Wang v Du

[2025] SADC 126

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

WANG v DU

[2025] SADC 126

Judgment of her Honour Judge Thomas  

23 October 2025

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE

DAMAGES - ASSESSMENT OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - PROOF AND EVIDENCE

The applicant and respondent were equal shareholders and directors in a company formed to purchase an abattoir and butchery business in Port Lincoln.  In the first week of trading the company’s new business, they fell into a bitter dispute about the operation of the business.  Their disagreement escalated to the point where their relationship broke down irretrievably and they began discussing one or other selling his shares to the other to resolve their conflict.  With the assistance of the priest from their local church, the parties negotiated a one-page share transfer agreement written in Chinese characters.

It is common ground that the share transfer agreement provided that the respondent would purchase the applicant’s shares in the company for a price of $389,500 by 11 July 2020 if he were successful in obtaining a loan.  On 9 July 2020, the respondent’s solicitor informed the applicant that the respondent had been successful in obtaining a loan. 

The applicant claims that by his solicitor’s email correspondence the respondent repudiated his purchase obligation, entitling the applicant to terminate which he did after the date for payment had passed.  The applicant claims he has suffered loss and damage in the amount of the unpaid purchase price without any deduction for the value of the shares he did not transfer to the respondent.

The respondent’s primary defence is that the contract, properly construed, does not provide the applicant with any entitlement to sue the respondent for default of his purchase obligation.  He contends the applicant’s only recourse was to purchase the respondent’s share on the same terms, which he failed to do.  In the alternative, the respondent contends the contract is unenforceable for uncertainty on grounds that there is no reliable translation of the Chinese characters into English, its terms are ambiguous and incomplete. 

There are disputes about the English translation of the share transfer agreement, unpleaded aspects of the respondent’s defence case, the admissibility of extrinsic evidence as an aid to construction, the respondent’s alleged anticipatory breaches and repudiation of his purchase obligation under the contract, the applicant’s purported acceptance of the respondent’s repudiation and termination of the contract and the applicant’s entitlement to damages as a remedy for breach of contract.

Held:

1.There should be judgment in favour of the applicant in the sum of $389,500.00 plus pre-judgment interest of $120,969.10.

2.The respondent’s express denial of his purchase obligation under the share transfer agreement is sufficient to put in issue the translation and construction issues.  The applicant must therefore establish as fact what the Chinese characters are in English words and what those words mean in law when read objectively applying the settled principles for the construction of commercial contracts.

3.Having withdrawn at the start of trial his cross claim and substantial parts of his defence and made two unsuccessful attempts to amend, the respondent should be confined to his pleaded case and not permitted to press a new case of an oral agreement for access to business documents being made on 27 May 2020.

4.Having regard to the two translations in evidence, the Court does have before it a reliable English translation of the relevant parts of the share transfer agreement.  The respondent’s contention that the significant differences between the translations cannot be resolved should be rejected.

5.The applicant’s construction of the contract should be preferred.  The respondent’s preferred construction of ‘simple reciprocity’ has no foundation in the text, context or object of the contract or the evidence.  It is contrary to the express words of the contract and should be rejected.  The respondent’s contention that the absence of default clauses support his case should also be rejected, as should his contentions about alleged conditions precedent and the meaning of “financial reports” in clause IV.

6.The share transfer agreement included all of the terms the parties regarded as essential and were legally necessary for a share transfer.

7.The respondent’s purchase obligation under the share transfer agreement was unconditional.

8.On the evidence, a clear inference of repudiation should be drawn from the respondent’s solicitor’s emails and his failure to pay the purchase price by 11 July 2020 or at all.  This was not a case where the solicitors’ correspondence merely sought an indication of the applicant’s attitude to the proposed settlement method and supplementary terms because they were not covered by the share transfer agreement. 

9.The applicant did not elect to terminate before the deadline for performance.  Instead, he kept his options open, insisting on performance.  His erroneous assertion as to the operation of the share transfer agreement should the respondent fail to perform his purchase obligation does not alter this conclusion.

10.The applicant validly terminated the share transfer agreement on 12 July 2020 by the email he sent the respondent’s solicitor.

11.The applicant established that he was ready, willing and able to perform his obligation of delivering a duly signed share transfer form to the respondent.  In the circumstances of the respondent’s anticipatory breaches and repudiation of the contract, there was no point in the applicant providing his bank details or nominating a solicitor to attend the settlement ultimately cancelled by the respondent.

12.In circumstances where the applicant did not transfer his shares to the respondent, the economic value of the performance of the contract at the time when performance was promised is not simply assessed by reference to the amount the applicant was not paid.  Since the applicant must satisfy the Court both as to the loss he suffered by reason of the respondent’s breach and as to its measure, it was necessary for the applicant to address the question of the value of his shares at the date of breach to prove his case.

13.Despite neither party addressing the value of the applicant’s shares at the date of breach, it should be concluded his shares were actually worthless at that date.  It follows that on a comparison between the position the applicant was in as a result of the respondent’s breach of contract and the position he would reasonably have expected to be in had there been no breach and the contract performed, the applicant is entitled to damages of $389,500.00 as at 11 July 2020.

14.Rulings as to the admissibility of the second and third translations made.

15.The admissibility of extrinsic evidence as an aid to construction considered.

Uniform Civil Rules 2020 (SA); Evidence Act 1929 (SA); District Court Act 1991 (SA), referred to.
Aerial Advertising Co v Batchelor’s Peas Ltd [1938] 2 All ER 788; Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38; Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441; Associated Newspapers Ltd v Bancks (1951) 83 CLR 322; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; Banque Commerciale SA (in Liq) v Akhil Holdings Ltd (1990) 169 CLR 279; Bellgrove v Eldridge (1954) 90 CLR 613; Berry v CCL Securities Pty Ltd (2020) 271 CLR 151; Biggin & Co Ltd v Permantite Ltd [1951] 1 KB 422; Chappel v Hart (1998) 195 CLR 232; Clark v Macourt 253 CLR 1; delfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Concut Pty Ltd v Worrell (2000) 176 ALR 693; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; Custom Credit Corporation Ltd v Cenepro Pty Ltd [1991] NSWCA 68; Dare v Pulham (1982) 148 CLR 658; Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 17; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; Essential Beauty Franchising (WA) Pty Ltd & Ors v Pilton Holding Pty Ltd & Ors [2014] SASC 84; European Bank Ltd v Evans (2010) 240 CLR 432; Fire & All Risks Insurance Co Ltd v Callinan (1978) 140 CLR 427; Foran v Wight (1989) 168 CLR 385; Freeth v Burr (1874) LR 9 CP 208; G. Scammell & Nephew Ltd v Ouston [1941] AC 251; Gissing v Gissing [1971] AC 886; Godecke v Kirwan (1973) 129 CLR 629; Hadley v Baxendale (1854) 1546 ER 145; Heyman v Darwins Ltd [1942] AC 356; Huppert v Stock Options of Australia Pty Ltd (1965) 112 CLR 414; Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; Jireh International Pty Ltd v Western Export Inc [2011] NSWCA 137; Johnson v Perez (1988) 166 CLR 351; Jones v Dunkel (1959) 101 CLR 298; L Albert & Son v Armstrong Rubber Co (1949) 178 F. 2d 182; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; March v E & MH Stramere Pty Ltd (1991) 171 CLR 506; Matson v Attorney-General (Cth) [2021] FCA 161; MBP (SA) Pty Ltd Pty Ltd v Gogic (1991) 171 CLR 657; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd [1974] AC 689; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; REALESTATE.com.au v Hardingham [2022] HCA 39; Robinson v Harman (1848) 154 ER 363; Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60; RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Shevill v Builders Licensing Board (1982) 149 CLR 620; Simic v NSW Land and Housing Corporation (2016) 260 CLR 85; Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Upper Hunter County District Council v Australian Chilling & Freezing Co (1968) 118 CLR 419; Vargas Pena Apezteguia y Cia SAIC v Peter Cremer GmbH [1987] 1 Lloyd’s Rep 394; Wenham v Ella (1972) 127 CLR 454; Western Export Services v Jireh International Pty Ltd [2011] HCA 45, considered.

WANG v DU
[2025] SADC 126

OVERVIEW

1. The applicant Mr Wang advances a claim in contract for damages based on the alleged failure of the respondent Mr Du to pay by 11 July 2020 or at all the purchase price for Mr Wang’s shares in a company they jointly owned and controlled. Their agreement was made in writing on 27 May 2020 in circumstances where their relationship had irretrievably broken down over disputes arising over the operation of the company’s business. At the time of their agreement, the key areas of dispute concerned serious accusations made by Mr Du about Mr Wang’s son’s conduct in diverting cash from the business and Mr Du’s alleged lack of access to the company’s books and records for the business despite Mr Du working in the business.  Mr Wang was deeply offended by Mr Du’s accusations and denied them.

2. Mr Wang relies on the terms of a share transfer agreement written in Chinese characters. There are threshold issues about the English translation of the document. There is contention about unpleaded aspects of Mr Du’s defence case and the admissibility of evidence of extrinsic matters for the purpose of construing the written agreement.  Questions arise about performance, breach and repudiation of Mr Du’s purchase obligation under the written agreement, Mr Wang’s purported acceptance of Mr Du’s repudiation and Mr Wang’s entitlement to damages as a remedy for Mr Du’s failure to purchase his shares.

   CONCLUSION

3. Mr Wang should have judgment in his favour on his claim against Mr Du in the sum of $389,500.00 plus pre-judgment interest of $120,969.10 for the following reasons.

   THE TRIAL AND THE EVIDENCE

   Narrowing of the Pleaded Issues

4. The trial began on the then current pleadings.[1]

   Mr Wang’s Case

   [1]    Statement of Claim – Revision 2 (FDN 70) (Claim); Defence – Revision 3 (FDN 48) (Defence); Cross Claim (FDN 47) (Cross Claim); and Defence (FDN 51) (Defence to Cross Claim).

5. Mr Wang’s case as pleaded and pressed at trial was simply put. [2]  In a nutshell, Mr Wang alleges that pursuant to the share transfer agreement, Mr Du agreed to purchase on or before 11 July 2020 all of Mr Wang’s shares in the company in exchange for payment of the purchase price of $339,500 and a purchase fee of $50,000.[3]  Mr Du was provided with the company’s financial statements for the purpose of Mr Du obtaining finance for payment of the purchase price and fee. Mr Du successfully obtained finance, thereby satisfying the only condition precedent to Mr Du’s purchase obligation under the share transfer agreement.[4]

   [2]    Written Submissions of the Applicant (FDN 86) (Applicant’s Written Opening) [5]; Written Submissions of the Applicant (FDN 96) (Applicant’s Written Closing) [37]; and Written Submissions of the Applicant (FDN 99) (Applicant’s Further Submissions).

   [3]    Claim [4.2].

   [4] Ibid [5].

6. Mr Wang claims that by failing to pay the agreed purchase price and fee by 11 July 2020 or at all, Mr Du breached an essential term of the share transfer agreement,[5] thereby repudiating his purchase obligation and entitling Mr Wang to terminate the share transfer agreement.[6]  Mr Wang further claims that in email exchanges between Mr Wang and Mr Du’s solicitor Mr Xiao between 9 and 14 July 2020, Mr Du repudiated his obligations under the share transfer agreement,[7] entitling Mr Wang to accept his repudiation and terminate the share transfer agreement, which he claims he validly did by a series of emails as well as by commencing this proceeding.[8] 

   [5] Ibid [6].

   [6] Ibid [7].

   [7] Ibid [7.2].

   [8] Ibid [8].

7. Mr Wang claims he has suffered loss and damage by reason of Mr Du’s breach of contract in the sum of the purchase price and fee plus costs and interest.[9] 

   Mr Du’s Case

   [9] Ibid [10] and prayer for relief [1],[3] and [4]. Mr Wang’s Claim sought in the alternative orders for specific performance of Mr Du’s purchase obligation under the share transfer agreement (prayer for relief [2]).

