Satchell v 70 Esplanade Pty Ltd

[2021] VCC 1946

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-20-00676

DAVID GEOFFREY SATCHELL	Plaintiff
v
70 ESPLANADE PTY LTD & ORS	Defendants

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	15–19, 22–23 and 26 November 2021
DATE OF JUDGMENT:	7 December 2021
CASE MAY BE CITED AS:	Satchell v 70 Esplanade Pty Ltd
MEDIUM NEUTRAL CITATION:	[2021] VCC 1946

REASONS FOR JUDGMENT
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Subject:JOINT VENTURE AGREEMENT

Catchwords:              Joint venture agreement – Membership of joint venture agreement – Whether third party making funds available a third joint venturer or lender to the second joint venturer – Purchase of land for joint venture purposes discharged by vendor for breach by joint venture company – Whether resulting from breach by first or second joint venturer – Third person making funds available a third joint venturer – Misleading or deceptive conduct – Allegation by one venturer that another venturer represented he would be able to meet his obligations at settlement of land purchase not proceeding – Loss and damage claim – Second defendant successful on contractual claim – Claim for damages for misleading or deceptive conduct must succeed or fail based on outcome of contractual dispute

Legislation Cited:      Australian Consumer Law, s18

Cases Cited:Ambridge Investments Pty Ltd v Baker & Ors [2010] VSC 59; Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749; County Securities Pty Limited v Challenger Group Holdings Pty Limited [2008] NSWCA 193; Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288; Ying Mui Pty Ltd & Ors v Frank Kiang Ngan Hoh & Ors (No 3) [2017] VSC 29; Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523; PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd (2007) VR 487; Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583; Briginshaw v Briginshaw (1938) 60 CLR 336;

Judgment:                  1. Within 14 days the parties must bring in short minutes to give effect to these reasons.

2. Costs reserved.

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APPEARANCES:	Counsel	Solicitors
For the Second Defendant	Mr N Dragojlovic	Le Brun & Associates
For the Third Defendant	Mr H Watkins	Keypoint Law

HIS HONOUR:

Background

1Ms Man Li Zhu was born in Shanghai in the People’s Republic of China.  She has been engaged in business in Australia for many years.  Ms Zhu is known in English speaking circles as “Mary”.  Mr Antoniou of the firm, Antony Sdrinis & Co, has acted for her in her commercial dealings for 20 to 25 years. (Transcript (“T”) 246, Lines (“L”) 5-6)

2From approximately August 2016, Ms Zhu, together with Mr Chen, known in English speaking circles as “Jason”, and Mr Hu, known in English speaking circles as “Charlie”, had been investigating possible real estate development opportunities (agreed Chronology page 1).  On 26 August 2016, a company known as `Venture Holdings Group Pty Ltd’ was incorporated under the Corporations Act 2001. (Court Book (“CB” 240) The initial directors were Mr Hu, who acted as Chairman, Ms Zhu and Mr Chen. (CB 279-281) Frute Pty Ltd, a company controlled by Ms Zhu, was the holder of 34 ordinary shares; Conway Australia Holdings Pty Ltd, a company associated with Mr Hu, held another 33 shares; and Js Chen Pty Ltd, a company associated with Mr Chen, was the holder of 33 ordinary shares. (CB 286-288) The shareholding therefore was substantially equal amongst the three venturers, with Ms Zhu holding one extra share.

3Ms Zhu had met Mr Chen around the year 2013 through his business as a “loan broker”.  Mr Chen had been introduced to her to assist her in raising a loan to purchase a city apartment. (T53, L23-25)  Mr Hu was a friend of hers whom she had known for seven or eight years. (Ibid, L26-39)  Initially, the three investigated a development project in Melton in 2016.  A satisfactory price for the subject land could not be agreed.  The land had not at that time been designated for development under the relevant planning scheme. (T54)  Investigation of another land parcel in Sunbury identified by Mr Hu also turned out to be abortive. (T55, L6‑10)  The company, Venture Holdings Group Pty Ltd, was incorporated with the shareholding described in contemplation of the Sunbury project. (Ibid, L21-46)  This project proved difficult to bring off because it entailed acquisition of some 17 allotments from 17 different owners. (T56, L12‑15)

4Whilst carrying out investigations relative to the Sunbury land, Ms Zhu met a Mr William Pryor, who is a friend of Mr Chen. (Ibid, L40‑47)  Mr Pryor is a development manager and company director. (T593, L24)  His companies are engaged in the business of property development and dispute resolution. (Ibid, L32-33)  Relative to the Sunbury project, Mr Pryor was not a joint venturer.  Rather, he was engaged “on success fee-based principle”. (T495, L15-18)  Since the Sunbury project did not proceed, he earned no fee for his efforts. (Ibid, L36‑44) 

5Whilst the venturers undertook a preliminary examination of a number of possible projects, the next one which they actually undertook was a property at 70 Esplanade, Brighton. (T596, L5‑9)  This property had been identified via an online advertisement.

6In February 2017, Mr Hu had ceased to be involved in the joint venture arrangement.  As a result, a new company, Venture Capital Group Holdings Pty Ltd, was incorporated on 7 June 2017, which did not include Mr Hu as a director or shareholder. (T69, L45‑T70, L6; Chronology, p1)  The shareholding consisted of 50 shares held by Mr Chen’s company, JS Chen Pty Ltd; 50 shares held by Ms Zhu’s company, Frute Pty Ltd; and 10 shares held by 3P’s Property Group Pty Ltd, Mr Pryor’s company. 

7Mr Pryor prepared a feasibility report envisaging the construction of eight townhouses on the site at No 70 and yielding a profit of $8 million to $10 million. (T58, L13‑22)  Mr Pryor planned that he would be project manager. (Ibid, L33)  This would have entailed his being paid an annual salary of $360,000 for a three year period.  According to Ms Zhu, this element of Mr Pryor’s involvement was disclosed to her only after the contract to purchase 70 Esplanade was signed. (Ibid, L42‑46)  It appears, however, that the feasibility study proposed payment of project development management fees totalling $900,000 in instalments of $25,000 per month for 36 months. (T122, L23‑24)  Ms Zhu said, however, “I didn’t notice this”.

8On 11 April 2017, Mr Pryor signed a contract to purchase the property at 70 Esplanade, Brighton, from Mr Satchell.  The contract was framed as an offer by “William Alistair Pryor and/or nominee” to purchase the property with a provision for acceptance by signature by Mr Satchell as vendor.  Mr Satchell signed the first page of the contract, leaving his date of signature blank.  Typed Special Condition pages were initialled by the parties, on 16 June by Mr Pryor and 19 June 2017 by Mr Satchell.  The difference in these dates remained unexplained in the evidence, but does not appear to be material. (CB 305‑357)  The contract provided for an initial deposit of $425,000 with a further $425,000 payable on 11 October 2017.  Payment of the purchase price and settlement of the sale were scheduled on 17 September 2018. (CB 308)

9Mr Pryor paid 10 per cent of the initial deposit. (T600, L26‑27)  On 13 April 2017, Mr Pryor, as the named purchaser under the contract, executed a nomination form nominating Venture Holdings Group Pty Ltd to take title to the subject property in accordance with the terms of the contract.  Ms Zhu and Mr Chen signed on behalf of Venture Holdings Group Pty Ltd.  Given that this company seems to have been superseded and discarded upon the departure of Mr Hu, it is not obvious why this nomination was made.

10On 21 June 2017, 70 Esplanade Pty Ltd was incorporated.  This company had two directors, namely, Ms Zhu and Mr Chen, and a share capital of 100 ordinary shares held initially as to 45 by Mr Chen’s company, JS Chen Pty Ltd, and 45 by Frute Pty Ltd, Ms Zhu’s company, and 10 ordinary shares by 3P’s Property Group Pty Ltd, Mr Pryor’s company. 

11On 7 June 2017, a further nomination was executed by Mr Pryor, this time in favour of Venture Capital Group Holdings Pty Ltd. (CB 418)

12Mr Pryor said that around July 2017, he sought to be removed from the joint venture:

“Because I felt as though the partnership had polarised to the point that I  felt as though that my position was untenable, and that I lost faith and trust within the partnership.” (T601, L28‑35)

13He said that he held a meeting with Mr Chen, discussing some five options as to how he might quit the joint venture.  He did not involve Ms Zhu in that discussion, “Because it was inappropriate for her to be there at that time because we were discussing her about her future within the partnership.” (T606, L29‑42) Mr Pryor said it was either him or her that had to go. (Ibid, L41-42)  A deed of cancellation and a new contract of sale with 70 Esplanade Pty Ltd as purchaser, and personal guarantees from Ms Zhu and Mr Chen, were executed by the relevant parties on 28 September 2017. (T607, L18-29)

14Mr Pryor was concerned that, should the nominated purchaser fail to perform, he would remain liable on the contract and his release was therefore essential. (T605, L3-30)  The monies paid as Mr Pryor’s share of the deposit remained in the estate agent’s bank account, but he was reimbursed by Ms Zhu and Mr Chen.  He was also paid some $20,000 for the time and effort which he had expended. (T606, L8‑27)

15Forms 484 numbered 7E9495163 and 7E9484832 respectively were lodged by Irene Lu and Associates Pty Ltd, an accountancy firm acting for Mr Chen, and SF Lum and Co respectively, recording that some four of the shares owned by Frute Pty Ltd, and four of the shares in the capital of 70 Esplanade owned by JS Chen Pty Ltd were transferred to a company, GMEH Pty Ltd, on 29 September 2017, with the shares owned by Mr Pryor’s company, 3P’s Property Group Pty Ltd being transferred as to five to Mr Chen’s company, and as to the other five, to Ms Zhu’s company, Frute Pty Ltd. (CB 583‑5)

16As will appear, the circumstances surrounding the involvement of shareholder, GMEH Pty Ltd, and its significance within the joint venture, are of crucial significance to the outcome of the present dispute between Ms Zhu and Mr Chen.

