaintiffs
v
QIANG LI & ORS (according to the attached schedule)	Defendants

S ECI 2016 01115

IN THE MATTER of OFFICAR PTY LTD (ACN 142 983 042)

BETWEEN:

QIANG LI	Plaintiff
v
OFFICAR PTY LTD (ACN 142 983 042) and others (according to the attached schedule)	Defendants

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	17, 22, 23, 24, 25 February 2021; 1, 2, 4, 11 March 2021
DATE OF JUDGMENT:	25 May 2021
CASE MAY BE CITED AS:	Petropoulos v Li
MEDIUM NEUTRAL CITATION:	[2021] VSC 292

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CONTRACT – Whether contract exists to treat moneys advanced to plaintiff as debt – Whether contract exists for transfer of shares between parties – Whether property jointly purchased is held on constructive trust – Whether removal as a director, shareholder, and unitholder constitutes oppression within the meaning of s 232 of the Corporations Act 2001 (Cth) – Whether withholding of receipts of notional rent from corporate property constitutes oppression within the meaning of s 232 of the Corporations Act 2001 (Cth) – Whether damages to be assessed at a point later than date of breach – Whether the rule in Browne v Dunn complied with through notice in affidavit – Johnson v Agnew [1980] AC 367; Johnson v Perez (1988) 166 CLR 351; Smith v Gould [2012] VSC 201; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR; Mallett v Mallett (1984) 156 CLR 605 considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Ribbands	Melbourne Legal
For the Defendants	Mr C Möller Mr A Purton	Corrs Chambers Westgarth

HIS HONOUR:

Introduction

On 20 August 2015, Aiping Zhang (‘Ms Zhang’)[1] emailed Christos Petropoulos (‘Mr Petropoulos’) requesting title details for a warehouse at 215 Proximity Drive, Sunshine West (‘the warehouse’) and occupied in part by Hausen Resource Pty Ltd (‘Hausen AUS’). Ms Zhang believed that she and Mr Petropoulos each had an effective half interest in the warehouse.[2] Ms Zhang believed her half interest was held on trust for her by her niece, Qiang Li (‘Ms Li’).[3]
[1]Ms Zhang is also referred to from time to time as ‘Alice’.
[2]Ms Zhang was not aware of the precise mechanism by which she had the half interest, save that she knew it was held for her by her niece.
[3]For clarity, Ms Li is the niece, not the wife, of Mr Minghai (Richark) Li. Ms Li’s name is occasionally written as ‘Liqiang’.

Ms Zhang was later surprised to discover that in December 2012, Mr Petropoulos had removed Ms Li as a director of Officar Pty Ltd (‘Officar’), which was in fact the registered proprietor of the warehouse. At the same time, Mr Petropoulos had procured the transfer by Ms Li of her shareholding in Officar as well as the units Ms Li held in the Officar Unit Trust, of which Officar was trustee. The effect of these transactions was that Ms Li, and therefore Ms Zhang, had no interest at all in the warehouse.

On 27 May 2016, Ms Li commenced proceedings in this Court (‘the oppression proceeding’), seeking inter alia relief from oppressive conduct pursuant to ss 232, 233(1), 234(c), and 461(1)(e),(f),(g) and (k) of the Corporations Act 2001 (Cth) (‘the Act’). Among other things, Ms Li sought orders that she be reappointed as a director and reinstated as a shareholder of Officar; orders that Officar be valued; orders for production of the books and records of Officar for the financial years ending 30 June 2015 and thereafter; and, further or alternatively, orders that Officar be wound up. In broad terms, Ms Li alleged that Mr Petropoulos had without her knowledge removed her as a director of Officar; deprived her of her shareholding in Officar; deprived her of her units in the Officar Unit Trust; and excluded her from Officar’s management and affairs.

On 4 August 2017, Mr Petropoulos filed a defence and brought a counterclaim in the oppression proceeding. Mr Petropoulos later pursued the matters raised in the counterclaim in a new action commenced on 22 June 2018 (‘the Petropoulous proceeding’). The Petropoulos proceeding named both Ms Li and Ms Zhang as defendants, as well as Minghai Li (‘Mr Li’),[4] who is Ms Li’s uncle and Ms Zhang’s husband. The Petropoulos proceeding was also brought against Hausen AUS and a similarly named entity incorporated in Hong Kong, Hausen Resource Pty Ltd (‘Hausen HK’). Mr Petropoulos also joined Global Resource Innovation Pty Ltd (‘GRI’) as a plaintiff,[5] an entity of which he is the sole director and shareholder.
[4]Mr Li is also referred to from time to time as ‘Richark’.
[5]GRI traded under the business name Global Resource Trading (‘GRT’). It also acted as the trustee of the CJP Family Trust, which appears to have functioned as a trading trust for Mr Petropoulos and GRI. For convenience, ‘GRI’ is used to refer to both GRI and GRT.

Subsequently, Ms Zhang replaced Ms Li as plaintiff in the oppression proceeding.[6] Further, on 3 June 2020 Hausen HK was wound up.[7] No claims are now pressed against Ms Li or Hausen HK in either proceeding.
[6]By order of the Hon. Justice Sifris made 4 December 2018. However, no order was made amending the title of the proceeding and all documents since filed have continued to list Qiang Li as the plaintiff.
[7]By order of the Hong Kong High Court at the application of Mr Li, who was a substantial creditor of Hausen HK.

Mr Petropoulos[8] alleges that in or about September 2010 he entered into an agreement with Mr Li that GRI would receive a 50% shareholding in Hausen HK (‘the 2010 agreement’). Mr Petropoulos further alleges that in or about 2012, Mr Petropoulos and Mr Li varied the 2010 agreement such that GRI would also receive a 50% shareholding in Hausen AUS (‘the 2012 agreement’). Mr Petropoulos contends that GRI has not received a 50% shareholding in either Hausen HK or Hausen AUS, in an alleged breach of the 2010 and 2012 agreements, respectively.
[8]As mentioned, GRI was also a plaintiff in the Petropoulos proceeding and references to Mr Petropoulos in that context should be taken as also referring to GRI.

Mr Petropoulos also alleges that Mr Li holds his one-third interest in 175 Blackshaws Road, Newport (‘the Newport property’) on trust for Mr Petropoulos and his wife Jacqueline (‘Mrs Petropoulos’). The Newport property was acquired in 2013 and Mr Petropoulos, Mrs Petropoulos, and Mr Li are registered on title in equal shares. Mr Petropoulos contends that the trust arose as he and his wife had paid the full purchase price of the Newport property. Mr Petropoulos contends that Mr Li’s one-third interest in the property was conferred on him on the basis that he would reimburse Mr Petropoulos one-third of the purchase price and associated costs within a reasonable time, which he has failed to do. Accordingly, Mr Petropoulos contends that Mr Li holds his one-third on a resulting or constructive trust for the benefit of Mr Petropoulos; or alternatively that Mr Petropoulos suffered loss and damage as a result of Mr Li’s failure to reimburse him in breach of this agreement to that effect.

Mr Petropoulos also alleges that GRI contributed 100% of the purchase price of the warehouse using funds loaned to it by both Hausen HK and the ANZ bank (‘ANZ’). Relatedly, Mr Petropoulos contends that the removal of Ms Li as a director and shareholder of Officar and as a unit holder in the Officar Unit Trust reflects GRI’s 100% interest in the warehouse and occurred with the assent of both Mr Li and Ms Li.

As the issues in the proceedings overlap, they were heard together and evidence in each was evidence in the other. Each of the witnesses in the proceeding gave evidence in chief by witness statement or affidavit, supplemented as the need arose by oral evidence in chief. Each witness was cross-examined, save for one witness called by Mr Petropoulos, Mr Peter Morrison.

The events the subject of the dispute occurred many years ago, with the critical events occurring between 2010 and 2013. Accordingly, the witness statements were prepared and the oral evidence was given many years after the events to which they refer. In such circumstances there is an inevitable risk that witnesses will reconstruct, rather than recollect, the evidence they give. Insofar as that reconstruction is prompted by reliable, contemporaneous, and complete documentary material, such a course is logical and unobjectionable. But where the reconstruction is the product of documents which are equivocal, incomplete, unreliable, or which reference events which are otherwise undocumented, there is a risk that the evidence given by a witness will be unduly affected by self-interest, consciously or otherwise. Accordingly, in the fact-finding exercise which I have undertaken I have been primarily assisted by contemporaneous documentary evidence. I have lent less weight to oral evidence given years after the event where that oral evidence is not corroborated by, or consistent with, the facts as disclosed by the objective documentary evidence.

Such a process of fact-finding has been particularly problematic for Mr Petropoulos. Many of the key matters that he relies upon in his case are not evidenced, or even corroborated by, the documentary evidence. Relevantly, Mr Petropoulos contends that in a large number of instances he discussed critical matters with Mr Li by telephone or text message on the Blackberry phones that each was using at the relevant time. Those Blackberry phones and the relevant messages cannot be produced. Of itself, the absence of documentary material supporting Mr Petropoulos’ claims does not mean that his evidence cannot be accepted. But evidence unsupported by contemporaneous documentary material must be subjected to close scrutiny, particularly where Mr Petropoulos’ account is contrary to the contemporaneous documentary evidence or is otherwise at odds with the actions of an ordinary rational person in the circumstances revealed by those contemporaneous documents.

In my opinion Mr Petropoulos has not established the existence of the 2010 agreement. Nor has he established the existence of the 2012 agreement. Moreover, I do not accept that the entirety of the purchase price for the Newport property was provided by Mr Petropoulos and accordingly I do not accept that Mr Li holds his interest in the Newport property on a trust for Mr Petropoulos. I also do not accept that the entirety of the purchase price for the warehouse was paid for by GRI. Relatedly, I do not accept that the removal of Ms Li as a director of Officar or the transfer of her units in the Officar Unit Trust and shares in Officar to GRI occurred with her knowledge or consent or with that of Mr Li.

In the result, the claims brought in the Petropoulos proceeding will be dismissed and Ms Zhang will be entitled to relief in the oppression proceeding, the terms of which will be the subject of further argument.[9] My reasons for those conclusions are set out below. Critical to my reasoning are the objective facts as disclosed by reliable contemporaneous documents.
[9]The nature of the relief will be affected by the fact that Officar is a trustee of a unit trust.

Mr Petropoulos’ account, particularly with respect to the removal of Ms Li as a director of Officar, the associated transfer of her shares and units, and the related alleged agreement between Mr Petropoulos and Mr Li that GRI would assume full ownership of the warehouse, is unsupported by any contemporaneous documents and is inherently unlikely to have occurred in light of the objective facts as disclosed by those documents. The same applies with respect to the Newport property and the 2010 agreement. The claims with respect to the 2012 agreement are not attended by the same inherent unlikelihood as the other claims, but in any event have not been established to the requisite standard of proof.

In evaluating Mr Petropoulos’ claims with respect to the 2012 agreement, I have taken account of both the lack of corroborating evidence, but in addition my general adverse view of his evidence, particularly with respect to the Newport property, the warehouse, and the removal of Ms Li from Officar.

It is clear that Mr Petropoulos provided Mr Li (and to an extent, Ms Zhang) with considerable assistance in their attempts to move to, and after their arrival in, Australia. It is also clear that Mr Petropoulos considers that he played a central role in the activities of Hausen HK, Hausen AUS, the acquisition of the warehouse and the acquisition of the Newport property. I suspect that he considers his role has not been sufficiently acknowledged or rewarded by Mr Li and Ms Zhang. This sense of grievance has, in my view, resulted in Mr Petropoulos giving an account of events based on a flawed reconstruction of the relevant circumstances and improperly motivated by a desire to advance his own interests and thereby obtain the reward he considers to be his due.

Although I consider that Mr Petropoulos has overstated the centrality of his role in the activities of Hausen HK and Hausen AUS, and his assistance to Mr Li and Ms Zhang generally, I also considered that Mr Li’s evidence was to some extent affected by a desire to downplay Mr Petropoulos’ role. That said, on the critical issues Mr Li’s evidence was firm and largely supported by contemporaneous documents. Moreover, it was clear that each of Mr Li, Ms Zhang, and Ms Li were intelligent and astute in their commercial dealings. As such I consider that the likelihood of Mr Li and Ms Li acting in the manner Mr Petropoulos suggests, which was clearly contrary to their own interests, to be slight indeed.

Relevant facts[10]

[10]The factual matters set out below are for the most part evidenced by reliable contemporaneous documents. Where they are not, the evidence is uncontroversial.

Mr Petropoulos and Mr Li met in or about November 2002. At the time, Mr Petropoulos was working for Smorgon Steel, sourcing commodities for steelmaking. Mr Li was working for Chino Minerals Corporation (‘Chino’), a Chinese company that imported and exported metallurgical products. Chino is and was part of a larger corporate group that owns and operates steelmaking plants in China. Chino sourced products to be used in those plants from local Chinese suppliers and from international markets. Its primary export was recarburiser. After meeting in November 2002, Mr Petropoulos arranged for Smorgon Steel to acquire recarburiser from Chino.