8. There were serious inadequacies in the pleaded defence and cross claim Mr Du relied on at the start of the trial.  Some difficulties apparently arose because his defence responded to a superseded version of Mr Wang’s claim that had not been revisited since and a translator was not involved in preparing the case for trial until the Friday before it started. Serious generalised allegations of misconduct in operating the business were made against Mr Wang and his son in both the defence and cross claim without any proper particulars. A bare allegation that business income had been diverted by Mr Wang and his son was repeated a number of times. The enforceability of the share transfer agreement was challenged on the ground it did not record the subjective intention of the parties in making “an oral agreement”[10] and the consequential relief sought in the cross claim were declarations that the agreement “be rectified”[11] and that Mr Wang is to purchase Mr Du’s shares for $389,500.

   [10] Cross Claim [3].

   [11] Cross Claim prayer for relief [1].

9. When these difficulties were raised with Mr Du’s counsel at the outset of the trial, Mr Du’s case was confined to one of construction and unenforceability.

10. Mr Du first withdrew all but the rectification claim in his cross claim and disclaimed the allegations about diversion of cash from the business as no longer being pressed.[12]  Paragraph 3 of the defence alleging misconduct in operating the business by Mr Wang and his son was then withdrawn and Mr Du’s counsel foreshadowed a ‘tidy up’ of the remaining defence pleas.[13]  On the second day of trial Mr Du abandoned further parts of his defence,[14] his rectification claim[15] and made two unsuccessful attempts to reformulate his remaining defence including by the introduction of a new construction case based on numerous matters extrinsic to the written document.  Mr Du’s application to amend was dismissed.[16]

    [12] T8.5-.10; T8.25-.29; T124.6-.11.

    [13] Defence [3]; T12.28-.31.

    [14] Defence [3], [4] and [7] were abandoned.

    [15] T48.24-.29. See also T125.8-.11.

    [16] Ex tempore ruling made on 21 February 2024 (FDN 95). 

11. Notably, Mr Du withdrew all the generalised allegations in his defence and cross claim about the operation of the business that were the subject of dispute between the parties both before and after the share transfer agreement was made. The withdrawal of these allegations puts beyond doubt the irrelevance of the merits of the underlying disputes about the operation of the business to any remaining issue in dispute in this proceeding.  Plainly, the fact that certain accusations were made by Mr Du about the operation of the business is a different matter and, to the extent the making of these allegations was a relevant fact, it was not controversial these allegations had been made and caused a bitter dispute between the parties and the breakdown of their relationship.

12. As a result, the scope of what remains of Mr Du’s pleaded defence is relatively confined and comprises essentially three limbs.  First, it puts Mr Wang to proof of his claim for common law damages for Mr Du’s alleged breach of his contractual obligation to pay Mr Wang for his shares by 11 July 2020 under the share transfer agreement.  Secondly, it challenges the enforceability of their agreement on grounds of uncertainty and incompleteness and for being “defective” by “not recording the subjective intention of the parties”.[17] Thirdly, it puts in issue satisfaction of the condition precedent to Mr Du’s purchase obligation, namely whether Mr Du was provided with “a financial report of the Businesses as at 3 May 2020 and prior.”[18] 

    [17] Defence [2.1].

    [18] Ibid [2.2.4.1].

13. By closing submissions, Mr Du’s primary case had shifted to one of “commercial construction of the language” used by the parties in a written agreement where “there is no reliable translation”.[19] Ultimately, relying on ‘surrounding circumstances’, Mr Du contends the parties’ common assumption was that there would be “a clean break, by one or other, getting all the shares so they could run the business without the other.”[20] By reason of their common assumption, the parties intended a reciprocal agreement whereby one or other would purchase the other’s shares, with Mr Du to have the first opportunity to do so.  If Mr Du did not purchase Mr Wang’s shares then it was agreed Mr Wang would purchase Mr Du’s shares for the same price and on the same terms. 

    [19] Written Submissions of the Respondent (FDN 97) (Respondent’s Written Closing) [1].

    [20] Ibid [21] and [27.13].

1. In support of his new construction case of ‘simple reciprocity’, Mr Du further contends the parties never contemplated Mr Wang would have any right to sue Mr Du for damages for breach of contract if he did not purchase Mr Wang’s shares for any reason. As such he submits Mr Wang’s remedy should have been limited to purchasing Mr Du’s shares and, somewhat inconsistently, seeking specific performance of Mr Du’s purchase obligation. 

2. Mr Du also relies in closing submissions on an unpleaded oral agreement allegedly made on 27 May 2020 that Mr Wang would provide Mr Du with access to all the paper and electronic records of the business as soon as possible.[21] Mr Du ultimately submits access to the company records was “essential to run the business ASAP and for the purpose of obtaining arm’s length finance”.[22]  These allegations involve further unpleaded twists to Mr Du’s evolving construction case.

   [21] Respondent’s Written Closing [27.11] and [48].

   [22] Ibid [50].

3. As a result, it is necessary to first consider the extent to which Mr Du should be confined to his pleaded case and secondly, the legal basis of Mr Du’s ‘subjective intention’ defence in circumstances where he abandoned his rectification claim and the ‘surrounding circumstances’ in paragraph 3 of his defence and his counsel disavowed any defence case that no contract existed because the parties did not intend to bind themselves. [23]

   Confinement to his Pleaded Case

   [23] T15.8-.12.

4. Pleadings serve two important functions. The first is to define the issues for decision. The second is to state with sufficient clarity the case that must be met and ensure the basic requirements of procedural fairness that a party should have the opportunity of meeting the case put against them. [24]

   [24] Dare v Pulham (1982) 148 CLR 658 at 664; Banque Commerciale SA (in Liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287; Berry v CCL Securities Pty Ltd (2020) 271 CLR 151 at [72]-[73]; Uniform Civil Rules 2020 (SA) r 71 [Effect of Pleadings].

5. These are well-established reasons for confining Mr Du to what remains of his pleaded case and not permitting him to advance a new unpleaded case without the Court’s leave. In circumstances where his earlier application to amend was opposed by Mr Wang and dismissed by the Court, it would be anomalous and unjust to permit Mr Du to depart significantly from his pleaded defence during the course of the trial. The prejudice to Mr Wang and the public interest in preventing such prejudice are obvious.  If Mr Du were permitted to advance a new case for the first time in closing submissions when evidence had closed, Mr Wang would be denied his right to a fair opportunity to meet the unpleaded case ultimately put against him.  

6. In oral closing submissions, Mr Wang challenged two aspects of Mr Du’s ultimate case as unpleaded and not relevant. The first was the reliability of the English translation of the document written in Chinese characters.  The second was the proper construction of the share transfer agreement. 

   The Translation and Construction Issues

7. Mr Wang submits the English translation he relies on was admitted in Mr Du’s defence and not the subject of any positive case pleaded by Mr Du.  He submits Mr Du’s challenges to it are irrelevant to the pleaded disputes.  He submits it is “a [barren]argument that exists in a vacuum” because there was never any pleaded defence challenging Mr Wang’s construction of the share transfer agreement.[25] 

   [25] T335.22-.28.

8. Contrary to Mr Wang’s submissions, there is no admission of the English translation or of the terms of Mr Du’s alleged purchase obligation in Mr Du’s pleaded defence.  Apart from limited admissions that do not bear on the translation or construction issues, Mr Du denies Mr Wang’s pleading of Mr Du’s purchase obligation, putting Mr Wang to proof of his case.[26]

   [26] Claim [4] and Defence [4].

9. Mr Du’s express denial is sufficient to put in issue the English translation and the proper construction of the relevant terms of the share transfer agreement upon which Mr Wang relies. To prove his case, Mr Wang must therefore establish as fact what the Chinese characters are in English words and what those words mean in law when read objectively applying the settled principles for the construction of commercial contracts.

10. Accordingly, Mr Du should not be precluded from making submissions about the proper construction of the relevant terms of the share transfer agreement in answer to Mr Wang’s construction case.

    Access to Documents Agreement

11. Mr Du pleads that it was a condition precedent of the share transfer agreement that Mr Wang would provide him with “a financial report of the Businesses as at 3 May 2020 and prior” but it was not provided.[27]  This plea at its highest raises questions of construction and performance of the share transfer agreement.

    [27] Defence [2.2.4.1].

12. In closing, Mr Du advances an unpleaded claim about the existence of an oral agreement allegedly reached on 27 May 2020 for Mr Wang to provide Mr Du with access to all the paper and electronic records of the business.[28]  He submits he was to get “access to all the business documents electronic and paper,”[29] purportedly  relying on his and Mrs Du’s oral evidence that it was promised by Mr Wang on
    

    [28] Respondent’s Written Closing [48].

    [29] Ibid [27.11].

    27 May 2020 that this would happen once he signed the share transfer agreement. By contrast, Mr Du submits the Court should reject Mr Wang’s evidence in cross-examination of this topic.

13. Mr Du should be confined to his pleaded case and not permitted to press a new case of an oral agreement for access to business documents being made on 27 May 2020. The prejudice to Mr Wang is all the more obvious in circumstances where Mr Du withdrew the allegations in his defence and cross claim concerning access to the company books and records, including specifically the allegation that Mr Wang and his son refused to give them to him, and the trial proceeded on that basis.[30]

    [30] Cross Claim [11].

14. It is therefore not strictly necessary to resolve the conflict between Mr Wang and Mr Du’s evidence about what was discussed about Mr Du’s access to all the company books and records.

15. In any event, there are good reasons for rejecting Mr Du’s contentions that any such an agreement was made. First, the evidence shows that the character of the discussions on 27 May 2020 was in the nature of a negotiation, with successive drafts being typed by the priest and despite discussing that “all documents concerning the business should be written in clause 4, but this was not added.”[31] If there was such an earlier oral agreement or consensus, it was discharged and the parties’ agreement was recorded in writing.[32] Accordingly, it is the share transfer agreement that governs the parties’ resolution of their deadlock as equal shareholders.  Secondly, such an oral agreement contradicts the terms of the written share transfer agreement properly construed. 

    Mr Du’s ‘Subjective Intention’ Defence

    [31] T313.4-.5.

    [32] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 (Equuscorp) at [36].

16. Mr Du’s pleaded defence challenges the enforceability of the share transfer agreement on the separate ground of its failure to record the ‘subjective intention’ of the parties.[33]  The legal basis of these pleas is unclear and there is no apparent merit to them.[34]

    [33] Defence [2.1], [2.2.1], [2.2.3] and [2.2.5].

    [34] Mr Du’s counsel intimated that he thought it should be deleted but needed to consider it.  T124.26-.30.

17. As Mr Du’s defence properly acknowledges, the subjective intentions of the parties are not relevant to the Court objectively construing the share transfer agreement,[35]  accepting that where the parties’ actual intentions amount to a concurrence or a common understanding, this might inform the parties’ presumed objective intentions.[36] The question then arising is one of construction, not unenforceability.

    [35] Defence [2.2]; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 (Codelfa); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 (Mount Bruce Mining) at [50]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 17 at [16].

    [36] Codelfa at 352-354.

18. The only possible relevance of these pleas of ‘subjective intention’ was Mr Du’s rectification claim which was withdrawn, giving rise to the question whether these pleas should have been withdrawn with the rectification claim.

19. This conclusion is fortified when proper regard is had to the nature and purpose of the equitable remedy of rectification. It is not a defence. Rectification is a remedy concerned with a mistake as to what is recorded in a written instrument and the conscience of the parties.[37]   Its purpose is to make a written instrument conform to the ‘true agreement’ of the parties where the writing by common or unilateral mistake fails to express the parties’ agreement accurately.[38]

    [37]  Simic v NSW Land and Housing Corporation (2016) 260 CLR 85 at [48].

    [38] Ibid [103].

20. It is incumbent on an applicant seeking rectification to show precisely the form to which the agreement should conform and, where proven to the satisfaction of the Court, it is necessary for the Court to make orders changing the words of the instrument to conform with the parties’ contractual intentions. No question of unenforceability of the written instrument arises where there is a mistake recorded in it because it is rectified by order of the Court.

21. It is therefore not necessary to consider Mr Wang’s submissions on the topic of Mr Du’s ‘subjective intention’ defence.[39]  It is incontrovertible that the parties intended to bind themselves to the terms of the share transfer agreement negotiated and signed on 27 May 2020 and Mr Du accepts that is so. The relevant question to be resolved is whether the parties’ agreement, properly construed, is unenforceable for uncertainty or incompleteness.

    The Issues to be Determined

    [39]  Applicant’s Written Closing [51]-[58].

22. The issues to be determined are therefore as follows.

    1.What are the words of the share transfer agreement in English?  This is the translation issue.