17Mr David Barnes is a chartered accountant and a partner in the city accountancy firm, BSA Partnership.  He has provided accountancy services and advice to Ms Zhu and her enterprises for the last 20-25 years. (T330-1)  Mr Chen and Ms Zhu attended a conference with Mr Barnes at his office on 12 September 2017. (T333, L13-16)  Mr Barnes analysed the matter on which his advice was sought on a whiteboard, a printout of which appears in the Court Book. (CB 1296-7)

18The whiteboard notation constitutes an analysis of the development project for 70 Esplanade, indicating two options – the first entailing sale of the land with a development permit; alternatively the completion of the development with the construction and sale of the eight town houses providing for construction in the period February 2019 to August 2021 and completion of the project by sale of all units by June 2022.  The diagram includes the notation, “will have a S/H agreement by lawyer (WILLCOX)”.  This apparently indicated that a shareholder’s agreement would be drawn up by the law firm, Hall and Willcox.  The diagram also referred to “Jason” having “46%” and Mary having “46%” with eight per cent attributed to “investor”. 

19Mr Barnes said that his firm was not advising on “structure”, but generally it recommended, in circumstances such as these, the use of a company structure rather than a special purpose unit trust.  This was because the corporate tax rate of 30 per cent was more favourable than the personal rate, which would be applied to the profit derived by unit holders.  There was an opportunity to retain profit before distribution by way of fully franked dividends.  Where, however, a unit trust structure were used, there would be an immediate tax liability at the personal rate on the profit derived. (T336-7) 

20There was a further issue whereby penal stamp duty could be levied on discretionary trusts which were defined under the Duties Act as `foreign corporations’.  A discretionary trust could fall within that definition if it permitted distribution of income to non-residents. (T339-340)  The whiteboard printout stated, “Look at the trust deeds [of the shareholder discretionary trust companies] to see the beneficiaries are Aust only. If o/seas they are foreign [attracting] higher stamp duty”.  Asked who the individual identified as “Investor” was, Mr Barnes said “he was Mr Eight Per Cent”. (T338, L21)  By that, he meant that the “Investor” was to be a shareholder as to eight per cent of the capital of 70 Esplanade Pty Ltd. (Ibid, L25-29)  The percentages 46 and 8 were instructions by Ms Zhu and Mr Chen. (Ibid, L35-39)

21According to Mr Barnes, the instruction as to the proposed shareholder agreement to be drawn by law firm Hall and Willcox was given to him by Mr Chen. (T341, L9-11)  As to the shareholder’s agreement, it seems that a draft was prepared by Hall and Willcox.  According to Mr Chen, “When Mary and myself looked at it, … we probably decided it was not adding value because we fifty-fifty per cent.  We was [sic] exiting the company so’s not complication on that. Yes.” (T523, L17-19)

22Mr Hao Liu is a data engineering manager. (T573, L47)  Mr Liu has known Mr Chen since 2010, when Mr Chen acted as his finance broker in obtaining a home loan.  Mr Chen has arranged at least three home loans for Mr Liu.  Mr Liu introduced him to a number of his friends as well. (T574, L1-22)

23They had previously been involved in a development project at Ivanhoe to which Mr Liu had contributed some $400,000.  He had been promised a return of 20 per cent up to 50 per cent on his money.  As it was, he derived a return of 20 per cent in addition to the return of capital. (Ibid, L24-44)  In July 2017, Mr Chen sent a WeChat message including photographs of the development project at 70 Esplanade. (T575, L1-24, CB 462)  The message stated, “Purchased 9.3mil plus acquisition cost just over $10mil. Permit in 12-18 months, construction another 12-18 months, will have permit and pre sales before going to construction”. 

24Mr Liu attended a meeting with Mr Chen at Mr Chen’s Richmond office.  According to Mr Liu:

“He just saying this probably one of the best project … he’s doing. And he told me about … what he said in the message, like how much in total. It’s roughly around, like, 10 million. And then – yes, a little bit about the plan. Like, they’re going to build townhouses on the land or something like that.” (T575, L32-35)

25According to Mr Liu:

“I think … he needed funding, so – and also we did the last one [scil at Ivanhoe].  So this one will be quite similar to the last one. And it’s quite easy as well, just, like, put the money in and then you get the interest back … we discuss about the percentage of interest as well, so he did mention about minimum 20 per cent. So it’s three year – it’s up to three years project. So it’s longer – a bit longer than the previous one …” (Ibid, L39-44)

26The Ivanhoe project had been completed in a single year. (T576, L11-12)  Mr Liu agreed to commit $800,000. (Ibid, L43-45)  Mr Liu said:

“So it’s very similar to the last one. … so he lent the money to the developer for Jason – he’s a developer … lent money to him.  So he agreed on a percentage with me and he’s guaranteed the principle [sic] will be safe.” (T577, L4-6)

27Mr Liu made his first payment in the sum of $450,000 “around September 2017”. (Ibid, L28)  He said he paid the money to the company Mr Chen directed him to pay it to, “a company that I think Jason owns. It’s called Venture Holding.” (T578, L1-10)  At that stage, Mr Liu said he had no further monies to invest in the project. (Ibid, L25-27)

28Mr Liu left management of these matters to Mr Chen.  He was not kept abreast of developments such as the cancellation of the original contract. (Ibid, L29-46)  Mr Liu’s subscription or advances were made on 11 September 2017 of $450,000 to Venture Capital Group Holdings Pty Ltd, and thereafter in instalments of $50,000 to the same company. (CB 586, 588, 594, 595, 597, 598, 600, 601)

29In 2018, Mr Liu said he was contacted by Mr Chen, who told him that there was an issue with the settlement of the land and he needed more money.  Mr Liu said he felt uncomfortable redrawing on his home loan but, in the end, he lent Mr Chen “another $400k”. (T579,  L40-43)  He said this advance was made in December 2018. (T580, L1-2)  This “loan” was repaid with interest of 10 per cent. (Ibid, L6-11)  As to the $800,000, the Transcript at 580 is uncertain.  I heard Mr Liu to say that the $800,000 had not been repaid. (T580, L19)  As to how Mr Liu had raised the initial $800,000 advance, he said that he raised $400,000 from his home loan, $200,000 from his mother, and $200,000 from his mother-in-law, remarking, “I convinced them I think this is going to be 100 per cent safe”. (T586, L11-16)

30According to Mr Liu, Mr Chen had given him “an indicative share or something maybe”. (T587, L32-33).  Mr Chen told him:

“there [sic] going to be eight per cent. So, first, he asked me to set up a family trust, so I set up the family trust. And he said there will be eight per cent off the total – whatever.” (T588, L11-13)

31He said he thought the shares were in “Venture Holding”. (Ibid, L18-19)  These, it would seem, are shares in 70 Esplanade, which were transferred to GMEH Pty Ltd in the transaction referred to earlier.

32On 2 October 2018, Valuers Victoria Peavey and Craig G Kilby, on behalf of Charter Keck Cramer Pty Ltd, carried out an inspection to value the property at 70 Esplanade, Brighton. They were instructed by “Financier Australia”, which is Mr Chen’s brokerage.  The valuation which they prepared was expressed to be for “first mortgage security purposes”. (CB 670)  They assessed the property was worth $9 million, commenting:

“The asset consists of the substantial but highly irregular (almost ‘L’ shaped) allotment and 1,807 sq. m. which occupies an excellent position in Brighton, directly opposite the Port Phillip Bay foreshore (albeit on busy Esplanade).”(CB 671)

33They noted that the land was:

“improved with a single level circa 1950s constructed dwelling which provides for four bedroom accommodation, two bathrooms together with a balance of living amenity.  The dwelling, whilst relatively functional, presents in very dated condition and is considered to be of no added value.”(Ibid)

34They said the property was:

“suited to redevelopment, either in the form of a new luxury residence or alternatively, as we understand is the intention of the purchaser, a medium density townhouse project.”(Ibid)

35They concluded:

“The site would appeal to a broad developer purchaser profile, readily saleable in the current market and representing a relatively low-medium risk scenario to an intending mortgagee.” (Ibid)

36The settlement date of 17 September 2018 was extended by mutual agreement to 21 November 2018. (T253, L18-23)

37Mr Antoniou of Antony Sdrinis and Co, who was acting for 70 Esplanade as purchaser and for Ms Zhu and Mr Chen, said that in September of that year, Ms Zhu advised him that she had made a bad investment, referring to a venture other than the purchase of 70 Esplanade, and she was “concerned”. (Ibid, L24-32)  This would presumably have an effect upon Ms Zhu’s ability to fund the settlement of the purchase of 70 Esplanade.  She told Mr Antoniou that “she had invested $1.325 million with a firm of lawyers in Sydney which investment was to give her a high rate of interest”.  According to her, the money was repayable to her, together with interest totalling approximately $1.6 million on 30 September 2018.  In November, when we discussed this issue, she advised me that she was having difficulty in recovering or getting her money back from this investment.  She also advised me that Mr Chen was the person who had advised her to invest in this investment.” (Ibid, L40-47)

38Mr Antoniou said, “since October 2018 I tried many times to find out from both parties – Mr Chen and Ms Zhu – whether they were obtaining finance and requesting details of the lender to enable me to prepare for the settlement on the 21^st”. (T254, L8-11)

39No appointment was ever made for the proposed settlement on 21 November.  Mr Antoniou said, “I did not have any instructions about where the funds were coming from.  I didn’t even have any instructions at that time in early November who the lender was.” (T255, L6-8)

40On 22 November 2018, according to a file note made by Mr Antoniou, Ms Zhu telephoned him complaining about Mr Chen’s advice to her to invest $1.3 million with a Sydney law firm.  According to the file note, she said:

“Mr Chen does not seem to be willing to invest any of his savings towards the balance of the settlement monies and Mr Chen expects her to effect the settlement with her own monies and the loan from Balmain.