On 24 July 2007, Hausen Forwarding Pty Ltd was incorporated in Australia. Its initial shareholders included Mr Li, Ms Li, Gerard Breslin (‘Mr Breslin’) and an entity called Sino Carbon UK Co Ltd.[11] By 14 December 2007, Hausen Forwarding Pty Ltd had changed its name to Hausen Resource Pty Ltd (or ‘Hausen AUS’), which it retains in these proceedings. It appears that Ms Zhang became the sole shareholder of Hausen AUS on 27 August 2012.
[11]An obvious example of Mr Petropoulos giving evidence by way of reconstruction is his evidence that ‘on or about 24 July 2017 Richark told me that he had registered a company in Australia, Hausen Resources Pty Ltd.’ A close reading of the company search shows that the company incorporated on 24 July 2007 was the Company known as Hausen Forwarding Pty Ltd, which later changes its name to Hausen Resources Pty Ltd. Mr Petropoulos’ evidence was obviously incorrect, and although in this respect the error relates to a trivial matter, it is emblematic of the process of reconstruction which was a feature of his witness statement in particular.

In or about August 2007, Smorgon Steel merged with OneSteel. After the merger, Mr Petropoulos was retrenched. In November 2007, Mr Petropoulos established GRI. Using Mr Petropoulous’ connections with Mr Li, GRI began to broker supplies of metallurgical products to Chino on a commission basis.

In 2008 and 2009, Mr Petropoulos and Mr Li worked together to identify opportunities for Chinese investors in the mining sector. Mr Li pursued these opportunities separately from his role at Chino. Mr Petropoulos and Mr Li agreed to register an Australian company to be used as the vehicle for any investment in these opportunities. Accordingly, on 1 October 2009, Global Minmetal Corporation Pty Ltd (‘Global Minmetal’) was acquired[12] and Mr Petropoulos was established as its sole director and secretary. Its shareholders were GRI, Mr Li, and two Chinese investors. Subsequently, the Chinese investors exited and Mr Li and GRI became the sole equal shareholders.
[12]Prior to its acquisition in October 2009, Global Minmetal appears to have been a shelf company.

On 16 November 2009, Hausen HK was established to act as an intermediary between Chino and international ore suppliers. Mr Li described Hausen HK as effectively a subsidiary of Chino, established to capitalise on advantageous borrowing rates in Hong Kong. Relevantly, GRI also began to broker supplies of metallurgical products to and from Hausen HK.

Initially, Hausen HK’s shareholding was distributed amongst the shareholders of Chino and Chino itself. Subsequently, Mr Li attempted to open a bank account for Hausen HK with the Development Bank of Singapore in Hong Kong (‘DBS’). DBS told him that the signatures of each of Hausen HK’s shareholders were required to open such account. Additionally, where a shareholder of Hausen HK was a company, as Chino was, the signatures of each director of Chino was required. To avoid these practical difficulties, Mr Li was installed as the sole director and shareholder of Hausen HK. Importantly, Mr Li executed agreements with Chino’s shareholders, in substance providing that Mr Li would hold his shares in Hausen HK on consignment (effectively as a nominee) for that shareholder.

In 2009, Mr Li and Mr Petropoulos began to discuss purchasing a warehouse in Melbourne. On 13 April 2010, Mr Petropoulos forwarded to Mr Li a copy of a contract of sale for a warehouse at 1-3 Ganton Court, Williamstown (‘the Ganton Court property’). Mr Li responded by email shortly afterward:

Dear Brother,[13] I checked with my wife and she want to put herself name for this property only. Is it possible to do it???

Mr Petropoulos replied that they could use Mr Li’s wife’s (Ms Zhang’s) name alongside that of Mr Petropoulos. On the same day, Mr Li emailed Mr Petropoulos:

You know that this property is bought by my family and there is nothing with our company. So could I make joined-venture property with you??? It should be half by half and I will ask my wife to pay first AUD85000.00 immediately. Please try your best to consider it and confirm to me!!!

[13]Mr Li and Mr Petropoulos referred to one another in their messages as ‘Brother’.

Mr Petropoulos responded, confirming that ‘the warehouse is only between our families 50/50’ and that it would be registered in Ms Zhang’s name as to half and Mr Petropoulos’ name as to half. Mr Petropoulos’ email concluded by noting ‘nothing with Chino or Global Minmetal’. Mr Li then emailed Mr Petropoulos confirming the deal.

As it happened, Mr Petropoulos’ attempt to purchase the Ganton Court property was unsuccessful.

In May 2010, Mr Petropoulos travelled to Beijing where he met with both Mr Li and a Zhongze Xue (Mr Xue). Mr Xue was Chino’s CEO and as such Mr Li’s superior at Chino. It is common ground that at the meeting the possibility of allocating Mr Petropoulos shares in Hausen HK was discussed. The precise content of the discussion is disputed. According to Mr Petropoulos, Mr Xue said he was prepared to offer Mr Petropoulos a share in Hausen HK ‘as a reward’, presumably for the supplies he had brokered for Chino and Hausen HK through GRI. Mr Li disputes this. Mr Li says that at the time of the meeting, the rate of commission then being charged by GRI to Chino was often higher than Chino was willing to pay. Accordingly, Mr Li says that Mr Xue asked Mr Petropoulos to reduce the commission, in response to which Mr Petropoulos offered to take shares in Hausen HK in lieu of commission. It is common ground that at or about that time it was hoped that Hausen HK might be listed one day on the Hong Kong Stock Exchange.

In any event, on 31 May 2010 Mr Petropoulos emailed Mr Li. The email reads:

As discussed on the telephone today I would like your boss to consider making me a 10% shareholder in Hausen Resources. In doing this we can increase the business in Australia to supply the Steel Mills and larger foundries.

The next day, Mr Li responded:

Dear Brother, my boss just finished the conversation with my boss and he said all of import and exporting iron ore must done through Hausen. So it is better for our company to put your name about 5% in Huasen [sic]. Is it okay for you to accept it???

Mr Petropoulos responded:

Hi Brother, I can accept but I think 10% would be more better as I work very hard to find long term good suppliers.

The next day, Mr Li reported:

There is one good new for us. My boss accept to register your name in Hausen 10% now. Pls sent your passport copy to me and I will do it soon.

On 10 June 2010, Mr Petropoulos identified an alternative warehouse at 215 Proximity Drive, Sunshine West and forwarded details of it to Mr Li by email.

On 21 June 2010, Mr Li emailed Mr Petropoulos to inform him that Mr Li’s niece, Ms Li, would contact Mr Petropoulos directly. Ms Li was an Australian resident and was to hold the family interest in the warehouse on behalf of her aunt, Ms Zhang. A few days later, Ms Li emailed Mr Petropoulos with her name (Li Qiang), her date of birth, and her tax file number.

On 24 June 2010, Mr Petropoulos executed a contract of sale[14] for the purchase of the warehouse, the terms of which provided for a purchase price of $1.23 million. There was an immediate holding deposit of $1000, with the balance of the 10% deposit due on 13 July 2010. The contract stipulated a settlement date of 30 September 2010, subject to the vendor completing certain works. Mr Petropoulos forwarded a copy of the contract to Mr Li and informed him that Mr Petropoulos would need to organise a bank loan to finance the purchase. Mr Petropoulos also invited Mr Li and Ms Zhang to Australia to assist with settlement.
[14]An email in evidence of Andrew Shields dated 25 June 2010 acknowledges receipt of a signed contract. The executed contract in fact bears a date of 2 June 2010.

On 7 July 2010, Mr Petropoulos sent an email to a Chino company address and copied in Mr Li. The email read:

Dear Sir/Madam,
Please arrange payment for purchase of Warehouse as stated below:
Contract No FX-2B8A30 for the purchase of the property known as 215 Lot 4 Proximity Drive, Sunshine West, Victoria, Australia. Being a new warehouse of approximately 1315m² on land measuring 2000m².
Please remit Zhang AiPing’s deposit payment of US$110,000.00 by due date 8^th July 2010 to account details below:
…
[Account details then set out]
(Emphasis added)

On 7 July 2010, GRI received the sum of US$99,000, paid from a DBS account held in the name of Hausen HK. DBS’ remittance advice for that transaction issued to Hausen HK describes the payment as ‘borrowed money’.[15]
[15]An invoice from GRI to Hausen HK referable to this payment was issued on 27 October 2010, and was described as being for a 10% deposit for the purchase of the warehouse.

On 16 July 2010, Mr Petropoulos emailed Mr Li to inform him that Mr Petropoulos had made improvements to the warehouse and requested that Mr Li send US$25,000 to cover these costs. Mr Li responded that day, advising that the requested moneys had been sent to Mr Petropoulos’ account. Mr Petropoulos thanked him, stating: ‘I wouldn’t ask for the money but after taking the new petrol stations, I have little cash now. I was hoping we would have done some Iron Ore business by now.’

In any event, on 16 July 2010 GRI received the further sum of US$24,987.15. DBS’ remittance advice also described this payment as ‘borrowed money’.

On 20 July 2010, Mr Li forwarded Mr Petropoulos a series of documents to arrange the transfer by Mr Li of 90,000 shares in Hausen HK to Mr Petropoulos. Mr Li’s email attached the relevant documents and forwarded to Mr Petropoulos an earlier email sent by KTC Partners, Hausen HK’s accountants. The earlier email requested that the documents be signed and returned to KTC Partners.

On 27 July 2010 Mr Li forwarded another email to Mr Petropoulos, attaching further share transfer documents. Unlike the email of 20 July 2010, the documents attached to the 27 July 2010 email were signed and stamped instruments of transfer providing for the transfer of shares from Chino to Mr Li. Mr Li’s email to Mr Petropoulos stated:

Brother, Agent just finished transfering [sic] from Chino to me and they will do another transfering [sic] from me to you before end of this week. Please check this documents for your reference.

Again, Mr Li had forwarded on to Mr Petropoulos earlier emails from KTC Partners to Mr Li. The email chain outlined that the entire shareholding of Hausen HK, presently owned by Chino Minerals, would be transferred to Mr Li; Mr Li would then transfer 9% of those shares to Mr Petropoulos, with the end result that the shares in Hausen HK would be held as to 91% by Mr Li and as to 9% by Mr Petropoulos.[16] The email chain made it clear that 90,000 shares represented 9% of the shares in Hausen HK.[17]
[16]Mr Li gave evidence, which was unchallenged, that the reason why Mr Petropoulos was transferred 9% and not 10% of the shareholding was that a 10% shareholding would create transactional burdens with DBS, Hausen HK’s bank: any shareholder with a shareholding in Hausen HK of 10% or higher would be required to provide a personal guarantee to DBS in favour of Hausen HK. Nonetheless, Mr Petropoulos’ 9% shareholding was frequently referred to by the parties as a 10% shareholding
[17]Further down in the relevant email chain, an instrument of transfer was attached that provided for the transfer from Chino to Mr Li of 500,000 shares; of which 90,000 shares were then transferred to Mr Petropoulos. The mere existence of at least 500,000 shares in Hausen HK makes clear that 90,000 shares could not have represented 50% of the total shareholding.

In mid-August 2010, Mr Petropoulos’ accountant, George Sianas (‘Mr Sianas’), advised that the purchase of the warehouse should proceed via a unit trust. Ultimately, the Officar Unit Trust was used to effect the purchase.

On 19 August 2010 a relationship manager at ANZ, Jonathan Yoong, emailed Mr Petropoulos requesting:

(a) a copy of the signed contract of sale for the warehouse;

(b) details regarding the projected rent;

(c) confirmation that Officar would be the purchasing entity for the warehouse;

(d) GRI’s interim management accounts for the year ending 30 June 2010; and

(e) GRI’s final accounts for the year ending 30 June 2009.

On 26 August 2010, Mr Petropoulos sent to and asked Ms Li to sign and return four copies of a deed of trust, as well as an application form for units in the unit trust. On 30 August 2010, Ms Li duly signed and returned the documents.

On 2 September 2010, ANZ contacted Mr Petropoulos requesting, among other things, copies of:

(a) both Mr Petropoulos and Ms Li’s 2009 tax returns;

(b) Global Minmetal’s interim accounts for up to 30 June 2010; and

(c) a copy of any executed contract between One Steel and Global Minmetal.[18]

ANZ also requested confirmation that the amount sought to be borrowed was $738,000, being 60% of the purchase price of the warehouse and sought clarification as to how the balance of the purchase price and stamp duty was being funded.

[18]Mr Petropoulos had informed ANZ Bank that OneSteel would occupy part of the warehouse and pay rent accordingly.

On 7 September 2010, ANZ forwarded a follow-up email to Mr Petropoulos reiterating their request for this information.

On 8 September 2010, Mr Petropoulos emailed Mr Li setting out the following details:

(a) the purchase price, $1,230,000;

(b) GST of $123,000 (anticipating that this sum would be returned in three months’ time when a quarterly tax assessment was lodged);

(c) stamp duty of $74,415; and

(d) Land Titles Office fees of $1,352;

coming to a total of $1,428,767.

Mr Petropoulos’ email noted that after taking account of the paid deposit of $123,000 and a loan of $735,000, he needed a balance of $570,767 from Mr Li by 24 September 2010.

On 15 September 2010, ANZ emailed Mr Sianas, with a list of information required for settlement. In particular, statements of financial position were sought from the proposed guarantors, Mr Petropoulos and Ms Li.[19] The email also set out the proposed borrowing structure that Mr Petropoulos had apparently confirmed with ANZ. That structure contemplated that:
[19]Clearly this was connected with the guarantee that, at that stage, ANZ required from Ms Li.