    2.What do its terms mean? There are a number of construction issues arising.

    3.Was the share transfer agreement unenforceable for uncertainty or incompleteness? These are the unenforceability questions.

    4.Was Mr Du’s purchase obligation unconditional?

    5.Did Mr Du breach or repudiate his purchase obligation?

    6.Did Mr Wang accept Mr Du’s repudiatory breach and terminate?

    7.What loss or damage did Mr Wang suffer by reason of any repudiatory breach by Mr Du’s purchase obligation under the share transfer agreement?

    Documentary Evidence

    Joint Tender Book

23. Before trial, the parties prepared a three-volume joint tender book[40] identifying the documents each party proposed to tender. Following objections to the tender of specific documents and the narrowing of the pleaded issues, a substantial number of documents were withdrawn from the joint tender book by the agreement between counsel reached after the trial concluded.[41] Ultimately, the documentary evidence comprised a single volume. 

    The Second Translation

    [40] MFI A1.

    [41] Revised Tender Book Index agreed by counsel: email from Ms Carroll of Bridges Lawyers dated 8 March 2024: MFI A6.

24. Before trial, the parties were unable to agree on the English translation of the share transfer agreement written in Chinese characters to be put before the Court.   

25. Mr Wang included in the joint tender book a written Chinese to English translation made on 4 June 2020 by certified translator Mr Ningjia Han (the Han Translation).[42]  In his written opening, Mr Du challenged the accuracy of the Han Translation, particularly as to clause III, by reference to a second written translation made on 1 July 2020 (the Second Translation).[43]  It was described by Mr Du as “better” but “not completely correct in clause III”.[44]

    [42] Exhibit A1.25.156 (.25 referring to tab 25 and .156 to page 156).

    [43] Proposed document 112 at page 1262: Index to Joint Tender Book filed on 13 February 2024 (FDN 87).

    [44] Opening Address of the Respondent (FDN 88) [42].

26. At the start of trial, the tender of the Second Translation was the subject of objection by both Mr Wang as being “unsatisfactory” because its certification stamp was obscured[45] and by Mr Du on the ground that its authenticity/provenance was not established and translation was in issue.[46] In closing submissions, albeit in reference to the Shi Translation, Mr Wang (wrongly) contended that translation was not in issue because there was no pleaded defence challenging his interpretation of how the share transfer agreement worked.[47]

    [45] T6.16-7.21.

    [46] Respondent’s Objection to Tender Book documents (FDN 89).

    [47] T335.22-.31.

27. The Second Translation was referred to and relied on by Mr Du in his closing submissions numerous times. Despite this, it was ultimately excluded from the joint tender book by agreement between counsel.[48]  It was not tendered separately and was therefore not in evidence at the close of the trial.

    [48] MFI A6.

28. Given the obvious inference that Mr Du’s legal representatives had either omitted the Second Translation from the final version of the joint tender book index or referred to it in closing submissions in error, the Court invited the parties to make further written submissions on the issue.

29. In further submissions, Mr Du confirmed the Second Translation had not been tendered but submitted it was an oversight “[to be] addressed now by [Mr Du] applying to tender [it]”, and advanced reasons in favour of its admission into evidence ‘now’ without anything further being done. [49]  Mr Wang also confirmed the Second Translation had not been tendered by agreement of the parties but objected to any reliance on it, noting no application to re-open Mr Du’s case had been made. 

    [49] Additional Submission of the Respondent (FDN 100) (Respondent’s Further Submissions) [1.11] and [1.16].

30. Mr Du then made an oral application to re-open for the sole purpose of tendering the Second Translation.[50] No evidence was tendered to further explain the error made by Mr Du’s legal representatives. Mr Du concedes the evidentiary weight of the Second Translation is not significant,[51] and is limited compared to the Han Translation and a third one made by certified translator Ms Mengchang Shi (the Shi Translation) during the trial.[52] However, he contends the Second Translation is not new evidence having been ventilated as part of the translation issue at trial and is relevant and therefore admissible evidence supporting both his construction and uncertainty cases and should be before the Court for completeness.

    [50] FDN 101.

    [51] 8 October 2025, T4.29-33; T7.11-.14.

    [52] Ibid T6.8-.11; T9.16-.20.

31. Mr Wang objects to Mr Du’s application to re-open and the tender of the Second Translation primarily on the ground of its inadmissibility, having objected to its tender at the start of trial and not resiled from that position throughout. Mr Wang further submits the Second Translation should be afforded no weight by reason of its indecipherable certification stamp and the absence of any certification as to the accuracy of the translation. Moreover, the translator was not called and it was not put to Mr Han in cross-examination.

32. There is no dispute about the principles to be applied in considering an application to re-open.[53]

    [53] Matson v Attorney-General (Cth) [2021] FCA 161 at [178]-[181].

33. The compass of this application is relatively confined and does not disturb the public interest in litigation being conducted efficiently and expeditiously or in the public interest of finality of litigation. Nor is delay a real issue, despite the lateness of the application. The Second Translation is not new evidence and was the subject of closing submissions, despite Mr Wang’s objection to its admissibility from the start of trial.  Neither party proposes to take the matter further, whatever ruling is made by the Court.

34. Ultimately, the Courts’s discretion to grant leave to re-open turns on the significance of the proposed ‘new’ evidence in context of the issues in dispute. Three observations should be made.

35. First, contrary to Mr Wang’s submissions, the Second Translation is relevant and therefore admissible to the extent that it confirms the reliability of the relevant parts of the Han Translation or not (although the differences in parts of clause III are not relevant, contrary to Mr Du’s submissions as previously explained).  However, its relevance is only cumulative to the confirmation already provided by the Shi Translation and therefore its potential significance is slight.

36. Secondly, little or no weight should be afforded to the Second Translation. Its provenance is unknown and there is no evidence on this topic. It was not certified in the same way as the Han Translation was and the stamp identifying the translator and their practitioner identity number is illegible.

37. Thirdly, the translator was not called and never proposed to be called by Mr Du.  The differences in it were not put to Mr Han in cross-examination. If the Second Translation were admitted into evidence there would be unfairness in Mr Du using it to bolster his uncertainty case in closing submissions when there was no real opportunity for Mr Wang to meet that case in the evidence.   

38. For these reasons, the Second Translation should not be admitted in evidence under s 53(2) of the Evidence Act 1929 (SA).  Accordingly, Mr Du’s application to re-open should be refused, with the result that it remains the case that the Second Translation is not in evidence.  It must therefore be disregarded in determining the issues in dispute in this proceeding.

    The Shi Translation

39. A further challenge to the reliability of the Han Translation arises from Mr Du subsequently seeking to rely on the Shi Translation.  It was made on 21 February 2024 (after Mr Han had given evidence). As part of the Court’s judgment, Mr Du seeks a ruling on his application to tender it and be granted leave to rely on the oral evidence of Ms Shi against the objection of Mr Wang on the ground of relevance and prejudice in terms of the time at which it was tendered.  As to relevance, Mr Wang contends Mr Du impliedly admitted the operative terms of the share transfer agreement in his defence.

    Ruling on the Shi Translation

40. For the following reasons, the Shi Translation and Ms Shi’s oral evidence are admissible and relevant to the extent they address the English translation of the Chinese characters constituting the terms of Mr Du’s purchase obligation under the share transfer agreement.  These are matters of fact that Mr Wang must establish to prove his case. Any prejudice arising is the result of a forensic decision made by Mr Wang’s counsel to call Mr Han knowing that Mr Du was obtaining another translation without knowing its contents.

41. The translation question is in issue by reason of the express denial pleaded in Mr Du’s defence.[54] The Shi Translation is probative of this question and relevant to an assessment of the reliability of the Han Translation that Mr Wang relies on to prove his case.

    The Parties’ Supreme Court Affidavits

    [54] See [20]-[22] above.

42. A substantial part of the joint tender book in evidence comprises parts of some affidavits filed in the application Mr Wang brought in the Supreme Court of South Australia on 14 October 2020 to wind up the company on just and equitable grounds.[55]

    [55] Supreme Court of South Australia action no CIV-20-004234.  A substantial number of exhibits referred to in the content of the affidavits are not included.

43. There are two affidavits made by Mr Wang in support of his application to wind up the company.  One made on 13 October 2020[56] and one on 17 March 2021.[57] There are two affidavits made by Mr Du. The first was made in opposition to the winding up application on 17 November 2020[58] and the second was made on 25 November 2021 in support of an application for an injunction restraining the joint administrators from making a distribution of funds under the deed of company arrangement.[59]

    [56] Exhibit A1.53 and A1.54.

    [57] Exhibit A1.71 and A1.72.

    [58] Exhibit A1.64.

    [59] Exhibit A1.82.

1. These affidavits and their annexures are voluminous and detailed. Their subject matter is highly contentious. At trial, the parties made limited use of this evidentiary material, their counsel adopting the approach they would made express reference to anything relied upon.[60] Mr Wang relies on Mr Du’s affidavits to challenge his credit on discrete inconsistencies between his oral evidence at trial and his previous affidavit evidence.  Mr Du relies on part of his November 2020 affidavit to “detail [his] extensive requests for documentation” in support of his unpleaded oral agreement made on 27 May 2020 for Mr Wang to provide Mr Du with all the paper and electronic records of the business.[61]

   [60] T299.8-.33.

   [61] Respondent’s Written Closing [46.4] and [48].

2. The permissible uses of these affidavits requires careful consideration for the following reasons.

3. First, for the purpose of construing the relevant terms of the share transfer agreement, these affidavits are largely irrelevant and therefore inadmissible to the limited extent they evidence the parties’ words and conduct reflecting their actual or subjective intentions and expectations in making their agreement and antecedent negotiations.[62] Moreover, these affidavits were made after the parties were in dispute about their obligations under the share transfer agreement and the institution of this proceeding.

   [62] Codelfa at 347.

4. Secondly, evidence of surrounding circumstances (events, circumstances and things external to a written agreement) cannot be adduced to displace or alter its plain meaning. Contrary to Mr Du’s submissions as discussed below,[63] properly construed, there is no ambiguity or uncertainty about the meaning of “financial reports” in clause IV of the share transfer agreement. Nor is it appropriate to resolve Mr Du’s unpleaded allegation that a different agreement was made during the course of negotiation on 27 May 2020 given the withdrawal of Mr Du’s rectification claim at trial and his counsel’s disavowal of any defence case that the parties in making their agreement lacked the requisite intention to be bound.

   [63] See [157]-[162] below.

5. Thirdly, in having proper regard to the purpose or object of the making of the share transfer agreement, it is not necessary to determine the merits of the underlying disputes about Mr Jun Wang’s conduct in operating the business or Mr Du’s requests for access to company records and information.  In this case, it is sufficient to appreciate that the object or purpose of the share transfer agreement was to give one or other of them complete ownership of the company to resolve the deadlock between equal shareholders over the operation of its business.

6. Fourthly, whilst the subsequent conduct of the parties may generally not be referred to in construing the terms of a previously concluded contract, it may be relevant to the question of damages arising from Mr Du’s alleged breach of contract.[64] 

   [64] See [263] below and following.

7. Fifthly, the context in which these affidavits were made is important.  They were made in winding up proceedings instituted after the parties’ continuing disputes about the business erupted publicly in September 2020. Despite their opposing views about whether the company should be wound up, the parties’ evidence shows significant dysfunction in the day-to-day operations of the company was caused when its bank account was frozen, Mr Wang and his son were excluded from the business by Mr Du and he continued to operate it on a cash basis.  In November 2020, the business ceased trading.  

8. These affidavits provide important and obvious insight to the reliability of both parties’ evidence at trial to the limited extent their evidence is relevant.  On their face, these affidavits show the parties’ entrenched beliefs in the correctness of their own positions in a series of bitter, escalating disputes about the operation of the business. By trial, both parties’ recollections of dated events were indelibly coloured by their long-running deep mutual animosity.  To complicate matters, their evidence was further clouded by translation issues given their evidence was made through interpreters.

9. For these reasons, the parties’ previous affidavit evidence should be approached with caution. Generally, where there are conflicts between the parties’ affidavit evidence, neither party’s evidence should be accepted as reliable and given weight unless it is consistent with other reliable evidence. 