She does not think she will proceed with the transaction/settlement …” (CB 744-5)

41Following the departure, in the circumstances described, of Mr Pryor, at the instance of Ms Zhu, a company known as “Pomeroy” was appointed as project manager for the 70 Esplanade development. (T67, L9-14)

42A company known as “Balmain NB Commercial Mortgages Limited” sent a letter to Mr Chen and Ms Zhu care of Mr Flynn De Freitas of Pomeroy Pacific, which said that it provided “an outline of the terms on which we believe Balmain NB Commercial Mortgages Limited … may be able to arrange the finance of [70 Esplanade, Brighton]”. (CB 710)

43The document styled “Indicative Funding Proposal” provided for a loan of up to $5.85 million or 65 per cent of the valuation made by “Balmain Discrete Mortgage Income Trust” to finance the purchase of 70 Esplanade for a period of 12 months on an interest only basis.  The settlement date was “21/11/18 or as advised”.  The interest rate was shown as 9.9 per cent per annum fixed for 12 months. (CB 711)  Security was to be provided by way of a first registered mortgage over the land, a general security agreement over the assets of 70 Esplanade, together with guarantees from Mr Chen, Frute Pty Ltd, JS Chen and Ms Zhu and “all relevant trusts”. (CB 711)

44The letter and the offer were signed by “Audrey Khaw, Partner”.  The offer stated “Interest will be capitalised and set aside from the facility limit, payable monthly in arrears”.  This seems to mean that the interest for the full 12-month period would be withheld from the initial drawdown. (CB 711)  Ms Khaw sent an email to Mr Chen and Ms Zhu dated 16 November 2018, noting a proposal that a new purchaser would be nominated. This proposal, however, does not seem to have proceeded. (CB 736-7)

45Later the same day, at 5.34pm, Mr Antoniou had a further telephone conversation with Mr Zhu in which she told him that she had spoken to Mr Chen, who had told her that he “does not want to inject any of his money into the settlement”.  According to the note, Ms Zhu told Mr Antoniou that Mr Chen had $1.5 million in the bank, but does not want to use it towards the purchase.  According to the note, if she was required to contribute the whole of the cash required at settlement she would not be able to meet the interest commitments on her other mortgages. (CB 747-749)

46On 29 November 2018, Mr Antoniou received a text message from Mr Chen saying “I got your message.  We are prepared to settle.  I will call you later as I am reading (LEAVING) from China to HK at the moment.” (CB 758)  Mr Antoniou copied this text under cover of an email to Ms Zhu dated the same day. (CB 757)  By an email of 30 November 2018, the solicitor acting for the vendor at Rotman & Morris advised Mr Antoniou that the vendor, Mr Satchell, could offer a second mortgage of no more than $800,000 for a period of eight months at an interest rate of 5 per cent.  She sought a response as a matter of urgency. (CB 759) 

47Meanwhile, Ms Zhu was looking to raise $1,737,320.70 by way of a borrowing from a company known as “Liberty/Secure Funding Pty Ltd”.  Mr Antoniou wrote to her in an email of 4 December 2018, noting that she had refused to execute the Liberty documentation because of the lack of the right to make early repayment.  He sought urgent advices as to the status of negotiations with Liberty. (CB 770)  On the same day, he sent an email to Ms Zhu and Mr Chen marked “extremely urgent”, asking for instructions by return email “as to how you propose to finance the balance of the monies required to effect settlement herein which, as you are aware, must be effected by Friday, 7 December 2018.”  He concluded by stating that a Notice of Default and Rescission served by the vendor would expire on that day. (CB 772)

48In the late afternoon of 5 December, Mr Antoniou had a lengthy telephone conversation with Ms Khaw of Balmain.  According to his note, he “confirmed to her that the vendor has agreed to extend the settlement to 14/12/2018”.  She told him that Mr Chen and Ms Zhu had not yet accepted Balmain’s Letter of Offer. (CB 774)

49Mr Antoniou requested an extension of settlement to 17/18 December 2018, advising Ms Carra of Rotman & Morris that his clients were “in the process of executing the relevant mortgage documentation to enable settlement to be effected on 17-18 December 2018”. (CB 781)

50A Letter of Offer dated 16 November 2018 from Liberty Financial Pty Ltd offered a loan of $1,755.000 to Frute Pty Ltd (Ms Zhu’s company) subject to a guarantee from Ms Zhu and another of her companies, Dyelex Pty Ltd, for a period of three years at an interest rate of 7.55 per cent per annum.  The offer required a first registered mortgage over the property at 22/24 Lakeside Avenue, Reservoir. (CB 784/5)

51On 6 December, Mr Antoniou sent another email designated “extremely urgent” to Ms Zhu, asking her to make an appointment to execute the Liberty loan documentation.  Ms Khaw sent an email on the late afternoon of 6 December 2018, advising Mr Antoniou that Balmain had approved a loan facility of $5.85 million for the purchase of 70 Esplanade on the basis that there would be a second mortgage security to the vendor for $1 million. (CB 787) The terms of the approval were attached. (CB 789-800)

52According to Mr Antoniou’s recollection, the Liberty documents came into his possession towards the end of November.  They had been partly completed by Mr Chen:

“but they needed some appointment or at least certification from me, as a solicitor. And when Ms Zhu brought in the documents towards the end of November, maybe beginning of December, I’ve noticed that the documents were incorrectly completed by Mr Chen and I had to have the documents re-executed and recertified.” (T263, L37-45)

53Mr Antoniou said that on 8 December 2018, being a Saturday, he received a text from Ms Zhu stating:

“AGREEMENT Date 8th December 2018

I Jason … Chen agreed to settle the property 70 Esplanade, Brighton Vic on 14 December 2018.

I will deposit my share for the purchase $1,350 million into the Trust Account of Antony Sdrinis & Co on Tuesday, 11 December 2018 [signature of Jason Chen]. (CB 810)

54Mr Chen denied entering into any such agreement or giving any such acknowledgment, whether in English or Chinese characters. (T570, L9-13)

55In the early hours of 10 December 2018, however, Mr Chen sent a text in Chinese characters via WeChat, the certified translation of which is as follows:

“For my friends’ AUD 800,000 investment, we need to talk about solutions. My friend doesn’t know you, he invests in the project because of me. According to our feasibility report, invested capital and expected return, this money is actually a loan to the company. Since his investment was fixed at AUD 800,000, we agreed that there would be no additional amount and the funds arrived first. I have mentioned for many times that the AUD 800,000 was brought into the company by me. The company got the benefits of the funds in the account and cash flow, but what I got was only verbal thanks. Except for the common interests of the company, there was no benefit or reward for me personally. I raised the money in the form of an 8% stock allocation in the simplest, cheapest, and least responsible way for the company, I think you should at least have equal financing. If there is no good proposal, the share should be adjusted. When our funds are in place, the 8% shall be counted into my 50%, so that an additional investment shall be paid by my 50%, then he doesn’t have to make any additional investment because of the high costs. He trusts me to invest the money, and I shall also be responsible for him. If there is no better scheme, the share mediation can be made by the accountant or changed by our agreement at any time.” (CB 811)

56As to the reference to a loan being made “to the company”, presumably 70 Esplanade, Mr Chen said, “Because everything we put into the company is a loan to the company.  So including Mary and myself, we put reference that when we put money into the company, it’s a loan to us.” (T554, L24-26)

57At 8.33pm on 12 December 2018, Mr Antoniou sent a text to Mr Chen stating:

“Hi Jason, settlement is scheduled for Friday, 14 December 2018.

For settlement to go through you must deposit in my trust account the sum of $1.4M forthwith.  Any surplus funds will be refunded to you immediately after settlement.  Details of my trust account will be provided to you first thing in the morning.

You are also required to see me tomorrow for the execution of the mortgage documents.