(a) the borrower would be GRI, as trustee for the CJP Trust;

(b) the purchaser would be Officar as trustee of the Officar Unit Trust;

(c) the tenant of the property would be Global Minmetal; and

(d) the security provided in favour of ANZ would comprise:

(i) a first registered mortgage over the warehouse;

(ii) a mortgage debenture against each of GRI, Officar and Global Minmetal;

(iii) personal guarantees from the directors and shareholders of GRI, Officar and Global Minmetal; and

(iv) a personal guarantee from each of the beneficiaries of the Officar Unit Trust.

The same day, Mr Petropoulos forwarded an incomplete personal statement of financial position to Ms Li, telling her that although ANZ understood that she was a student and did not have much in Australia, they would not process the loan unless she completed the form.

Mr Petropoulos subsequently completed his own statement of financial position, identifying a list of assets to a net total of $2,281,375. Relevantly, Mr Petropoulos stated that his assets including shares, bonds and investments as $700, as well as directors’ loans to the sum of $276,000 to entities described as ‘CJP + Mouldon’. Importantly, when detailing his assets he made no express reference to any shareholding in Hausen HK, of either 9%, 50%, or any other amount.

On 16 September 2010, Ms Li emailed Mr Petropoulos in response to his request for the completed statement of financial position and asking for a copy of the trust deed. Mr Petropoulos said that he did not have it. In any event, on 20 September 2010, Ms Li emailed Mr Petropoulos informing him that she had just bought a cleaning business under her name and was uncomfortable with the documents that she was about to sign. Accordingly, she again asked for a copy of the trust deed, as well as for a copy of any ASIC documents with respect to shareholders and directors or secretaries; a copy of the contract of sale; and a copy of the loan agreement including any guarantee documents, for her solicitor to review.

On 21 September 2010, Mr Petropoulos emailed Ms Li a copy of the contract of sale as well as a company search for Officar. The company search listed Ms Li and Mr Petropoulos as directors, with an appointment date of 7 April 2010. The company search also showed that the two ordinary shares in the company were held by the previous director and shareholder, Tom Kotsimbos. Ms Li responded thanking Mr Petropoulos for the provision of the documents and advising that she would send these documents to her solicitor and get back to Mr Petropoulos as soon as possible.

A few days later, on 23 September 2010, Ms Li emailed Mr Petropoulos noting that Mr Petropoulos had forgotten to send her the loan agreement and requesting that it be provided as soon as possible. Mr Petropoulos responded by email on 23 September 2010:

We are borrowing $738,000 with repayments of $60,000 per year. The normal loan period is 20 years but the contract I have signed with Onesteel is to pay $140,000 per year rent and service so I plan to pay loan in about 5 years.
As I mentioned before we are borrowing about 55% so if we had problem the bank would sell the warehouse so there is no risk at all for you.

Ms Li responded by email soon after informing Mr Petropoulos that as she had two companies under her name she was concerned about giving any personal guarantee to ANZ. Ms Li asked Mr Petropoulos to have ANZ confirm in writing that her guarantee would be cancelled when her uncle, Mr Li, ‘comes in’ (presumably as co-guarantor with Mr Petropoulos).

On 27 September 2010, a further sum of US$400,000 was transferred from Hausen HK’s DBS account into GRI’s bank account. Again, the remittance advice described the payment details as ‘borrowed money’. On 28 September 2010, a further sum of US$130,000 was transferred from Hausen HK’s account at DBS to GRI; albeit this time with payment details incomplete.

On 28 September 2010, ANZ completed a credit memorandum in relation to the proposed borrowing. The credit memorandum recorded that the proposed loan would be $738,000; that the debt would be in the name of GRI as trustee of the CJP Trust; that Officar as trustee for the Officar Unit Trust would be the owner of the property; that the GST was to be funded by the borrower from its own resources; and that the unit holders of the Officar Unit Trust were GRI as trustee of the CJP Trust as to 50% and Ms Li as trustee for Ms Zhang as to 50%. The credit memorandum also outlined proposed securities for the loan; being:

(a) a first registered mortgage given by Officar over the warehouse;

(b) guarantees and indemnity given by Mr Petropoulos on account of GRI; by Officar; and by Global Minmetal; and

(c) mortgage debentures over the assets and undertaking of GRI, Officar, and Global Minmetal .

The credit memorandum also recorded that Ms Li had not provided a statement of financial position. The memorandum described Ms Li as ‘a student at Macquarie University with no assets in her name’ and stated that ‘for the purpose of this transaction [Ms Li] will not be providing us with an individual guarantee’.

The memorandum also recorded that Ms Li was the niece of Mr Li, and that Mr Li was a 50% shareholder of Global Minmetal. The memorandum described Mr Li as Mr Petropoulos’ business partner, based in China and currently waiting on Australian permanent residency.

On 28 September 2010, Mr Petropoulos emailed Mr Li acknowledging receipt of the moneys transferred on 27 and 28 September 2020. However, the email said that ‘we do not have enough money to settle this warehouse’ and that although Mr Li had sent $414,507 ‘we require $570,767’. Mr Petropoulos said ‘we urgently require $156,260.00 AUD or (US$151,000.00)’. Mr Petropoulos concluded his email:

Brother, please give me your idea urgently. Because we have delayed so many shipments I have no cash money at the moment to help.

On 30 September 2010, ANZ issued a letter of offer to GRI. The letter of offer set out a facility limit of $738,000 and set out the securities to be taken by the bank. Those securities were in substantially the same terms as those summarised in the credit memorandum.

On 30 September 2010, Mr Petropoulos emailed Ms Li requesting that she sign and return loan documents so that the property could settle the following Monday. The email continued:

You will have [sic][20] personal guarantee and only sign as company director. Once we settle the property next week you will resign as director and you will no longer be involved in our company.
I thank you for your help for your uncle and wait for your news tomorrow when you send back to me.

[20]It is clear and was not disputed that the email should have read ‘you will not have personal guarantee’ (text in underline added).

On the same day Mr Li emailed Mr Petropoulos. The email reads:

Our accountor [sic] of HK called me and they checked the payment of warehouse to you. So could you issue one credit note or debit from Global resource to Hausen resource? So that we could put this into our accounting earlier.

Unsurprisingly, Mr Petropoulos did not understand what was required and on the same day asked Mr Li for clarification. In any event, Mr Petropoulos emailed Mr Li a tax invoice for US$400,00 from GRI and addressed to Hausen HK. The invoice was described as ‘deposit for the purchase of warehouse known as 215 Proximity Drive, West Sunshine’.

On 4 October 2010, Mr Petropoulos emailed Ms Li acknowledging receipt of the loan documents which Ms Li had apparently signed and returned. He said that ‘next week I will send you resignation as director documentation’. On 7 October 2010 Ms Li emailed Mr Petropoulos stating that ‘once I have receive the resignation document, i will complete it and send it back to you as soon as possible’.

Settlement of the warehouse purchase occurred on 18 October 2010.

In early 2011, Hausen AUS was granted a licence which permitted it to supply solid waste product into China. It is common ground that Mr Li informed Mr Petropoulos of this, including by an email in which he said:

There is one great news to tell you what we got the AQSIQ today. Number is A036100054. We can push our business now.

On 21 January 2011, OneSteel placed a purchase order with Global Minmetal for the delivery of 66 metric tonnes of recarburiser. This was the first purchase order placed by OneSteel on Global Minmetal now that the latter had been placed on OneSteel’s approved supplier list.

On 24 January 2011, Mr Li emailed Mr Petropoulos advising him that the accounts for Hausen HK would be reported in March 2011. Mr Li asked Mr Petropoulos: ‘will you get your profit or keep it in our account for more business? Please clarify this point to me.’

Hausen HK’s audited financial statements were subsequently released and disclose the following amounts in USD for the period 16 November 2009 to 31 January 2011:

(a) revenue of $110,918,425;

(b) a gross profit of $4,002,700; and

(c) a net profit of $3,482,341.

The statements record net assets[21] of US$3,610,876 for the financial year ending 30 June 2011. The company’s assets of slightly in excess of $12 million comprised cash, or cash equivalents and trade and other receivables. Hausen HK’s liabilities included trade payables of just under US$8 million; an amount said to be due to a director of US$489,603; and amounts due to related companies totalling US$324,350.

[21]The financial statements use the phrase ‘total equity’, but this represents net assets.

The financial statements of the CJP Trust, the trading trust for GRI, for the year ending 30 June 2011, which are unaudited, record net assets of $1,214. The statements record as an asset a receivable ‘Beneficiary Loan: Officar Unit Trust’ to the value of $730,463 as well as an unsecured non-current liability to Mr Li in the amount of $677,663. A second set of financial statements of GRI for the year ending 30 June 2011 is in relevantly identical form, save that they record the liability as owed to Hausen HK rather than Mr Li; it also lists the liability as secured. The reason for the two sets of financial statements of GRI for the 2011 financial year is dealt with below.

The financial statements of Officar for the year ending 30 June 2011 record a liability to GRI in the amount of $730,463, along with an additional liability in the form of a secured loan from ANZ in the amount of $738,000. As ANZ’s letter of offer was addressed to GRI, it is curious that the ANZ loan was recorded as a liability of Officar.

In two invoices, dated 31 January 2011 and 21 February 2011 respectively, Global Minmetal invoiced OneSteel for the recarburiser ordered on 21 January 2011. Both invoices directed payment to a bank account in Global Minmetal’s name.

In May 2011, Ms Zhang travelled to Australia on a sub-class 163 visa. She began to live in Melbourne in 2012 and used her sub-class 163 visa as a basis for a permanent residence application.

On 23 June 2011, Global Minmetal invoiced OneSteel for recarburiser. The form of the invoice matched the earlier invoices of 21 January 2011 and 21 February 2011 but provided details of a different bank account, this time in GRI’s name (not Global Minmetal’s). From this point onwards, all invoices issued to OneSteel from Global Minmetal directed payment to GRI’s bank account.

On 12 January 2012, Mr Li emailed Mr Petropoulos. As English is not Mr Li’s first language, the email is difficult to follow. However, in essence the email pressed Mr Petropoulos to ensure that certain outstanding accounts were paid by OneSteel. Mr Petropoulos replied on the same day:

Hi Brother,
I’m sure Onesteel will pay by due date.
For mesh as we have discussed, I need money from Hausen to pay this account. We discussed that we can receive about $1 million each per year but I have received nothing to help our business grow. I have paid the loan charges for our warehouse and taken no money from all our Onesteel business.

There is no evidence of any response by Mr Li.

Hausen HK’s audited annual financial statements for the financial year ending 31 January 2012 shows a substantial increase in annual revenue from that of the previous financial year, albeit at a reduced gross profit and net profit. The statements disclose the following amounts in USD:

(a) revenue of $240,697,006;

(b) gross profit of $3,101,745.;

(c) net profit of $1,185,799;

(d) net assets of $4,796,675;

A comparison of the balance sheet at the end of the financial year ending 30 June 2012 compared to that ending 30 June 2011 shows that both trade and other receivables had reduced to minimal levels; and that trade payables had reduced to nil. The company had just under US$4 million in cash or cash equivalents; as well as liabilities of US$2,184,828. The liabilities largely comprised amounts due to Mr Li, now in the amount of US$2,077,481. As at 31 January 2012, the company had retained earnings of US$4,668,140.

Now living in Australia, Ms Zhang was appointed as a director of Hausen AUS on 18 December 2011. Mr Li resigned as a director on 23 August 2012 and Ms Li resigned as a director on 1 August 2015. Ms Zhang has been the sole shareholder since 27 August 2012.

On 26 June 2012, Averil Byrne (‘Ms Byrne’) of OneSteel emailed Ms Zhang, acknowledging a meeting held between them in Tianjin and asking that Ms Zhang provide pricing for a number of products to be offered by Hausen AUS to OneSteel. On 7 August 2012, Ms Byrne advised Ms Zhang that OneSteel wanted to have ‘Hausen’ (presumably Hausen AUS) set up as an approved supplier in OneSteel’s system.[22]
[22]Global Minmetal was already an approved supplier.

On 16 August 2012, Ms Byrne emailed OneSteel’s procurement managers, advising that Hausen AUS had secured a supply contract for recarburiser for September 2012 to January 2013.

On 18 August 2012, a OneSteel procurement manager, Mr Colin Gannon (‘Mr Gannon’), forwarded this email to Mr Petropoulos seeking confirmation that Hausen AUS had secured this supply contract. Mr Petropoulos forwarded the email thread to Mr Li and to Ms Zhang stating ‘[p]lease see below information from Colin. He is very upset because he looks stupid from our actions.’

However, in forwarding Mr Gannon’s email to Mr Li and Ms Zhang, Mr Petropoulos made significant changes to the existing email thread.[23] In particular, Mr Petropoulos:
[23]These changes were significant and reflect poorly on Mr Petropoulos. It raised an impediment, not adverted to by OneSteel and not in any event established on the evidence, that it was necessary to acquire insurance of $20 million. It also deleted reference to the fact that Hausen AUS had secured supply. It was plainly Mr Petropoulos’ intent to hide this fact from Mr Li and Ms Zhang.

(a) changed Mr Gannon’s email, adding the words underlined below:

“I need confirmation that this is true this has made me look stupid as we discussed at meeting with Tim and Averil that Global Minmetal will supply the group. If new vendor required they must have Australian insurance and product liability of 20 million dollars.”