   Evidence from the Company’s Administration 

10. The joint tender book also includes an affidavit made in the winding up proceedings by Mr Andrew Heard on 3 December 2021.[65] Mr Heard was one of the two joint and several administrators of the company appointed by the parties on 9 April 2021.  His affidavit discloses the outcome of the adjourned second meeting of creditors of the company held on 21 June 2021 at which the creditors voted in favour of a deed of company arrangement proposed by Mr Wang, refers to the proposed final distribution of company’s funds and his solicitor’s correspondence with Mr Du about Mr Du’s objections to the proposed final distribution.

    [65] Exhibit A1.83.

11. Neither party challenges Mr Heard’s evidence. This evidence should be accepted as reliable and given weight in so far as it is relevant to the question of Mr Wang’s entitlement to damages in this proceeding. Bearing in mind their purpose and the qualifications made about their limitations, the various creditors reports in evidence by their inclusion in the joint tender book should also be treated as reliable where relevant.

    The Witnesses at Trial

    Translation

12. Since none of the lay witnesses speak fluent English, they gave evidence through an interpreter.  As a result, there was at time some confusion and ambiguity in their evidence. Save for the simplest question, much of the subtlety of their evidence was lost in translation. As the transcript shows, much of the witnesses’ evidence was expressed in the broken English of the interpreter.

13. Cross-examination of the witnesses on documents written in English was particularly difficult and generally did not elicit any useful testimony.  This was apparent when the interpreter said it was “not her job to read” any documentary evidence put to the witness.[66]

    [66] T198.21-.33.

14. It was therefore necessary to be careful about the inferences to be drawn from the witnesses’ oral evidence and in forming any adverse judgments about their credit and reliability.

    Mr Wang

15. Mr Wang relied on his trial affidavit made on 12 February 2024[67] through a certified translator as his evidence in chief.  It repeats substantially the same matters to the time of making the share transfer agreement as set out in his 13 October 2020 affidavit filed in the winding up proceedings. Much of it is otiose following Mr Du’s withdrawal of his rectification claim and paragraph 3 of his defence.

    [67] Exhibit A2.

16. Mr Wang’s oral evidence addresses some further relevant topics, including the provision of the company’s financial reports to Mr Du on 5 June 2020, Mr Du’s loan approval, his July 2020 correspondence with Mr Xiao, his preparedness to settle and subsequent events.  There is no reason to doubt the reliability of
    Mr Wang’s evidence on these topics.

17. Mr Wang was cross-examined about the meeting at the priest’s house on 27 May 2020, his preparedness to settle the share transfer and Mr Du’s requests for documents.  Much of his evidence about the course of negotiations and what was in the share transfer agreement was inadmissible given its only use was as an aid to construction.

18. A prime example is the following evidence given by Mr Wang in cross-examination that repeated his written evidence[68] and assertions made in his email correspondence[69] with Mr Xiao:[70]

    Q.    If they didn’t buy your shares, you would buy his shares.

    A.    That was in the agreement.   

    [68] Exhibit A1.53.257 at [42].

    [69] Exhibit A1.118 and A1.119.

    [70] T140.23-.25.

19. Aside from the ambiguity of this evidence, Mr Wang’s subjective intentions and expectations about what was in the share transfer agreement are inadmissible. It is for the Court to construe the terms of the parties’ contract, not the witnesses. This line of cross-examination did not concern the purpose of the parties’ contract or the common assumption that was advanced in closing submissions and ultimately was not probative of any relevant matter.

20. Overall, Mr Wang should be accepted as a truthful witness.  There was only one topic of relevance on which his reliability was seriously challenged.

21. Mr Wang was cross-examined about Mr Du’s requests for access to the books and records of the business. Mr Du submits Mr Wang’s evidence on this point should be rejected and the Court should find Mr Wang agreed to provide those documents as soon as possible after 27 May 2020, consistent with Mr Du’s evidence. It is unnecessary to make such a finding because this line of cross-examination is not relevant for the reasons already discussed which Mr Du’s counsel accepted at trial.[71] 

    Mr Du

    [71] T199.16-.32

22. Mr Du gave oral evidence through an interpreter and said that he did not speak or read English, only understanding a couple of words. Mr Wang gave contrary evidence, saying that Mr Du understands English and referred to being with him when he spoke in English to the employees and to a supplier about buying sheep.  Mr Wang’s evidence was shown to be correct when during the trial it was evident Mr Du understood what was being said in English and responded before the interpreter had translated.  Mr Du’s denial that he had understood the Court’s direction in English that he was required to answer a question that he was avoiding before it was translated was not persuasive.[72]

    [72] T273.26-275.7.

23. Mr Du was cross-examined at length about the extent of Mr Wang’s involvement in the business, Mr Du’s access to the company’s bank account and business records including through the company’s accountant. Mr Du was often uncooperative, giving non-responsive and sometimes unnecessarily rude or emotive responses.  Aspects of his oral evidence were shown to be inconsistent with his affidavit evidence and previous correspondence with Mr Wang.  Some answers were clearly exaggerations and a repetition of his strong view that
    Mr Wang totally controlled the business from the outset (despite Mr Du working in it and Mr Wang not) and Mr Wang had denied him access to the company books and records (despite Mr Du working in Port Lincoln where the business operated and having access to the bank account on his mobile).

24. A notable example of hyperbole was Mr Du’s evidence that Mr Wang “took all my money – all my salary, he took all my salary” when he was only asked to confirm that Mr Wang was not paid a salary in the business, having just given evidence that he (Mr Du) was paid a salary because it was his role to manage the business when this had not previously been contentious.[73] Other examples were Mr Du’s evidence on the topic of the parties’ contributions to working capital[74] and his interpretation of Mr Wang’s responses to Mr Xiao’s July 2020 emails.[75]

    [73] T261.27-262.8.

    [74] T277.8-280.38.

    [75] T292.18-294.32.

25. Credit aside, much of Mr Du’s evidence was not relevant to the issues in dispute and is of little assistance in resolving the issues in dispute. That said, Mr Du’s evidence did confirm the share transfer agreement was the result of negotiations at a meeting held for the purpose of “resolving the conflicts and issues between church brothers and sisters”.[76] Otherwise, his evidence of pre-contractual negotiations is generally inadmissible as an aid to construction of the share transfer agreement.

    Mrs Du

    [76] T212.1-.4.

26. Mrs Du’s evidence was brief and largely concerned the meeting of 27 May 2020. She gave evidence through an interpreter and there were difficulties with her understanding of questions put to her at times.  Mrs Du frankly acknowledged she was nervous and had difficulty remembering what was discussed almost four years ago.  She confirmed she was in Court to support her husband. Mrs Du’s evidence also confirmed that the discussions held on 27 May 2020 were in the character of negotiations. Save for this one matter, her evidence was of little assistance in resolving any of the issues in dispute.

    Failure to Call Witnesses

27. The parties criticise one another for not calling the priest and his wife about what occurred at the 27 May 2020 meeting. Mr Du also criticises Mr Wang for not calling his son Mr Jun Wang about the underlying dispute about access to company records. 

28. Neither parties’ submissions about the other’s failure to call witnesses should be accepted.  The rule in Jones v Dunkel[77] has no application in this case where there was no issue to be answered by the evidence of the witnesses who were not called.  Contrary to both parties’ submissions, what occurred at the 27 May 2020 meeting or the merits of Mr Du’s complaints about access to company records are not in issue having regard to what remained of Mr Du’s pleaded defence case following withdrawal of his cross claim. The parties’ negotiations cannot be used to alter the plain meaning of the share transfer agreement or prove an unpleaded oral agreement about access to company records that is not an issue to be determined in this proceeding.

    [77] (1959) 101 CLR 298.

29. In these circumstances, the evidence of the priest and his wife about the parties’ negotiations on 27 May 2020 is of no assistance to the Court in determining the relevant issues in dispute.

30. As for Mr Jun Wang’s evidence, the merits of the accusations made by Mr Du about his conduct in the operation of the business are not relevant.  What is relevant is that Mr Du made serious allegations about Mr Jun Wang’s conduct in operating the business, and this and other disputes led to the making of the share transfer agreement. Mr Jun Wang’s evidence about “circumstances relating to the Agreement” would not add anything to the evidence about the object or purpose of the share transfer agreement.[78]  An adverse inference should not be drawn from the failure to call evidence which is merely cumulative.[79] 

    THE FACTS

    [78] Respondent’s Written Closing [54].

    [79] J D Heydon, Cross on Evidence, (LexisNexis Butterworth, 8^th ed, 2010) at [1215].

    Background

31. The relevant background to the disputes that led to the negotiation and execution of the share transfer agreement on 27 May 2020 is relatively uncontroversial. 

32. Mr Wang and Mr Du and their wives were once close friends, having first met through their local church.  As friends, Messrs Wang and Du decided to go into business together.  In July 2019, they entered into a sale contract to purchase a substantial established business that operated two butcher shops and an abattoir from leased premises in Port Lincoln, trading as Port Lincoln Gourmet Meats. The purchase price under the contract was $550,000 for goodwill and plant and equipment plus $100,000 as the estimated value of stock-in-trade.

33. In August 2019, the parties incorporated the company AFD Foods Pty Ltd to purchase and carry on the business. As trustees of their family trusts they were each issued and held non-beneficially 50% of the company’s shares (600 fully paid shares each) and were appointed its directors. [80] 

    [80] Mr Wang alleged the parties were equal shareholders in the company which Mr Du admitted and no point was taken about Mr Wang’s shares being held non-beneficially. Claim [2] and Defence [1].

34. Through the vendor’s sales agent, the parties negotiated new lease arrangements for the two butcher shops and the abattoir, the transfer of 25 employees and business systems.

35. Messrs Wang and Du speak Mandarin Chinese. Neither speaks nor writes fluent English. Mr Wang’s son, Mr Jun Wang, speaks fluent English. They agreed he would work full-time in the business. In the winding up proceedings there was contention about Mr Jun Wang’s agreed role in the company and the authenticity of two versions of his written employment agreement dated November 2019. These matters are not relevant to the issues in dispute in this proceeding and are unnecessary to resolve. It is sufficient to acknowledge the deep animosity created by the parties’ dispute over Mr Jun Wang’s role in the company and the allegation he diverted cash from the business.

36. Settlement of the business sale contract was deferred and occurred on 3 February 2020. The amount paid for the business at settlement (including $116,269.23 for stock-in-trade and after adjustments) was $672,115.42. There is no reason to consider the business was purchased at anything but market price or that there was any material change to its value between contract and settlement.

37. The parties equally funded the purchase price. Unsecured loans to the parties were recorded as liabilities in the company’s balance sheets in evidence. Those liabilities were at 30 April 2020, $339,500 each;[81] at 27 May 2020, $324,000 for Mr Wang and $329,093 for Mr Du;[82] and at 30 June 2020, $324,000 for Mr Wang and $329,242 for Mr Du.[83] According to Mr Du’s unchallenged evidence, there was no specific agreement as to when these loans would be repaid.

    [81] Exhibit A1.29.166.

    [82] Exhibit A1.26.157.

    [83] Exhibit A1.77.953.

38. Shortly after settlement, the parties agreed that Mr Du would go to Port Lincoln to work in and assist manage the business and be paid the same wage as Mr Jun Wang. It was agreed that Mr Wang would not work in the business or be paid a wage.  Mr Wang had other business interests to occupy his time.

39. In the first week of operation, a dispute arose about the reconciliation of daily takings.  Mr Du accused Mr Jun Wang of diverting cash from the business and not accurately interpreting Mr Du’s instructions to other employees. Mr Du then complained about lack of access to the business records. Mr Du’s accusations led to a bitter personal dispute between the parties that continued to escalate as time passed.

40. By March 2020, the parties’ relationship had broken down to the point that they began negotiating which of them would purchase the other’s shares in the company.

41. By late May 2020, the parties were no longer speaking to one another and Mr Du threatened to bring legal proceedings about access to company records and information. The priest was aware of their dispute and intervened by inviting the parties and their wives to attend bible studies at his home on 27 May 2020.  As
    Mr Du put it, the meeting progressed into an informal conciliation led by the priest during the course of which the parties negotiated and ultimately signed a share transfer agreement written in Chinese characters typed by the priest.