Regards, Stelios.” (CB 837)

58The following day, he sent an email to Ms Zhu copied to Mr Chen, stating that the “share” of monies to be made available by Ms Zhu at settlement on 14 December was $1,425,062.32. (CB 838)

59He complained about Ms Zhu’s refusal to pay the funds raised from Liberty into his trust account.  The same day, Mr Antoniou sent an email, again designated “extremely urgent” to various parties, including in particular Ms Zhu and Mr Chen, as well as Ms Khaw of Balmain and Mr De Freitas of Pomeroy Pacific.  He sent a settlement and adjustment statement for “careful perusal”, noting that $2,850,124.64 was “required in order to enable us to proceed with the settlement of the matter which is scheduled for Friday, 14 December 2018”.  He set out details and included the statement of adjustments and settlement. (CB 850-853)

60Following this despatch of emails, Mr Antoniou attended a meeting at the offices of Balmain.  According to his file note (CB 854), the meeting extended for some 4 hours and 15 minutes.  Ms Khaw and an assistant are recorded as being in attendance, as well as Mr Chen, Ms Zhu, Ms Zhu’s husband and Mr Flynn De Freitas. (CB 854-860)  Mr Antoniou said, “it was [an] extremely unpleasant meeting with people shouting and screaming. When Ms Audrey Kaur [viz Khaw] requested the parties to explain how they could fund the balance of the purchase monies, Mr Chen advised the people present – and there were quite a few people – that he only needed to put into the purchase of the property whatever his share was less $800,000.” (T275, L22-27)  He said, “Mr Chen said at the meeting that one of his friends [viz Mr Hao Liu] advanced to him $800,000 as part of his [viz Mr Chen’s] contribution to the project and therefore, his contribution was not, say, $1.4 million, but it was less 800”. (Ibid, L34-36)

61Mr Antoniou said, “that was the very first time I heard of the existence of this friend. I think the name of the friend was not mentioned at the meeting, but I stand to be corrected.” (Ibid, L41-43)

62At that point, according to Mr Antoniou, “the meeting … exploded”. (T277, L9)  He said, “after the revelation [by] Mr Chen [the meeting] really went down into chaos”. (Ibid, L1-2)   Ms Zhu and her husband and Mr Chen were raising their voices and discussing this issue in Chinese (viz Mandarin). (T276, L6-15)  Mr Antoniou did not understand Mandarin.  He requested the parties to withdraw and cool down and seek to resolve the issue in a separate meeting in the next door conference room.  This resolved nothing.  The parties continued shouting.  Mr Chen accused Ms Zhu’s husband of having made “serious threats of physical violence”.  The meeting broke up. (Ibid, L17-29)

63At the end of the meeting, according to Ms Zhu, Mr Chen said, “I’m short of $800,000” and Mr Antoniou offered to find some emergency loans and told Mr Chen that he could talk to “the emergency loan company”, to which Mr Chen agreed.  She said that Mr De Freitas was also lending a hand, “helping Jason … to get a loan”. (T99, L19-23)

64Ms Zhu said:

“After we went home, we [viz, she and her husband] were both upset and also worried because we know that what kind of legal responsibilities if we didn’t settle. So we could not go to sleep. So around 10.30 pm, we were sure that Jason have to be at home so we went to his home, ask … to … talk to him, ask him to settle.” (T100, L32-35)

65After some delay, Mr Chen appeared and suggested that they talk at a McDonald’s restaurant. (T801, L1-3, 15-16)  Mr Chen complained that Ms Zhu and her husband came “unannounced [and] uninvited” to their house. (T414, L23-24)

66According to Mr Antoniou, it was only after the late night meeting at McDonald’s that he was instructed to try and raise funds for Mr Chen, which led him to finance broker, Mr Ian Shearer, who was willing to look at the application for funds in the sum of $800,000. (T285, L29-32)

67Mr Chen said that he only agreed to attend the meeting with finance broker, Ian Shearer, following the meeting at McDonald’s, which he said extended to 4.00am.  It was clear to him, he said, that Ms Zhu and her husband would not go away until he agreed to attend the meeting. He said, whilst agreeing to attend the meeting, he did not agree to borrow any money.  He said when he met Mr Shearer he:

“told him that if he can do anything better for the whole project, right, we got a Balmain loan, this much, and we had - each had to contribute this much, if he can come up with something better, I can still consider.  That’s what I told him.  But I didn’t apply for a loan or sign for anything. (T415, L25-29).

68Mr Chen was shown an Authority to Act (CB 1166) signed by Mr Shearer but unsigned by Mr Chen.  This document was an attachment to a letter sent to Pomeroy. (T416)

69Ms Zhu received an indicative offer from La Trobe Financial dated 17 December 2018 (Exhibit 1).  It will be recalled that the loan from Liberty was secured over a warehouse in Reservoir owned by one of Ms Zhu’s companies.  The La Trobe Financial loan was proposed to be secured on a house that she owned in Balwyn North.  This house was held for investment purposes.  According to Ms Zhu, after the impasse at the meeting:

“I apply another loan, use my Balwyn North house and go to La Trobe apply another loan. Because I need to settle. I need a guarantee I can get the money. I wanted the two loan, which one can approve first and I want to guarantee I can get the money, I can settle 70 Esplanade.” (T217, L28‑31)

70The application and the indicative loan offer were for the sum of $1.7m.  As to the ultimate fate of the loan application, Ms Zhu said:

“When – before Christmas nothing happened. And after Christmas, still nothing happened. Because now they suddenly ask me this question which is, firstly, not fair to me because I didn’t check all records. My remember, this approved in April.” (T218, L34‑37)

71Ms Zhu said she did not take up the loan because it was for 30 years. (Ibid, L45)  Exhibit 1 also included a series of WeChat texts from Mr Chen’s assistant, who advised that La Trobe sought payment of $1,202.50 for valuation fees. (T220, L1‑10)  In cross-examining Ms Zhu, counsel for Mr Chen correctly observed that the WeChat text exchange occurred after the funds had been made available to Ms Zhu by Liberty Financial. (T222, L6‑7)  Ms Zhu, however, denied that the La Trobe Financial loan application was made for the purposes of the 70 Esplanade settlement. (T224)  She agreed that the indicative loan offer from La Trobe was organised by Mr Chen with her consent. (T225, L34-35)

72At 10.35am on 17 December, Mr Flynn De Freitas of Pomeroy sent an email to Mr Chen advising him of a meeting with finance broker, Mr Ian Shearer, at midday on that day at his office in Collins Street, Melbourne.  The email continued:

“Mr Shearer has asked you provide:

·    The caveat over 47 Corhampton Rd

·    Current rates notice for 47 Corhampton Rd

·    Copy of Supreme Court Offer of Compromise re Manda Capital

·    Detail of the apartment you will make available for a caveat

·    Copy of rates notice for this apartment

I understand that Mr Shearer may request that a third property be caveated but this third caveat may have a limited (say $200k max) claim.”

7347 Corhampton Road was Mr Chen’s residence. (CB 1159)  Mr Antoniou also advised Mr Chen and Ms Zhu of the appointment with Mr Shearer. (CB 1161‑2)  Mr Antoniou had sent Mr De Freitas details of the proposed meeting, a copy of a document styled “Authority to Act” signed by Mr Shearer with a place for Mr Chen to sign, left unsigned, as an attachment. (CB 1164‑1167)  Mr Antoniou did not attend the midday meeting. (T291, L10‑11)

74On 19 December, Ms Zhu and Mr Chen attended a conference with Mr Mark Liu of the firm APAC Litigators, who advised it would be possible for 70 Esplanade, and therefore Ms Zhu and Mr Chen as its guarantors, to escape liability on the sale contract with Mr Satchell.  Mr Liu proposed writing to Mr Satchell’s solicitors claiming a right to avoid the contract because the searches attached to the s32 vendor statement were “some 18 months out of date”. (CB 1226-1228)  Mrs Zhu chose this solicitor because he was a Mandarin speaker (unlike Mr Antoniou).  Mr Chen said he declined to agree to the dispatch of the letter. (T428, L21_‑24)  He said this was in accordance with advice that he had received from another legal practitioner carrying on practice under the name “SLK”. (Ibid, L26‑34)  According to Mr Chen, his advice from SLK was that the course advocated by APAC Litigators was right neither legally nor morally. (Ibid, L45‑47)  Whilst these events were occurring, Mr Antoniou said:

“I was in constant communication with the vendor’s solicitors because I knew they had another settlement themselves, based on the funds ... they would receive from my client.” (T287, L31‑33)

75As a result, he said he was “confident that they would give us [an] extension.”  He said he believed the vendor’s Notice of Rescission (presumably the one expiring 7 December) “had no validity and I think they probably realised that”. (Ibid, L35‑36)  In fact, an extension was granted. (Ibid, L40‑41)  Mr Antoniou still hoped the transaction might settle on 20 December. (T289, L25‑28)

76At 5.09pm, 17 December, Mr Antoniou received an email from Ms Khaw of Balmain.  She noted that 70 Esplanade had accepted a finance offer from Balmain, a copy of which she attached, and continued:

“Please note that the letter of offer expired on 14/12/18 and Balmain has verbally informed Pomeroy (client’s capital advisor) that to extend the offer for finance beyond 14/12/18, Balmain will be seeking an additional condition to the loan ie the achievement of a planning permit 6 months from drawdown, failing which a $1M principal amortisation [viz, the payment] will be required.” (CB 899-911)

77At 5.20pm in the late afternoon of 17 December 2018, Mr Antoniou received an email chain from Mr Shearer.  The chain included correspondence which he had had from Mr David Lyall of Millbrook Finance, presumably the proposed lender for the loan which Mr Shearer was seeking to arrange.  Mr Shearer said:

“Lender has advised he [is] unable to proceed due to Caveat on Title of North Balwyn.  Unless Caveat is removed and valuation completed we are unable to assist.  Please advise your clients accordingly as we are not instructed by Jason Chen.”

78The caveat in question appeared to relate to amounts claimed by a lender which was suing to recover the amounts it claimed from Mr Chen in the Supreme Court.  The lender had apparently made an offer of compromise. (CB 1110)

79At 9pm the same day, Mr Antoniou received a text from Mr De Freitas of Pomeroy,  stating:

“Hi Stelios, Jason now only needs $450K [presumably as a result of the further subscription by Mr Hao Liu].