(b) changed Ms Byrne’s email, deleting the text struck-through below:

“Based on the requirements listed by each site, ~~we are pleased to advise that ChinoMinerals/Hausen Resources have secured supply~~ for Ca94% into Laverton, Sydney and Waratah for the period Sept12-Jan13.”

(c) otherwise deleted sentences from Ms Byrne’s email, including about Hausen AUS approval as a supplier to OneSteel.

On 22 August 2012, OneSteel registered Hausen AUS as an approved supplier. The same day, Mr Petropoulos emailed Mr Gannon, Ms Byrne and the OneSteel procurement managers, stating:

“In the past 2 years the General Manager/Shareholder of Chino Minerals Corp has opened a 50/50 Joint Venture Company in Australia (Melbourne) Global Minmetal Corporation Pty Ltd to facilitate 2 things. Firstly to supply the World Steel/Iron making community with raw materials that requires financing outside of standard Chinese trading terms either LC (LETTER OF CREDIT) or CAD (Cash against Documents). Secondly was for the purpose of Mr Lee [sic] and his family immigrating to Australia which occurred at the start of this year. Global Minmetal has been supplying both Onesteel and Bluescope/New Zealand Steel in the period with Carbon and Ferro Alloys.”
(emphasis added)

Later that day, Mr Li sent an email to Ms Byrne. The email was drafted by Mr Petropoulos and sent by Mr Li at Mr Petropoulos’ request:

“I am very sorry for causing so much confusion. Sometimes it is difficult to understand between 2 cultures and understand English properly.
Everything Chris has said is correct and we will do all our business through Global Minmetal as we have done in the past. As you are aware I am 50% shareholder of Global Minmetal and we do business around the world.
We also moved to Australia and buy our house beside Chris and also our warehouse. Global metal have all the relevant insurance cover and provide finance for Onesteel.”

As a result, it appears Hausen AUS did not directly supply OneSteel,[24] instead supplying OneSteel indirectly through Global Minmetal. Relevantly, as noted above from 23 June 2011 the invoices from Global Minmetal to OneSteel directed payment to GRI’s bank account.[25]
[24]Save for filling one order at OneSteel’s Rooty Hill plant.
[25]At [73].

Hausen AUS however secured a direct supply in April 2013 following a successful tender. As in October 2012, Mr Petropoulos was upset about this and Mr Li again sent an email to Ms Byrne at Mr Petropoulos’ request. The email apologised that ‘communications between are [sic] groups have mistakes. We find ourselves in the same position and having the same problem as August last year. Ms Zhang in turn replied through misunderstanding channels and confused our company relations and policy.’

Global Minmetal continued to supply carbon products to OneSteel alongside Hausen AUS until 2015. The carbon products supplied by Global Minmetal were acquired by GRI (not Global Minmetal) from Hausen AUS, which in turn acquired those products from, among others, Hausen HK. Thus Hausen AUS was both a direct and indirect supplier to OneSteel.

On 7 December 2012, the sum of $120,443.48 was deposited by the Australian Taxation Office (‘the ATO’) into a Westpac bank account in Officar’s name, apparently referrable to the GST paid by Officar on the purchase of the warehouse.

Also on 7 December 2012, Mr Petropoulos maintains that Mr Sianas caused a Form 484 notice to be lodged at ASIC recording Ms Li’s resignation as a director of Officar on that same day, and recording the transfer of her share in Officar to GRI.

On 11 December 2012, the sum of $120,000 was withdrawn from the same account by way of the purchase of a bank cheque. Mr Petropoulos did not recall precisely how the proceeds of the bank cheque were used, but accepted that they went to a Petropoulos-controlled entity.

On 13 July 2013, Mr Petropoulos and his wife were successful in purchasing the Newport property for the sum of $570,000. The contract of sale provided for payment of a 10% deposit of $57,000 upon signing, with the balance of the purchase price due at settlement on 11 September 2013. It is common ground that Mr Li and Mr Petropoulos agreed that Mr Li would acquire a one-third interest in the property, although the parties differ on the discussions which led to the agreement that Mr Li would acquire a one third interest.

On 13 August 2013, Mr Petropoulos sent two emails to Frank Liang (‘Mr Liang’) of the Bank of China. Mr Liang responded, asking Mr Petropoulos if he could provide some information about the property he wished to purchase. On 14 August 2013, Mr Petropoulos again emailed Mr Liang, copying in Mr Li, and advising that Mr Petropoulos and Mr Li had purchased the Newport property. Mr Petropoulos noted that the purchase price at auction was $570,000 and stated that ‘we are looking at a loan of $350,000’ and that ‘Richark believes he can borrow from BOC using Chinese security’. Mr Petropoulos asked Mr Liang for advice as to how best to proceed.

Mr Liang responded shortly afterwards. Mr Liang’s email read:

“Dear Chris,
Thanks for your information. Based on the property value, if apply home loan of $350K should be OK, but we will review the borrower’s financial status.
Could you let me know who is the borrower, yourself or Richark or someone else? And how about are [sic] other borrower’s incomes currently?
For another option of borrowing based on Richark’s Chinese assets, I have no comment so far and it will be subject to BOC in China to assess the assets in China.”

On 20 August 2013, Mr Petropoulos sent a further email to Mr Liang, once again copying in Mr Li. Mr Petropoulos asked Mr Liang to call Mr Petropoulos as he needed to finalise title registration for the Newport property. There is no evidence of any response from Mr Liang, aside from Mr Liang forwarding a loan application form and non-residency declaration form to Mr Li on 21 August 2013. Mr Li in turn forwarded these forms to Mr Petropoulos on the same day.

On 26 August 2013, Mr Petropoulos met with a bank officer of ANZ and completed and signed a mortgage application form. The form set out a request for finance to facilitate the purchase of an investment property which was to be acquired by Mr Petropoulos, Mrs Petropoulos, and an unnamed partner. The finance was be secured by a mortgage over a separate property at 12 Bletchley Place, Kealba (‘the Kealba Property’) owned by Mr and Mrs Petropoulos.

On 21 August 2013, prior to the receipt of the 26 August 2013 email, ANZ had already obtained a kerbside valuation the Kealba property in the amount of $420,000.

At the meeting on 26 August 2013, Mr Petropoulos also signed a statement of financial position which listed the total assets and liabilities of himself and his wife. The statement of financial position included total assets of $2,067,000 and total liabilities of $109,433. Aside from property assets in the sum of $950,000, the remaining substantial assets listed by Mr and Mrs Petropoulos composed a single line item of $800,000 described as ‘Total Other Assets’. Mr Petropoulos made no express reference to any shareholding in Hausen HK or Hausen AUS; listing only $33,000 for a line item ‘Other Cash Assets (Shares/Bonds)’.

Notwithstanding the bank officer’s recommendation that the loan be approved, on 30 August 2013 the loan was declined. Nonetheless, it seems that ANZ completed a further credit assessment on 3 September 2013 with additional information as to certain income items. Following this further credit assessment the loan was approved.

That credit assessment noted the principal as $336,000. The credit assessment recorded the loan-to-value ratio as 80%,[26] and stated that

“CUSTOMER PURCHASING THE PROPERTY FOR INVESTMENT IN NEWPORT WITH ANOTHER PARTNER They will use existing security in own names (Mr & mrs Petropoulos) to borrow and not use purchase property for loan as they will borrow individually for this purchase No borrowings in joint names or against this new purchased security Partner to source own funds.”

[26]This was plainly a reference to the loan-to-value ratio based on the Kealba property.

On 28 August 2013, Mr Petropoulos sent an unsigned transfer of land form to Mr Li requesting that he sign it as transferee and return it urgently. Mr Li completed the transfer form on or about 28 August 2013 and returned it to Mr Petropoulos on 2 September 2013.

On 4 September 2013, Linda Rintoul from Direct Mobile Conveyancing sent a letter to Mr Petropoulos, Mrs Petropoulos, and Mr Li, noting the amounts due at the settlement of the Newport property. The settlement was scheduled to take place on 11 September 2013.

On 5 September 2013, Mr Petropoulos emailed Mr Li and his personal assistant at Chino, requesting that payment towards the Newport property be made that day. The email was part of a chain with the subject line ‘land transfer’. Mr Li’s assistant replied promptly, asking for bank account details. This request was met by the forwarding of an invoice from GRI to Chino dated 5 September 2013. The invoice was for US$200,000 with the description ‘Purchase of land in Melbourne 175 Blackshaws Road, Newport, Vic 3015 Deposit of settlement’. On 5 September 2013, US$199,939.26 was received into a GRI foreign currency account, noted as having been transferred from Hausen HK.

The next day, the invoice was reissued, this time addressed to Hausen HK (rather than Chino), and was emailed to Sophia and Mr Li accordingly.

On 10 September 2013, ANZ issued a letter of offer to Mr and Mrs Petropoulos approving a loan of $336,000 secured by a mortgage over the Kealba property.

Ultimately, settlement of the Newport property did not take place until 16 October 2013. At settlement, Mr Petropoulos and Mrs Petropoulos were registered on title as tenants in common jointly holding two of the three shares, whilst Mr Li was registered as tenant in common of the remaining share.

On 4 May 2015, Ms Zhang emailed Mr Petropoulos asking for a copy of the title for the Newport property, noting that it had been registered in the name of Mr Petropoulos, Mrs Petropoulos and Mr Li. Ms Zhang also asked for a copy of a Foreign Investment Review Board approval in connection with the purchase. Mr Petropoulos advised that he had sent Ms Zhang a copy of the title, but noted that FIRB approval was not required as the property had been bought with Mr Petropoulos and his wife.

On 13 July 2015, Mr Li and Mr Petropoulos exchanged a series of messages over WhatsApp. Mr Petropoulous appears to have been again concerned about direct communications between Ms Zhang and OneSteel arranging for direct supply of metallurgical products from Hausen AUS to OneSteel. Mr Petropoulos had sought clarification from Ms Byrne who confirmed that a direct supply arrangement existed between OneSteel and Hausen AUS. The messages exchanged on WhatsApp read as follows:

“Mr Li:“Brother, I can’t sleep for the problem in One Steel. I thought over it again and again. Could I rise one proposal to make you relax?

Mr Petropoulos: What’s you’re [sic] idea?
Mr Li:Firstly can I ask my wife to keep leaving that 5 dollars to you to make you profit?
Mr Petropoulos: I pay $5 to Colin and Craig. I never keep it. For others I pay Adrian and Peter in COMSTEEL. I’m angry because I trust you with more than 1 million dollars to invest Hausen and I get treated very badly. My name get dirty so many times.

Mr Li:   I really do not know this transaction.
Mr Petropoulos:         Which transaction?
Mr Li:   Secondly after a couple of months. My wife will quit   from company and we can do it as per our discussion


This time.”

On 20 August 2015 Ms Zhang emailed Mr Petropoulos, asking for a copy of the purchase agreement and title to the warehouse for the purposes of her visa application.

Mr Petropoulos replied by email shortly afterwards. Mr Petropoulos told Ms Zhang that her name was not on the title or on the contract and as such neither were needed for immigration purposes. Mr Petropoulos asked Ms Zhang whether she wanted him to prepare a lease from Officar to Hausen AUS to assist with her visa application.

Ms Zhang responded:

“Hi Chris, I received email form [sic] our agent and ask me to provide not my idea, I have to provide ASAP.
As I explain I bought our warehouse with You when I lodged our documents, if I rent office, I must provide the tracsaction [sic] records I paid rental per month.
It is obvious I did not say I rent our warehouse.
I remember you appointed family trust in name of you for warehouse. Liqiang is our trustee, your [sic] and Liqiang signed the purchaing [sic] property contract.
I believe you have a full set of documents. I have to provide within 2 weeks after I got notice from immigration.”

Mr Petropoulos then replied:

“When Liqiang make trouble and not sign forms I had to remove her from company and trust or I could not get the loan from bank.[27]
Officar is just my name. Richark know this because we couldn’t get the loan.”[28]

[27]This was not in fact the case at all; see [53], [60], [63] above.

[28]Mr Li denies that he knew this.

Later that night Ms Zhang emailed Mr Petropoulos:

“Hi Chris, this means i or Liqiang am not ownership of warehouse. There is only your name in title of warehouse land.
But you and Liqiang signed the contract of property.
I want to know how to remove her name as she signed the contract of property.
Now, How can i show i own half property of our warehourse [sic] to immigration.
Pls let me know.
Thanks&best,

Alice”

Ms Zhang reiterated her request on 21 August 2015:

“Hi Chris,
Good morning!
Did you read my below email i send you last night?
last night I read your email, You told me ownership of our warehouse is Officar Pty Ltd, But you have ceased Liqiang from Officar Pty Ltd.

Liqiang is my trustee.
Thus, What documents can prove I am holder and own half of our warehouse land?
I need you help and sort out the problem.”

After receiving no response, Ms Zhang sent a further email to Mr Petropoulos on 24 August 2015. That email read:

“Hi Chris,
Good morning!
Would you like to tell me you can add my name in the title of our warehouse land? Or You add my name into Officar Pty Ltd?
It is extremely urgent to fix up the problem.
Pls let me know your idea.”

There is no evidence of any response from Mr Petropoulos. Nonetheless, Mr Petropoulos and Ms Zhang exchanged emails on 26 August 2015 about an insurance policy taken out over the warehouse.