    Approval of Mr Du’s Loan Finance

42. On 5 June 2020, the company’s accountant provided both Mr Wang and Mr Du with a financial report for the company for the year ended 30 April 2020 she had prepared.[84]

    [84] Exhibit A2 [39]-[40].

43. Mr Du made inquiries about finance and obtained finance to fund the purchase of Mr Wang’s shares. His success was communicated to Mr Wang by Mr Du’s solicitor Mr Xiao by an email sent on 9 July 2020 at 3:31 pm that advised Mr Wang that Mr Du’s “loan to purchase [Mr Wang’s] shares has been approved”.[85] 

    [85] Exhibit A1.118.1282.

    July 2020 Emails

44. Between 7 and 14 July 2020, emails were exchanged between Mr Wang and Mr Du’s solicitor Mr Xiao about settlement of Mr Du’s purchase of Mr Wang’s shares under the share transfer agreement.[86]   

    [86] Exhibit A1.118 and A1.119.

45. The English translation of these emails is agreed.[87]

    [87] Exhibit A1.118 and A1.119.

46. On 7 July 2020, Mr Xiao sent Mr Wang an email in English informing him that he was acting for Mr Du and inquiring as to whether Mr Wang had a new legal representative. Mr Wang did not then have any lawyers acting for him.

47. Ultimately, settlement of the sale of Mr Wang’s shares did not occur on 11 July 2020 or at all. There is a dispute between the parties about the legal effect of the email correspondence exchanged between Mr Wang and Mr Xiao in July 2020. It is convenient to deal with the detail of this correspondence in the context of the questions of Mr Du’s alleged repudiation of the share transfer agreement and Mr Wang’s purported acceptance of his repudiation below.[88] 

    [88] See [211]-[236].

    Subsequent Events

1. According to Mr Du’s unchallenged affidavit evidence, on 20 July 2020 at 3:00 pm, Mr Xiao sent Mr Wang a further email proposing settlement take place on 22 July 2020, asked for Mr Wang’s bank account details and sought confirmation that Mr Wang would provide the documents requested by Mr Du at settlement.[89]  This email is not in evidence although it is relied on by Mr Du to support his contention that Mr Wang was in breach of contract.

   [89] Exhibit A1.64.531 at [82].

2. On 20 July 2020, Mr Wang’s then newly appointed solicitor Mr Jelbert sent Mr Xiao an email attaching a pre-action claim and offer to settle. An extract of that attachment was tendered without objection for the purpose of showing that Mr Wang was no longer willing to sell his shares to Mr Du.[90]

   [90] Exhibit A5.

3. On 18 August 2020, Mr Wang instituted this proceeding seeking an order for specific performance of Mr Du’s purported obligation under the share transfer agreement to sell Mr Du’s shares to him for $389,500 (albeit based on an erroneous construction of its terms): [91]

   The Applicant claims the Respondent is liable to perform on an agreement between them to sell his shares to the Applicant for an agreed price. The Applicant relies on a signed written agreement in making his claim and alleges the Respondent is bound by those terms.  The Applicant therefore alleges the Respondent does not have a defence to the claim.

   [91]  Claim (FDN 1).

4. The parties did not resolve their disputes over the share transfer agreement.  Mr Du and Mr Jun Wang continued to work in the business.

5. The parties’ disputes escalated in early September 2020 into even more acrimonious disagreement over the business and Mr Jun Wang’s role in it.  On 3 September 2020, Mr Du removed Mr Jun Wang as a signatory to the company’s bank account without consulting Mr Wang.  Mr Wang retaliated by reinstating Mr Jun Wang as a signatory and froze the company bank account.  Mr Wang alleges Mr Du then effectively removed him and Mr Jun Wang from the business operations and Mr Jun Wang’s employment was terminated without reason on 4 September 2020.[92]  Mr Du accepts he terminated Mr Jun Wang’s employment but alleges it was justified by Mr Jun Wang’s misconduct.[93]

   [92] Exhibit A1.53.259-.260 at [52].

   [93] Exhibit A1.64.532-.535 at [90]-[117].

6. Solicitor’s letters were exchanged.  The parties disputes continued on a broader and public front that began to significantly disrupt business operations.

7. Mr Du continued operating the company’s business on a cash basis, accepting only cash sales and making cash payments for wages and payments to suppliers in September 2020. In October 2020, Mr Wang paid the company’s creditors from his own funds.  The business operations were substantially scaled down. Sales decreased significantly, employees resigned or were let go and suppliers refused to supply on credit. By 17 November 2020, there were only eight remaining employees. In the opinion of the joint administrators, this method of operation was not sustainable and the business collapsed by the end of November 2020.[94]

   [94] Exhibit A1.77.949.

8. It was also the joint administrators’ opinion that the value of the goodwill of the business ($550,000 at cost) was lost when the business ceased trading.[95]  Soon after, the company’s landlords retook possession of the three leased premises from which the business operated. After this time there is less clarity about control of the company’s assets and the actions of various parties.[96] Mr Du apparently retrieved some plant and equipment and put it in storage, otherwise it was left in the landlords’ premises.

   [95] Exhibit A1.78.1012.

   [96] Exhibit A1.77.949.

9. Meanwhile, on 14 October 2020 Mr Wang instituted proceedings in the Supreme Court of South Australia to wind up the company and appoint a provisional liquidator on just and equitable grounds. Mr Du opposed the winding up, contending in his first Supreme Court affidavit that the business had continued to operate profitability despite the freezing of the company bank account and operations could be scaled up again and it would operate more profitability when the bank account was unfrozen. Ultimately, no provisional liquidator was appointed.

10. Instead, on 9 April 2021 the parties appointed Mr Andrew Heard and Mr Anthony Phillips as voluntary administrators of the company.

11. In May 2021, the joint administrators reported to creditors on the company’s current financial position.  It had total cash at bank of $579,646. The value of the only tangible assets comprising plant and equipment was estimated to be between $50,000 to $120,000 and for motor vehicles was between $37,000 and $50,000.[97]  Unsecured creditors including the parties were estimated at $1.204 million.[98]

    [97]  Exhibit A1.77.956-.957.

    [98]  Exhibit A1.77.959.

12. Despite their concerns about the inaccuracy of the company’s financial statements given the way in which the company’s financial records were maintained (particularly after 3 September 2020 on the advice of the bookkeeper), the joint administrators were of the opinion that the company traded profitably until early September 2020.[99]  Mr Du’s affidavit evidence that the company continued to trade profitably thereafter should be rejected as unreliable.

    [99]  Exhibit A1.77.952.

13. Ultimately, the joint administrators recommended to creditors that it would not be in their interests to end the administration because the company was insolvent and:[100]

    There is a deep dispute between the Directors that means returning control of the Company to them would be impractical.

    [100] Exhibit A1.79.1046.

14. Winding up the company was not recommended either because either of the deeds of company arrangement (DOCA) proposed by the parties would result in far larger dividend return to unrelated creditors.

15. At the adjourned second meeting of creditors held on 21 June 2021 the creditors voted in favour of entry into a DOCA proposed by Mr Wang. The DOCA was executed on 12 July 2021.[101]  Mr Du ceased to be a director of the company as a term of the DOCA.

    [101] Exhibit A1.83.1099-.1127.

16. The company is still registered and the parties remain its equal shareholders.

17. The evidence concerning the finalisation of the administration is incomplete. The evidence there is discloses that under the terms of the DOCA all of the company’s assets were realised to pay unrelated creditors and there was ultimately no surplus to meet all of Mr Wang’s and Mr Du’s related party claims as creditors or to return any funds to the company. Whilst Mr Wang received a dividend for the payments he made to creditors, it is common ground that both Mr Wang and Mr Du lost their initial loans to the company to fund the purchase of the business.

    THE TRANSLATION ISSUE

    The Parties’ Submissions

18. In support of his uncertainty case, Mr Du contends the Chinese characters in the share transfer agreement are ambiguous and uncertain and incapable of reliable translation. Mr Du submits, on the assumption that the Shi Translation will be admitted into evidence, the agreement written in Chinese characters “is the subject of 3 different translations by 3 different translators”[102] and “there are significant differences.”[103]  In oral closing, Mr Du put his submission more forcefully: three translators “whose credibility is not challenged”, all trying their best get “three entirely different translations.”[104]

    [102] Respondent’s Written Closing [62].

    [103] Ibid [67].

    [104] T345.16-.19.

19. Mr Du further submits the differences cannot be resolved by the Court preferring one translation over another because that “is in effect a Court assuming and writing some of the terms for the parties, as opposed to having reliable translated terms…”.[105]

    [105] Respondent’s Written Closing [79.2].

20. As a result, Mr Du contends the Court does not have a reliable translation capable of objective construction and enforcement.[106] 

    [106] Ibid [62]-[72].

21. In answer, Mr Wang submits Mr Du’s challenges to the translation evidence have no bearing on the pleaded issues concerning Mr Du’s purchase obligation under the share translation issue because the contingency envisaged by clause III was not enlivened. Accordingly, Mr Du’s challenges to the Han Translation were irrelevant and otherwise “went nowhere”.[107]

    [107] Applicant’s Written Closing [43].

    Analysis – What were the terms in English?

22. Mr Du’s submissions significantly overreach in a number of respects. The two translations in evidence are not entirely different. As explained below, the only material differences do not concern Mr Du’s purchase obligation. Contrary to Mr Du’s submissions, the Shi Translation confirms the reliability of the relevant parts of the Han Translation. Therefore, the Court has before it a reliable English translation of the relevant parts of the share transfer agreement.

23. If there were material differences between the translations to be resolved, the Court would need to resolve which translation was preferred.  This would not constitute writing the contract for the parties.  It is a question of fact to be resolved just like any other conflict of evidence such as a material difference between witnesses about what one said to the other in making an oral contract.

24. It is necessary to set out the Han Translation in full to properly understand Mr Du’s challenges to its reliability.[108]

    [108] Exhibit A1.25.156 (emphasis added).

    Share Transfer Agreement

    Party A:  Changmin WANG
    
    Party B:  Zhigang DU

    The Parties have, through friendly consultation, agreed as follows on the transfer of shares in AFD-Foods PTY TDL:

    IParty B shall purchase 50% shares from Party A for THREE HUNDRED AND THIRTY-NINE THOUSAND FIVE HUNDRED AUSTRALIAN DOLLARS. Party B shall pay to Party A a purchase fee of FIFTY THOUSAND AUSTRALIAN DOLLARS. The two amounts add up to THREE HUNDRED AND EIGHTY-NINE THOUSAND FIVE HUNDRED AUSTRALIAN DOLLARS.

    IIThe deadline for payment shall be 11 July 2020, that is one and a half months from the date that the Parties executed this Agreement.

    III.Party B promises that if the loan remains unsuccessful by the deadline for payment, it will transfer 50% of its shares to Party A for THREE HUNDRED AND THIRTY-NINE THOUSAND FIVE HUNDRED AUSTRALIAN DOLLARS with a fee of FIFTY THOUSAND AUSTRALIAN DOLLARS.

    IVParty A shall provide Party B with financial reports prior to 3 May 2020 in support of the loan processing for Party B, with the required accounting fees payable by the company.

    VAnything not covered by this Agreement shall continue to be addressed by the Parties through peaceful and friendly negotiations at the presence of a third party witness.

    VIThis Agreement shall be prepared in triplicate: one for each party and one for the witness.

    VIIExecuted on this day of 27 May 2020.

25. The only relevant inaccuracy in the Han Translation established in cross-examination of Mr Han is literally and contextually immaterial.  Mr Han accepted that his English translation of clause III included the words “a fee” (underlined and bolded above) but there were no characters in the Chinese document corresponding to those words. However, he confirmed that the character for the word “with” was there, as were the characters for “A$50,000”.[109]  In effect, his translation made express the obvious implication arising from clause I given the prices were the same, that is “A$50,000” was a “fee”.

    [109] T27.33-28.8.

26. There is no real contention or any material difference between the clauses concerning Mr Du’s purchase obligation addressed primarily by clauses I, II and IV.  Where there are different English words in the translations for the same Chinese characters, they are obvious synonyms (ie purchase/buy, due date/deadline, negotiation/consultation, loan application/loan processing etc).

27. No point was taken about there being ambiguity about the identity of the shares the subject of the share transfer agreement. For Mr Du’s purchase obligation, the subject shares refer to Mr Wang’s 50% of the company’s issued shares (ie the 600 fully paid shares in the company held in his name).