Will Ian’s lender consider this, with caveat on Jason’s main property plus one other (townhouse, value of $950K with $450K mortgage)?

However, Manda Capital caveat will still remain on main property.

Kind regards, Flynn” (CB 1206)

80The following day, just after midday, Mr Antoniou rang Ms Zhu.  He asked her if she was prepared to advance a further $450,000 to Mr Chen to enable the settlement to go through.  Ms Zhu declined, saying she did not trust Mr Chen, and blamed him for the settlement’s failure.  She said she was going to sue Mr Chen for lying to her and not being able to pay his contribution.  She told Mr Antoniou that she was not prepared to settle unless she was satisfied that Mr Chen had all the moneys for settlement, and she would wait till next year if necessary. (CB 1209-1211; T292, L36–T293, L13)

81In the late afternoon of 18 December 2018, Mr De Freitas of Pomeroy Pacific sent an email addressed to Ms Zhu and Mr Chen, offering a finance facility from an unidentified lender which entailed a loan “to Jason Chen in his personal capacity”.  The proposed transaction entailed a requirement that 70 Esplanade Pty Ltd sell the subject property on a long-term 12‑month settlement date for $7.75m, with settlement on 20 December 2019. (CB 1223)  Neither Ms Zhu nor Mr Chen was interested in this proposal.

82On 20 December, Ms Zhu emailed a printout from her Westpac account indicating the arrival in that account of $1,737,214.56 said to be the advance by Liberty.  The attachment indicated these funds arrived in Ms Zhu’s account on 13 December 2018.  Ms Zhu said in her covering email:

“I’m ready for the 14th December 2018 settle 70 Esplanade Brighton.” (CB 1239-1240)

83On the morning of 20 December 2018, Mr Antoniou telephoned Ms Khaw of Balmain, advising her that Mr Satchell had served a second Notice of Default and Rescission.  Ms Khaw reiterated that the previous offer had expired on 14 December and no loan would be made by Balmain, “unless the terms are revised and evidence is [given] with respect to the client’s equity.”  She said Balmain would be referring the matter for legal advice and she did not believe that Balmain would renew the loan offer.

84At 11.42am, Mr Antoniou rang Ms Khaw again, advising her “that Mary Zhu does not want to proceed with purchase of the property under any circumstance because Jason Chen is a liar and [she] cannot trust him any more.” (CB 1241-1243)  He had called Ms Zhu at 10.58am, advising her of the service of the second Notice of Default and Rescission, and had received the instructions which he passed on to Ms Khaw. (CB 1244‑5)

85That same morning, Ms Zhu had sent an email to Mr Chen as follows:

“Dear Jason,

I regret to inform you that due to today being the last day to settle the property (70 the Esplanade Brighton). As we have yet to see any evidence of promised funds being transferred or deposited into the necessary accounts, you are now in breach of contract and as such, the contract for this project will henceforth be terminated. Furthermore, as the cause for contract termination has been due to a breach of contract on your part, all the subsequent costs and penalties associated with contract termination will also be your responsibility.” (CB 1248)

86Mr Chen replied:

“It’s not good to blame on your partner and shifting your responsibilities. As I’ve contributed $800K extra into the joint venture via my friend, you haven’t yet shown your contribution to equal in our joint company. I’ve just enough for my 50% contribution including my friend’s contribution and as partners we are supposed to help each other to settle the contract and work out the difference. If you are trying your best to settle the contract, I believe that our solicitor is waiting for instruction and ... Balmain also waiting for acceptance of the new loan offer, we need to provide the evidence for the vendor who’s helping us to try to negotiate with his vendor to get his purchased property back and negotiate to settle the related properties. I believe the communication is not to copy everyone in here but to the solicitor.”

87Ms Zhu replied:

“Dear Jason,

In reference to the $800,000, it is Hao Liu’s investment into the company which entitles him to 8% of the companies total equity. This capital is paid in order to cover his 8% equity as well as his stamp duty. This money was transferred from his own family trust account to 70 Esplanade PTY LTD. We have records of this transaction and can prove that it was indeed Hao Liu’s own personal capital; as such, I do not believe you can claim that this is your personal contribution. It is unethical to claim others contribution under your own name in order to argue that we have not paid our fair share. In response, we have fulfilled our 46% of our costs and liabilities. Whereas currently, your 46% share still stands unfulfilled and in bad faith.”

88The exchange concluded with a response from Mr Chen as follows:

“Dear Mary,

Hao is my personal friend, you never spoken to and met, why is he putting in $800K into our company? The $800K was put into our joint company Venture Capital Holdings pty ltd at my direction and i then move the money into 70 Esplanade project. Venture Capital Holdings Pty Ltd was 50/50% between us and Hao has no shares. The $800K investment into the project was counted as owner equity and expect return in according with the feasibility. It formed my 50% funding requirement as we agreed to start the project on 50/50% basis. 8% share certificate issued from 70 Esplanade is just for accounting the capital like preference share, it can’t be worth $800K while you have put in $350K for 46%. If you don’t agree with the contribution from my friend, you should return the capital and we both funding the project 50/50% to settle the property.”

89In the early afternoon of 21 December 2018, Balmain sent a letter addressed to the directors of 70 Esplanade, care of Mr Chen, over the signature of “William Davis, Head of Credit”, stating inter alia:

“The Lender advises that the commitment to fund the Facility has now lapsed and it is not able to proceed with the Facility [in] the form approved or in any other form.”

90The letter demanded a “break fee” in the sum of $88,700.00. (CB 1252‑3)

91In the early afternoon of 21 December 2018, Mr Antoniou emailed Mr Chen, stating he had been instructed by Ms Zhu that he was “not allowed to perform any further work on Ms Man Li Zhu’s behalf or on behalf of 70 Esplanade Pty Ltd” without her express permission. (CB 1254)

92The Notice of Default and Rescission dated 19 December 2018 had been served on Mr Antoniou’s firm.  It stated, inter alia:

“Take further notice that the vendor intends to exercise their contractual and other rights unless:

1.     The default is remedied;

2.     Interest on the amount due under the contract at the rate specified in item 8 [viz 15% p.a.] is paid; and

3.     Costs specified in item 9 [viz $660 inc of GST] are paid;

Within 14 days of service of this notice upon you.

Take further notice that unless the default is remedied and interest and costs paid in accordance with this notice, the contract will be rescinded pursuant to general condition 28 of the contract of [s]ale.” (CB 1238)

This proceeding

93By writ and statement of claim dated 19 February 2020, Mr Satchell, the vendor of 70 Esplanade, commenced this proceeding against the first defendant, 70 Esplanade Pty Ltd, Ms Zhu, and Mr Chen.  He claimed a declaration that the deposit paid had been forfeited “as his absolute property”.  He sought $1,548,333.13 damages, interest and costs.

94On 17 September 2020, Judicial Registrar Tran (as she then was) made consent orders providing, inter alia:

“The plaintiff’s claim against the defendants is dismissed with a right of reinstatement, and no order as to costs.”

95These orders gave effect to a settlement reached by the parties whereby the first defendant, 70 Esplanade Pty Ltd, agreed to pay the plaintiff $100,000; the second defendant, Ms Zhu, agreed to pay him $500,000; and Mr Chen agreed to pay him $350,000. (Second defendant’s outline of opening submissions, paragraph 17)

Ms Zhu’s claim

96By her amended statement of claim for contribution and indemnity against Mr Chen dated 6 November 2020 (hereafter referred to as her statement of claim), Ms Zhu sought against Mr Chen an order that she be indemnified for the liability she accepted to the plaintiff in the sum of $500,000; alternatively, contribution to that amount “to such extent as the Court determines to be just and equitable ...”, damages and costs.

97Ms Zhu’s claim alleged a joint venture contract between her and Mr Chen and Mr Hao Liu which entailed the incorporation of the first defendant, 70 Esplanade Pty Ltd and the proposed redevelopment of the land at 70 Esplanade, including the demolition of the existing structure and the construction of a multi-unit development.  It was said that the shareholding in 70 Esplanade would be 46 per cent to Ms Zhu, 46 per cent to Mr Chen, and 8 per cent to Hao Liu, with Mr Liu contributing $800,000, and the balance of the purchase price acquisition costs and associated costs being contributed equally by Ms Zhu and Mr Chen.  That agreement was said to be partly oral and partly to be implied.

98It was said that Mr Chen failed to contribute the sum of $1,359,901.60, being the share which he was obliged to contribute, with the result that 70 Esplanade was unable to complete the purchase and found itself in breach of contract, with its deposit forfeited, and subject to a damages claim. Therefore, Ms Zhu “has or will suffer loss and damage”. Alternatively, it was said that as a result of representations by Mr Chen in trade and commerce to the effect that he had the financial means and ability to make the agreed contribution to the purchase price of the land, Ms Zhu has suffered loss and damage. It was said Mr Chen’s representations were misleading or deceptive, contrary to s18 of the Australian Consumer Law, and she was entitled to recover the loss and damage suffered.

Mr Chen’s claim

99By his amended contribution claim filed 6 November 2020 (hereafter referred to as his statement of claim), Mr Chen sought indemnity from Ms Zhu for the liability which she had accepted to the plaintiff, Mr Satchell, quoting the amount of $350,000; alternatively, an order that he be entitled to contribution from Ms Zhu “for the entirety” of his liability under the deed of settlement, damages, interest and costs.