At Ms Zhang’s request, on 20 August 2015 Ms Li undertook an ASIC search of Officar. Ms Li said that it was as a result of this search that she discovered that she had been removed as a director of Officar and that her share in Officar had been transferred to Mr Petropoulos. Ms Li gave evidence that she had never signed any document providing her consent to being removed as a director or shareholder of Officar.

On 26 August 2015, Ms Zhang sent another email to Mr Petropoulos telling him that her lawyer had advised her that it was reasonable that Ms Zhang’s name be placed on title and asked Mr Petropoulos to update the register accordingly.

On 10 September 2015, Ms Zhang emailed Mr Petropoulos again, complaining that it had been three weeks since she had requested her name be placed on title for the warehouse. Her email read in part:

“I do not know the reason you ceased Liqiang director, As both you and Liqiang should agree and then you and her can sign the change form.

In the end, you can ask your accountant to change. Up to now, Liqiang said she did not know you removed her.
Can you show me siganaute [sic] form by you and her when you changed derector [sic] time on 7 Dec, 2012?
I sugguest [sic] you recover Liqiang as director for Officar Pty Ltd.”

On 12 December 2015 Ms Zhang’s solicitors, Nevett Ford, wrote to Mr Petropoulos. Their letter requested:

(a) copies of the transfer and resignation documents purportedly signed by Ms Li;

(b) that Ms Zhang be appointed as a director of Officar;

(c) that Ms Zhang have transferred to her 50% of the shares in Officar; and

(d) a copy of the most recent financial statements of Officar as well as particulars of any commercial arrangements entered into by Officar.

Not having received a satisfactory response to the demands raised in the letter, Ms Li commenced the oppression proceeding on 27 May 2016.

On 4 December 2018, the Court made consent orders[29] in the oppression proceeding providing that Mr Petropoulos and GRI take all reasonable steps to appoint Ms Zhang as a director of Officar and to transfer to her half the shares in Officar and half the units in the Officar Unit Trust. The orders were without prejudice to Mr Petropoulos and GRI’s allegations made in either the oppression or the Petropoulos proceeding. Ms Zhang was subsequently appointed a director on 21 December 2018 and obtained shares and units in the company and unit trust respectively. It is not controversial that the maintenance of these circumstances depends on her succeeding in the oppression proceeding.
[29]At a directions hearing.

The 2010 agreement - general

With respect to the 2010 agreement, Mr Petropoulos alleges an agreement containing terms that:

(a) the parties would join together in sourcing metallurgical products;

(b) Mr Petropoulos would be appointed as the director of Hausen HK;

(c) Mr Li would cause 50% of the shares of Hausen HK to be transferred to GRI in consideration of GRI waiving commissions charged to Hausen HK on iron ore and other commodities of US$0.50 per tonne;

(d) Hausen HK agreed to pay each of Mr Petropoulos and Mr Li an annual salary of US$1 million;

(e) Mr Petropoulos would locate a warehouse in Victoria which would be used to purchase, store and sell metallurgical products which would be purchased in full by Hausen HK.

As ultimately pressed at trial, the critical allegation of breach of the 2010 agreement is a failure by Mr Li to transfer 50% of the shares of Hausen HK to GRI. The plaintiffs claim damages of an amount said to be the value of 41% of the shares as at the date when the transfer should have occurred; it being accepted that Mr Petropoulos had been issued with 9% of the total shares of Hausen HK.

Further, Mr Petropoulos also alleges that as a result of Hausen HK failing to provide the full purchase price of the warehouse, the 2010 agreement was varied to accord GRI sole beneficial ownership of the warehouse along with debts of the amounts borrowed to acquire it. Mr Petropoulos contends that these varied terms reflect the present ownership of the warehouse.

Mr Li denies the 2010 agreement beyond accepting that it was agreed Mr Petropoulos would be issued 9% of the shares in Hausen HK in return for helping with the development of Hausen HK’s business, and in lieu of receiving commission on transactions brokered for Chino and Hausen HK by Mr Petropoulos and GRI. Similarly, Mr Li denies the varied terms concerning the warehouse, maintaining that the parties agreed that beneficial ownership of the warehouse would be split evenly.

Critical to Mr Petropoulos’ claim is acceptance of his evidence in chief as to three conversations with Mr Li alleged to have occurred respectively on or about 19 May 2010, on 1 July 2010, and 27 July 2010.

On 19 May 2010, Mr Petropoulos says that Mr Li told him that Mr Li intended to acquire the entirety of the shares in Hausen HK from Mr Xue. Mr Li allegedly said that Hausen HK would serve as a corporate vehicle for himself and Mr Petropoulos to establish a business together. Mr Petropoulos says that he and Mr Li agreed they might be able to supply the whole of the Chino group of companies with metallurgical product, from which they expected to generate a minimum of US$20 million in profits and provide a salary of US$1 million. Mr Petropoulos says that Mr Li told him that if he agreed to the joint shareholding arrangement, GRI would no longer be paid commission for the contracts it brokered. Rather, GRI would become a 50% shareholder in Hausen HK and instead receive a profit share. As mentioned above, Mr Petropoulos and Mr Li had discussed and agreed that their long-term aim was to float Hausen HK on the Hong Kong Stock Exchange.

Mr Petropoulos also says that he and Mr Li discussed the purchase of a warehouse by Hausen HK to serve as security and allow Hausen HK to obtain letters of credit.

On 1 July 2020, following execution of the contract of sale for the warehouse in June 2010, Mr Petropoulos alleges that Mr Li contacted him by Blackberry messenger to advise him that Hausen HK would pay the full purchase price of $1.23 million, with the understanding that the property would be used to raise letters of credit for Hausen HK.

On 27 July 2010, after receiving an email from Mr Li advising that Mr Li had acquired the entirety of the Hausen HK shareholding from Mr Xue, Mr Petropoulos alleges that Mr Li called him and reiterated his offer of a partnership. Mr Petropoulos says that he told Mr Li that he was willing to be his partner on the terms discussed earlier, including that he would be paid an annual salary of US$1 million and that GRI would cease invoicing Hausen HK for commission in respect of new contracts brokered for the company.

Relevantly, Mr Petropoulos alleges that Mr Li agreed to transfer to Mr Petropoulos 40% of the shares in Hausen HK. Mr Petropoulos believed that the effect of this transfer was that the ‘10%’ shareholding he already held would increase to a 50% shareholding. Mr Petropoulos says that he and Mr Li agreed not to draw a salary or receive any profit share until the company was well-established. Mr Petropoulos says that Mr Li confirmed this agreement both orally via telephone and by Blackberry message.

Mr Li disputes each of these conversations.

The Blackberry messages which allegedly evidence the conversations on 1 July and 27 July 2010 were not produced by Mr Petropoulos and are not in evidence. Accordingly, it is difficult to establish that these conversations occurred as alleged by Mr Petropoulos.

Mr Li concedes that he did have a Blackberry device, but says that he does not recall using it frequently in his dealings with Mr Petropoulos and that he would never have used it to record significant business transactions. Mr Li says that any significant business transactions between Mr Petropoulos and himself were recorded in emails.

I accept that the parties communicated by Blackberry messenger, sending the equivalent of SMS messages to one another on a regular basis. Mr Petropoulos was able to retrieve a portion of those messages sent during a period from about October to December 2013. Those Blackberry messages that have been retrieved show communications between Mr Li and Mr Petropoulos consistent with a regular correspondence between close business partners.

However, it is one thing to accept, as I do, that the parties communicated regularly by Blackberry messages. It is another thing to find that those Blackberry conversations occurred on the terms alleged by Mr Petropoulos.

In my view, whether the discussions occurred as alleged must be evaluated in the context of the facts revealed by those objectively verifiable contemporaneous communications which are before the Court.

Having carefully evaluated the contemporaneous documentary evidence, I am not persuaded that the conversations occurred between Mr Petropoulos and Mr Li on the terms deposed to by Mr Petropoulos.

Therefore, I do not accept his evidence that Mr Li agreed that 50% of the shares in Hausen HK would be transferred to Mr Petropoulos. Nor do I accept Mr Petropoulos’ evidence that he and Mr Li agreed that the warehouse would be paid for in full by Hausen HK; or that as a consequence of Hausen HK not doing so that the parties agreed that Mr Petropoulos or GRI would be entitled to sole beneficial ownership of the warehouse. Mr Petropoulos’ version of events is largely unsupported by the contemporaneous documentary evidence. The contemporaneous documentary evidence that does exist points to the improbability of, or is otherwise inconsistent with, the oral arrangements alleged by Mr Petropoulos.

Although Mr Petropoulos contends that the discussions as to the share transfer and acquisition of the warehouse arose under the same agreement, it is convenient to assess the evidentiary basis of the terms relating to the share transfer and to the acquisition of the warehouse separately.

The 2010 agreement – the share transfer claim

That Mr Li promised Mr Petropoulos 50% of the shares in Hausen HK is unlikely for the following reasons.

First, the nature of the promise is inherently unlikely given the nature of Mr Li’s interest in the shares. Mr Li held his interest in the remaining 91% shares in Hausen HK on consignment, effectively as a nominee of Chino and its shareholders. Mr Petropoulos now accepts this as a fact, but maintains that he did not know this at the relevant times. Although the nature of Mr Li’s ownership meant that he could not effectively deliver on any promise to transfer a 50% shareholding in Hausen HK, Mr Petropoulos claims that such a promise was nonetheless made. Although it is possible for a person to make a binding promise they cannot keep, a promise is less likely to have been made if the promisor could not reasonably deliver on its terms. That Mr Li could never have effectively delivered on the promise as alleged is a factor which militates against Mr Petropoulos’ version of events.

Secondly, in the circumstances, it is unlikely that the Mr Petropoulos would have been offered a shareholding of such size and potentially significant value. Both Mr Li and Mr Petropoulos agree that they discussed listing Hausen HK on the Hong Kong Stock Exchange. In the event that Hausen HK was listed on the Hong Kong Stock Exchange, it is likely that Chino’s shareholders and Mr Li would have enjoyed the substantive share of the profit. It is unlikely that Mr Li would have promised to confer such a substantial shareholding on Mr Petropoulos in those circumstances. It is one thing for Mr Petropoulos to have been given a 9 or 10% shareholding, but another thing entirely for him to be promised a 50% share.

Thirdly, those objective contemporaneous documents that are in evidence point only to a 9% shareholding being conferred on Mr Petropoulos. The documents sent to Mr Petropoulos by email on 27 July 2010 made it clear that Mr Petropoulos was to receive only a 9% shareholding. Mr Petropoulous said in his witness statement that immediately after receiving that email, Mr Li telephoned Mr Petropoulos and told him that he would transfer him 40% of the shares in Hausen HK in addition to the 10% he already held. It is unlikely that having sent an email advising of the transfer of 9% of the shares in Hausen HK to Mr Petropoulos, Mr Li would immediately thereafter have called Mr Petropoulos and proposed a different and entirely oral arrangement conferring a larger total shareholding of 50% on him.

Fourthly, Mr Petropoulos’ account of his understanding of the proportion of the shareholding he held is implausible and sits at odds with his affidavit sworn on 23 November 2016. In that affidavit, Mr Petropoulos was at pains to emphasise that he signed the relevant share transfer documents in the mistaken belief that the 90,000 shares he received were 50% of the total shares in Hausen HK. He deposed in that affidavit that he is now aware that 90,000 shares is only 9% of Hausen HK’s total share capital. It is obvious in the 23 November 2016 affidavit that Mr Petropoulos was advancing an argument that he had believed at time that he had been transferred 50% of the shares in Hausen HK as a result of the transfer to him of the 90,000 shares.

However, the email chain of 27 July 2010 between Mr Li and Mr Petropoulos makes it clear that the 90,000 shares represented only 9% of the shares in Hausen HK. When Mr Petropoulos was taken to those emails in cross examination, he accepted that he had in fact read the full email chain, albeit a few days after it was sent. Accordingly, Mr Petropoulos must have known that the 90,000 shares represented only 9% of the total shareholding. That Mr Petropoulos read the 27 July 2010 email chain was not mentioned in, and is patently inconsistent with, Mr Petropoulos’ affidavit of 23 November 2016. Moreover, it is unclear why, if Mr Petropoulos was promised a 50% shareholding, he did not ask for the remaining 41% of the shares after reading the 27 July 2010 email.

Fifthly, Mr Petropoulos’ actions are inconsistent with any entitlement to a greater shareholding. In cross-examination, Mr Petropoulos said that he did not ask for the remaining 41% because he trusted Mr Li. This answer is inconsistent with his 23 November 2016 affidavit and in any event is not persuasive. Mr Petropoulos was aware from the end of January 2012 that Hausen HK had retained profits of over US$4 million and was a company that generated substantial turnover. Mr Petropoulos’ failure to follow up on the transfer of 41% of shares in a company which had substantial retained profits begs credulity and sits at odds with Mr Petropoulos’ willingness to press his own commercial interests.[30]
[30]See in particular his insistence that Global Minmetal (in fact, GRI) and not Hausen AUS supply OneSteel; see [79] – [83] and [106] above.

Finally, in the various statements of financial position completed by Mr Petropoulos in connection with the proposed loans from ANZ, he did not at any point list a shareholding in Hausen HK as an asset.