28. Mr Du’s challenges focussed on clause III, submitting there were material differences between the Han and Shi Translations. On the basis that the Shi Translation should be preferred, Mr Du identified a difficulty with the number of Party B’s shares to be transferred (50% of Party B’s shares) and the purchase price ($50,000 of $389,500).  He contended clause III was inconsistent with the parties’ common intention that the terms of their reciprocal purchase obligations be the same, a question that is ultimately not relevant. 

29. Having regard to the text of the Han and Shi Translation, the identified differences were limited and concern only some of the characters and English words in clause III.  Neither difference is necessary to resolve because they both concern the terms of Mr Wang’s purchase obligation in circumstances where Mr Du had not been able to get approval for a loan by the payment date. Since Mr Du was successful in getting loan approval (which he formally admitted in his defence), Mr Wang’s (conditional) purchase obligation was never engaged.

30. Given the importance of the issue to the parties, there is utility in making a further observation. Having regard to the object of the transaction, read in context, the first submitted difficulty does not arise.  The “50%” in “his own 50% of shares” in clause 3 of the Shi Translation should be read as referring to 50% of the company’s shares owned by Party B, not as 50% of his shares (ie 300 shares). Read this way there is no inconsistency between the Shi and Han Translations on this matter.

    THE CONSTRUCTION ISSUES

    The Law

31. The rights and liabilities of parties under a contract are to be determined objectively, having regard to its text, context (as a whole) and purpose.[110]

    [110] Mount Bruce Mining at [46], citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 (Woodside) at [35] and Codelfa at 350, 352.

32. The meaning of the words used in a contract is to be determined by reference to what a reasonable person in the position of the parties would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties.[111]  This inquiry requires attention to the language used by the parties, the commercial circumstances addressed by the contract, the purpose of the transaction and the objects it is intended to secure.[112]

    [111] REALESTATE.com.au v Hardingham [2022] HCA 39 (REALESTATE.com.au) at [43] citing Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].

    [112]  McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22] per Gleeson CJ; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462 at [22]; Woodside at 656-657 at [35]; Mount Bruce Mining at [47].

33. Ordinarily, it is possible to construe the terms of a contract by reference to the contract alone.  If the words in the contract are unambiguous or susceptible of only one meaning, the Court must give effect to them. A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial operation if an interpretation different to the language were adopted.[113]

    [113] Jireh International Pty Ltd v Western Export Inc [2011] NSWCA 137 at [55]; Western Export Services v Jireh International Pty Ltd [2011] HCA 45.

34. Recourse to the surrounding circumstances may be necessary to identify the commercial purpose or objects of the contract or where there is a constructional choice.  Any such recourse is objective and is limited to those events, circumstances and external things known to the parties or those that assist in establishing the purpose or object of the transaction, including its history, background and context and the market in which the parties were operating.[114]

    [114]  Codelfa at 350.

35. Evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to subtract, add to, vary or contradict the terms of a contract, except in limited circumstances.[115]  It is not admissible to contradict the language of the contract when it has a plain meaning.[116] 

    [115] REALESTATE.com.au at [44] citing Codelfa at 347, Equuscorp at [36] and also Lewison, The Interpretation of Contracts, 7th ed (2020) at 145-153 at [3.87]-[3.100].

    [116]  Codelfa at 352.

36. The parties’ subjective intentions and expectations are not relevant.[117]  Evidence of the parties’ statements and actions reflecting their actual intentions and expectations are therefore inadmissible.[118]

    [117] Equuscorp citing Gissing v Gissing [1971] AC 886 at 906; Ashington Piggeries

    Ltd v Christopher Hill Ltd [1972] AC 441 at 502.

    [118] Codelfa at 352.

37. Evidence of pre-contractual negotiations is generally inadmissible as an aid to construction.  It is admissible to the extent it establishes objective background facts known to both parties and the subject matter of the contract where relevant.  But it cannot be used for any other purpose including as evidence of the parties’ subjective intentions or the meaning of particular words of clauses in the contract.[119] The rationale is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make and are superseded by, and merged in, the contract itself.[120] 

    [119] Essential Beauty Franchising (WA) Pty Ltd & Ors v Pilton Holding Pty Ltd & Ors [2014] SASC 84 at [205].

    [120] Codelfa at 352.

38. Nor can regard be had to subsequent conduct of or communications between the parties after the contract is executed to construe the contract.[121] 

    [121] Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [35].

39. Where parties enter into a written contract, the Court will generally hold them to the obligations they have assumed under it.  The Court will adopt a commercial approach so that everything that can be done is done to give effect to an agreement that businesspersons would assume would be fulfilled.[122] The Court will take this approach unless relief is afforded by operation of statute or some other legal or equitable principle appropriate to the case.[123] In this case, no such defence or claim was ultimately pressed at trial, Mr Du having abandoned his rectification case.

    [122] Custom Credit Corporation Ltd v Cenepro Pty Ltd [1991] NSWCA 68.

    [123] Equuscorp at [35].

40. Finally, in the search for contractual intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.[124]

    [124] Upper Hunter County District Council v Australian Chilling & Freezing Co (1968) 118 CLR 419 at 437.

    The Parties’ Submissions

41. Mr Du submits the share transfer agreement should be construed having regard to the parties’ common assumption that by one or the other transferring their shares to the other one, there would be a clean break so that the purchaser could run the business without the other. This was because neither could work with the other.  Since it was intended that one or other would get the shares and the business, neither would be entitled to sue the other for default. Mr Du contends the parties certainly did not contemplate that there would be an ability for Mr Wang to sue Mr Du if he did not purchase Mr Wang’s shares.

42. Mr Du submits an entitlement to sue him for damages “does not make sense” because it could lead to Mr Wang suing as he did, making “the shares and the business [become] worthless”.[125] 

    [125] Respondent’s Written Closing [29.6].

43. Instead, if Mr Du did not buy Mr Wang’s shares and make payment by the deadline as provided in clause II, then it was up to Mr Wang to buy Mr Du’s shares.[126]  In short, “Mr Du had first go, Mr Wang second”.[127] This is Mr Du’s ‘simple reciprocity’ case as his counsel described it.

    [126] Ibid [29.8], [30]-[31].

    [127] Respondent’s Written Opening [105]; Respondent’s Further Submissions [2.15].

44. In his pleaded defence, Mr Du also alleges he was not provided with the financial reports for the company, a condition precedent to the share transfer agreement.[128]  By this plea, Mr Du apparently put in issue the meaning of “financial reports” in clause IV of the share transfer agreement (and performance of this obligation).

    [128] Defence [2.2.4.1].

1. Where the conduct of a promisee entitled to terminate a contract is inconsistent with an intention to perform their obligations under the contract and is otherwise repudiatory, it may, depending on the circumstances, constitute an election to terminate.  For example, instituting proceedings alleging termination and claiming damages based on termination of the contract has been found to constitute an election to terminate.[184]

   [184] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.

2. But conduct that is at the same time both consistent and inconsistent with an election to terminate is necessarily equivocal.[185] 

   [185] Vargas Pena Apezteguia y Cia SAIC v Peter Cremer GmbH [1987] 1 Lloyd’s Rep 394 at 398.

3. Breach by the promisee or their not being ready, willing and able to perform their obligations under the contract are generally not impediments to their election to terminate the performance of the contract for breach or repudiation by the promisor.[186]  This is because an election to terminate the contract concerns the promisee seeking to be discharged from future performance as opposed to their ability to provide the agreed return for the promisor’s performance.[187]

   [186] J W Carter, Carter’s Breach of Contract (J W Carter Publishing, 3^rd ed, 2024) at [10-15] and [10-51].

   [187] Ibid at [10-17].

4. In some cases, readiness or willingness to perform is excused when it is clearly pointless or inappropriate.[188]

   [188] See Foran v Wight (1989) 168 CLR 385 at 408; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235.

5. A promisee can lose their right to elect to terminate a contract if they choose to continue contractual performance, that is affirm the contact. In Sargent v ASL Developments Ltd, Mason J said:[189]

   A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd v Goonan). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.

   [189] (1974) 131 CLR 634 at 656. Citation omitted.

6. More recently, the High Court in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788[190] explained an election to affirm a contract kept extant the set of contractual rights that were necessarily and immediately inconsistent with those that would arise upon termination of the contract.  An election to affirm would result in the loss of the inconsistent rights arising upon termination of the contract (such as loss of bargain damages), the election only applying where:[191]

   …the nature of the sets of rights is such that “neither one may be enjoyed without the extinction of the other.”

   Did Mr Wang terminate the contract?

   [190] [2022] HCA 38 at [52].

   [191] Ibid at [50] citing Sargent v ASL Developments Ltd op cit at 641.

   The Parties’ Submissions

7. Mr Wang’s pleaded case is that he elected to terminate the share transfer agreement by reason of his email exchanges with Mr Xiao between 9 and 14 July 2020 and the commencement of this proceeding.[192] In closing submissions, Mr Wang also relied on an extract of his solicitor’s letter of 20 July 2020 stating that Mr Wang was no longer willing to sell his shares to Mr Du as evidencing his election to terminate the share transfer agreement.

   [192] Claim [8].

8. By the bare denial in his defence, Mr Du put Mr Wang to proof of his pleaded case in the alternative to his primary case that on his preferred construction of the share transfer agreement, Mr Du did not breach his purchase obligation. 

   Conclusion

9. For the following reasons, it should be concluded that prior to the specified deadline for performance (being 11 July 2020) Mr Wang did not elect to terminate the share transfer agreement. Contrary to Mr Wang’s pleaded case, he insisted the parties perform their contract and settlement proceed but kept his options open, by making no election either way. His erroneous assertion as to the operation of the share transfer agreement should Mr Du continue to refuse to perform his obligations under the share transfer agreement does not alter this conclusion.  This assertion was merely an expression of Mr Wang’s (erroneous) view about what the contract would require if Mr Du did not pay the purchase price on 11 July 2020.  Objectively viewed, none of his emails sent before 11 July 2020 evince a clear and unequivocal election to immediately terminate the parties’ contract.

10. However, a different conclusion follows from the Fifth Wang Email sent on 12 July 2020 read in context of the earlier email communications with Mr Xiao.  By sending this email, Mr Wang made and communicated a binding election to terminate the share transfer agreement.  He followed through on what was implicit in his first three emails and expressly stated in the Fourth Wang Email that any delay or failure to strictly implement the share transfer agreement would “break the agreement” and he would then purchase Mr Du’s shares on the same terms and conditions.[193]  That is, he would not sell his shares and Mr Du’s purchase obligation was at an end. 

    [193] Exhibit A1.119.1298.

    Analysis

11. In response to the First Xiao Email, Mr Wang proposed steps to complete the transaction contemplated by the parties’ contract, his opening words plainly recognising the parties’ contract:[194]

    Thank you for your email.  The two parties signed the agreement based on the principle of honesty and mutual trust, and we shall complete it in accordance with the transaction principles we agreed on.  Our required steps are…

    [194] Exhibit A1.119.1295 (emphasis added).

12. In closing, Mr Wang said:[195]

    Please confirm whether there are any objections to the above steps and reply before 14:00 tomorrow (10/07/2020).  If our lawyer does not receive the full payment before 11/07/20, we will purchase all your shares in accordance with the agreement signed by both parties.

    [195] Ibid (emphasis added).

13. Objectively viewed, Mr Wang’s closing statement merely expressed his (erroneous) interpretation of the parties’ contract.  

14. A reasonable person in Mr Du’s position would have understood from the First Wang Email that Mr Wang was not immediately ending their contract. Nor was he affirming it by exercising a right conferred by it.  Mr Wang was keeping his options open.

15. Mr Wang’s Second, Third and Fourth Emails, all sent on 10 July 2020, reiterated his insistence on the parties implementing the share transfer transaction strictly in accordance with their agreement, once again not making any election to terminate or affirm the share transfer agreement.

16. On the due date of 11 July 2020, Mr Du’s repeated anticipatory breaches of the share transfer agreement became an actual breach. By reason of Mr Du’s continuing repudiation of his obligations under the share transfer agreement, Mr Wang was entitled to terminate at that time, which he did by sending the Fifth Wang Email:[196]

    Since we failed to receive your full payment on the final payment date (11/07/2020) stipulated in the share transfer agreement, according to the agreement signed with the equal negotiation and consent of both parties and witnessed by a third party, we will under the same conditions and methods, purchase all your Mr Zhi Gang Du’s shares in AFD Foods… 

    [196] Exhibit A1.119.1299.