100Mr Chen’s claim dated the joint venture agreement to August 2016, with the joint venturers being Ms Zhu, Mr Chen, and Mr Hu, with an agreement that each would be “equal partners”.  It referred to Venture Holdings Group Pty Ltd as being “the corporate vehicle to carry on the joint venture pursuant to the JVA”.  According to Mr Chen, the joint venture agreement was varied orally around 2017 so that Mr Hu would cease to be a joint venturer and Ms Zhu and Mr Chen would incorporate a new company in place of Venture Holdings Group Pty Ltd.  According to Mr Chen, “in or around mid 2017” Mr Chen borrowed $800,000 from Mr Hao Liu to be used “in the form of an advance to Venture Capital Group Holdings Pty Ltd on Chen’s behalf.”  According to Mr Chen, he had contributed $1,064,750 to the acquisition of the land at 70 Esplanade by December 2018, as against a contribution by Ms Zhu of $265,894.

101Settlement of the purchase of 70 Esplanade required a contribution of $1,759,327.50 by Ms Zhu, and $960,472.50 by Mr Chen, an amount which, as at 13 December 2018, Mr Chen was “ready, willing and able” to advance.  It was said that in breach of her obligations, Ms Zhu failed and refused to provide or procure funding in the sum referred to, and elected not to proceed with the settlement on 20 December 2018, thereby committing a substantial breach or a repudiation of the joint venture agreement.  As a result, Mr Chen had suffered loss and damage.  Finally, Mr Chen said that he was “entitled in equity to an adjustment of the proportion of contribution as between guarantors in his favour.”

Mr Chen’s defence  

102Mr Chen’s defence to Ms Zhu’s amended claim filed 15 December 2020 included a number of admissions and denials.  In particular, in so far as it had been alleged that Mr Chen had financial means and ability to make his agreed contribution, it was said that he had reasonable grounds “so to represent”.

Ms Zhu’s defence

103Ms Zhu’s defence to Mr Chen’s amended contribution claim filed 15 January 2021 made certain admissions and denials.

Conclusions

Which joint venture?

104In his closing submissions, Mr Watkins, counsel for Mr Chen, posed three key issues for determination in the resolution of this dispute.  I did not understand Mr Dragojlovic, counsel for Ms Zhu, to disagree with the identification of those issues.  The first of them is, “which Joint Venture Agreement is established?”

105According to Mr Chen, at the times material to the present dispute there existed a bilateral joint venture between him and Ms Zhu with rights and liabilities split 50/50.  The $800,000 sourced from Mr Liu, according to Mr Chen, was to be regarded as a personal loan advance to him, Mr Chen, with the result that the amount required at settlement of the purchase of 70 Esplanade, after application of the available proceeds from the Balmain loan, was 50 per cent of the relevant figure minus $800,000 which he had already subscribed via Mr Liu’s advance which had been paid to Venture Capital Group Holdings Pty Ltd.  This joint venture, according to Mr Chen, should be regarded as relating back to the joint venture originally entered into between him, Ms Zhu, and Mr Charlie Hu, with an equal three-way split, which, however, did not proceed to acquire any development property or properties.

106According to Ms Zhu, the relevant joint venture should be regarded as dating from the arrival of Mr William Pryor as one of the joint venturers, his allocation of shares, and the purchase contract for 70 Esplanade.  Again, according to Ms Zhu, the joint venture operative at material times reflected the scenario on which Mr Barnes advised her and Mr Chen in September 2017 in which the two of them each held 46 per cent interests and a further 8 per cent interest was allocated to a generic figure referred to as an “Investor”.  In the event, this investor, according to her analysis, was Mr Liu.  It followed that the subscriptions or advances or investments, however one wished to characterise them, made by Mr Liu were made relative to his 8 per cent entitlement, which was reflected in the share capital of 70 Esplanade Pty Ltd.  Since the $800,000 made available by Mr Liu was, on this analysis, made relative to his own role in the venture, it was not available as a credit or deduction in liability for Mr Chen, and the shortfall to be financed at settlement of the purchase of the property after allocation of the Balmain finance and the vendor finance of $1m was to be shared equally between Ms Zhu and Mr Chen without any deduction or adjustment relative to Mr Liu’s $800,000.

107Resolution of this key issue is embarrassed by the absence of any contractual documentation, with the sole written legal structure for the joint venture – whatever it might be – to be found in the share structures of the companies involved, in particular 70 Esplanade itself.

108For analytical purposes, Mr Dragojlovic placed primary reliance on an unreported decision of Vickery J in Ambridge Investments Pty Ltd v Baker & Ors [2010] VSC 59. As a prelude to his analysis of the complex fact situation confronting him, his Honour cited with approval a series of common characteristics of joint ventures identified by Crennan J (sitting as a Judge of the Federal Court of Australia) in her decision in Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749 at [74], where her Honour identified the following characteristics:

“1.Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common.

2.  Participants exercise joint control of the undertaking.

3.  Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate.

4.  Participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made.

5.  Participants have a joint (or community of) interest in the performance of the undertaking’s purpose.

6.  Participants associate in the undertaking for mutual commercial gain which can be mutual profits.

These recognisable and common characteristics can be found in various permutations and constellations such that it is not appropriate to attempt to isolate which characteristics would be both necessary and sufficient for the constitution of a joint venture agreement. It is always a question of fact whether any particular undertaking constitutes a joint undertaking for mutual commercial gain.”

109According to Mr Dragojlovic, it was immaterial whether one dated the joint venture structure or structures back to 2016 and Mr Charlie Hu’s involvement or not.

110The following matters may be regarded as supportive of Ms Zhu’s case and were relied upon by Mr Dragojlovic:

(i)    The structure was reflective of the scenario that chartered accountant Mr Barnes advised Ms Zhu and Mr Chen on;

(ii)   Mr Antoniou as solicitor for the joint venture and 70 Esplanade operated upon the assumption that the equity “top-up” to be provided by Mr Chen and Ms Zhu at settlement was 50/50 without any deduction for the $800,000 sourced from Mr Liu until Mr Chen asserted otherwise in the meeting at Balmain on 13 December 2018;

(iii)   When Mr Chen received communications from Mr Antoniou on 29 November 2018, 10 December 2018, 12 December 2018 and 13 December 2018, all of which proceeded on an assumption consistent with Ms Zhu’s case, he made no denial in response;

(iv)     Counsel were agreed that the miscellaneous contributions made by the parties to the joint venture for the acquisition of the subject property were $269,394 for Ms Zhu and $267,355.20 for Mr Chen; viz, approximately equal.  Consistently with Mr Chen’s case, he might have been expected to decline to make these contributions on the basis that he had already made a fully-paid contribution of $800,000 (memorandum from second defendant’s counsel, 25 November 2021);

(v)   Whilst the last-minute $400,000 loan advance made by Mr Liu to Mr Chen had been repaid, the earlier $800,000 outlay remained outstanding some three years after the effective collapse of the joint venture, suggesting that this was an equity subscription rather than a loan advance subjecting Mr Chen to a personal liability to repay;

(vi)     Mr Chen attended a meeting with finance broker, Mr Ian Shearer, in a last-minute attempt to raise funds to enable the purchase of 70 Esplanade to be settled.

111The considerations which might be regarded as being supportive of Mr Chen’s interpretation are as follows:

(i)    Mr Liu’s unchallenged evidence was that the $800,000 outlay which he made was a loan to Mr Chen;

(ii)   Until 13 December 2018, the joint venture’s solicitor was unaware of the existence of Mr Liu;

(iii)   At material times, Ms Zhu had never met Mr Liu;

(iv)     As a necessary inference from the two previous matters, Mr Liu had never met his alleged joint venturer Ms Zhu, and upon his evidence had no knowledge of his alleged joining of the joint venture and no intention so to do;

(v)   The face value of the borrowing undertaken by Ms Zhu from Liberty would have been sufficient to fund the larger contribution which Mr Chen’s case and interpretation of the joint venture arrangements would have required her to make.  According to Mr Chen’s interpretation, it was only her losses in an investment in New South Wales in the second half of 2018 which led her to wish to retain $400,000 of the Liberty advance to cover her ongoing interest obligation.

112According to Mr Chen’s counsel, Mr Watkins:

“The formation and terms of a contract must be determined objectively. Post-contractual conduct has limited relevance to the interpretation of terms as it reflects a parties [sic] subjective understanding of the agreement (which may be incorrect). However, it may be used to determine what terms were agreed.” (Closing submissions, paragraph 27)

113He referred to County Securities Pty Limited v Challenger Group Holdings Pty Limited [2008] NSWCA 193 [17]-[27], [150].

114He continued at paragraph 28 of his closing submissions:

“In order to form an agreement, all of the essential elements of contract (offer, acceptance, intention to create legal relations, consideration) must generally exist. Only in very rare and very clear cases will an implied contract arise. This is not that case. The conduct relied on – being the issue of shares to Mr Liu – is not unambiguous and directly contradicts the evidence of the two individuals involved.”

115He referred to Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [47] and Ying Mui Pty Ltd & Ors v Frank Kiang Ngan Hoh & Ors (No 3) [2017] VSC 29 at [151]-[157].

116Mr Dragojlovic contended that a contract might be inferred from acts and conduct of a party without individual proof of the steps of offer and acceptance.  He referred to Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, 82, and Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523. He said the question was whether, viewed as a whole and objectively from the views of reasonable persons, a concluded bargain is shown to have been reached. He referred to PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd (2007) VR 487 [6] per Nettle JA (as his Honour then was).