The sole document which Mr Petropoulos points to in support of the 2010 agreement is an email sent by Mr Petropoulos to Mr Li on 12 January 2012 recording that Mr Petropoulos and Mr Li anticipated that under their arrangement they could receive ‘about $1 million each per year’ (underline added). Mr Petropoulos relies upon this reference to $1 million each as suggesting an equivalence in each of Mr Petropoulos and Mr Li’s anticipated benefits from Hausen HK that would indicate an equal shareholding.

This email is the high point of Mr Petropoulos’ case as to the alleged agreement for 50% of the Hausen HK shares. It falls short of providing reasonable support for Mr Petropoulos’ account. In January 2012, Mr Petropoulos and Mr Li were equal shareholders in Global Minmetal. Accordingly, the reference to $1 million each could just as easily refer to the moneys that each hoped to earn from that company. Alternatively, Hausen HK reported net profit for the financial year ending 31 January 2012 of US$1,185,799. Mr Li speculates that it is likely that he and Mr Petropoulos discussed the likely net profit of Hausen HK in January 2012, and it is possible that Mr Petropoulos may have misinterpreted the discussion. In all events, this email alone, equivocal as it is, does not have sufficient evidentiary force to satisfy me of the existence of the 2010 agreement.

Relatedly, Mr Petropoulos asserts that prior to entering into the 2010 agreement, he expected to derive commissions in excess of $6 million[31] from transactions brokered for Hausen HK’s benefit. Mr Petropoulos argues that whilst he may have foregone $6 million in commissions for a 50% shareholding, he would not have given up commissions of that size for a mere 9% shareholding. The details of the brokered transactions are set out as Annexure A to Mr Petropoulos’ witness statement under the concededly misstated description that they are commission payments due to GRI. The annexure lists a range of contracts, which Mr Petropoulos contends were arranged by him and covered the period from 1 November 2009 to 28 September 2018. Based on this annexure, he identifies total commission outstanding as $6,256,165.60.
[31]The annexure from which Mr Petropoulos derives this figure does not identify the relevant currency. Chino appears to have transacted in USD, and Mr Petropoulos appears to have charged his per tonne commissions in USD.

There are a number of problems with this argument. The 2010 agreement was allegedly reached in or about September 2010. The commissions supposedly foregone relate to the period up to 28 September 2018. Whilst Mr Petropoulos may have been able to make a rough forecast in September 2010, he had no means of being certain as to the volume of business that would be transacted going forward which might earn him commission. Moreover, as at September 2010, GRI and Mr Petropoulos had only rendered two invoices to Chino for commissions totalling less than US$65,000. Mr Petropoulos’ contention that he would not have given up $6 million in commission for a 9% shareholding but would have given that sum for a 50% shareholding is a contention assisted with the benefit of hindsight, in view of some eight years of transactions undertaken after the alleged agreement.

Neither Mr Petropoulos nor GRI ever had any agreement in place with Hausen HK or Chino that entitled them to any definite commission. Rather, it would appear that commission was negotiated and payable on a contract-by-contract basis. Mr Petropoulos had no certainty of earning any commissions whatsoever, much less $6 million. Additionally, Mr Li disputes that Mr Petropoulos negotiated many of the contracts set out in the annexure.

At its highest, it might be said that in hindsight Mr Petropoulos would have been better off not agreeing to take the 9% shareholding in Hausen HK and instead should have continued to seek remuneration on a contract-by-contract commission basis.

In the result, I conclude that the only relevant agreement as to Hausen HK’s shareholding was that between Mr Petropoulos and Mr Xue that Mr Petropoulos would receive 9% of the shares in Hausen HK. I am not persuaded that there was any agreement between Mr Petropoulos and Mr Li that Mr Petropoulos would receive 50% of the shares in Hausen HK.

The 2010 agreement - the warehouse claim

In addition to the conversations of 19 May 2010 and 1 July 2010 described above, Mr Petropoulos’ claims in relation to the warehouse component of the 2010 agreement also require acceptance of his versions of the critical conversations between himself and Mr Li on 26 August 2010, 2 October 2010, and 16 October 2010.

As mentioned above, Mr Petropoulos says that on 1 July 2010 Mr Li sent him a Blackberry message advising him that Hausen HK would pay for the warehouse in full and would use the collateral against the raising of letters of credit to free up cash reserves, consistent with their earlier discussions in Hong Kong.

Mr Petropoulos gave evidence that on 26 August 2010 Mr Li called him and told him that Hausen HK would no longer be in a position to fund the total purchase of the warehouse. Mr Petropoulos says that he responded by telling Mr Li that this was ‘terribly short notice’ and that it would be very difficult for Mr Petropoulos to arrange alternative finance before settlement. Relatedly, Mr Petropoulos says that on 27 August 2010, he forwarded a copy of the contract for the purchase of the warehouse to ANZ and requested a loan proposal.

On 2 October 2010, Mr Petropoulos maintains that he telephoned Mr Li and told him that he was tired of sending Blackberry messages ‘to deal with the chaos’ of finalising the loan. Mr Petropoulos says that he was upset that GRI now had both a loan with ANZ[32] and a debt of US$653,987.15 to Hausen HK for the moneys already provided for purchase of the warehouse; comprising:
[32]Of course, the loan to ANZ is in fact shown in Officar’s financial statements, not GRI’s; see [70] above.

(a) US$99,000 provided on 7 July 2010;

(b) US$24,987.15 provided on 11 July 2010;

(c) US$400,000 provided on 27 September 2010; and

(d) US$130,000 Provided on 28 September 2010.

Mr Petropoulos says that he and Mr Li then agreed that the ‘best way forward’ would be for GRI to take full responsibility for the purchase of the warehouse and to own it outright, and that they would finalise the details of the new ownership arrangement when Mr Li arrived in Melbourne a few weeks later.

Subsequently, Mr Petropoulos says that when Mr Li arrived in Melbourne on 16 October 2010, they confirmed that the warehouse would be owned solely by GRI, and that accordingly Ms Li would be removed as a director and shareholder of Officar and as a unitholder in the Officar Unit Trust. In addition, Mr Petropoulos says that he and Mr Li agreed that the loan of US$653,987.15 payable by GRI to Hausen HK would be adjusted against the commissions payable by Hausen HK to GRI.[33]
[33]Of course, on Mr Petropoulos’ case he had agreed not to charge commission in return for his shareholding in Hausen HK. When confronted with the proposition that he could not reduce the loan amount against any payable commissions as he had given them up in the 2010 agreement, he said that the commission entitlements he had given up were future commissions, and not those subject of and accruing under agreements made before the entry into the 2010 agreement. The evidentiary basis for this entitlement is weak, if not non-existent.

Mr Sianas deposed that as a result he prepared replacement documents which on, on or about 7 December 2012, were executed by Mr Petropoulos and a Form 484 was lodged with ASIC.

Mr Sianas’ affidavit exhibited the ASIC Form 484 lodged in 2012 and signed by Petropoulos alone which recorded that Ms Li had ceased to be a director of Officar on 7 December 2012, a register of officers as at 7 December 2012 which recorded that Ms Li had resigned on 7 December 2012; a memorandum of resolutions of directors signed by Mr Petropoulos alone dated 7 December 2012 resolving to accept Ms Li’s resignation as a director; and an unsigned letter from Ms Li declaring her resignation which was dated 7 December 2012.

In his evidence in chief Mr Sianas confirmed that the Form 484 did not require a signature from the person resigning, but that Ms Li had nonetheless signed a letter stating ‘I hereby resign as director’ or words to that effect, which document was received by Mr Sianas in late 2010.

Mr Sianas said that in November 2012 when Mr Petropoulos raised the fact that Ms Li remained a director, Mr Sianas prepared another set of documents. When questioned, he clarified that the documents that he had prepared in 2010 were similar in all relevant respects other than year to the 2012 versions of those documents exhibited to his affidavit. The exhibited documents now said to be 2012 versions of the 2010 documents relate solely to resignation as a director. They do not deal with the transfer of shares or units.

In fact, there also exists a share transfer form purporting to transfer one share in Officar from Ms Li to Mr Petropoulos with provision for signing by both transferor or transferee. It is signed by Mr Petropoulos alone as transferee. Additionally, there exists a transfer form purporting to transfer 50 units in the Officar Unit Trust from Ms Li to GRI. This too was signed by Mr Petropoulos on behalf of GRI as transferee alone. These documents were not exhibited to Mr Sianas’ affidavit. As such, there is no evidence from Mr Sianas that he sent the transfer documents in respect of the shares and units to Ms Li, whether in 2010 or at all.

Ms Li says that whilst she was willing to complete the documentation necessary to resign as a director of Officar and communicated this to Mr Petropoulos on 7 October 2010, she never received the relevant documentation. Ms Li also says that she was never asked to transfer her shareholding in Officar or her units in the Officar Unit Trust to Mr Petropoulos; nor did she receive documentation to that effect.

Whilst Ms Li conceded in cross-examination that it was possible that she received documentation to effect those transfers in 2010 and simply forgot that this was so, she maintained that she did not believe that to be the case.

It was not put to Mr Sianas or Mr Petropoulos that Mr Sianas had never sent transfer documents for the shares and units to Ms Li, much less received signed transfer forms back from her.

Counsel for Mr Petropoulos submitted that in the absence of a direct challenge to this element of Mr Petropoulos’ and Mr Sianas’ accounts, counsel for Mr Li had not complied with the rule in Browne v Dunn.[34]
[34](1893) 6 R 67, 70.

I do not consider that it was necessary to expressly put this matter to Mr Sianas. First, the evidence of Mr Sianas, who prepared the documentation necessary to effect the purported removal of Ms Li, exhibited only the documents removing her as a director, not anything relating to the transfer of shares and units. Thus there was no positive evidence in chief from Mr Sianas which otherwise needed to be challenged. Secondly, in any event, Mr Petropoulos and Mr Sianas had been put on notice by Ms Li’s affidavit that she denied signing the documents necessary to effect such transfers. This is sufficient to put Mr Sianas on notice that events were contested. In those circumstances, it was not necessary to expressly put the matters to Mr Sianas (or Mr Petropoulos) in cross-examination.[35]
[35]See J D Heydon, Cross on Evidence (LexisNexis Butterworths, 2019), [17445]; cited with approval in Fairfax Media Publications Pty Ltd v Gayle (2019) 372 ALR 287 at 315.

I do not accept the evidence of Mr Sianas and Mr Petropoulos and prefer the evidence of Ms Li. I therefore do not accept that Ms Li resigned as a director of Officar in or about October 2010. I do not accept that she was asked in October 2010 or indeed at any other time to transfer her shares in Officar or her units in the Officar Unit Trust to Mr Petropoulos; or much less that she agreed to do so.

First, while it is one thing for Ms Li to have agreed to resign as a director of Officar, it is quite another for her to have agreed to transfer her shareholding in Officar and her units in the underlying unit trust to Mr Petropoulos. It is inconceivable that she would have done so without consulting either her aunt, Ms Zhang, for whom she held those interests on trust; or her uncle, Mr Li, who had first asked her to assist with the transaction and which involved his business associate, Mr Petropoulos. At the time, Ms Li was a university student studying at Macquarie University. She is now a qualified accountant. It is obvious from her communications in 2010 that she is a careful person who was astute enough in 2010 to clarify precisely what she was being asked to sign. For Ms Li to have transferred those shares or units to Mr Petropoulos without recourse to her aunt is entirely at odds with Ms Li’s careful approach in 2010.

It is also clear that Ms Zhang continued to believe from 2010 to 2015 that she was the effective half owner of the warehouse. This accords with her request to Mr Petropoulos for the warehouse’s title details on 20 August 2015. She would not have done this if she had been aware of a previous transfer of shares and units by Ms Li in 2010.

Secondly, even on Mr Petropoulos’ version of events, any agreement by Ms Li to transfer her shares in Officar or her units in the Officar Unit Trust would require me to accept Mr Petropoulos’ separate claim that he and Mr Li agreed in 2010 that GRI would take full ownership of the warehouse. I have rejected that claim.

Thirdly, Mr Petropoulos’ own communications to Mr Li after October 2010 are inconsistent with Ms Li having relinquished her half interest in the warehouse in October 2010. For example, in his email to Mr Li of 12 January 2012 Mr Petropoulos referred to the warehouse as ‘our warehouse’.

Fourthly, given that in October 2010 Ms Li had manifested a clear willingness to resign her directorship of Officar, I find it very difficult to understand why in December 2012, if it had become apparent that the resignation documents allegedly sent to her had been lost and not filed, that Mr Sianas and Mr Petropoulos would not have sent a fresh set of documents to Ms Li for execution. Clearly, there was no urgency attached to the removal of Ms Li as a director, much less the transfer of her shares or units.

Relatedly, the documentation that was lodged at ASIC in 2012 records Ms Li’s resignation as a director as having occurred on 7 December 2012. Similarly, the attendant share transfers and unit transfers also occurred on that date. This conflicts with Mr Petropoulos’ and Mr Sianas’ account that the resignation in fact occurred in October 2010. Mr Sianas explained this by saying that the resignation was post-dated to avoid a fine associated with the late lodgement of the form. This does not justify in any way the course followed by Mr Sianas and Mr Petropoulos.

The catalyst for the removal of Ms Li as a director and the related preparation of share transfer and unit transfer document was the impending receipt of a deposit of $120,442.48 from the ATO. The receipt of that payment, much less the subsequent use to which those funds were put, was never disclosed to Ms Li, Ms Zhang or Mr Li.