17. Mr Wang’s words communicated a clear and unequivocal election to terminate the share transfer agreement, despite him choosing an inconsistent set of rights that did not in fact exist because of his erroneous construction of the share transfer agreement. In the words of Mason J in Sargent v ASL Developments Ltd,[197] Mr Wang’s words are only justifiable as an election to terminate the share transfer agreement. 

    [197] Op cit at 656.

18. Since Mr Wang validly terminated the share transfer agreement on 11 July 2020, it is not necessary to consider whether Mr Wang’s subsequent conduct constituted an election to terminate the parties’ contract.  Plainly, Mr Wang could only terminate once despite his pleading relying on a number of alleged elections to terminate.

19. For completeness, two matters should be noted.  First, that Mr Wang’s conduct in instituting this proceeding and seeking specific performance of a contractual obligation based on an erroneous construction of the parties’ contract is inconsistent with an intention to be bound by the parties’ contract and would constitute an effective election to terminate if the share transfer agreement was still on foot.  Secondly, whilst alleging Mr Wang was in breach of contract (for different reasons), Mr Xiao apparently did not engage with Mr Wang’s purchase obligation.  Instead, Mr Xiao on Mr Du’s behalf sent Mr Wang on 20 July 2020 a further email proposing settlement take place on 22 July 2020 on the same conditions as previously demanded.  This communication has no contractual effect since it followed Mr Wang’s termination of the parties’ contract on 12 July 2020.

    Mr Wang’s Obligations to Perform

20. Mr Wang must prove readiness and willingness to perform his concurrent obligations under the share transfer agreement as an element of his cause of action of damages for breach of contract. Absent proof of readiness and willingness, Mr Wang has no cause of action.[198]

    [198] Foran v Wight (1989) 168 CLR 385 at 401, 417, and 430-431.

21. Much was made in Mr Du’s closing submissions of Mr Wang’s alleged failure to be ready, willing and able to perform his concurrent obligations under the share transfer agreement.  Mr Du submitted Mr Wang was not ready, willing and able to perform his obligations because he failed to nominate bank details or a solicitor to attend a settlement, no place for settlement having been agreed.

22. Mr Wang’s evidence that he was ready to settle but “they [Mr Xiao and Mr Du] didn’t follow the spirit of the agreement” should be accepted.[199]  When proper regard is had to Mr Xiao’s emails, it is apparent Mr Wang should be absolved from the consequences of him not nominating a bank account or a solicitor to attend settlement.[200] Such nominations would have been pointless, particularly when Mr Xiao cancelled settlement because Mr Wang would still not agree to the settlement method proposed by Mr Xiao multiple times and a new supplementary agreement that were both fundamentally inconsistent with the parties’ obligations under the share transfer agreement. It was not the case that Mr Xiao on Mr Du’s behalf ever approached settlement as only requiring a simple transfer, unlike Mr Wang.

    DAMAGES

    [199] T185.19-.21; T186.3-.18.

    [200] Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246-7.

    The Law

23. When assessing damages for breach of contract the ‘ruling principle’ is that the award should put the promisee, so far as money can do it, in the same situation as if the contract had been performed as promised.[201] Incontrovertibly, the purpose of the award of damages is compensatory.

    [201] Robinson v Harman (1848) 154 ER 363 at 365; Wenham v Ella (1972) 127 CLR 454 at 460, 471 (Wenham v Ella); Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at [13] (Tabcorp Holdings); Clark v Macourt (2013) 253 CLR 1 at [7], [26], [60] and [106].

24. In The Commonwealth v Amann Aviation Pty Ltd, Mason CJ and Dawson J explained the purpose of an award of damages for breach of contract as: [202]

    …protect[ing] a plaintiff’s expectation of receiving the defendant’s performance. That expectation arises out of or is created by the contract.  Hence, damages for breach of contract are often described as “expectation damages”.  The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff’s expectation, objectively determined, rather than subjectively ascertained.  That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation. 

    [202] (1991) 174 CLR 64 at 80 (The Commonwealth v Amann Aviation Pty Ltd).

25. Their Honours later said:[203]

    …‘expectation damages’, ‘damages for loss of profits’, ‘reliance damages’ and ‘damages for wasted expenditure’ are simply manifestations of the central principle enunciated in Robinson v Harman rather than discrete and truly alternative measures of damages which a party not in breach may elect to claim.

    [203] Ibid at 82.

26. In Clark v Macourt, Gageler J agreed and said:[204]

    The expectation interest is no less, but no more, than the interest protected by seeking “to give [a] promisee the value of the expectancy which the promise created”.  In other words, it is the interest of the injured party “in having the benefit of [the contractual] bargain by being put in as good a position as he [or she] would have been in had the contract been performed. (citations omitted)”

    [204] Op cit at [61].

27. The corollary of the ‘ruling principle’ in Robinson v Harman[205] is that an award of damages for breach of contract should not put the injured party in a superior position than they would have been had the contract been performed.[206]  Therefore, if performance of a contract would not have resulted in a loss, no damages are payable.[207]  And, where a promisee claims damages for a loss caused by a breach of contract, any benefit received by the promisee must be taken into account in determining the extent of their loss.

    [205] Op cit.

    [206] The Commonwealth v Amann Aviation Pty Ltd op cit at 82 citing L Albert & Son v Armstrong Rubber Co (1949) 178 F. 2d 182 at 189; and also 136, 155 and 163.

    [207] Ibid at 84 and 89.

28. There are qualifications to the ‘ruling principle’. One is that the law does not compensate an injured party for the non-fulfilment of an expectation that could not reasonably be supposed to have been within the contemplation of the other parties when they made their contract as the probable result of breach.[208] Another is that damages which are too remote are not recoverable.

    [208] European Bank Ltd v Evans (2010) 240 CLR 432 [12]-[13], referring to Hadley v Baxendale (1854) 1546 ER 145 at 151.

29. In Bellgrove v Eldridge,[209] the Court explained that whilst the application of the ‘ruling principle’ depends on the commercial context of the case, it is always applied with a view to assuring the promisee is compensated for the monetary value of faithful performance by the promisor of the bargain. For example, where the circumstances of a case do not involve the transfer of a marketable commodity, the ‘ruling principle’ is not displaced.[210]

    [209] (1954) 90 CLR 613 at 617-618.

    [210] Clark v Macourt op cit at [107] citing with approval Bellgrove v Eldridge op cit and Tabcorp Holdings op cit at [13].

30. As for the time for assessing damages, in Clark v Macourt, Keane J said:[211] 

    The value to be paid in accordance with the ruling principle is assessed at the date of breach of contract, not as a matter of discretion, but as an integral aspect of the principle, which is concerned to give the purchaser the economic value of the performance of the contract at the time that performance was promised. In this way, the measure of damages captures for the purchaser the benefit of the bargain and so compensates the purchaser for the loss of that benefit (citation omitted).

    [211] Op cit at [109] citing Johnson v Perez (1988) 166 CLR 351 at 355-356.

31. The rule that damages are assessed at the time of breach is not absolute.  The Court will depart from it to avoid injustice.[212]

    [212] Johnson v Perez op cit at 355-356, 367 and 386-387.

32. Proof of actual (as distinct from anticipatory) breach of contract entitles an applicant to at least nominal damages, whether or not the contract has been terminated.[213]  To recover substantial damages in contract, the applicant must prove the breach was the cause of the damage.[214]

    [213] Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 300.

    [214] Chappel v Hart (1998) 195 CLR 232 at 270.

33. Provided there is evidence that a promisee has lost something of value, difficulty in assessing its value is not a bar to recovery. Where precise evidence is not available the Court must do the best it can.[215] However, “[d]ifficulty of proof does not dispense with the necessity of proof”.[216]  Only nominal damages will be awarded where it is impossible to assess what damages should be recovered either because no or no sufficient or reliable evidence was called.  In other cases where the evidence is incomplete but sufficient to assess an award of damages, the Court may award some damages that are not nominal but are less that the applicant seeks. 

    [215] Biggin & Co Ltd v Permantite Ltd [1951] 1 KB 422 at 438 approved by The Commonwealth v Amann Aviation Pty Ltd op cit at 83.

    [216] Aerial Advertising Co v Batchelor’s Peas Ltd [1938] 2 All ER 788 at 796.

34. Whilst loss is not an element of a cause of action in contract, an applicant seeking substantial damages bears the burden of proving on the balance of probabilities that a breach of contract has caused their loss, that it was not too remote and the amount of the loss.[217] The legal onus may shift in certain circumstances.  For example, where an applicant seeks reliance damages for wasted expenditure reasonably incurred, once the expenditure and its reasonableness are proved, the respondent has the onus of establishing that the expenditure could not have been recouped even if the contract had been fully performed.[218]  Where a defence of mitigation is pleaded, the respondent bears the onus of proof.  In this case, no defence of mitigation was pleaded or advanced at trial.  The absence of such a defence does not relieve Mr Wang from proving causation.

    [217] The Commonwealth v Amann Aviation Pty Ltd op cit at 80, 99 and 118; Clark v Macourt op cit at 11.

    [218] The Commonwealth v Amann Aviation Pty Ltd op cit at 86-89 and 126-127.

35. It is well established that the legal concept of causation differs from philosophical and scientific notions of causation and whether a particular loss was caused by a particular breach of contract is determined by applying common sense.[219]

    [219] March v E & MH Stramere Pty Ltd (1991) 171 CLR 506 at 509, 515, 522 and 524-525; Chappel v Hart (1998) 195 CLR 232 at 242, 255, 268-269 and 281-282.

36. Although damages are generally assessed at the date of breach, post-breach events may be relevant to prove losses or damage flowing from a breach or steps that were or should have been taken to mitigate a loss where relevant.[220]  Self-evidently what happens post-breach does not necessarily flow from the breach.

    [220] Wenham v Ella op cit at 473-474.

    The Parties’ Submissions

37. Mr Wang identifies the loss he has suffered by reason of Mr Du’s breach of contract as the unpaid purchase price of $389,500.[221]  He seeks the full measure of the purchase price without deduction as the economic value of performance of the contract at the time when performance was promised at 11 July 2020. Mr Wang contends it was for Mr Du to advance a case that the measure of damages claimed should reflect a deduction of some value for his shares, plead any defence of mitigation and put evidence of value before the Court.[222] 

    [221] Applicant’s Written Closing [108]-[110]; Applicant’s Further Submissions [8]-[10].

    [222] Ibid [7], [11] and [17].

38. In supplementary closing submissions, Mr Wang submits the Court can infer his shares were worthless since the breakdown in the relationship of the parties that occurred because Mr Du repudiated his contractual obligations, and insolvency practitioners were appointed soon after.  He submits:[223]

    …The shares in question related to ownership in a 2-person company operating a butcher and abattoir in Port Lincoln. That business collapsed irretrievably when the relationship between the two men broke down – as occurs inevitably when any small proprietary limited company or quasi-partnership collapses.  Not long after, the company slipped into administration. The shares in question are not comparable to membership in a publicly listed company or some other liquid asset of identifiable value in the eyes of third parties…

    [223] Ibid [13].

1. Mr Du’s primary defence was that the share transfer agreement, properly construed, did not provide either party with any entitlement to a remedy for damages in case of breach.  Essentially, Mr Wang’s claim of a liquidated sum is contrary to the parties’ reciprocal agreement.

2. Otherwise, Mr Du put Mr Wang to proof of his case.  He submits Mr Wang has not proved he suffered any loss and if any loss was suffered (which is denied), then it was as a result of Mr Wang’s failure to purchase Mr Du’s shares when he had the chance.[224]

   Analysis

   [224] Respondent’s Further Submissions [2].

   The Seminal Question

3. Mr Wang does not sue for a contract debt or bring a claim in damages in lieu of specific performance.  He seeks common law damages for the loss of the economic value of what he would have received if Mr Du had performed their contract on 11 July 2020. He contends his expectation loss is measured by the purchase price he was not paid and does not identify his loss in any other way.