117Here, the question is not what is the true construction of a written contract, but rather, what contract or contracts did the parties make orally?  The rule that it is not legitimate to use as an aid in the construction of a contract anything which the parties said or did after it was made (Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, 582, per Gummow, Hayne and Kiefel JJ; James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, 603, per Lord Reid) does not apply here, where the question is what contract the parties made, not what does the contract which the parties made mean. It may be remarked that the distinction between the content of a contract which is entirely in writing and its true interpretation is easy to draw. The distinction between the content of a wholly oral contract and its meaning, where the content of the contract is not to be found in a written document, is, to say the least, elusive. In the upshot, counsel are agreed that what the parties did is legitimate to consider as to what contract they in fact made.

118There seems to be a contradiction in the position taken and the analysis advanced by Mr Watkins.  He accepts that there was a joint venture, or, to put it another way, regards the actions of the parties as sufficiently unambiguous to establish the existence of such an agreement, yet he says there is a lack of unambiguous conduct to support the contract alleged by Ms Zhu.  Plainly, as the rehearsal of the facts above shows, there is sufficient unambiguous evidence to establish the existence of some form of joint venture agreement.  My task is to find whether the evidence is sufficiently unambiguous to establish the existence of the terms alleged by the one party or the other.

119In the present case, it may be thought that the most significant factor supporting the characterisation of Mr Liu as a joint venturer was the registration of eight shares in the capital of 70 Esplanade in the name of his company GMEH.  In Mr Liu’s view, this was some kind of security for his loan or an “indicative share”.  One would expect security for a personal loan obligation to be provided by the putative borrower, viz Mr Chen, or by a guarantor of Mr Chen providing such security on a general or non-recourse basis.  There was no suggestion that Ms Zhu had joined in the borrowing or guaranteed the borrowing on a full recourse or non-recourse basis.  Why, then, should some four of her shares have been allocated to Mr Liu’s company?  No doubt a traditional legal mortgage of shares might have the shares transferred into the name of the mortgagee/‌lender, subject to an equity of redemption in favour of the borrower/upon repayment of the secured debt.  It would be a matter for the law of mortgages as to how the voting power of the shares should be exercised pending repayment of the principal and interest.  No doubt, a special provision could be included in the arrangement tailored to the parties’ requirements.  These parties, however, were engaging in these transactions without the guidance of legal practitioners or advice as distinct from secretarial support and documentation from accountants.  It is fanciful to consider that they envisaged a traditional legal mortgage by way of conveyance subject to a proviso for redemption.  The apparent reallocation of the equity in the property-owning company is overwhelmingly indicative of an adjustment of the equity in the joint venture rather than a mere personal loan transaction.  Again, the readjustment is consistent with the structure which Mr Barnes advised Ms Zhu and Mr Chen upon.

120The overwhelming consideration pointing in the opposite direction, however, is the evidence of Mr Chen and Mr Liu as to the transaction which they intended to undertake.  The lack of acquaintanceship between Mr Liu and Ms Zhu is of some, but not overwhelming, significance.  One imagines that in the case of large international or interstate partnerships such as chartered accountancy firms there are many partners who are not personally acquainted with one another, though no doubt, if they really wished to make personal contact they could.  Personal acquaintance, therefore, is not an indispensable element of partnership or a joint venture relationship.

121In the manner in which events have turned out, it was plainly in Mr Chen’s interest to promote the interpretation of the joint venture on which he relies in the proceeding.  He must be regarded as a self-interested witness on the subject.  Mr Liu likewise must be regarded as affected by self-interest.  If Mr Chen’s claim against Ms Zhu is successful, and the judgment is satisfied, Mr Liu may have reason to be optimistic that his $800,000 subscription will be repaid in whole or in part.  One might think this would be particularly important to him because some parts of that subscription, loan or otherwise, were funded by his mother and his mother-in‑law.  Yet, Mr Liu’s evidence was not only uncontradicted – viz, no other witness gave direct evidence of a transaction different from the one described by Mr Liu – but he was not challenged in cross-examination upon his evidence that he entered into a simple loan transaction.  No doubt, ethically, Mr Dragojlovic was precluded from making such a direct challenge because of the lack of instructions which would justify him in doing so, but Mr Liu’s evidence stands uncontradicted and unchallenged.

122The upshot is that a distinct finding in favour of the one case or the other will leave me troubled and uneasy.  In those circumstances, if one were dealing solely with a claim by the one defendant or by the other defendant, it would be tempting to dispose of it by allowing the negative considerations operative relative to the one case or the other to lead to a finding that the necessary burden of proof has not been discharged.  This is not, however, a situation where there is an allegation of a criminal offence or some serious fraud or where a finding of some serious professional misconduct is being sought.  The well-known principles of Briginshaw v Briginshaw (1938) 60 CLR 336 and s140 of the Evidence Act 2008 do not seem to be engaged. A fact-finding that would leave both claims dismissed on this point would be unsatisfactory, to say the least. In the circumstances, I feel that I am under a legal obligation to choose between the competing considerations.

123Mr Liu said that he was the “data engineering manager” for an American company. (T573, L47)  He described having invested money with Mr Chen relative to a property development project in Ivanhoe where he was promised a return “between 20 to 50 per cent” with a minimum of 20 per cent. (T574, L38‑41)  He described this return as “interest”.  He then described a second project in Brighton, which was the venture to redevelopment 70 Esplanade.  He met Mr Chen at his Richmond office. (T575, L25‑27)  According to Mr Liu, “He just saying this is probably one of the best project is – he’s doing. And he told me about the – like, what he said in the message, like how much in total. It’s roughly around, like, 10 million.” (T575, L32‑34)  As to the “structure” of this project, Mr Liu said, “He mentioned he has some business partner. That was it.” (T576, L22)  There was no discussion of any agreement with the unnamed business partner. (Ibid, L29‑31)  As to the then status of the project, Mr Liu remembered being told, “I think they were – they hired a company to do that for them or something. Yes. They – I think they – then maybe they in progress of applying for some permit or – yes.” (Ibid, L39‑41)  Asked “what was the basis or – how would you describe your payment of the $800,000?”, Mr Liu replied, “So it’s very similar to the last one. So the – it’s – so he lent the money to the developer for Jason – is a developer ... lent money to him. So he agreed on a percentage with me and he’s guaranteed the principle [sic] will be safe.” (T577, L1‑6)   I asked him what he meant by this, and he replied “no matter what happens, so he can return that money.” (Ibid, L9‑10)

124Mr Liu did not present as one experienced in financial structures.  His occupation suggests that his expertise lies in the world of electronics and computing rather than finance.  The passages quoted indicate that he was seeking, in a general sense, to “invest” in a project being promoted by Mr Chen, who from his point of view had a good track record in producing investment returns.  He appears to have reposed complete faith in Mr Chen, making no enquiry, on his account, as to the structure of the venture in which he was investing or to which he was lending money.  Asked if he expected to have any say in how the project was conducted, he replied, “No. It’s all managed by Jason.” (T578, L32)  He was not given a copy of the contract of sale or told of its cancellation. (Ibid, L34‑39)  He had no idea “that they were borrowing additional money from other sources”. (T579, L1‑4)  Asked about his shareholding in 70 Esplanade, he said he was told by Mr Chen that he had received shares, who said, “there [sic] going to be eight per cent. So, first, he asked me to set up a family trust, so I set up the family trust. And he said there will be eight per cent off the total – whatever.” (T588, L4‑13)  He said he was told that he would have shares in “Venture Capital Holdings”. (Ibid, L28‑35)  Mr Liu said, “He just saying he locate some indicative share.” (Ibid, L40)  As to the additional outlay, to use a neutral term, of $400,000, Mr Liu said he agreed on interest at the rate of 10 per cent. (T590, L23‑26)  As to the first hundred thousand, the promised return or “interest” was “about minimum 20 per cent. So it’s a three-year – it’s up to three years project. So it’s longer – a bit longer than the previous one, so it’s bigger return, bigger ...” (T575, L43‑44)

125This survey of Mr Liu’s evidence indicates that whilst he did characterise the transaction that he entered into as being a “loan”, he did not display insight into the distinction between the variety of transactions whereby one may, in a broad sense, “invest” money in a project.  In particular, he displayed no clear awareness of the difference between debt and equity.  When he spoke of a “20 per cent” return on the project, it was unclear whether this was 20 per cent per annum or simply 20 per cent upon the face value of his investment.  He drew a distinction between the Ivanhoe project, which was completed within a single year (T576, L11‑13), and the Brighton or 70 Esplanade project, which was planned perhaps to take three years.  He suggested that the longer period to complete the project might call for a larger return, implying that the percentage figures he was quoting were not intended to be per annum, but rather percentage returns on funds employed generally.

126For reasons already explained, Mr Liu cannot be regarded as a wholly disinterested witness in the way that Mr Barnes, Mr Pryor or Mr Antoniou can be regarded.  He is Mr Chen’s friend, and, not having had repayment of his $800,000, he has a financial interest in the outcome of this proceeding and the success of Mr Chen’s counterclaim.  His lack of acquaintance with or interest in the details of the Brighton project are, to people who have spent their lives trying to work out the legal detail of commercial relationships, incomprehensible.  Yet these things seem to be of a piece with his overall involvement in this dispute.  Ultimately, therefore, I cannot regard his evidence as being legally definitive as to what transaction he was undertaking or thought he was undertaking, or wholly independent.  This means that, upon analysis, it seems far less downright and persuasive on the characterisation of the joint venture arrangement with which we are dealing here.