Having regard to the above, it follows that Ms Li was removed as a director of Officar in December 2012 without her knowledge. Even if Mr Sianas’ evidence is taken at its highest, the only documents he supposedly prepared were those relating to the directorship of Officar, and as such the transfer of her shares in Officar and the units in the Officar Unit Trust occurred without her knowledge or the knowledge of Ms Zhang and Mr Li.

As a consequence, and including, by reason of the failure to inform Ms Li, Ms Zhang and Mr Li of the receipt of the $120,442.48 from the ATO and the subsequent disposition of those funds, Ms Li (and Ms Zhang as the beneficial owner of Ms Li’s interest in the company) was wrongfully excluded from the affairs of Officar from at least 7 December 2012 onwards. At all times, Ms Li should have remained as a director and shareholder of Officar and a unitholder of the Officar Unit Trust. As such she should have been made aware of the receipt of the $120,442.48 and of its subsequent disposition.

The conduct of removing Ms Li as a director and shareholder of Officar and excluding her from its activities is oppressive conduct in the affairs of Officar within the meaning of s 232 of the Act.[36] So too is the failure to account to Ms Li and inform her of the receipt of the $120,442.48 from the ATO and the subsequent appropriation of that sum solely for Mr Petropoulos’ purposes.[37]
[36]See eg Re SRW Nominees Pty Ltd [2019] VSC 547; Hurrican v Sensible Funerals Pty Ltd (2007) 61 ACSR 359.
[37]See eg Cowling v Mekken [2015] VSC 196.

However, I do not accept that there was any failure on the part of Mr Petropoulos to account to Ms Li for the receipt of rental payments or other payments made by Mr Petropoulos’ business associates in connection with their occupancy of the warehouse. Mr Petropoulos said that those associates occupied the premises without charge. There is no contrary evidence before me. Curiously, and notwithstanding that the material provided by Mr Petropoulos to ANZ referred to an agreement by which OneSteel and Global Minmetal would occupy the warehouse and pay rental to Officar, there was no evidence of any executed lease or equivalent agreement, nor any evidence that rental moneys or some form of other occupancy payment was made. Accordingly, I do not accept that there was any relevant failure to account with respect to the receipt of moneys from OneSteel or Mr Petropoulos’ associates that would amount to oppressive conduct in Officar’s affairs.

Both parties accepted that the fact that Officar is a trustee of a unit trust is no impediment to relief under ss 232 and 233 of the Act,[38] although it may be relevant to the nature of the relief sought.[39]
[38]Wain v Draypac [2012] VSC 156.
[39]For example the present relief seeks an order that Officar be wound up. The winding up of the trustee will not bring about the winding up of the Officar Unit Trust.

The 2012 agreement

As alleged by Mr Petropoulos, the terms of the 2012 agreement varied the 2010 agreement such that GRI was to be issued 50% of the shares in Hausen AUS in return for a transfer to Hausen AUS of GRI’s Australian business. The share transfer was to occur once Ms Zhang’s residency status in Australia had been secured.

Acceptance of Mr Petropoulos’ claims in relation to the 2012 agreement requires acceptance of Mr Petropoulos’ evidence in respect of critical conversations with Mr Li.

In the statement of claim in the Petropoulos proceeding, the relevant conversations are said to have occurred in or about March and June 2012. In fact, in his witness statement Mr Petropoulos gave no evidence as to conversations relating to the alleged 2012 agreement occurring in or about March and June 2012. Rather, the critical conversation relied upon is said to have taken place between Mr Petropoulos and Mr Li in or about January 2011, once again via a Blackberry message. Mr Petropoulos was unable to produce the alleged Blackberry message. Mr Petropoulos says that in the messages he agreed to share GRI’s business contacts with Hausen AUS and to assist Hausen AUS with development of its waste stream strategies. Mr Petropoulos also alleges that it was agreed that some business that would have otherwise been transacted through Hausen HK was instead to be transacted through Hausen AUS, so as to assist Mr Li’s application for permanent residency. In return, Mr Li supposedly agreed to provide Mr Petropoulos with a 50% share in Hausen AUS.

Both Mr Li and Ms Zhang, the latter having moved to Melbourne in 2012 and who had been appointed as director of Hausen AUS on 18 December 2011, deny that any conversations to this effect occurred and accordingly deny that the 2012 agreement exists.

In order to understand Mr Petropoulos’ case for the 2012 agreement, and in particular the contention that GRI transferred its business to be transacted through Hausen AUS, it is necessary to examine the circumstances in which recarburiser was supplied to OneSteel.

From July 2010 Chino had supplied GRI and/or Global Minmetal with recarburiser. From January 2011, Global Minmetal supplied recarburiser to OneSteel but, save for some initial sales, the moneys paid by OneSteel in satisfaction of the Global Minmetal invoices were required to be paid by OneSteel to a GRI bank account. From about May 2012, Hausen AUS (instead of Hausen HK) supplied the recarburiser[40] to GRI.[41] Effectively, Hausen AUS was inserted into the supply chain. Ms Zhang’s evidence was to the effect that Hausen AUS acquired the recarburiser from both Chino (via Hausen HK) and other suppliers.
[40]Acquired from Chino/Hausen HK and other suppliers.
[41]Of course, as far as OneSteel was concerned the supply to it was made by Global Minmetal; Mr Petropoulos admitted in cross-examination that although payment was directed to GRI for the invoiced recarburiser, the invoiced were presented to OneSteel as being from Global Minmetal.

The price at which Global Minmetal supplied the recarburiser to One Steel was higher than the price at which GRI had acquired the recarburiser from Hausen AUS. In other words, Global Minmetal made a profit on the sale of recarburiser to OneSteel, notwithstanding the introduction of Hausen AUS into the supply chain with the Chinese manufacturers (whether Chino, Hausen HK or any other supplier). Global Minmetal’s profit was not paid into its bank account but instead was paid into GRI’s bank account. Mr Petropoulos vigorously asserted his right to make a profit in this manner and denied that he had any obligation to disclose these profits to Mr Li or to Ms Zhang.

On the issues before me, it is not necessary to decide whether there was any obligation of disclosure on Mr Petropoulos. Nor is it necessary for me to be concerned with the fact that the Global Minmetal invoices directed that payment be made into GRI’s bank account. However, I note that an email to OneSteel dated 22 August 2012, prepared by Mr Petropoulos emphasises that Mr Li was a 50% shareholder of Global Minmetal.[42]
[42]See [81] above.

However, the fact that GRI received the profit off sales of recarburiser made by Global Minmetal to OneSteel makes it difficult to identify what was given up by Mr Petropoulos in return for the 50% shareholding allegedly promised in the 2012 agreement. Even if the supply of recarburiser to OneSteel can be regarded as GRI’s business and not Global Minmetal’s,[43] it is clear that Mr Petropoulous and GRI did not yield up the entirety of their Australian business to Hausen AUS.
[43]Notwithstanding that the purchaser, OneSteel, was placing orders on Global Minmetal and receiving invoices from it.

More pertinently, the fact that Mr Petropoulos and GRI did not give anything up militates against the probability that any conversation took place to the effect that Mr Petropoulos and GRI would give up its business. In circumstances where Mr Li denies that such a conversation occurred and there is no objective evidence to support Mr Petropoulos’ contention, I am not persuaded that any such conversation occurred.

It is true that Mr Petropoulos provided advice to Mr Li from time to time in connection with Hausen AUS’ business. Whilst Mr Li, and Ms Zhang, said that Mr Petropoulos provided assistance exclusively to Hausen HK, and not Hausen AUS, I am not persuaded that the distinction between the business of the two entities is as clear as they assert. In my opinion it is clear that at least part of the discussions between Mr Li and Mr Petropoulos involved Hausen AUS. It is also true that business ventures of various kinds between Mr Petropoulos, Mr Li and Ms Zhang were, in broad terms, concluded on some form of shared basis; eg the warehouse was to be owned equally, and Mr Petropoulos and Mr Li were equal shareholders in Global Minmetal.

But the provision of assistance by Mr Petropoulos to Mr Li and Ms Zhang does not entail a contract in the form of the 2012 agreement. Though the evidence discloses mutual cooperation and assistance consistent with a friendship between business contacts; it does not go far enough to establish a business partnership governed by an equal shareholding arrangement. In a WhatsApp communication of 13 July 2015, Mr Li made reference to the fact that his wife would soon quit ‘the company’, and that Mr Li and Mr Petropoulos could now ‘do it as per our discussion this time’. But such a communication is a tenuous basis to find that either in January 2011, or in about March to June 2012, Mr Petropoulos and Mr Li agreed that Mr Petropoulos would have 50% of the shares in Hausen AUS transferred to him. The provision of advice or assistance by Mr Petropoulos to Mr Li is equally consistent with the fact that Mr Petropoulos and Mr Li had a number of shared business activities, including at that stage the joint acquisition of the warehouse; the provision of recarburiser to OneSteel through Global Minmetal; and later from at least 16 October 2013 the acquisition of the Newport property. In that context it is hardly surprising that Mr Petropoulos may have also provided advice in connection with Hausen AUS.

Nor does the content of the WhatsApp communication establish to any requisite standard of proof the existence of a promise to convey 50% of the shares in Hausen AUS to Mr Petropoulos. The communication is equally consistent with several other scenarios, including that some of Hausen AUS business would be transferred to the jointly owned Global Minmetal. In fact, the name Hausen AUS does not appear in the WhatsApp message.

In the circumstances, I do not accept that there was a discussion in January 2011, or at any other time, in which Mr Li promised to cause the transfer of 50% of the shares in Hausen AUS to Mr Petropoulos. Accordingly, the claims in respect of the 2012 agreement must fail.

The Newport agreement

Mr Petropoulos’ claim with respect to the Newport agreement is predicated upon acceptance of Mr Petropoulos’ evidence of critical conversations between Mr Petropoulos and Mr Li on 5 July 2013, 6 August 2013 and 9 September 2013. Save for minor aspects of the conversation on or about 5 July 2013, Mr Li denies that the conversations occurred.

On 5 July 2013, Mr Petropoulos says that he told Mr Li that he needed ‘[his] money’ from Hausen HK to purchase an investment property. According to Mr Petropoulos, Mr Li asked Mr Petropoulos how much he wanted, to which Mr Petropoulos said ‘approximately $500,000’. Mr Petropoulos says that Mr Li initially said this would not be a problem and later responded by saying that these funds would be paid to Mr Petropoulos in instalments. Mr Li denies this conversation, aside from accepting that he received a call from Mr Petropoulos at about this time in which Mr Petropoulos raised the prospect of purchasing an investment property together.

On 6 August 2013, Mr Petropoulos says that Mr Li told him that Mr Li wanted to be involved in the proposed development of the Newport property (which was to involve the construction of three townhouses on the site). Mr Petropoulos says that in the course of that conversation, Mr Li also told him that money in Hausen HK was ‘tight’ and that Mr Petropoulos would now only receive US$200,000. Mr Petropoulos says that as a consequence he realised he would have to take out a loan to fund the balance of the purchase of the Newport property. Mr Li denies this.

On 9 September 2013, Mr Petropoulos says that Mr Li called him and told him that Mr Li’s bank was not in a position to settle the loan Mr Li intended to take out to finance his share of the Newport property, and that accordingly if Mr Petropoulos wanted the Newport property to settle on time he would need to cover the balance of the purchase price himself.[44] As a consequence, Mr Petropoulos says that the following morning he notified ANZ of the additional funds required and the bank adjusted the principal to $336,000. Mr Li denies this.
[44]Being Mr Li’s one-third of the purchase price and costs, that is $201,296.55.

I do not accept Mr Petropoulos’ evidence. It is unsupported by any objective contemporaneous evidence and is improbable in light of the facts disclosed by such contemporaneous documentary evidence as does exist.

First, the funds advanced by Hausen HK coincide almost exactly with one-third of the purchase price, which is reflective of Mr Li’s one-third interest registered on title. It is not in dispute that Mr Li arranged for the transfer of US$199,939.26 to GRI from the Hausen HK bank account on 5 September 2013. Such an amount is broadly equivalent to one-third, including stamp-duty, of the purchase price for the Newport property (which was $570,000). Mr Petropoulos’ version of events requires me to accept the happy coincidence that the amount that Hausen HK paid to him in response to his request for ‘his money’ from Hausen HK was US$199,939.26 which happens to correspond to approximately one-third of the purchase price of the Newport property. The more probable explanation is that the US$199,939.26 represented Mr Li’s one-third share of the Newport property, as Mr Li asserts.

Secondly, Mr Petropoulos’s supposed entitlement to monies from Hausen HK is unclear. As alleged, the 2010 agreement included a promise on Mr Petropoulos’ part that GRI would not be entitled to the commission that it otherwise would have charged to Hausen HK for the procurement of metallurgical product for Chino. Any such entitlement must rest on a claim to an asserted entitlement to commissions that had become due from transactions brokered before the 2010 agreement, but which were not due at the time of the agreement and were not foregone. Mr Li denies any subsisting entitlement on Mr Petropoulos’ part to commissions and there is no objective evidence of any agreement.