4. In circumstances where Mr Wang did not transfer his shares to Mr Du, the economic value of the performance of the contract at the time when performance was promised is not simply assessed by reference to the amount Mr Wang was not paid. The value of Mr Wang’s shares that were not transferred at the date of breach (being 11 July 2020) must be accounted for.

5. Mr Wang’s claimed loss therefore assumes the shares he did not transfer to Mr Du of which he retained ownership were worthless at the date of breach. This must follow because the application of the ‘ruling principle’ in Robinson v Harman[225] calls for a comparison between the position Mr Wang was in as a result of Mr Du’s breach of contract and the position he would reasonably have expected to be in had there been no breach and the contract performed.[226] 

   [225] Op cit.

   [226] The Commonwealth v Amann Aviation Pty Ltd op cit at 99.

6. There is no contention about the position Mr Wang would have been in if the contract had been performed.  Since Mr Wang identifies his loss as non-payment of the purchase price, it follows that the seminal question to be resolved in this case is what was the actual value of Mr Wang’s shares at the date of breach?  Were his shares worthless at the date of breach as he ultimately contended?

   Onus of Proof

7. To justify an award of substantial damages, Mr Wang must satisfy the Court as to both the loss he suffered by reason of Mr Du’s breach and as to its measure.

8. Contrary to Mr Wang’s submissions, it was necessary for him (and not Mr Du) to prove his shares were worthless at the date of breach to prove his claim for expectation damages.  Any question of mitigation is a separate question to whether Mr Wang has suffered a loss or not, acknowledging that it is causation and not mitigation that is in issue.

   Time of Assessment

9. No question of alternative times of assessment arises from the case Mr Wang pleaded and advanced at trial.  Mr Wang claims his loss crystallised at the time of Mr Du’s breach and repudiation of his purchase obligation on 11 July 2020.  The date of breach for all practical purposes coincided with the date of termination

   
   

   (12 July 2020).  Therefore, Mr Wang’s loss is to be assessed at 11 July 2020.

   Causation, Reasonable Foreseeability and Remoteness

10. For the reasons already explained, the application of the ‘ruling principle’ in this case does not require analysis of whether Mr Du’s breach caused the business to collapse or the company’s insolvency. Mr Du’s breach led incontrovertibly to

    
    

    Mr Wang not being paid the purchase price. If Mr Du had performed his contractual promise under the share transfer agreement, Mr Wang would have been paid the purchase price. No questions of reasonable foreseeability or remoteness arise.

11. As well as being irrelevant, it is not correct to contend as Mr Wang does that Mr Du’s breach caused the disputes between the parties. Their disputes pre-existed the making of the share transfer agreement and its purpose was to resolve the deadlock between disputing equal shareholders by one or other of the parties becoming its sole shareholder and ultimately controlling the company.  Mr Wang’s evidence in his first Supreme Court affidavit that their dispute was irretrievable from the first week of operation should be accepted.

    What was the value of Mr Wang’s shares at breach?

    Difficulty of the Question

12. This is a difficult question to resolve because neither party properly addressed it in evidence or submissions.

13. Neither party led any valuation evidence to prove the value of Mr Wang’s shares at the date of breach on 11 July 2020 (or any other date) thereby establishing whether Mr Wang suffered a loss or profit as a result of Mr Du’s breach of contract since he still retained his shares. There was no considered analysis or argument about the impact of Mr Du’s breach on the financial position of the business at the relevant time, assuming it were accepted that the value of the business of the company is a reasonable proxy or starting point for valuing Mr Wang’s shares.

14. This lacuna in the evidence is explained by the approach the parties took to the question of damages. 

15. Mr Wang did not address the question of the actual value of his shares at the date of breach because he (wrongly) contends it was for Mr Du to establish that some reduction should be made from the unpaid purchase price reflecting the value of his shares. In further submissions, he contends Mr Du’s breach caused the dispute that led to the company’s later insolvency and both their shares being worthless without any substantive analysis or reference to the evidence.

16. Mr Du did not address this question because his (unsuccessful) primary case was that, properly construed, the share transfer agreement excluded any right to common law damages for breach.  Mr Du’s contention that Mr Wang caused the loss of both parties’ initial purchase contributions focussed on Mr Wang’s alleged failure to take up the opportunity to buy Mr Du’s shares under his preferred (but erroneous) construction of the share transfer agreement. Otherwise, he put Mr Wang to proof of his case, submitting Mr Wang caused his own loss if he suffered any, which he denied.

17. Despite the difficulties arising from the parties’ approach to this question, there is sufficient evidence to draw inferences about the value of the business and in turn the value of Mr Wang’s shares at the time of breach. 

    Evidence Relevant to Value

18. There is no serious dispute that all the company’s shares were essentially worthless by the time of trial, following the collapse of the company’s business in late November 2020 and the company’s insolvency.  Nor is there any dispute that this case does not involve the sale of a marketable commodity or any issue of mitigation (since none was pleaded).  However, it is too simplistic an approach to conclude that Mr Wang’s shares were worthless or their value was completely destroyed by Mr Wang’s breach of contract at the date of breach because the business subsequently ceased to trade and the company became insolvent.

19. The correct approach requires consideration of the actual value of Mr Wang’s shares at 11 July 2020. In the absence of any direct valuation evidence, it is necessary to adopt a broad-brush approach to assessing damages and for the Court to do the best it can on the evidence there is.

20. To the extent that the value of the business might be said to be a proxy for the value of the company and its shares, there was reliable evidence about the value of the company’s business at the outset of trading in February 2020 and less reliable evidence of its profitability, assets and liabilities thereafter. The evidence shows the business was of substantial value in February 2020 when it commenced trading under the company’s ownership and apparently traded profitably until the public and extraordinary eruption of the disputes between the parties in early September 2020.[227] 

    [227] Exhibit A1.77.952.

21. The company’s informal balance sheets until the date of breach show its net assets were negligible ($90,557[228] and $21,188[229]). As would be expected for the first few months of trading, total business assets were almost entirely offset by the parties’ initial purchase contributions recorded in its accounts as unsecured loans.  It should be assumed this position would continue until substantial trading profits were earned.

    [228] Exhibit A1.29.166.

    [229] Exhibit A1.77.953.

22. The value of the business on usual valuation principles would be derived from its long-term profitability. In the case of an established business, albeit newly acquired, it might reasonably be expected that it would continue to trade profitably, assuming no adverse changes to its operation.

23. The accounting records show the business was trading at a modest profit at the date of breach despite the parties’ continuing disputes having begun in the first week of trading in February 2020 and Mr Du’s breach of his obligation under the share transfer agreement on 11 July 2020.  The risk of their disputes erupting as they did in early September 2020 and disrupting the business operations was high. There could reasonably be little confidence of the continuing profitability of a newly acquired business with minimal net tangible assets in the circumstances of the escalating disputes between deadlocked shareholders when their agreed mechanism for resolving their deadlock had failed.

24. It is this risk that must be considered in valuing Mr Wang’s shares at the date of breach.  Contrary to Mr Wang’s submission, it is not the case that Mr Du’s breach caused the breakdown of parties’ relationship. It had already broken down irretrievably before the share transfer agreement was negotiated and signed.

25. Plainly, the value of a company’s shares, and specifically a non-controlling interest in a proprietary company, is not the same as the value of its business or the company as a whole.  On usual valuation principles, a substantial discount to the value of the company as a whole would apply to a non-controlling shareholding in any event despite the company operating a valuable and profitable business.

26. In summary, the circumstances at 11 July 2020 were as follows:

    ·the share capital of the company was nominal and held equally by the parties

    ·the net tangible assets of the company were negligible

    ·business goodwill was the company’s most significant asset

    ·the significant loan accounts in the parties’ names represented their funding of the purchase price of the business, offsetting most of the value of the company’s assets

    ·the business had no substantial trading history under the company’s ownership

    ·there was an unresolved pre-existing dispute between the parties that was acrimonious and escalating

    ·the parties’ chosen mechanism for resolving their deadlock, the share transfer agreement, had failed and added to their disputes

27. Three conclusions follow. First, given the history of their dispute, it was unlikely that the parties would resolve their disputes. Secondly, the likelihood of Mr Wang selling his 50% shareholding in the company to a third party was negligible. Thirdly, the likely result of winding up the company on 11 July 2020 would have been the same as the result of the DOCA in 2021.

28. Having regard to these matters, the value of the company as at 11 July 2020 was negligible as was the value of its shares.  If it had been concluded that the business had a modest value despite the parties’ disputes, the value of a non-controlling shareholding would still have been negligible.  In the latter case, any value would be completely discounted by the inherent risk of the parties’ escalating disputes disrupting or destroying the long-term profitability of the business.

    Conclusion

29. Having concluded that Mr Wang’s shares were actually worthless at the date of breach, on a comparison between the position he was in as a result of Mr Du’s breach of contract and the position he would reasonably have expected to be in had there been no breach and the contract performed, Mr Wang is entitled to damages of $389,500.00 as at 11 July 2020.

    INTEREST

    Pre-judgment Interest

30. Mr Wang claims interest on his damages of $389,500 from 12 July 2020 to judgment at 7%, relying on r 182.3 of the Uniform Civil Rules 2020 (SA) (UCR).[230]

    [230] Claim, Part 4, Prayer for Relief [4]; Applicant’s Written Closing [112].

31. Mr Du submits simple not compound interest should be calculated on any judgment sum awarded in Mr Wang’s favour and the applicable interest rate should be 5% until 3 July 2023, and 7% thereafter.  Mr Du does not otherwise challenge Mr Wang’s claim for pre-judgment interest.

    Principles

32. Pursuant to s 39 of the District Court Act 1991 (SA), Mr Wang, as the party in whose favour a monetary judgment is to be granted, is entitled to an award of interest for the whole or part of the amount for which judgment will be given, unless good cause is shown to the contrary. Interest is payable at a rate, and for a period as determined by the Court. For a liquidated claim, the period should run from the date the liability to pay the claim fell due.[231]

    [231]  District Court Act 1991 (SA) s 39(2)(b).  

33. Section 39 confers a broad discretion on the Court in fixing pre-judgment interest that must be exercised on a principled basis,[232] bearing in mind that the function of the award of interest is to compensate a successful applicant for the loss or detriment suffered by being kept out of their money during the relevant period.[233] Interest is not awarded on the basis of the use the respondent has had of the money or as punishment.

    [232]  Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64 at [531].

    [233]  MBP (SA) Pty Ltd Pty Ltd v Gogic (1991) 171 CLR 657 at 663.

34. It follows that in awarding damages the Court must bear in mind that the object of the award is to restore an applicant to the situation, so far as money can, in which the applicant would have been but for the respondent’s wrongful conduct.[234]   Whilst the established approach is to deal with interest in a fairly broad brush fashion, due regard should be given to the manifestation and duration of the loss or detriment in question in any case. The conduct of the parties at trial may be a relevant consideration.

    [234]  Fire & All Risks Insurance Co Ltd v Callinan (1978) 140 CLR 427 at 433.

    For what period should interest run?

35. There is no real issue as from when interest should run.  It should run from 11 July 2020, the payment deadline for Mr Du’s purchase of Mr Wang’s shares.

36. Under r 182.2 of the UCR, unless the Court otherwise orders, a judgment takes effect at the end of the hearing where judgment was pronounced orally in Court. Therefore, pre-judgment interest should run to 23 October 2025 and thereafter, a claim for post-judgment interest arises under s 40 of the District Court Act 1991 (SA).

    What is an appropriate interest rate?

37. Whilst the appropriate rate is a matter for the Court to determine in each case, as a guide, UCR r 182.3 provides the Court may calculate the interest payable at the rate of 5% per annum until 3 July 2023 when the rate was increased to 7% per annum.[235]  In this case it is appropriate to follow the guide and adopt an interest rate of 5% per annum until 3 July 2023 and 7% per annum thereafter to the date of judgment.

    [235] Uniform Civil (No 9) Amending Rules 2023.

    What interest should be awarded?

38. Applying 5% simple interest from 11 July 2020 to 3 July 2023 and 7% thereafter to the date of judgment on a judgment sum of $389,500.00 results in an award of pre-judgment interest of $120,969.10.

    COSTS

39. The parties should be heard as to costs, including costs reserved following Mr Du’s abandonment of parts of his defence and his cross claim.[236]

    [236] Applicant’s Written Closing [113]; T326.15-T327.27.