127A simple loan would not have required a “rejigging” of shareholding in any of the companies involved, whether the property-holding company or the “mother” company of the joint venture. A simple loan to Mr Chen would not have required reallocation of some of the shareholding of Ms Zhu’s company, Frute Pty Ltd. A mere personal loan, such as the $400,000 last-minute advance, would not have required the establishment of a family trust company. This makes sense only in the context of Mr Liu’s being a joint venture partner. There are also telling comparisons and contrasts between the initial $800,000 outlay by Mr Liu and his interests on the one hand, and the $400,000 last-minute loan. The latter entailed no reallocation of shareholding. It entailed a simple agreed interest rate, rather than the vague “minimum 20 per cent” said to apply to the former. The latter loan has been repaid. The $800,000 transaction remains open and dependent on the outcome of this proceeding. If Mr Liu is to be taken at his word, which I am inclined to do, he was a joint venturer without appreciating it, or fully appreciating it. He could perhaps be regarded as in the same position as state courts or tribunals which over the years, as part of the jurisprudence of Chapter III of the Commonwealth Constitution, have been held to be exercising Federal jurisdiction under that chapter without knowing it.

128$800,000 represents 8 per cent of a project with a capital value of $10m.  This seems a plausible interpretation.  Mr Watkins correctly observed, however, that it is analytically flawed.  The percentages should be calculated by reference to the equity employed, rather than by reference to the larger figure, consisting mainly of funds which were to be borrowed from Balmain.  If the correct analysis is adopted, then a subscription of $800,000 should have yielded an equity share of about 20 per cent.  Mr Watkins’ analysis cannot be faulted.  Nevertheless, it does not exclude the possibility, indeed the probability, that what occurred here was the adoption of a plausible miscalculation.  Further, it cannot have been a coincidence that the shares allocated to Mr Liu’s company represented eight per cent of the capital of 70 Esplanade.  The same equity percentage which was subject to discussion at the conference which Mr Chen and Ms Zhu had with Mr Barnes, and which was to be attributed to the generically described “Investor”.

129Plainly, if we are to see Mr Liu and his family trust company as joint venturers, they were joint venturers of a distinctly lesser type than Ms Zhu, Mr Chen and their companies.  Mr Liu and his company were offered no “say” in the venture.  There was no suggestion that he should be a director of 70 Esplanade or any other company.  On the other hand, he was not required to come forward and give a guarantee and indemnity of 70 Esplanade’s obligations under the contract of sale or, had it proceeded, the loan by Balmain.  It has not been suggested, however, that there may not be differential rights and obligations for different joint venturers.  In the discussions with Mr Barnes, the person described generically as the “investor” and referred to by Mr Barnes as “Mr 8 per cent” was spoken of in purely generic terms and was not invited to the conference with Mr Barnes.  All of this is consistent with the “investor” being a “sleeping partner”; sleeping in the sense of not being involved in management or required to undertake frontline obligations such as signing guarantees.

130Subject to the misgivings which I have earlier expressed, in my view it is the more probable analysis of these transactions that the joint venture was as Ms Zhu alleges rather than as Mr Chen contends.

Status of $800,000 outlay by Mr Liu

131It follows that the $800,000 outlay by Mr Liu was an equity contribution rather than a personal loan to Mr Chen.

132I turn to the third of the questions or issues posed by Mr Watkins in his closing submissions (paragraph 1).

Whose breach caused the loss?

133In his closing submissions, Mr Watkins, on behalf of Mr Chen, observed that both parties refused to pay moneys into Mr Antoniou’s trust account.  He continued:

“Regardless of what Ms Zhu may now say, settlement did not occur on 14, 18 or 20 December 2018 simply because the parties could not agree what they had agreed between themselves to pay.” (Closing submissions, paragraph 19)

134I accept that characterisation of the impasse.  It leaves open, of course, the possibility that if one party were insisting upon a right which he or she had, and the other party was in breach of contract denying that entitlement, the responsibility for the collapse of the joint venture may lie with the party who was in the wrong in the debate.

135Mr Watkins continued, saying:

“The mere fact that Ms Zhu had received $1.7M of borrowed funds is not sufficient to evidence that she would have proceeded in circumstances where she was refusing to put these funds into trust to enable settlement.” (Ibid, paragraph 20)

136According to Mr Watkins’ analysis, despite last-minute efforts to raise funds, the failure of the venture and the termination of the purchase agreement for 70 Esplanade occurred because Ms Zhu instructed Mr Antoniou to tell Balmain the deal was off and purported to terminate the joint venture where the purchase could have been settled early in the new year of 2019 because Mr Satchell’s second rescission notice did not expire until early in January 2019. (Ibid, paragraph 21)  Mr Watkins said it was the loss of the Balmain funding which killed the transaction, and Ms Zhu was responsible for that. (Ibid, paragraphs 22‑23)

137In his closing submissions, Mr Dragojlovic said Ms Zhu was ready, willing and able to proceed with the purchase, but Mr Chen was not.  The responsibility for the demise of the project was therefore his.

138According to Mr Chen’s amended statement of claim at paragraphs 17A and 17B, Ms Zhu’s actions in “calling off” the settlement constitute a substantial breach of the joint venture agreement or a repudiation of it, described as evincing “an intention no longer to be bound by the terms of ... the JVA”.  These allegations are denied by Ms Zhu in her Defence. (Paragraphs 22 and 23)  Paragraphs 10‑12 of Ms Zhu’s Defence allege that the loss of the purchase contract was caused by Mr Chen’s failure or refusal to make the full share of his funds available as required by the agreement.  It does not use the language of repudiation or substantial breach.  In substance, however, I regard the two pleadings as mirror images of one another.

139Neither counsel made submissions as to discharge upon breach of contract, I assume because they regarded the principles as well established and not in need of restatement or elaboration.  On the view which I take, Mr Chen was obliged to contribute 50 per cent of the shortfall needed to settle the purchase from Mr Satchell after allowance for outside finance, viz the Balmain loan and the $1m vendor finance second mortgage.  Mr Chen refused to do this, and demonstrated, by his failure to raise additional funds via his dealings with finance broker, Mr Ian Shearer, that he was finally disabled from performing his obligations under the joint venture agreement according to their terms, or unwilling to perform them.  Ms Zhu was therefore entitled to call the transaction off.

140Mr Chen’s only source of funds, on his account, was the deposit of $1m in United States currency, with an equivalent value of $1.5m in Australian currency.  He was required, on the view that I have taken, to make available approximately $1.35m at settlement of the purchase of 70 Esplanade, but only $900,000 (presumably calculated in Australian currency) was available because, on his evidence, the balance of the US dollar account belonged to some other, undisclosed person.  At any rate, had he had $1.35m Australian dollars, he would not have been prepared to pay it. (T571)  In light of his evidence that part of the US dollar deposit belonged to somebody else, and his inability to raise money on his own residence because of the existence of a caveat relative to an amount being claimed in Supreme Court proceedings, I conclude that Mr Chen was unable to meet his obligations under the joint venture agreement.

Misleading or deceptive conduct

141Ms Zhu in her statement of claim made a further, or perhaps “fallback”, claim based on misleading or deceptive conduct.  In substance, it was said that she had been misled or deceived by Mr Chen’s expressly or, by implication, representing to her that he would be in funds to perform his contractual obligations under the joint venture agreement.  It is not evident to me how this alleged further cause of action can really add to or change the outcome of the contractual analysis which I have just undertaken.  If, as a matter of contract, Mr Chen was not obliged to make available approximately $1.35m at the settlement of the purchase of 70 Esplanade, the failure of that settlement could be attributed to Mrs Zhu and not to Mr Chen.  The loss and damage suffered would have been caused by her actions, not by the falsity of any representation made by Mr Chen.  On the other hand, if Ms Zhu’s contractual claims succeed, as I have determined they should, the claim for damages for misleading or deceptive conduct adds nothing.

142Mr Watkins said that Mr Chen had reasonable grounds to believe he could settle the transaction, referring to his asset and liability statement and bank statements. (CB 692 and 733)  It is unnecessary for me to express any concluded view on this point, but the asset and liability statement included the US dollar deposit account, attributing its ownership entirely to Mr Chen, which, as we have seen, was not the case.

Disposition

143It follows that, in accordance with her statement of claim, Ms Zhu is entitled to recover the $500,000 which she paid to Mr Satchell pursuant to her settlement with him, and $284,394, being the amount that she contributed to the purchase price, acquisition costs, and costs associated with the joint venture.  She also sought $28,852.98 described by Mr Dragojlovic in closing submissions (paragraph 57c) as being “the costs, fees and interest paid by Ms Zhu to Liberty Financial Pty Ltd in respect of the drawdown of the loan for the purpose of funding settlement.”  It would seem that the Liberty loan was ultimately employed for other purposes by Ms Zhu.  Therefore, what Ms Zhu sought was the costs of establishment and the first month’s interest only. (T633‑4)  Mr Dragojlovic said that the knowledge that the loan was put to other uses led to Ms Zhu’s scaling back her claim, which originally extended to interest for the entire term of the loan.  Ultimately, however, as it seems to me, if the loan has been put to some other purpose, it is not evident why any part of its costs should be cast upon Mr Chen.  The loan was either wasted or it was not, and it would seem that it was not wasted.

144Mr Chen’s claim fails.

145I will direct the parties to bring in short minutes to give effect to these reasons.

Costs

146I have heard no submissions on the question of costs, and so I will reserve them.