Further, as alleged the 2010 agreement also included a term that GRI would not draw any profits from Hausen HK through its shareholding but rather would allow the same to be retained by Hausen HK to grow its business. Although the 2010 agreement supposedly included a term that Hausen HK would pay Mr Petropoulos an annual salary of US$1 million, there is little or no evidence that supports the existence of any such agreement and, in any event, it is common ground that at no stage did Mr Petropoulos or GRI receive any moneys by way of salary from Hausen HK. Moreover, in the various statements of financial position provided by Mr Petropoulos to ANZ in support of the loans to finance the acquisition of the warehouse, there is no mention of any moneys owed to Mr Petropoulos by Hausen HK; nor of a shareholding that could have entitled him to any dividend or other form of profit share. Further, there is no documentary evidence of a request by Mr Petropoulos to Mr Li at any point from 2010 onwards for moneys due to him, whether by way of salary, commission, dividend, or other form of profit share. Had Mr Petropoulos been owed such moneys from Hausen HK, it strains credibility that he is not able to point to a single communication where he requested such moneys, or at least made reference to his entitlement. The closest document evidencing any such reference is the 12 January 2012 email, which falls far short.

Thirdly, the sequence of events set out by Mr Petropoulos and otherwise implicit in his account of events is again contradicted by the ANZ file. As noted above, ANZ’s file records a kerbside valuation for the Kealba property on 21 August 2013 which returned an estimated market value of $420,000. When it is kept in mind that Mr Petropoulos met with ANZ on 26 August 2013 and signed a loan application with a contemplated facility limit of $336,000, being exactly 80% of the value of the Kealba property, it is overwhelmingly probable that Mr Petropoulos either met with or first made enquiry of ANZ in connection with a proposed loan of around 80% of the value of the Kealba property before 21 August 2013 and that the figure of $336,000 was arrive at on 26 August 2013 once the Kealba valuation had been obtained. Mr Petropoulos’ evidence, however, is that the $336,000 was only sought on 10 September 2013, after Mr Petropoulos became aware Mr Li could not finance the balance of the purchase price. I do not accept that this is the case.

When Mr Petropoulos was cross-examined on this apparent contradiction he said that he had sought the $336,000 in advance out of an abundance of caution. Mr Petropoulos said that he was anxious that Mr Li might not deliver on his promise of funds, particularly as he had experienced previous difficulties with Mr Li financing the acquisition of the warehouse. This explanation was not averred to at all in Mr Petropoulos’ witness statement. I have rejected Mr Petropoulos’ evidence that Mr Li breached any agreement in relation to the acquisition of the warehouse. There was therefore no previous failure to deliver on a promise of funds by Mr Li that could justify such excessive caution on Mr Petropoulos’ part.

Finally, the proposition that Mr Li failed to deliver on his promised contribution for the Newport property is decidedly at odds with the fact that Mr Petropoulos still gave instructions to the conveyancer that the property be registered in the names of Mr Petropoulos, Mrs Petropoulos and Mr Li.

If, as Mr Petropoulos alleges, it was the case that Mr Li had not paid anything towards the purchase price, it defies credulity that Mr Petropoulos would have given the conveyancer instructions to register Mr Li on the title of the Newport property, rather than Mr Petropoulos and Mrs Petropoulos alone.

I reject Mr Petropoulos’ evidence with respect to the Newport agreement. The far more likely explanation is that the $199,939.26 forwarded by Hausen HK represented Mr Li’s one-third share and that this was the reason why the property was registered in the names of Mr Petropoulos, Mrs Petropoulos and Mr Li.

Damages

I have rejected Mr Petropoulos’ case with respect to the existence of the 2010 agreement and his related contention that the agreement was breached by a failure to transfer to him 50% of the shares in Hausen HK. Accordingly, it is not necessary for me to consider the amount of damages recoverable by Mr Petropoulos in respect of such breach.

However, given the parties made submissions on the issue, I will make some brief observations. Mr Petropoulos contended that the quantum of damages should represent 50% of the net assets of Hausen HK as at the date of breach; that is, late 2010 or early 2011, when Mr Li failed to transfer the Hausen HK shareholding within a reasonable period of time. On that basis, Mr Petropoulos contends that the value of a 50% shareholding in Hausen HK as at the date of breach, being 31 January 2011, is reflected by its audited balance sheet. That balance sheet discloses net assets of US$3.6 million and retained earnings of US$3.48 million. On this premise, Mr Petropoulos contends that the loss resulting from the failure to transfer a 50% shareholding is US$1.8 million; and that damages should be awarded accordingly.

Whilst Mr Li agreed that the general rules that the time for the assessment of loss and damage is at the time of the breach,[45] Mr Li contended that this was an appropriate case to depart from the general rule. Mr Li contended that assessing damages as at 31 January 2011 would give rise to injustice, having regard to the evidence that Hausen HK made a loss in the financial years ending 31 January 2012 and 31 January 2013; and more particularly because Hausen HK went into liquidation in 2020. He also contends that the proper approach to valuing shares in a private company is to take expert advice,[46] and that Mr Petropoulos’ failure to adduce expert evidence as to the value of the shares in Hausen HK as at 31 January 2011 prevents the Court from quantifying damages.
[45]Wenham v Ella (1972) 127 CLR 454, 459, 463, 470; Johnson v Perez (1988) 166 CLR 351, 355.
[46]Smith v Gould [2012] VSC 201, [125], [160].

Taking into account the circumstances of this case, and leaving to one side the issue of the correct methodology, in my view this is an appropriate instance to depart from the general rule that damages should be assessed at the date of breach. To do otherwise would give rise to an injustice in the sense referred to in Johnson v Agnew.[47] The purpose of an award of damages for breach of contract is compensatory. Generally speaking, the object of such award is to place the plaintiff in the position which it would occupy if the defendant had performed the breached obligation.[48] In the present case, if Mr Li had performed a promise to transfer a 50% shareholding in Hausen HK to Mr Petropoulos, it is overwhelmingly likely that Mr Petropoulos would have simply retained that 50% shareholding; including during the period in which Hausen HK subsequently made losses and ultimately went into liquidation. In circumstances where Hausen HK was never listed on the Hong Kong Stock Exchange, contrary to the initial aspirations of Mr Petropoulos and Mr Li, there is no evidence of an available market in which Mr Petropoulos could have realised his shareholding.
[47]Johnson v Agnew [1980] AC 367, 400-401.
[48]See generally Robinson v Harmon (1848) 154 ER 363, 365 (approved in Commonwealth of Australia v Amman Aviation Pty Ltd (1991) 174 CLR 60, 80, 98, 117, 134, 148, 161).

I would not reject Mr Petropoulos’ claim for damages to be assessed merely because of the absence of expert evidence. I accept that in an appropriate instance damages for a failure to transfer a shareholding may be valued by reference to the net assets of the company. However, in my opinion this is not such a case. Hausen HK was the Hong Kong outpost of Chino, itself based in mainland China. Its business was entirely dependent upon Chino’s continued support and willingness to operate in that fashion. Whilst its turnover was significant, its gross profit as a proportion of its turnover was small: this reflected the fact that it acquired product from Chino at a price broadly comparable to the price at which it then sold that product. There is no realistic probability that Mr Li or any other interested person would have paid US$1.8 million, or any other sum remotely like it, for Mr Petropoulos’ 50% shareholding in Hausen HK. Moreover, the retention of any assets at all in Hausen HK or the continuation of its business was entirely at Chino’s pleasure.

In the case of the failure to transfer the shares in Hausen AUS, Mr Petropoulos again contended that the quantum of damages, representing the value of a 50% shareholding in Hausen AUS, should be assessed as at the date of the breach; being the end of 2015, at which time Ms Zhang secured her Australian residency. On that basis, Mr Petropoulos contends that the value of the shares not transferred should be assessed by the net asset value of Hausen AUS, which was $209,326 as at 30 June 2015 and $367,852 as at 30 June 2016. Unlike Hausen HK, Hausen AUS is still in operation. Further, unlike with Hausen HK, if Mr Petropoulos had been provided with 50% of the shares of Hausen AUS, there is a prospect that he could have realised those shares either by way of a sale to Mr Li or Ms Zhang; or by legal action affording relief in the nature of a buyout. In cases of this nature it is not unknown for the value of the shares of the party that wishes to be bought out to be assessed, at least in part, by reference to the net assets of the company in which shares are held.[49] Accordingly, if I had assessed Mr Petropoulos’ damages on the basis that he was entitled to damages for breach of the 2012 agreement in relation to the failure to transfer shares in Hausen AUS to him or GRI, I would have awarded damages broadly in the amount of $144,000.
[49]See the discussion of cases Mallett v Mallett (1984) 156 CLR 605, 616-617, 627-628.

In addition, having regard to my rejection of Mr Petropoulos’ claims with respect to the Newport agreement, it is not necessary for me to consider Mr Petropoulos’ argument that Mr Li’s interest in the Newport property is held on a resulting or constructive trust for Mr Petropoulos. It is a necessary, but not sufficient, element of that claim that the US$199,939.26, received by GRI and transferred from Hausen HK, was not intended to facilitate Mr Li’s one-third share acquisition, and instead constituted a payment from Hausen HK of moneys due to Mr Petropoulos or GRI. Even if I was satisfied that the payment was of this nature, which I am not, I would not have held that Mr Li’s interest in the Newport property is held on a resulting or constructive trust for Mr Petropoulos.

The purchase of property by a person in his name using funds provided by another, subject to evidence of a contrary intention, creates a resulting trust in favour of the contributor of the purchase moneys.[50]
[50]Calverley v Green (1984) 155 CLR 242, 246.

The resulting trust arises because of the presumed intention that the property is held in shares proportionate to the respective contributions of purchase price.[51]
[51]Bloch v Bloch (1981) 180 CLR 390, 397.

If I had accepted Mr Petropoulos’ evidence I would have held that Mr Petropoulos personally contributed the US$199,939.26 that facilitated the purchase of the 1/3 share registered in Mr Li’s name. A resulting trust on the terms alleged by Mr Petropoulos would be presumed, but would be rebuttable by evidence of a contrary intention. Here such evidence exists: Mr Petropoulos had carriage of the completion of the purchase and it was he, not Mr Li, who gave instructions to the conveyancer with respect to the transfer to and the identity of those persons who would be registered on title.

In those circumstances, any presumption of a resulting trust has been rebutted by contrary evidence of intention in the form of Mr Petropoulos’ instruction to the conveyancers to record Mr Li as the holder of a one-third interest. In that event, even if I were to accept Mr Petropoulos’ evidence and reject Mr Li’s, the appropriate characterisation of the transaction is that Mr Li would have been indebted to Mr Petropoulos in the amount of UD$199,939.26; not that Mr Li would have held his one-third share for the benefit of Mr Petropoulos.

Nor do I consider that the circumstances alleged give rise to a constructive trust. An institutional constructive trust arises where there is evidence that a person was intended to hold property on behalf of another, or should have had such an intention.[52] Although there is scope for the Court to impose a remedial constructive trust, either in circumstances where a substratum for joint relationship or endeavour is removed without attributable blame and where it would be unconscionable for one party to assert or retain the benefit of relevant property;[53] or where the remedy of constructive trust is appropriate as a consequence of some form of breach of fiduciary duty or other equitable wrong;[54] neither of those circumstances have relevant application in the instant case.
[52]Nolan v Nolan [2004] VSCA 199 [60]; Hohol v Hohol (1981) VR 221, 225.
[53]Muschinski v Dodds (1985) 160 CLR 583.
[54]See, inter alia, Peter Young, Clyde Croft, and Megan Smith, Croft on Equity (Thomson Reuters, 2009) [6.710].

Conclusion

The claims made by Mr Petropoulos and GRI in the Petropoulos proceeding have not been established and will be dismissed.

Ms Zhang’s claims in the oppression proceeding are made out. The removal of Ms Li as a director of Officar and the transfer without her knowledge of her shares and units in Officar and the Officar Unit Trust to GRI, all occurred without the knowledge of Ms Li and Ms Zhang and constituted oppressive conduct within the meaning of s 232 of the Act. The failure to inform Ms Li and Ms Zhang of the receipt of the $120,443.48 from the ATO and the subsequent disposition of those funds constituted an exclusion of her from the affairs of Officar.

Ms Zhang will be entitled to relief in the oppression proceeding, the precise form of which can be the subject of further submission. I shall list the matter for further hearing and for the making of final orders necessary to give effect to these reasons and for ancillary directions at a date convenient to the parties.

SCHEDULE OF PARTIES

S ECI 2018 00145
BETWEEN:
CHRISTOS PETROPOULOS	First Plaintiff
GLOBAL RESOURCE INNOVATION PTY LTD (ACN 128 673 683)	Second Plaintiff
-and-
QIANG LI	First Defendant
MINGHAI LI	Second Defendant
AIPING ZHANG	Third Defendant
HAUSEN RESOURCE PTY LTD [HONG KONG]	Fourth Defendant
HAUSEN RESOURCE PTY LTD (ACN 126 690 248)	Fifth Defendant
S ECI 2016 001115
BETWEEN:
QIANG LI	First Plaintiff
AIPING ZHANG	Second Plaintiff
-and-
OFFICAR PTY LTD (ACN 142 983 042)	First Defendant
CHRISTOS PETROPOULOS	Second Defendant
GLOBAL RESOURCE INNOVATION PTY LTD (ACN 128 673 683)	Third Defendant

[2021] VSC 292

25 May 2021